Can President Trump Win The Next Election?

As we pass the half-way mark in 2018, the remainder of the year is filled with uncertainty.  With a strong start out of the gate, investors are faced with sluggish returns, as corporations report strong earnings and sound fundamentals.  With resurfaced talks of a recession, investors have shown they have been quick to take gains off the table in 2018, preventing a continued upwards trend in the S&P 500.  At Samra Wealth Management, we believe two factors we have not previously discussed contribute towards this uncertainty: Political Risk, and the Risk of increased data regulation.  This month’s issue of The Samra Report covers the likelihood of President Trump winning another term in office, what factors play into this victory, and how to mitigate portfolio risk given the uncertainty.

The Circus that is the White House

As the S&P 500 steps outside of it 2 standard deviation comfort zone for the 12th time this year, investors are experiencing record volatility.  Although the media may be quick to point the finger at President Trump’s temperament and rash decision making, a deeper look at the data shows the 10-year bond has stepped outside of 2 standard deviations 14 times year to date. Crude oil is even more volatile at 17 times, during a time of relative peace in the middle east.  This month’s issue of The Samra Report looks into factors that will continue to plague investor portfolios throughout 2018 and provides recommendations on dampening volatility while capturing upside growth.

Flawed Fundamentals

The Trust & Estate portion of the financial plan is often the most difficult, however, provides the most peace of mind.  At Samra Wealth Management, we believe that asking tough questions, such as “How much is your business worth should you die?” and “Have you and your spouse talked about remarrying should one of you pass”, provides our clients with confidence in their financial plans.

April's Fool

A tumultuous month plagued with political conflict, escalated threats of a trade war, and talks of increased regulatory scrutiny on big tech firms.   Combined with another cabinet reshuffle and scandal effecting the Trump administration, has given the media more ammunition, making one thing clear: President Trump does not play well with others.  Although the voting public may question; “does the President still have the best people working for him”, as there has been recent skepticism, whether anyone qualified for a cabinet position would want it, given the cabinets record of late.  There is no denying the Trump administration’s actions have led to record volatility, causing the heads of strategy at the largest brokerage firms, relaying messages of reassurance through their financial advisors to their clients.  This month’s issue of The Samra Report focuses on the Trump administrations actions as they affect investment portfolios, the changing dynamic of municipal bonds and the search for high-quality/high-yield income, and the potential long-term benefit of President Trump’s policies. 

What Happened in February

At Samra Wealth Management, we are redefining what it means to be a conservative investor.  Recommending against US Government bonds, and strongly recommending against the use of annuities until the end of 2018.  Questions conservative investors should be asking themselves:


·      Why invest in US Fixed-Income (bonds), during what we believe to be a rising interest rate environment? (Supported by 3 Fed Rate hikes in 2017, and Fed Chair Jerome Powell’s hints towards 4 hikes in 2018. Increases in interest rates lead to a devaluation of a fixed income portfolio.)

·      Although annuities offer fixed rate, or a margin of safety.  Why lock into an annuity product, when we have strong reasons to believe interest rate hikes during 2018 will cause these same annuity products to offer higher returns at year-end?

·      Has your financial advisor provided you with a “shock analysis”, an analysis showing the interest-rate risk of your portfolio? Essentially, quantifying for the investor how an increase in interest rates would negatively impact the value of a fixed-income portfolio. 

·      What alternative investments do you have as part of your portfolio, and how do they mitigate downside exposure?

Keeping Up with the Jones's

As global financial markets continue on a similar trajectory in line with prior months, the bull market shows little sign of losing momentum.  Earnings continue to beat analyst expectations, and increased consumer confidence and market sentiment has households less worried about saving, as consumption and investment pick-up.  At Samra Wealth Management, we believe there are select opportunities remaining in 2018, however, investors who are recently coming off the sidelines, should remain cautious. 

2018: The Year Ahead

2018: The Year Ahead

With the S&P 500, Dow and Nasdaq reaching all-time highs in 2017, a restructured tax plan combined with heightened investor sentiment, has investors who have remained in cash since the financial crisis coming off the sidelines with riskier appetites, in search of higher yields.  Although economic indicators point towards continued global expansion, investors should remain cautious.  Geopolitical risk, and advancements in technology leading to lower dependence on human capital, could be cause for concern. 

When History Repeats Itself: The Next Industrial Revolution

In the early 2000’s, Americans had come accustom to paying $400 for a desktop computer, and had little foresight that they were assisting in the fall of the US Economy.  With higher disposable incomes, in a consumer driven economy, consumers, retailers and financial organizations found themselves over-leveraged, creating a perfect storm scenario.  With the recession now in the rear-view mirror, investors find themselves experiencing pre-recessionary déjà vu.  Not only are investors coming off of the sidelines and playing catch-up with risky investments, more firms are streamlining operations looking to replace costly human capital.  This month’s edition of The Samra Report focuses on off-shoring and outsourcing, technology replacing human capital, and how to prepare your portfolio against the next market shock.

