2nd Quarter Updates and Commentary from IEM
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Whether you spend your summer lakeside, on hiking trails or golfing, your friends at IEM hope you have a wonderful rest of the summer!
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The conclusion of the second quarter in 2018 has left some investors trying to reconcile the juxtaposition of a strong and improving economy with the more volatile stock and bond markets. The unemployment rate is the lowest it has been in nearly two decades, corporate earnings growth is estimated to be 19%
[1]
for the twelve months ending Q2 of 2018, and there are early signs of wage acceleration.
In contrast, the S&P500 has had peak to trough declines of approximately 10%, 7.5%, and 4% already this year, and is holding on to approximately a 2.6%
[1]
gain for the year. International and emerging equity markets have pulled back more in 2018 after leading equities in 2017, down approximately 2.4%
[2]
and 6.5%
[3]
on the year, respectively. Last, aggregate domestic bonds are down approximately 1.6%
[4]
as a result of higher interest rates.
In our estimation, the improved economic landscape paradoxically creates a new set of challenges for markets – namely, the ability to withstand tighter monetary policy and higher borrowing costs. Moreover, increased concerns about trade wars and tariffs are an unexpected headwind for global markets, and greatly contributed to the negative second quarter for international equity markets.
IEM Investments
Nonetheless, while
realized
returns in 2018 have been muted thus far due to the aforementioned challenges,
expected
returns are likely benefiting from the economic developments. To wit, earnings growth accompanied by no change in price leads to a smaller Price-to-Earnings (P/E) ratio, which makes valuations relatively more attractive. Additionally, higher yields on bonds initially leads to small declines in price, but future income yields increase.
In this current environment, we believe strongly in a disciplined and prudent approach to investment management, including a well-diversified portfolio in conjunction with thoughtful tactical adjustments. Two areas in the market that have performed well year-to-date are Small Cap US equities and TIPS (treasury inflation-protected bonds), both tactical positions in the IEM Portfolios in the last six months.
We believe the balance of long-term strategic allocations with shorter-term tactical adjustments can help to navigate the ever-changing economic and financial landscapes.
Your team at IEM
Danny Schoenecker, CFA
Ted Smith, Amanda Johnson, Charley Stewart, Danica Goshert, Dan LaNasa
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[1] FactSet [2] JP Morgan[3] JP Morgan[4] JP Morgan[5] JP Morgan
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any funds or stocks in particular, nor should it be construed as a recommendation to purchase or sell a security. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested.
Investments in small, mid or micro cap companies involve greater risks not associated with investing in more established companies, such as business risk, stock price fluctuations, increased sensitivity to changing economic conditions, less certain growth prospects and illiquidity.
Neither diversification nor asset allocation guarantee against loss, they are methods used to manage risk.
Securities and investment advisory services offered through CRI Securities and Securian Financial Services, Inc. Members FINRA/SIPC. Integrated Equity Management is independently owned and operated. 2165459/DOFU 6-2018
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“Passion. Purpose. Progress.”
Anonymous
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This isn’t our quote, but it fits The IEM Way perfectly. Passion – for serving our clients, and for growing our business. Purpose – to seek new endeavors every day that improve our client’s experience in working with us. Progress – to adapt successfully to our rapidly changing world so we can continue to be there for you, and for generations to come. Progress only comes with change, and we are embracing progress with energy and excitement.
With progress in mind, we spent two years evaluating our capabilities and augmenting them so that every interaction you have with us is excellent, and adds value to all clients, and to our associates. We have an improved business model, new and updated physical surroundings, a growing team of Private Wealth Managers, and a highly qualified operations team. IEM’s infrastructure is the strongest it has ever been, and the progress is not done. IEM has gone from a six-person firm to a 17-person firm in a very short period of time, driven entirely by passion, and purpose.
IEM has had a hallmark of stability for almost 35 years and as a result has many, many long-term relationships with its clients. We are grateful to you for this, and are pleased you are on the journey with us; I look forward to advancing on this journey with you for many years to come! And I am also grateful for the IEM team, whose dedication and energy make the effort needed to effect change exhilarating and fun. The future is exciting!
In the past nine months or so we have focused much more outwardly by evaluating “The IEM Client Experience” that we have now and where we think it needs to go. Some of these changes you have probably already noticed but I want to let you know that more significant improvements in your client experience are around the corner.
We are thrilled about some of the things that are coming and we are confident that you will be excited too.
