The Uncertainty ahead...

The Uncertainty ahead...

As we approach year end, there are more factors of concern than there have been during any other time since the great recession.  The key word seems to be uncertainty:  continued political uncertainty; uncertainty over the FOMC’s lack of interest rate direction, and uncertainty of whether the second longest bull market in history, will head into it’s 8th year.  These uncertainties combined with the likelihood of inflation to push higher, will undoubtedly cause confusion as well as opportunity in the months ahead.

Although the media polls have Clinton with a 5 point lead, over Trump, with only 8 days remaining until the election.  At Samra Wealth Management, our duty is to act in the best interest of our clients, ignore the media, and concentrate on quantitative data and facts.  We remain confident in our prior months consensus, with Clinton’s momentum continuing to rise, and a Donald Trump victory not priced into the markets.  A Trump victory would likely cause short-term volatility, which we are not seeing; as Trump loses momentum in both Florida and Ohio.  Given our prediction of a Clinton win, it is important to remember a Republican majority in the house and senate, will not make for a significant change in legislation, with a Democratic win.  Our research indicates Technology, Healthcare and Industrials will lead sector performance, and we have pulled back from our prior month conviction in Consumer Staples.  

With the Federal Open Market Committee missing another opportunity to raise interest rates, it is unlikely we will see a rate increase in November, and we double down on our July prediction of a 0.25% increase in December.  An increase in key interest rates would also have an impact on other areas.  We recommend decreasing exposure to treasuries, and increasing allocation in TIPS, Insurance Companies, and Banks.  As the USD strengthens over foreign currencies, the impact will negatively effect trade, as domestic products increase in price for foreign buyers.  As opposed to directly investing in foreign markets, we recommend investing in US companies with strong exposure to foreign markets, limiting the currency risk.  Although firms such as Proctor & Gamble, Johnson & Johnson and Pfizer have lucrative foreign sales, they physically sell products in foreign markets.  In January 2015, Pfizer estimated that it would lose $2.8B from unfavorable currency swings.  The chart below shows: how some big American corporations that get half of their sales abroad reported weak 2015 quarterly results and lowered forecasts for the year, partly because of the impact of a strong dollar.

Alternatively, this risk is, to some degree, manageable: as companies utilize currency hedging as a way to limit these losses.  McDonalds Restaurant may be thebest example of a company managing foreign exchange risk, as McDonalds currently has locations in 119 countries world wide, and although domestic sales are on the decline, the fast-food chain continues to see better growth overseas.  Although only half of all publicly traded companies with foreign exposure hedge their currency risk, those companies utilizing successful currency hedging strategies stand to gain domestically, from offshore profitability.

As we are well into the second longest bull market run in history, the media barrage of “bursting bubbles” appears to be well over-hyped.  “Low, but rising interest rate expectations, modest inflation and a strong dollar are good for stocks”.  Given our research we have strong conviction within the following areas: 

Healthcare: The healthcare industry is close to all-time low valuations, trading at 15 times earnings, and poised for further growth under a Clinton win.  Although fears of drug pricing has recently come under scrutiny with Mylan’s EpiPen, it is unlikely with a Republican leaning Congress we will see any drug pricing reform.  As baby boomers continue to transition into retirement, we expect their increasing need of healthcare to further strengthen our view on the industry.  

Information Technology: With strong balance sheets, stable earnings and stockpiles of cash, the IT sector is poised for global growth.  In our July newsletter, “The Tech Edition”, we focused on 10 areas of IT we expect to see strong growth.  Continuing on this theme, we expect digital data, robotics and automation to be the driving force amongst technology: given the increasing need for cyber security, and advancements in automation and 3-D printing.  With IT being less sensitive to the dollar, this sector warrants increased portfolio allocation.

Telecom Services: With bond yields continuing to suffer, a rise in interest rates suggest movement out of fixed income, and into equity areas providing reasonable dividend yields.  Telecom is likely to provide an increasing yield as we see increases in interest rates, and moderate increases in inflation.  

Real Estate: As an alternative investment, real estate tends to have low correlation to the market, making it appropriate for most investor, to help dampen volatility, as the graph below shows.  However, this month, real estate was labeled as a stand-alone sector by Standard & Poor’s and MSCI, making it relatively more attractive. 