Should You Invest In Bitcoin?

Should You Invest In Bitcoin?

Eight years into a bull market, investors who have remained in cash since the financial crisis are coming off the sidelines and entering the financial markets; prompting concerns from financial professionals.  This month’s issues of The Samra Report covers: digital currency, the blockchain revolution and the future of cryptocurrency.

The Weather & Your Portfolio

The Weather & Your Portfolio

The world of finance, is a lot like the world of medicine: An infinite number of variables, countless areas of expertise, and immeasurable opinions from both professional and novice sources.  With the recent barrage of hurricanes leaving 16.5 million Americans without power, this issue of The Samra Report focuses on the weather and your portfolio.

Invest For Social Good, Or Invest For Higher Returns...

The general practice amongst financial advisors, is for the advisor to assess their client’s risk profile and allocate assets amongst off-the-shelf investment vehicles.  This flawed practice illustrates a strong disconnect between the financial advisor, the client’s tax advisor and the client’s enthusiasm towards reaching their financial goals.  This month’s issue of The Samra Report highlights the widely unknown area of impact investing, contrasting the benefits against charitable donations, and our preference of allocation with regards to geographic location and sector. 

How to beat the S&P 500 (by only investing in the S&P 500)

In February of this year, Warren Buffet, slammed Wall Streets’ active managers, while praising passive investment pioneers such as Jack Bogle, founder of The Vanguard Group.  This month’s issue of The Samra Report explains: how Warren Buffett’s remarks were taken out of context, how to beat the S&P 500, and provides insight from Benjamin Graham, Warren Buffet’s mentor, professor and widely known as the father of value investing. 

Divesting vs. Reallocating Exposure

Investors and advisors with a flawed fundamental understanding of macro-economics, are certain to experience negative returns during times of market appreciation, as they neglect to factor an appreciation of domestic currency, against the appreciation of foreign equity and debt instruments.   This month’s issue of The Samra Report will focus on divesting vs. reallocating exposure, depression babies, and alternative investments in the new housing market. 

President Trump Could Boost Technological Innovation...

With the media focusing on the Presidents Twitter account, and a list of failed accomplishments over the administrations first 100 days.  This month’s issue of The Samra Report will focus on identifying sectors of growth, as well as areas that have been overlooked as skeptics criticize the president on his campaign promises, while President Trump continues to push his agenda towards policy change.  

Happy Birthday Bull Market

Over the last 8 years, many investors have followed the crowd into passive strategies, oftentimes quoting media headlines of “Passive Strategies Outperforming Active Managers”.  However, these statistics are misleading, as most investors who invest in an active strategy, invest in a strategy with little active management. 

Don’t Buy Low, Sell...

Investors have few resources to determine the caliber of their financial advisors, as most investors commit to following a strategy of buying low and selling high.  Such strategies recommended by a financial advisor show a flawed investment foundation, and can help investors determine if their financial advisors are investment professionals, or amateurs regurgitating corporate sales literature.  To the layman, the philosophy of buying low and selling high is common sense, however, the intelligent investor understands the goal is to own a stock at an attractive price.  In this scenario, the correct course of action is to sell a put option on the stock.  As a result, there are two possible outcomes: (1) Should the stock not reach the strike price, the investor collects the premium from selling the put contract, however, does not own the stock (2) At the strike price, the investor owns the stock they wished to purchase at a quoted price, however, also collected the premium from the sale of a put contract, effectively allowing them to purchase the stock at a lower price.


Discrepancies such as these, differentiate the novice from the investment professional. 

The Fiduciary Rule...

With a new administration occupying the White House, investors have been pleased to see the stock market continue to rally, after the Presidential election, with the Dow climbing to over 20,000 for the first time.  Although President Trump has clashed with the media, and the new administrations’ actions have caused liberals to protest, nearly shutting down airports, the stock market has been little effected.  Economist Larry Summers pointed out that although President Trump’s policies have caused frustration, they have not yet affected trade.  Translation: The Presidents’ bark is worse than his bite, for now at least.

The Year Ahead 2017





3.         In Brief

4.         The Economy – The U.S

5.         The Economy – Global

5.         Developed Europe

5.         The Nordic Region

5.         Asia

6.        Important Dates

7.        Domestic Equities

7.       Financials

8.       Technology

12.      Healthcare

13.      Industrials

14.      Fixed Income

15.      Alternative Investments (AI)






In Brief

With global political volatility spilling over into the financial markets in 2016, the year ended on a positive note, with the S&P up 9.84%, however, a more extensive calculation with dividends, reveals the true 2016 S&P 500 return to be closer to 12.25%.  The 2017 Year Ahead, a Global Investment Outlook provides our insight for the year ahead, across the global landscape.  Essentially, our best ideas for 2017, across sector, geographical location, and asset class.

