What’s On Tap?
February 11, 2016
Global financial markets remain in a significant negative downtrend that began at the end of 2015. Oil prices continue to dominate the headlines and drive daily if not hourly financial market volatility. As of this writing, WTI Crude Oil is approaching the lows of the year at $26.45. (WTI previously hit a low of $26.68 on January 20th). As oil prices approach their lows for the year, so do the global equity markets and this correlation between oil prices and equity market performance has been very strong during this cycle.
The crash in oil prices has spread throughout the globe negatively affecting the economies of the oil producing nations, deteriorating currencies and impairing financial markets. The High Yield Bond market has been declining due to the lower credits and investor worries tied specifically to energy company debt. Banks have been under tremendous pressure around the globe as investors fret over energy loan exposure on their books and perhaps some off balance sheet debt or derivative exposure that may be lurking behind the scenes. In addition, banks continue to be plagued by the near zero interest rate environment that continues to exist around the globe. Under this environment, banks net interest margin (NIM) remains compressed putting pressure on profitability. The energy debt concerns and the ongoing challenging operating environment for banks have put tremendous pressure on this sector year to date.
Braver’s Tactical investment strategies and models recognized the negative trends that emerged and strengthened at the end of 2015 and proactively began seeking the stability offered by lower risk investments in cash and fixed income. Our Tactical strategies have been defensively postured for the balance of 2016 and as of this writing our cash and/or fixed income exposure in these strategies is as follows:
Braver Investment Strategy % Cash % Fixed Income Total Cash & Fixed Income
Tactical High Income Bond 100% 0% 100%
Tactical Opportunity 65% 20% 85%
Tactical Balanced 50% 25% 75%
Global Tactical Balanced 26% 45% 71%
Tactical Equity Sector Rotation 50% 0% 50%
*Weightings are subject to change.
This market correction that ripped through many sectors in 2015 has accelerated further in 2016 and has extended into most sectors and geographies. Equity valuations around the globe have come down significantly as investors have taken an approach to sell first and ask questions later. Many U.S. and global leading businesses are now selling at reasonable if not cheap levels. However, until some stability can be found in the energy markets, China, global economies and interest rates investors may continue to ignore opportunities being unlocked by this selloff. Buyers are simply not yet emerging. As the markets search for a bottom, our tactical models remain defensively positioned seeking to stabilize portfolios. When the markets do bottom, opportunities around the globe may be plentiful.
Braver is pleased to announce the addition of Christopher S. Deeley, CFA to our portfolio management team. Chris brings to Braver nearly 20 years of investment experience and he will be a member of our investment committee. Chris joins us from LMCG Investments in Boston where he managed globally diversified equity and balanced portfolios for individuals and small institutions. Prior to joining LMCG in 2006, Chris worked for a number of Boston based investment advisors including: Babson Capital, Bingham Legg Advisers, and Congress Asset Management. Chris graduated from Boston College with a Bachelor of Science Degree and went on to earn his MBA from Babson College. He is a Chartered Financial Analyst (CFA) and a member of the Boston Securities Analyst Society.
We are always here to answer any questions you may have. Please feel free to contact Ted Welsh at 617-559-3418 or Andrea Johnson at 617-559-3413 as your initial points of contact.
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