As things change – and in this day and age faster than ever -- we realize that continuing our passion, purpose and progress for you is what will keep us relevant for the decades to come. Again, our gratitude abounds. Thank you, and have an enjoyable summer.
Ted
Change is the law of life. And those who look only to the past or present are certain to miss the future. – John F. Kennedy
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Welcome to the Team .....
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IEM’s newest Associate Private Wealth Manager, who joined IEM in April. Dan has over ten years of financial services industry experience, initially in Operations, Compliance, and Sales Supervision roles. In early 2018, Dan decided to follow his passion and apply his industry knowledge to working directly with clients and joined Integrated Equity Management as an Associate Private Wealth Manager. He currently holds his Series 4, 7, 24, 53, and 66 registrations, along with Life, Accident and Health licenses and is a Registered Principal.
Dan attended the College of St. Scholastica in Duluth, Minnesota, where he graduated with a degree in Economics and was a pitcher on the St. Scholastica baseball team.
Dan lives in Highland Park, Minnesota with his wife Maggie and their 18-month-old daughter Audriana (Addie). They enjoy neighborhood walks, especially if a stop at Menchie’s for frozen yogurt is involved. Dan also enjoys summers filled with cabin trips, golfing, baseball, and barbeques with family and friends.
Dan is a registered representative and investment advisor representative of CRI Securities, LLC and Securian Financial Service, Inc.
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Muqing joined IEM in 2017 as a Master’s intern focusing on data management; we were excited that in May of this year Muqing accepted a position as a full-time associate on the Financial Planning team. As a Financial Planning Associate, Muqing is responsible for working with advisors and clients to gather, input, and analyze financial planning information.
Originally from Zibo, China, Muqing received her Bachelor of Science in Mathematics with a focus on Actuarial Science from the University of NC at Charlotte in 2016. While there, she received a Mathematics Department Honors Degree for a paper she researched and wrote on Optimal Investments. She received her Masters of Financial Mathematics from the University of Minnesota in May, 2018. In 2017 Muqing qualified for the Champion Round of the Chicago Mercantile Exchange Trading Challenge by performing among the top 10% of participating teams.
Muqing enjoys her work helping clients achieve their goals through financial planning. She lives in Minneapolis, and likes to travel and draw in her free time.
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IEM in the Community (SRN)
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On Thursday, May 24th, IEM went out into the community with all team members to participate in a community volunteer day. After looking at several options,
Start Reading Now
(SRN) was selected for our spring “give back” event, which meant a cash donation to SRN from IEM and time off for every associate to volunteer.
Start Reading Now aims to narrow the achievement gap by putting ten new books in the hands of every first, second and third grader at participating schools. Eligible schools are those where over 50% of the children qualify for free lunch.
Teams of associates from IEM met Start Reading Now volunteers at two elementary schools to host
free
book fairs (SRN held book fairs at 30 area elementary schools this May). Kids come through the book fair one classroom at a time, and we helped them select their ten free books from among the hundreds of new books available to them. The children will benefit from receiving the free books to build their home libraries, just in time for summer vacation.
The excitement, energy and joy from those kids will stay in our memories for a long time, and remind us of the difference we can all make.
The IEM team is honored to be able to serve our community’s children alongside such a forward-looking organization. We are thankful for your support as we carry out our mission to give back!
You can learn more about Start Reading Now at
www.startreadingnow.org
. IEM will have another “give back” event later in 2018.
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Danny Schoenecker, CFA
is the quiet force behind the investment strategy at IEM. One of his favorite sayings is “run a tight ship” and that is one of the many skills he brings to IEM as he analyzes client portfolios, constructs and rebalances IEM’s model portfolios, and keeps the team updated on economic trends and outlook. Danny joined IEM in early 2017 as Director of Financial Planning and Investments, and in this role, in addition to overseeing IEMs investment strategy and philosophy, he manages the financial planning team.
Danny has a B.S. in Economics and Political Science from the University of Wisconsin-Madison and an MBA from the University of St. Thomas, with an emphasis in investments and finance. Danny has also earned a Certified Financial Analyst (CFA) designation and is a CAIA Charterholder, as well as holding other investment licenses.
In his free time, Danny is planning his 2019 wedding, takes great care of his dog and enjoys any type of activity that involves traveling or being in the great outdoors.
Danny Schoenecker is a registered representative and investment advisor representative of CRI Securities, LLC and Securian Financial Service, Inc.
2173116/DOFU 7-2018
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