Screen Shot 2016-10-31 at 1.52.30 PM.png

Given the uncertainty in the months ahead, we continue to recommend managed strategies over passive themes.  For those investors who are unable to stomach the volatility we recommend an introduction to Alternative Investment’s, as a way to help dampen the volatility, given the low correlation Alternative Investments have with the market. 

 

 

 

 

 

 

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

How to Position your Portfolio for the Presidential Election and Beyond...

How to position your Portfolio for the Presidential Election and beyond...

Given the lack of volatility of late, investors have reason to be concerned, with the uncertainty plaguing: the presidential election, a definitive answer from the Fed regarding an interest hike, and how to position a portfolio to weather the results of the November election.  This month’s issue of The Samra Report will provide our opinion on the direction of the presidential election, a prediction on the Fed’s interest rate decision, and how to position your portfolio given these factors, and beyond.

With the first presidential debate proving no-clear winner, we believe media risk is playing too large of a part in the current assessment of the presidential candidates.  With US media predictions aside, we believe the most likely outcome is a democratic win, favoring Clinton (69%) to Trump (28%).  Our reasoning behind this prediction:

  • During the 2012 presidential race, given the same duration to the election, at this point in time, Mitt Romney trailed Barack Obama 44.4% to 48.2,  to the 47.2 to 44.3 lead Hilary Clinton holds over Donald Trump. 
  • British bookmakers place current odds, after the first debate in favor of Hilary Clinton 4/9, over Donald Trump 7/4.

Given the June surprise of the UK’s referendum vote, our recommendation is to ensure our client’s portfolios are allocated to dampen volatility, regardless of the election outcome.  The below chart, strengthens our conviction to overweight Technology, Healthcare and Consumer Materials over the S&P 500, as the chart shows average relative sector performance during Republican vs. Democratic presidents, from 1973 to 2015.

During the September FOMC meeting, a divided Fed held interest rates unchanged.  Although not an unexpected move, with inflation and unemployment within the Fed’s target range, and the market up approximately 8% year-to-date, the decision to not hike rates in December, could prompt inflation to climb above the Fed’s target range, given full employment, and signs of higher wages.  At Samra Wealth Management, it is in our opinion the Fed should raise interest rates come December.  A delay in a rate hike, prompts the question: “is the US economy so fragile, that it cannot tolerate a 25bps raise by year-end. 

The Intelligent Investor by Benjamin Graham, the finest publication on value investing, led investors to believe a conservative allocation consisted of a portfolio made up of a 25% equity to 75% fixed-income allocation.  Although this may have served investors well up until the turn of the millennium, given the volatility of recent, this advice from Warren Buffett’s Columbia professor is now outdated.  The truth is, a conservative portfolio can consist of up to 100% invested in stock, however, this does not hold true for portfolio’s consisting of 100% fixed income, expecting a real-return after inflation, given interest rate risk.  Our recommendation to our investors is to use a researched based, actively managed portfolio, positioning their strategy to meet the goals identified by their dynamic financial plan, for their core strategy.  There are a few concerns with this approach:

  • Research that shows active managers underperforming passive investments.
  • Alternative Investments dampen returns as well as volatility
  • Benchmarks like the S&P are outperforming retail investors.

The age old debate: Actively Managed vs. Passively Managed... The truth is, in this context, passively managed investments do outperform actively managed investments.  However, this argument has gained momentum due to the large media interference, further confusing retail investors.  If we take a deeper look into this argument, the question arises: “what is the criteria of an active investment vehicle?”  The answer in two parts: (1) the investment is typically, a mutual fund, separately managed account, or ETF portfolio; (2) the investment is named an actively managed strategy, or make mention of an active philosophy in the investment description.  Given these parameters, actively managed, does not necessarily mean an investment is actively managed.  True actively managed strategies are measured by their active share ratio, a measure in percent, active share represents the portion of portfolio holdings that differ from its benchmark holdings.  That being said, true actively managed investment vehicles, those portfolios with an active share ratio of greater than 60% beat their benchmark, after fees, across all markets cycles studied, 62% of the time, with a better downside capture, providing a higher sharp ratio (risk-free return).

At Samra Wealth Management we recommend alternative investments as a method to help dampen portfolio volatility, and to provide our clients with peace of mind, and conviction during market downturns.  However, although alternative investments, such as commodities, real estate and hedge funds typically appreciate in value during market downturns, they can also dampen gains during a bull market. 