Over the next 12 months, we expect domestic equities reach double digit growth, in select sectors:

  • Financials
    •  Stand to benefit from President Trump’s Wall Street friendly policies and the prospect of lower corporate taxes.  Although Financials gained 22.8% in 2016, with rising interest rates and strong valuations, the financial sector looks to benefit in 2017.
  • Healthcare
    • With steps, already underway to repeal and replace Obama Care (ACA), we believe the aggressive terminology, translates to “refine”.  Given the loss of tax revenue generated by the Federal Government, and 20 million Americans would lose healthcare coverage, refining ACA is the most likely outcome.
  •  Technology
    • With technological innovation impeding on all other areas of business, this looks to be a good year for technology.  Although there is concern over Trump’s immigration policies, repatriation should offset these concerns.
  • Industrials
    • With the Trump Administration’s promise of expansionary fiscal policy, we expect Industrials to see a boost.  With the prospect of a $1 trillion investment in infrastructure over the next decade, lower corporate taxes boosting business investment, and increased military spending, the near future looks good for Industrials. 

With regards to geographical allocation, our consensus is on the United States, as domestic equities stand to gain for a number of factors.  We also recommend Japanese equities on a currency hedged strategy, given the dollar strengthening position against the Yen.  Europe (ex U.K) is also attractive, given steady growth, however, we recommend avoiding the UK, and focusing on the Nordic Region and Developed Europe.  The strengthening dollar should add value to the Travel & Tourism sector.

We continue to recommend investors consider high-yield over government and municipal fixed income, and allocate more towards equities and alternative investments (AI).  With low commodities prices already rising in in 2017, and real estate feeling the effects of rising interest rates, we recommend clients looking to allocate towards AI should be selective in terms of industry, and geographical location.


The Economy – The U.S.

Eight years into economic expansion, the bull market has continued with steady trajectory, with few signs of slowing down.  The U.S. markets have shown resilience, as equities are fairly valued, and the Fed has had to take little intervention.  The Trump victory, although a shock to the world had little effect on global markets, mainly due to the lack of transparency from the Trump administration, regarding fiscal and trade policies, as well as indications of financial deregulation, and the repeal of the Affordable Care Act. 

As the state of the U.S Economy continues to show improvement over all sectors, it is inevitable we will see signs of inflation.  Inflation supported by an expanding economy, supported by higher wages, lower gas prices, and relatively low mortgage rates.  In order to keep inflation steady, we expect the Fed to raise interest rates only once in 2017, and twice in 2018, stepping away from the broad popular consensus of twice in 2017, and two to three times in 2018.

Actions taken by the Fed, in terms of increases in the base interest rate, will negatively affect trade.  As our interest rates increase, foreign investors move assets to the United States, strengthening the greenback.  As the dollar increases in value, against foreign currencies, U.S. goods and services become more expensive for foreign buyers.  All while imports become more affordable to the U.S. consumer.

President Trumps policies are likely to be expansionary, as he leans towards protectionism, which is inflationary due to tariffs and curtailed immigration.  The Fed is willing to accept a slight increase in inflation, as long as they able to maintain close to a 2% target with a level of consistency.  Given the relatively low prices on energy, we believe Core Inflation is a better measure of the economy in the New Year.


The Economy - Global

Global economies have shown resilience to 2016’s two surprises: Brexit and the U.S. election.  At Samra Wealth Management we favor the following areas for geographical allocation:

  • Developed Europe
    • Technological advancements, and friendly immigration policies are leading to developed Europe to follow the United State in becoming a hub for entrepreneurial start-ups.  Cities such as Berlin, Dublin and London are just a few of the cities highlighted by the World Economic Forum, as the best cities for start-ups. 
  • Nordic Region
    • With an increased emphasis on renewable energy, the happiness of their citizens, entrepreneurial friendly policies and the best education systems in the world, the investment for the Nordic Region looks to pay off in 2017 and beyond.  The Nord’s have effectively driven down operating costs, from utilizing outsourcing and investing in cheaper and sustainable energy infrastructure.  They’ve started a war for talent, where top college graduates are investing their futures at home, as opposed to immigrating towards the West.  

  • Asia
    • Behind the U.S. Japan is our favored market, given the Bank of Japan’s continued stimulus and resilience to both Brexit and the U.S. Election, with low inflation these stimulus measures by the BOJ look to provide a jolt to the Japanese equity markets.  A weakening Yen against the dollar, causes concerns of foreign-yield risk, and we therefore recommend any investments in the Japanese markets be made on a currency hedged basis.

