Jan 30 2017
January 30, 2017

2016 – The Rear View Mirror

0 Comment

The 4th quarter of 2016 is now solidly in the rear view mirror.  Thank goodness.  The presidential election exposed raw nerves among the electorate and played havoc with efforts to position portfolios in preparation for the vote outcome.  The day following the election saw an immediate jump in the DOW average and interest rates.  The conversation quickly turned to the DOW running to 20,000 points based on belief that newly elected President Trump would push policies very favorable to business.  Then, he started tweeting and no one was sure what would happen next.  By the end of the year the market has taken a hard turn in the opposite direction.

We increased our gold position in the run up to the election.  Gold turned into a drag on the portfolio immediately following the election and remains in the negative in our accounts.  Gold has made a nice recovery in January but it was the hit on our portfolio in the 4th quarter.  As I write this commentary in the last days of January, the portfolio is up YTD in every position but one.

The morning after the election we added to 3 of our equity positions.  We continue to run without a fixed income position other than a small toe in the water in the inflation protected TIPS.  There is no expectation of adding bonds to the portfolio if interest rates continue their northerly march.  Our bond proxy positions in real estate and utilities took a hit with the turn in interest rates but have recovered and continue to pay healthy dividends.

Our cash position remains on average around 30%.  We are in the 2nd longest bull market on record.  The longest bull market ended with the financial crash in 2008.  The volatility index remains very low.  The lack of volatility often indicates a big change to come.  If the market should continue to go up then we will ride it and add to positions on dips.  Should it turn down then we should see protection for the portfolio in our gold position and the available cash to buy the market on sale.

Issues on the horizon for the market are the strengthening dollar, the currency and debt crises in China, the elections in Europe which threaten the future of the Eurozone, President Trump’s ability to push his policies through the legislative process and the uncertainty of what might be tweeted in the middle of the night.

As always, your questions are welcomed.  Thank you for being our clients and for the trust you have placed in us.