With retail investors typically comparing their portfolio performance against the S&P 500, we advise our clients to instead compare their performance against a benchmark better suited to their risk tolerance.  At Samra Wealth Management we create our client’s portfolios to correlate to the risk-tolerance reflected by the client’s dynamic financial plan, and compare returns to the adequate Dow Jones Relative Risk Index.  

 

 

 

 

 

 

 

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.

Recessionary Fears

  Recessionary Fears   The S&P 500, Dow and NASDAQ surged to all times highs this month, as oil rallied 10% to $48.52, raising the question: “how long can this last”.  As fears of recession worry investors, at Samra Wealth Management; we believe these fears have little ground in the short-term, given: strong fundamentals, decreasing unemployment, and increasing investor sentiment.  However, investors should be cautious, as we expect rough waters at the tail-end of 2017, into 2018; based on personal income levels, we predict to fall for a large portion of Americans.  Given the current economic climate, we look to project the effects of an interest rate decision by the Fed.  Corporate earnings have continued to post strong and consistent results, as over 90% of the S&P posted their Q2 earnings, with 70% beating their mean earnings estimates, led by: information technology and healthcare.  However, these results are to be expected: since the early 2000’s most corporations have streamlined operations, to run efficiently; replacing staff with technology, while eliminating unprofitable operations.  Examples range from the manufacturing sector with robotics replacing human capital, to the service industry, with fast-food restaurants such as McDonalds and Panera bread introducing self-service kiosks to their customers.  In the short-term these changes provide greater opportunity in terms of profitability: after the initial investment in technology has been made, it replaces human capital, and is depreciated through accelerated depreciation, drastically reducing the cost of goods sold, and human error, while allowing operations to run at a maximum sustained level of output.   On the jobs front: in the short-term we believe unemployment will continue on a downward trajectory, however, our long-term opinion; we stand cautious ofunemployment given the jobs landscape is experiencing a shift.  Technology is replacing the dependence on human capital, globalization is consolidating operations, while retail sales shift to online sales away from traditional brick and mortar.  Inevitably these changes in infrastructure will lead to a decrease in demand for labor, lower income generated from labor, and lower consumer confidence.  We do not expect a uniform drop in per capita income, as the upper middle class and above will expect to see their income and wealth increase from alternative sources such as inheritance, income derived from retirement plans and pensions, and the sale of assets to fund retirement, or to downsize to more manageable housing.  Decreases in income levels will effect those below the poverty line, as well as the lower middle class, leading to increases in government transfer payments, decreases in consumption spending and decreased personal savings and investment.  On the supply side of the equation, the cost of education continues to rise at a faster pace than inflation, with college tuition increasing 146% since January 2000.   With 38 million Americans living with student debt, the debt level of student loans has surpassed $1 trillion.  Prospective students are now considering alternative paths, opting for vocational training, and educating themselves with publicly available sources such as Coursera, an open-source platform that allows the student to take courses from some of the most renowned educational institutes, such as Stanford, MIT and Wharton to name a few, at no cost.  Students are provided with the knowledge, however, come away without a diploma, and without incurring any debt.  The cost of education combined with decreased salaries, has aided in the start-up revolution, originating in Silicon Valley, and spreading across the most rural areas of the US.  The search for higher wages is leading to migration and a push towards advanced degrees as the top 25 highest paying jobs require at the minimum a 4 year college degree.   In our June issue of The Samra Report, we predicted the Fed will increase interest rates by year end, however, we believe this action will come too late, and the Fed has missed the opportunity to raise interest rates when it would have had little impact to the US economy, however, an increase in interest rates by December 2016 will lead to strengthening of the US Dollar, lowering exports, and lower corporate income from foreign operations due to currency risk.  Regardless, our consensus is that the Fed will raise interest rates, and the raise will continue gradually until the Federal Funds Rate surpasses 1%.               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

Recessionary Fears

The S&P 500, Dow and NASDAQ surged to all times highs this month, as oil rallied 10% to $48.52, raising the question: “how long can this last”.  As fears of recession worry investors, at Samra Wealth Management; we believe these fears have little ground in the short-term, given: strong fundamentals, decreasing unemployment, and increasing investor sentiment.  However, investors should be cautious, as we expect rough waters at the tail-end of 2017, into 2018; based on personal income levels, we predict to fall for a large portion of Americans.  Given the current economic climate, we look to project the effects of an interest rate decision by the Fed.