 Source: UBS

Source: UBS

As China’s growth stabilizes, investors’ worries diminish, however we stand cautious of the Chinese market, given the PBOC’s vocal intent of devaluing the RMB, and the Private debt-to-gross domestic product, which has climbed to 200%.  Investors should look at small and mid-cap Chinese firms, and firms that are under-valued.  Trades in the Chinese market could prove detrimental to portfolios investing without an adequate currency hedge.  China could also benefit from President Trump’s trade war with Mexico.

Singapore and Hong-Kong will benefit from the global hunt for yield, however, investors of equities should be cautious, and again we recommend any investment outside of the United States to be conducted on a currency hedged basis.

With the recent demonetization in India, Indian equities look to outperform emerging markets.  However, given Narendra Modi’s ability to strengthen the Indian economy by making India an easier place to do business, and inviting in direct foreign investment.  India has something that is attractive to many foreign corporations: a young population and a rapidly growing educated middle-class.  Organizations from the National Basketball Association (NBA), Disney, Coca-Cola and Microsoft have poured billions of dollars into the Indian economy, attempting to capture additional market share, with a population that overshadows that of developed nations.  Since this strategy will likely support the Indian Rupee, any investments made in the Indian equity markets should be made with a non-hedged strategy. 

 Source: BlackRock

Source: BlackRock

Domestic Equities

There is no doubt 2016 has been a rollercoaster year, a year where uncertainty has plagued the political and economic environment.  Although the quantifiable data and statistics from government departments (The Department of labor; The Department of Commerce; The Federal Reserve) have shown steady improvements:  it is now apparent that these statistics are not uniform across our economy.  A decrease in the unemployment rate to 4.6% the lowest jobless rate since August 2007, has not decreased uniformly across the United States, with rust belt states such as West Virginia and Pennsylvania trailing the nation with unemployment rates of 6.0% and 5.7% respectively.  The Bureau of Economic Analysis also indicates West Virginia and Pennsylvania per capita income has grown at 2.5% and 3.8%, far below the national rate of 4.5%.  A Trump victory, however, has boosted consumer confidence, in these states, as the index climbed to 113.7 in December, a 15-year high.  Given Donald Trumps ‘Wall St. friendly demeanor’, the year ahead looks promising to investors of domestic equities,

Over the next 12 months, we expect domestic equities reach double digit growth, in select sectors:

  • Financials
  • Healthcare
  • Technology
  • Industrials



“In the days following the U.S election, Financials were the best-performing sector”.  With financials being the key beneficiary to rising interest rates, banks and insurance companies should expect a good year ahead.  With President Trump Wall St., friendly demeanor, and cabinet make-up, there will be little to hold back financials this year.  However, not all financials will profit: with the advent of the Department of Labor’s Fiduciary Rule, set to come into play this April.  Insurance companies focusing on variable annuities will feel the pressure of losing out on sales opportunities, abiding by the new legislation. 


In early 2000, the dot-com bubble burst, leaving investors who opted for annualized returns of over 25% from 1995 to 2000, discouraged and ruined.   It is no surprise the media is echoing similar concerns, as the market continues to reach new highs.  At Samra Wealth Management, we believe there are reasons for concern and volatility throughout the remainder of the year, however, we do not expect a significant decline in US market valuation, with consideration to the technology sector.  Unlike the dot-com bubble of 2000, a time when great ideas just didn’t make sense in the real world, in 2016 these concepts are adding value through convenience.  At SWM, we have compiled a list of our top ideas based on the potential growth outlook in the industry as it relates to the market capitalization in each area.


Artificial Intelligence (AI)

“Artificial Intelligence (AI) is the new electricity” according to Tony Kim, a portfolio Manager with BlackRock’s Global Opportunities Group.  The ability to convert massive amounts of complex data to useful information can be used in every other business sector, from banking to healthcare.  Research shows AI to the best bet for future investment, as AI is on track to reach a market of $70 billion by 2020.  Investors should be cautious, as many ideas within AI will become obsolete, or replicated by larger firms that have the capabilities.  The Caveat here is, although AI could eliminate up to 47% of total US employment, it is important to remember a decline in the labor force would lead to less disposable income in the economy.  Expect domestic firms to use India and China as test markets due to their large populations.


Cyber Security

According to PwC; in 2015 the number of reported security incidents rose 48%, to approximately 118,000 per day, while organizations reporting financial losses in excess of $20m rose 92%.  The increased attacks are striking both corporate balance sheets, as well as brand image.  As we head towards a cashless society, with global internet penetration at an all-time high, and mobile platform increasing in popularity, it is our opinion at Samra Wealth Management, corporations of all sizes will dedicate more resources to battle cyber-attacks.  The US government has taken a proactive role in committing to fill an additional 3,500 cyber security positions by January 2017.


