Wealth Management Blog | WrapManager (18)

JP Morgan Evaluates Implications of an Interest Rate Hike

Posted by WrapManager's Investment Policy Committee

June 15, 2017

After a brutal recession and a painfully slow recovery, the U.S. economy no longer needs emergency measures of support from the U.S. Federal Reserve. Policymakers began the process of normalizing monetary policy at the end of 2015, and although the Fed is raising rates because the economy is healthier, the prospect of higher interest rates has created consternation and angst among some investors.

While the Fed’s own projections are for a slow and gradual rate hike cycle, futures pricing suggests that the market thinks interetst rate hikes may be a bit slower. Although the gap between the Fed’s projections and the market’s view has narrowed, there is still room for surprises and volatility. The key thing to watch will be how market expectations adjust to the Fed’s new forecasts, as a Fed that hikes more quickly than the market expects could lead to upward pressure on the U.S. dollar and a de facto tightening for the U.S. economy.

Read the entire commentary here.

When it Comes to Retirement Planning, What’s the Difference Between Needs and Wants?

June 14, 2017

Retirement planning involves more than just saving money in a 401(k) or putting away cash in IRAs here and there. An investor has to consider many other factors: living expenses and cash flow needs throughout one’s lifetime (as well as a spouse’s lifetime, if applicable), health care spending and how that can change over time, Social Security timing decisions, estate planning, and tax strategies. It can be a lot of work. When it comes to planning for living expenses and cash flow needs (spending), one beneficial exercise can be to categorize your assets/goals into 'needs,' 'wants,' and 'legacy' items. The next step would be to think about how your retirement plan can be used to fund each category, starting with your needs first. [+] Read More

BlackRock Evaluates Emerging Markets and European Equities

June 8, 2017

When contrarian becomes consensus... Many investors have flocked to emerging market (EM) and European equities this year, as money has broadly flowed back into risk assets. Our analysis suggests these equity trades are becoming consensus, and EM and European stocks are no longer the contrarian trades that they were for much of 2016. Read the three key points of BlackRock's weekly commentary below, or view the entire four-page weekly investment commentary now. [+] Read More

Chasing Heat? You May Get Burned.

June 7, 2017

The Information Technology sector has been on a roll so far in 2017. The returns for the sector year-to-date are nothing short of eye-opening: as of May 30, Information Technology has returned just over 20%, which puts it fairly far ahead of the next best performer, Consumer Discretionary (+11.52%). By comparison, the broad S&P 500 index is up a much lesser +7.7%, which while strong is still pretty modest compared to technology’s run.1 This strong performance has some investors scrambling to beef-up their investment portfolio’s technology holdings, in an effort to ‘join the party’ so to speak. But investors should take pause before rushing to buy more technology stocks. Doing so would essentially mean “chasing heat,” which is just another version of market timing– a tactic that is not necessarily advisable for the long-term investor. [+] Read More

Nuveen Evaluates Investor Skepticism

June 1, 2017

Global Equity Prices Should Trend Unevenly Higher Many investors remain uneasy about the global macro backdrop, despite accelerating global economic growth, low inflation, accommodative global monetary policy and solid corporate earnings. Concerns about possible recession and deflation remain, and many investors are continuing a flight to quality, which is causing global bond yields to remain at exceptionally low levels. At the same time, disappointing U.S. economic data and mounting concerns over political instability in Washington, D.C. have held back equity prices and the value of the U.S. dollar. Read an excerpt of the complete commentary below, or download the entire investment commentary as a PDF. [+] Read More

The 4-Step Action Plan if You’re Worried About Your Investment Portfolio

May 31, 2017

It is an interesting time in the United States’ sociopolitical sphere, to say the least. But lucky for you, this article isn’t about politics, a social movement, or anything in the news for that matter. It is about what to do if you start to get worried about how the equities and/or bond markets may react to ongoing developments and potential controversies. In the current environment, it is the uncertainty that has many investors on edge. For some, every day may feel like it has the potential for some breaking story that sinks markets. To help address any concern investors may have, we present a 4-step action plan for what to do when you’re worried about your investment portfolio. [+] Read More

Cambiar Investors Reflects on 1st Quarter 2017

May 25, 2017

The year 2016 marked the first year since the Global Financial Crisis (GFC) of 2008-09 when value investing decisively beat growth investing as a category, with value-style returns exceeding growth style returns by roughly 10 percentage points in most capitalization categories last year. Value stock indices are heavily populated by financial companies, which tend to be very sensitive to interest rate trends. Unsurprisingly, financials, bond yields, and value stocks as a category leapt forward in sync following U.S. elections, and subsequently lagged in relative performance terms when the upward momentum in bond yields topped out in early January, perhaps reassessing how much real change can be wrought. Whether or not value stocks truly “over-performed” in late 2016 or just needed to consolidate gains remains to be seen, but the change in market conditions in the first quarter suggests at least one of these narratives is true. Right around the Trump inauguration in January, market conditions flipped, and big cap growth stocks (which had lagged in late 2016) went on a tear while value names did little. The flip back from value to growth was most pronounced in small caps (growth benchmarks up over 5%, value indices down fractionally); that said, growth issues outpaced their value counterparts by a factor of 1.5x to 2.0x in most broader indexes. [+] Read More

Investor Psychology: Why You May Not Be Your Own Best Financial Planner

May 24, 2017

Dr. Meir Statman is a professor of finance (with a focus on behavioral finance) at Santa Clara University. You might say he is a foremost expert on how emotions can affect financial decision-making for managers and investors. His most recent book, “Finance for Normal People: How Investors and Markets Behave,” is pretty much a dead giveaway for where his life’s work is focused. So, when Dr. Statman pens an article in the Wall St. Journal titled, “How Emotions Get in the Way of Smart Investing,” it is probably worth a close look. Indeed, the relationship between human emotions and investing is a complicated one – and it’s one that many experts would agree is at odds. Few would disagree with this general idea: investors who can remove emotion from the investing equation have a better chance of doing well over time versus those who cannot. As Warren Buffet succinctly puts it, “it’s an easy game if you can control your emotions.” [+] Read More

JP Morgan Considers Inflation's Next Phase

May 18, 2017

Around the globe, a synchronized upturn in nominal growth is underway, including an upturn in inflation. Global monetary policy is responding in kind. The Federal Reserve (Fed) is increasingly confident that inflation will hit its target rate and has begun accelerating its cautious rate-tightening cycle; the pendulum is gradually swinging toward tightening at other developed market (DM) central banks. The investing community’s perception of inflation risk has swung during the current expansion from fear of an inflationary surge after the Great Recession to fear of global deflation when oil prices collapsed and, since last year, back to a reflation theme, again accompanied by worries that some economies, particularly the U.S., could overshoot their central banks’ targets. By contrast, throughout these periods, inflation itself (at least excluding volatile energy and food prices) has displayed surprising stability. How far will reflation go in the U.S. and other developed market economies? How can we forecast inflation? Read the entire market commentary here. [+] Read More

Leaving a Legacy That Spans Generations

May 16, 2017

When most people think of the late artist Prince, they think about a global music phenomenon with unforgettable pop hits and an unforgettable persona. That’s how he should be remembered. But what many people do not realize is that Prince’s fortune – the estate he worked tirelessly to create over time – is currently being battled out in the courts amongst a slew of relatives, “alleged heirs,” lawyers and advisors. Prince passed away over a year ago (April 21, 2016), yet his estate is still very much unsettled.1 The reason for the ongoing court battles and legal headaches? Prince didn’t have a will. [+] Read More