Corporate earnings have continued to post strong and consistent results, as over 90% of the S&P posted their Q2 earnings, with 70% beating their mean earnings estimates, led by: information technology and healthcare.  However, these results are to be expected: since the early 2000’s most corporations have streamlined operations, to run efficiently; replacing staff with technology, while eliminating unprofitable operations.  Examples range from the manufacturing sector with robotics replacing human capital, to the service industry, with fast-food restaurants such as McDonalds and Panera bread introducing self-service kiosks to their customers.  In the short-term these changes provide greater opportunity in terms of profitability: after the initial investment in technology has been made, it replaces human capital, and is depreciated through accelerated depreciation, drastically reducing the cost of goods sold, and human error, while allowing operations to run at a maximum sustained level of output. 

On the jobs front: in the short-term we believe unemployment will continue on a downward trajectory, however, our long-term opinion; we stand cautious ofunemployment given the jobs landscape is experiencing a shift.  Technology is replacing the dependence on human capital, globalization is consolidating operations, while retail sales shift to online sales away from traditional brick and mortar.  Inevitably these changes in infrastructure will lead to a decrease in demand for labor, lower income generated from labor, and lower consumer confidence.  We do not expect a uniform drop in per capita income, as the upper middle class and above will expect to see their income and wealth increase from alternative sources such as inheritance, income derived from retirement plans and pensions, and the sale of assets to fund retirement, or to downsize to more manageable housing.  Decreases in income levels will effect those below the poverty line, as well as the lower middle class, leading to increases in government transfer payments, decreases in consumption spending and decreased personal savings and investment.

On the supply side of the equation, the cost of education continues to rise at a faster pace than inflation, with college tuition increasing 146% since January 2000.   With 38 million Americans living with student debt, the debt level of student loans has surpassed $1 trillion.  Prospective students are now considering alternative paths, opting for vocational training, and educating themselves with publicly available sources such as Coursera, an open-source platform that allows the student to take courses from some of the most renowned educational institutes, such as Stanford, MIT and Wharton to name a few, at no cost.  Students are provided with the knowledge, however, come away without a diploma, and without incurring any debt.  The cost of education combined with decreased salaries, has aided in the start-up revolution, originating in Silicon Valley, and spreading across the most rural areas of the US.  The search for higher wages is leading to migration and a push towards advanced degrees as the top 25 highest paying jobs require at the minimum a 4 year college degree. 

In our June issue of The Samra Report, we predicted the Fed will increase interest rates by year end, however, we believe this action will come too late, and the Fed has missed the opportunity to raise interest rates when it would have had little impact to the US economy, however, an increase in interest rates by December 2016 will lead to strengthening of the US Dollar, lowering exports, and lower corporate income from foreign operations due to currency risk.  Regardless, our consensus is that the Fed will raise interest rates, and the raise will continue gradually until the Federal Funds Rate surpasses 1%. 

 

 

 

 

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

The Tech Edition

Tech Update

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.

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 platforms 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.

Augmented Reality (AR): Augmented Reality, which provides a user the ability to superimpose computer-generated images and data, on the users 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 fibre to human tissue.  

Drones: 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 trends 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 robots 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: 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 rational 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.

Wearables: 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.

 

 

 

 

 

 

 

 