Virtual Reality/Augmented Reality (VR/AR)

Augmented Reality, which provides a user the ability to superimpose computer-generated images and data, on the user’s real world view, has seen recent advancements, with regards to optics and 3D mapping abilities.  These innovations are creating real world applications, and we expect to see further usage in the following areas:

  • Aviation & Aeronautics
  • Military & Law Enforcement
  • Education & Training
  • Medical
  • Gaming
  • Robotics

Organizations able to capitalize on AR technology are already experiencing brand recognition, and increased market capitalization.  The Pokemon Go craze is one example of an early adopter, the technology has helped Nintendo reawaken their public image, as they double their market capitalization to $42B in just seven trading sessions since the mobile game was launched. 


3D Printing

3D printing has the capacity to cross into every other sector, and we are already seeing the benefits within areas of: technology, communications, manufacturing and robotics.  We expect real world implementation within the medical and healthcare fields on larger scales as the practices becomes commonly acceptable.  Siemens predicts: 3D printing will become 50% cheaper and up to 400% faster in the next five years; expected to surpass $8.3B in global market by 2023.  As the automotive industry in the United States heads towards an average fuel consumption mandate of 54.5 miles per gallon, by 2025, 3D printing may be the key.  According to Mallikarjun Huralikoppi of NS-3DS a 3D consultant, 3D printers are now equipped to print more than just plastic, and have been used to print materials ranging from carbon fiber to human tissue.  



According to PwC; the global market for commercial application for drone technology is estimated to be $2B, and expected to grow exponentially to $127B by 2020.  Although drones have started to make an impact outside of military applications, they have not penetrated mainstream markets, due to the lag on legislation overseeing unmanned aerial vehicles.  Drones have become relatively inexpensive to make, and we see this trend continuing as demand for drone technology increases.  As Amazon, Walmart and other retailers experiment with Drone technology, this could spell bad news for shipping and logistic companies such as FedEx and UPS, as the industry has recently seen an influx of start-ups specializing in shipping and logistics.


Digital Marketing

Given global internet penetration and mobile internet usage at an all-time high, current trend suggest digital marketing will surpass television over the next 5 years. Our belief is based on the ability to collect data about the consumer, and the quality of this data.  With television and print media, there is little feedback to prove the success of the marketing campaign, whereas digital marketing allows the content creator to filter through multiple variables.  Digital media comes in many forms, from pop-up advertisements, to social media.  It is our opinion companies using social media effectively, by building a network of followers stand to succeed in this area. 


Robotics and Automation

According to the International Federation of Robotics; in 2014 robotic sales increased by 29%, with 70% of global robot sales going to 5 countries: China, Japan, United States of America, the Republic of Korea and Germany.  The majority of these sales are utilized in the automotive industry, followed closely by the manufacturing of electronic devices.  Given the reliability of robotics, and their negative correlation to the cost of human capital; it is in our opinion this move towards automation will continue with similar trajectory.


Mobile Internet Connectivity

Kaushik Basu, World Bank Chief Economist, recently stated “the digital revolution is transforming the world, aiding information flows, and facilitating the rise of developing nations that are able to take advantage of these new opportunities.”  A perfect example was recently highlighted by the State Bank of India Chairman, Arundhati Bhatacharya, at the Consulate General of India in New York, as Bhatacharya talked about the impact investment made by SBI in rural villages, providing Wi-Fi access to communities, on a path towards a cashless society.  Other examples supporting the growth of this segment are highlighted by increased mobile connectivity amongst all age groups, gaming, and healthcare and wellness monitoring.  



Solar technology first discovered over a century ago, has seen widespread availability in residential homes over the last decade, and is currently the fastest growing segment within the energy sector.  With companies from Walmart to Apple making commitments to go green, at SWM we believe companies specializing in solar technology for commercial and residential application should continue to grow at a faster pace than seen over the last decade.  The rationale behind this growth is focused in 2 main areas: brand recognition as a socially responsible business, and the decreasing cost of solar technology.  As we continue to see technological advancements in this area, and implementation around the globe, we expect to see solar technology in areas we have not seen before, powering personal computers and electronics, to transparent solar technology placed over windows and roads, as are currently being used in the Netherlands.  When power storage solutions such as home batteries have the ability to store power, we expect to see a further increase in the area of solar technology. 

Autonomous Vehicles (AV)

According to Mckinsey & Company; “it is unlikely that any on-road vehicles will feature fully autonomous drive technology in the short term,” however, automotive manufacturers are currently investing in driver assisted technology.  Tesla (TSLA) has recently made autonomous driving a reality, and this trend is expected to continue as competitors enter the market, pushing the price level down.


