WrapManager's Wealth Management Blog

Churchill Management Group believes the odds of a stock market correction, defined by them as 10-20%, have increased. Their latest commentary explains their thinking, and addresses five news stories to expect this fall. "The above title is an old practical adage of Wall Street that describes how markets get rattled on the rumor of events to come and tend to settle down after the news has been revealed. As we go through the maturing phase of the bull market that began four-and-a-half years ago, it is a statement to keep in mind as the news coming in September is set to be expansive and emotional. On the docket are..." Download Churchill's Full Commentary Here Get Free Research Reports on Churchill Management [+] Read More

WrapManager’s Weekly Summary of Market and Economic News According to recent data released by the National Bureau of Statistics, the Chinese economy is stabilizing and should be able to meet growth targets on the year of 7.5%. The government has recently introduced policy measures of eliminating taxes on small businesses and increasing investment in urban infrastructure and railways to help give the slowing economy a boost.1 China’s Long-Term Economic Goals Over the long-term, China continues to indicate that they will tolerate lower growth rates as they move to reform the economy. Their goal is to rely less on exports and debt-finance construction for growth, and focus more on domestic demand while also reducing pollution and social inequality.1 Is the US Economy Slowing Down? Many analysts were optimistic there would be a pickup in economic activity in the second half of the year, but recent data point to a potential softening in the US economy. Spending, which accounts for approximately two-thirds of the US economy, was fairly weak in July, rising by a modest 0.1%. Inflation for the month was also tame, rising only 0.1% to 1.4%.2 [+] Read More

As we established in our recent posts “Assessing the Probability of a Stock Market Correction” and “Are There Strategies to Handle Stock Market Corrections?,” market pullbacks are fairly normal occurrences within bull markets. We also pointed out some features that identify stock market corrections - they’re relatively short in duration, vary in size, and perhaps most importantly, they’re unpredictable when it comes to identifying when they’ll start and end. It’s the last point that makes short-term market timing strategies not only difficult to execute, but also potentially harmful to investors. Stock Market Corrections Are Unpredictable With stock market corrections, there are no clear warning signs for when investors should sell out of equities or when it’s time to reinvest. That creates two clear risks to short-term market timing strategies: An investor sells out of equities in an attempt to time the market correction correctly, but the stock market continues to rise. An investor might get it right and sell out of equities before a stock market correction, but then it becomes a question of when to reinvest. There is the risk that he or she misses out on the upside of the recovery. [+] Read More

Lazard's Developing Markets equity team explains why they are excited about their growth-at-a-reasonable-price philosophy in developing markets. "We think this phenomenon of paying a high premium for perceived stable growth is a reaction to the global financial crisis that has led many investors to anticipate another large shock to the global economy even as central banks have worked to reduce that risk. This bias could persist but should fade as any of the following begin to occur..." Download Lazard Asset Management's Full Commentary Here Get Free Research Reports on Lazard Asset Management [+] Read More

In our recent piece “Assessing the Probability of a Stock Market Correction,” we explained the nature of corrections and examined the probability of a stock market correction occurring this year. We concluded we would not be surprised if a stock market correction occurred sometime in the future. Is there something that investors could or should do to prepare for the possibility of a stock market correction? Is There a Way to Avoid the Downside of a Market Correction? Given that stock market corrections are normal in a healthy market but unpredictable and short in nature, it’s nearly impossible to time it correctly. However, one strategy to avoid locking-in the downside of a market correction would be to remain invested throughout the correction. Below is a chart of the S&P 500 similar to the one we used in our “Assessing the Probability of a Stock Market Correction” piece, which illustrates the performance of the S&P 5001 from December 31, 2010 – August 14, 2013 (Click on the chart for a larger version): [+] Read More

Eagle Asset Management's Senior Portfolio managers sit down and discuss their outlook on what they consider the main issues in the world today. "Eagle Asset Management’s equity and fixed-income portfolio managers regularly meet to discuss ideas, events in the financial markets and potential opportunities for investors. The global economy still has areas of concern, especially in Europe and China. Meanwhile, there are mixed data points on the domestic front. Our managers’ discussion included such topics as how and when the Federal Reserve will taper its quantitative-easing program; U.S. energy independence; what effects, if any, federal policy and politics have on markets; and – perhaps most interesting to readers – how they have positioned investment portfolios." Download Eagle Asset Management's Full Commentary Here Get Free Research Reports on Eagle Asset Management [+] Read More

The run-up in stocks this year has been quite compelling so far. The S&P 500 is up +19.7% on the year as of August 51, and global stocks as measured by the MSCI World Index aren’t far behind at +14.34%.2 This strong performance has many investors asking: what is the probability of a stock market correction occurring sometime soon? Are there strategies to handle market corrections? Should I take some profits now as a short-term market timing strategy, so as to avoid any downside of a market correction? In a series of posts on stock market corrections, we’ll address these questions one at a time. What is the Probability of a Stock Market Correction Sometime Soon? Stock market corrections are normal occurrences in the markets. In fact, over the last 33 years the average intra-year decline for the S&P 500 is -14.7%.3 Using history as a guide offers some insight into a few examples of past stock market corrections (click on the chart for a larger version): [+] Read More

WrapManager’s Weekly Summary of Market and Economic News Eurozone Exits Longest Recession in Over 40 Years> Initial reports have the Eurozone posting 0.3% growth in the second quarter, signaling the Eurozone may have exited its longest recession in over 40 years. France and Germany helped pull the Eurozone up with 0.7% and 0.5% GDP growth, respectively, however Spain, Italy, and the Netherlands still posted negative GDP numbers. In spite of potentially having exited its longest recession in 40 years, the Eurozone still carries a 12.1% unemployment rate as of June.1 That is almost double the current unemployment rate in the U.S., which as of July stood at 7.4%.2 Japanese Debt Tops 1 Quadrillion Yen Japan’s outstanding debt (including borrowings) rose to a record 1,008.6 trillion yen, representing the most debt held by any country in the world. The fact that Japanese debt tops 1 quadrillion yen also means it’s debt burden is larger than the economies of Germany, France, and the UK—combined. [+] Read More

Investopedia defines diversification1 as “a risk management technique that mixes a wide variety of investments within a portfolio,” which “contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio.” The goal of diversifying a portfolio is to “smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated." Step 1: Diversifying Your Portfolio Across Asset Classes and Categories A glance at the chart below illustrates how this works. As you can see, different categories of assets may produce higher returns in some periods, but lackluster in others, and the best performing areas change hands regularly over time. (Click the chart for a larger version.) [+] Read More