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

The Brexit edition

  The Brexit Edition   On June 23, British voters voted in favor of referendum, opting for a quick divorce from the EU.  The aftermath of the vote was heard around the world, and rattled global markets, as the probability of referendum by most analyst fluctuated between 15% - 40%.  The unexpected referendum has caused panic, with investors looking for a safe haven.  We expect market volatility to continue for the remainder of the year, with the following areas of interest:       • Political Uncertainty in the UK.       • Lower Growth in the EU       • Interest Rate Direction by the Fed.       • The US Presidential Election  With British Prime Minister David Cameron set to exit Number 10 Downing Street, the conservative party looks towards new leadership.  The UK now faces a new challenge of finding a worthy leader, and unfortunately the candidates seem to lack favor as well as charisma.  New leadership and direction is a must, as the big banks have discussed moving operations from London to other areas of Europe.  With the UK expected to lose jobs, the EU will not escape unscathed,as we expect a decline in Eurozone GDP.  In the aftermath of the referendum vote, both Standard & Poor’s and Fitch downgraded the United Kingdoms credit rating from AAA to AA (AA+ to AA).   We expect the Federal Reserve to leave interest rates untouched for the remainder of the year, and although some analyst have predicted the probability of an interest rate cut, at Samra Wealth Management we find this unlikely, and unwarranted, given the Fed’s mandate to promote maximum employment, stable prices and moderate long-term interest rates.  Although it is not the role of the Fed to maximize corporate earnings, this would not be the first time we have seen the Fed overstep its mandate.   For investors of US equities, we expect the volatility to continue for the remainder of the year with uncertainty in the race for thePresidency, as polls show Hillary Clinton, edging out Donald Trump by a margin of 5 points.  We continue to keep a close eye on select sectors, as we expect to see a decline in financials, and energy, if democrats remain in the White House.    Given recent events, we emphasize the importance of portfolio rebalancing, diversification across asset classes, and the inclusion of Alternative Investments (AI) to help dampen volatility.  As currency investors look for a safe haven, both the US Dollar and Japanese Yen, continue to show resilience, with spreads increasing against both Pound Sterling, and the Euro. We expect to see further increases in Gold, surpassing the 21% year to date increase, however, we do not expect Gold to reach new highs.  International markets have been rattled, however, the media continues to play a big part in creating widespread panic.  Inexperienced investors are quick to forget the market declines over the past year, when the market descended below 1,900 on 4 occasions.  With the S&P hovering at 2,000, we remind our clients the sky is not falling, and although Britain may be headed towards recession territory, the decline in confidence creates tactical opportunity, while making little to no changes in our clients core portfolios.                   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   

The Brexit Edition

On June 23, British voters voted in favor of referendum, opting for a quick divorce from the EU.  The aftermath of the vote was heard around the world, and rattled global markets, as the probability of referendum by most analyst fluctuated between 15% - 40%.  The unexpected referendum has caused panic, with investors looking for a safe haven.  We expect market volatility to continue for the remainder of the year, with the following areas of interest:

     • Political Uncertainty in the UK.

     • Lower Growth in the EU

     • Interest Rate Direction by the Fed.

     • The US Presidential Election

With British Prime Minister David Cameron set to exit Number 10 Downing Street, the conservative party looks towards new leadership.  The UK now faces a new challenge of finding a worthy leader, and unfortunately the candidates seem to lack favor as well as charisma.  New leadership and direction is a must, as the big banks have discussed moving operations from London to other areas of Europe.  With the UK expected to lose jobs, the EU will not escape unscathed,as we expect a decline in Eurozone GDP.  In the aftermath of the referendum vote, both Standard & Poor’s and Fitch downgraded the United Kingdoms credit rating from AAA to AA (AA+ to AA). 

We expect the Federal Reserve to leave interest rates untouched for the remainder of the year, and although some analyst have predicted the probability of an interest rate cut, at Samra Wealth Management we find this unlikely, and unwarranted, given the Fed’s mandate to promote maximum employment, stable prices and moderate long-term interest rates.  Although it is not the role of the Fed to maximize corporate earnings, this would not be the first time we have seen the Fed overstep its mandate. 

For investors of US equities, we expect the volatility to continue for the remainder of the year with uncertainty in the race for thePresidency, as polls show Hillary Clinton, edging out Donald Trump by a margin of 5 points.  We continue to keep a close eye on select sectors, as we expect to see a decline in financials, and energy, if democrats remain in the White House.  

Given recent events, we emphasize the importance of portfolio rebalancing, diversification across asset classes, and the inclusion of Alternative Investments (AI) to help dampen volatility.  As currency investors look for a safe haven, both the US Dollar and Japanese Yen, continue to show resilience, with spreads increasing against both Pound Sterling, and the Euro. We expect to see further increases in Gold, surpassing the 21% year to date increase, however, we do not expect Gold to reach new highs.

International markets have been rattled, however, the media continues to play a big part in creating widespread panic.  Inexperienced investors are quick to forget the market declines over the past year, when the market descended below 1,900 on 4 occasions.  With the S&P hovering at 2,000, we remind our clients the sky is not falling, and although Britain may be headed towards recession territory, the decline in confidence creates tactical opportunity, while making little to no changes in our clients core portfolios.  

 

 

 

 

 

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