CCS Insight reports the global wearable market will reach $14B this year, and is further expected to grow to $34B by 2020.  Wearables represent a segment connecting the user to health and wellness, media, retail and jewelry via technology.  With Virtual Reality and gaming joining the wearables segment, this segment continues to look attractive.  Once commercial applications have been integrated, and become mainstream in terms of training and simulation, we believe the wearables market will surpass previous expectations.



President Trump has indicated a repeal of the Affordable Care Act, we believe this is highly unlikely, and the Healthcare Sector will continue to see double digit growth in 2017.  Although we do expect to see some changes to the Affordable Care Act, these changes would assist the Healthcare Sector.  The most favorable of these prospective changes would be some form of Health Savings Account, allowing individuals to dedicate tax deferred income specifically towards their healthcare needs.  Repealing the Affordable Care Act would have a detrimental effect on the economy, at risk would be (1) 20 million Americans would lose healthcare coverage, as a result the insurance companies would lose 20 million customers; (2) Insurance companies would lose Federal Subsidies, they have calculated into their projections, given the large capital investments they made with the advent of the Affordable Care Act; (3) The Government would lose the $13.9 Billion in Affordable Care Act tax income.


With an aging population, and increased global wealth and healthcare awareness, the healthcare sector looks to be a good investment over 2017.  Pharmaceutical pricing could come under scrutiny with the Trump Administration looking to make improvements to the Affordable Care Act.

 Source: BlackRock

Source: BlackRock

As technology impacts the world of medicine, and emergency response, we have witnessed some innovative ideas come to market.  Most recently, Rata Tata Chairman of the Tata Sons invested into the startup MUrgency Inc (pronounced Emergency).  A mobile platform in the form of an app that makes emergency response available with one tap on a mobile phone, in under 9 minutes in urban areas.  Although the one tap costs 350 INR, which converts to approximately $5.13 USD, the strategy is focused on building market share, and popularity.



With President Trump’s promise of expansionary fiscal policy, we expect Industrials to see a boost.  With the prospect of a $1 trillion investment in infrastructure over the next decade, lower corporate taxes boosting business investment, and increased military spending, the near future looks good for Industrials.  However, the Trump administration may be able to affect the industrial sector, however, it is unlikely they will be able to bring back any manufacturing jobs.  Since the Presidential Election, many CEO’s have come forward and talked about keeping jobs in the United States, and the creation of new domestic jobs.  However, these CEO’s seem to only tell part of the story.  Recently Ginni Rometty, CEO of IBM, announced the creation of 25,000 new jobs, in the United States.  Unfortunately, there was no mention of the recent layoffs at IBM.  A similar story with Ford, as they cancelled plans for a Mexico plant.  President Trump failed to acknowledge that Ford had already planned to bring 700 new jobs to the United States, prior to him winning the Presidential Election.   

The real story with manufacturing is, President Trump has little control over jobs that have been lost in manufacturing over the last two decades.  These jobs have been lost due to three reasons: (1) Automation, advances in technology and robotics has made it more cost effective for human capital to be replaced by robots; (2) Offshoring, these jobs have gone to countries where labor is far cheaper than it is in the United States.  Although these jobs could come back, it is unlikely that consumers would be willing to pay the additional cost incurred by domestic labor; (3) A combination of Automation and Offshoring: although it may be cheaper to create goods in a country like China where the cost of labor is significantly cheaper than it is here in the United States, we can simply not compete with robotics operations that have been off-shored. 


Fixed Income

With increases in inflation, we will undoubtedly see increases in key interest rates, as the Fed acts upon its mandate for steady inflation.  Increases in interest rates will lead towards investments flowing out of fixed income, and into cash and dividend yielding equities.  Higher inflation has caused risk-free income to vanish, causing investors to look elsewhere for yield.

Although the Fed may not move as soon as some speculators may believe, interest rate increases are already priced in ahead of Fed decisions.  It is our consensus to move away from treasuries, and invest in TIPS (Treasury Inflation-Protected Securities), high-yield corporate, and select emerging market sovereign debt on a currency hedged basis.

  • TIPS
    • As long-term rates rise in an improving economy, credit is more attractive than duration.  As inflation increases TIPS maybe the closest return to a risk-free investment.  Conservative investors should look towards TIPS, as they protect from the eroding effects of inflation.  

Price Impact of a 1% Change in interest rates

 Source: J. P. Morgan Asset Management

Source: J. P. Morgan Asset Management

  • High-Yield Corporate Bonds
    • Although inflationary increases, and rising interest rates are bad news for High-Yield, growing demand and declines in default rates help the cause of high-yield, making it a good recommendation for the year ahead.  Investors of high-yield in 2016 witnessed a 17.5% return.  We recommend conservative investors look towards allocating to both high-yield and investment grade corporate bonds.


