What's On Tap..


Hope all of you are enjoying the dog days of summer. As I sit down to write this week’s edition, I am struck by two numbers: 15 and 13. This year investors who purchased the Barclays U.S. Treasury 20+ Year Bond Index are up by more than 15% year to date. In a world that has seen people buy bonds for appreciation and stocks for income, 13 trillion dollars worth of bonds are now at negative interest rates.

And quietly the S & P, Dow Jones and Nasdaq Composite all rose to all-time highs last week for the first time since 1999. The rally continues to befuddle the most bearish who proclaim that the market has gone up for too long. 

At 90 months, it is now the second longest in American history, having progressed despite a long list of threats including a decline in corporate profits, high valuations and a Federal Reserve rate increase.

With the markets at all-time highs, where should investors look to find value? As we have written recently, U.S. economic reports have been better than forecast. The Bloomberg Economic Surprise index turned positive on July 12th. Stronger July payrolls along with wage increases are giving consumers more confidence and power to spend. In fact, hotels are reporting their second best year in history, following a record 2015.

Against that economic backdrop, the most defensive sectors of the market, such as utilities and telecom, have become the worst performers. We continue to see value in those sectors with low valuations such as financials and select energy companies. Investors also should continue to diversify their portfolios and look at emerging market stocks and bonds, as well as higher paying European equities.

Enjoy the remainder of summer and get ready for a news driven fall with the elections straight ahead.



                                                                    Stephen E. Johnson, JD, CFP®, CPWA®
                                                                   Portfolio Manager, Fundamental Analyst




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