  • Emerging Market Sovereign Debt
    •  Although EM bonds are threatened by the strengthening greenback, sovereign emerging market debt with attractive valuations purchased with a currency hedged strategy, look to be a good bet for the long-term investor.

Alternative Investments

A traditional "60/40" allocation to stocks and bonds may no longer be enough to provide you with the returns and diversification needed to achieve your long-term goals.  Since 1990, most portfolios carried predominantly equity risk: a 60/40 portfolio moved in the same direction as the S&P 500 Index 99% of the time.



With gold seeing an increase of 8.6% in 2016, we expect gold to see an increase of 7% in 2017, with an average price of $1350.  However, President Trumps policies are already causing volatility in the political landscape, we expect to see some investors move out of equities and fixed income into cash and alternatives, potentially pushing gold up to $1400.  We however, do not expect to see gold reach new highs.


Industrial Metals

As silver trades, significantly below its average, 2017 could see a 5% plus year for silver.  However, we expect palladium and platinum to see the biggest gains, with expectations of improving demand and rises in automotive sales. 


Crude Oil

We expect WTI to average $56/bbl while Brent averages $58/bbl.  Although global demand is expected to see an increase, technology in mining, and refining will keep up with the additional demand.  One Caveat to this rule would President Trump’s promise to strengthen the military.  A significant increase in the size of the United States Military would increase demand, and push prices higher, as the United States military is the largest consumer of fossil fuels in the world. 


 Source: J. P. Morgan Asset Management

Source: J. P. Morgan Asset Management

Real Estate

Although global real estate will feel the effects of rising interest rates, with rates hovering at historic lows for so long, we doubt global real estate will affect the commercial market, although individual home buyer’s may feel the pinch.  From an investment point of view, we recommend REIT’s in Australia, Hong Kong and Singapore.  Domestically, we recommend staying away from the metropolitan areas, and looking for value in residential secondary and tertiary cities, as well as sector specific REIT’s in the healthcare sector.


Hedge Funds

During times of uncertainty and market volatility, Hedge Funds can help dampen the risk in a portfolio, while providing opportunities for higher return.  2017 looks to be a good year for Hedge Funds, as we expect interest rates to rise, and increases in volatility coming from an out of sync relationship between the White House and the Financial Markets.  The HFRI Fund Weighted Composite Index returned 14 percent annually from 1990 to 2006, however, since then, it has returned 3.4% up until 2016.  During times of market volatility, the HFRI has allowed investors to profit, while reducing the volatility of their portfolios.  The following graph shows how Harvard University is investing in Alternative investments, allocating 14% of $35.7B in 2016 towards Hedge Funds. 

 Source: Bloomberg

Source: Bloomberg







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Important Disclaimer









All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed.  All economic and performance data is historical and not indicative of future results.  All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. The information and material contained herein is of a general nature and is intended for educational purposes only.  This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Before investing or using any strategy, individuals should consult with their tax, legal, or financial advisor

Samra Wealth Management, A Member of Advisory Services Network, LLC
















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2016’s Biggest “Unseen” Concerns...

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2016’s Biggest “Unseen” Concerns...

There is no doubt 2016 has been a rollercoaster year, a year where uncertainty has plagued the political and economic environment.  Although the quantifiable data and statistics from government departments (The Department of labor; The Department of Commerce; The Federal Reserve) have shown steady improvements:  it is now apparent that these statistics are not uniform across our economy.  A decrease in the unemployment rate to 4.6% the lowest jobless rate since August 2007, has not decreased uniformly across the United States, with rust belt states such as West Virginia and Pennsylvania trailing the nation with unemployment rates of 6.0% and 5.7% respectively.  The Bureau of Economic Analysis also indicates West Virginia and Pennsylvania per capita income has grown at2.5% and 3.8%, far below the national rate of 4.5%.  A Trump victory, however, has boosted consumer confidence, in these states, as the index climbed to 113.7 in December, a 15 year high.  Given Donald Trumps ‘Wall St. friendly demeanor’, the year ahead looks promising to investors of equities, and we have identified our sector and geographical confidence in our “Year Ahead” commentary report to be released in January.  

The media in 2016 focused on many issues, however, left investors underserved in areas that will impact the majority of investors.  We have identified the following 5 areas of concern:

  • Investing without a Plan
  • The Case Against Robo-Advisors
  • The Department of Labor Fiduciary Rule
  • Hidden Fees (Capital Gains)
  • Tax Loss Harvesting

The biggest hurdle for investors over the last two decades has been mixed market performance, consisting of 9.3% annualized returns; 3 cumulative years of declines over 10% (-10.14 in 2000; -13.04 in 2001; -23.37%), and a perfect storm scenario in 2008 with a market decline of 38.49%.  Inconsistent returns have caused fear in many investors, who have chosen to stay on the sidelines, and invested in low-yielding CD’s and Annuities, or have stayed out of the markets entirely, holding cash.  With the financial media causing unnecessary concerns, with talks of “market-bubbles”, the fact is, in the last two decades the market has returned annualized returns of 9.3% (with dividends reinvested), and a cumulative return of 597.58% (with dividends reinvested), results far better than what the average investor expects, or by the low guarantee, typically 3.5%, provided on variable annuities.  At Samra Wealth Management, we understand the importance of investing with a plan, and ensure every client has a dynamic goals-based financial plan, customized with their personal and financial goals.  This approach helps takes the “guess work” out of investing, and allows us to quantify for our clients, the progression towards reaching their financial goals.  This method of financial planning allows investors to invest with goals in mind, and helps to eliminate the emotional component of long-term investing, by planning for more than just investment returns, as investors often overlook the importance of Trust & Estate Planning; Wealth Transfer Strategies, Long-Term Care & Disability Planning, Asset Protection and Tax Efficiency Planning. 

Increased adoption of FinTech (Financial Technology), and the need for financial services firms to increase profitability has led to the advent of Robo Advisors.  A class of financial advisor that provide financial advice or portfolio management online with minimal human intervention.  Robo Advisors appeal to millennials, and to those with investable assets of less than $250,000.  Although this technology will cannibalize segments of the wealth management industry, investors with over $1 million of assets, tend to have sophisticated needs, that are beyond the capability of Robo Advisors.  With the large brokerage firms doubling-down on the capital investment needed for this platform in a hope to capture additional client segments, they may be making the mistake many other institutions have made prior with the implementation of technology: diluting their brand.  As sophisticated investors come to realize their investments are managed alongside their mailman's retirement plan, these sophisticated investors will look elsewhere for wealth management. 

With the Department of Labor’s “Fiduciary Rule” set to come in to effect, in April of 2017, this will start the overhaul of past financial advisor practices, and bring more attention to how financial advisors are compensated.  This change is long overdue, as it is not unheard of, for salespeople to enter the insurance industry, where few barriers exist.  Insurance sales staff, are able to represent themselves as financial advisors, and benefit from the comparatively high compensation paid out by variable annuities and other insurance products, without disclosing compensation to the client.  Technically, insurance salesman are not directly paid a commission, however, they receive compensation on the sale of insurance products, directly from the insurance company.  Typically, the sale of a variable annuity contract, can earn the advisor 5-8% of the initial contract value, while charging the client up to 2% a year for investment management, an additional 1.4% for (M&E) Mortality & Expense, and additional charges for added waivers.  The DOL’s Fiduciary Rule would require Financial Advisor to fully disclose their compensation to the client, when discussing retirement funds. 

Hidden fee’s are not only abundant within annuities, and are oftentimes overlooked in mutual funds.  These fee’s can be broken down into 4 categories: (1) Transactional Costs: essentially the cost of trading.  In the United States, these fees average 1.44%  (2) Expense Ratio: the cost of marketing, and management of the fund.  On average these expenses cost investors 0.90% each year.  (3) Brokerage Commissions: Typically, most individual investors are sold either a “Class A” or “Class C” Mutual fund.  “Class A” mutual funds can charge clients up to 5.75% as an upfront fee, while “Class C” mutual funds do not charge an upfront fee, however, do charge a higher annual expense over 2%. (4) Capital Gains: are the funds paid out by the mutual fund once they have sold a position, and are typically deducted from the mutual fund, annually, in December.  Unfortunately, most investors are unaware of these fee’s as mutual fund companies provide fee disclosures, hidden within hundreds of pages of the annual fund prospectus.  Furthermore, capital gains distributions can not be determined until the end of the year. 

Loss of portfolio values come not only from market losses and fee’s, however, from tax inefficiencies. Investors of mutual funds do not have the benefit of tax loss harvesting, the practice of selling a security that has experienced a loss, to offset a gain or income, since investors of mutual funds own a share of the mutual fund, and not own the underlying securities.  Most investors, are unaware of this strategy, and as a result, do not profit due to tax inefficiencies, in their wealth management strategies. 

2017 looks to be a promising year for investors, and the financial industry, however: investors of mutual funds and annuities should remain cautious, given their inefficient wealth management strategies. 








All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed.  All economic and performance data is historical and not indicative of future results.  All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. The information and material contained herein is of a general nature and is intended for educational purposes only.  This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Before investing or using any strategy, individuals should consult with their tax, legal, or financial advisor

Samra Wealth Management, A Member of Advisory Services Network, LLC is not in the business of providing tax or legal advice, and any information contained within, is for the purpose of commentary, and not advice.  Prior to acting on any information contained in this publication, it is recommended you consult with your tax advisor or legal counsel.

Samra Wealth Management, A Member of Advisory Services Network, LLC