The Dow Jones and the S&P 500 have hit fresh all-time highs this year, and many investors are starting to consider whether stocks are approaching “overvalued” territory. As investors, you’ve worked hard to accumulate assets and grow your portfolio over time, so it’s natural to wonder if “being overvalued” could mean it’s time to pare back your equity holdings or at least reconsider your asset allocation. But the real question to address first is: are stocks really overvalued? JP Morgan Research puts current stock valuations in perspective by taking a look at how they measure up historically. What they found is that current valuations are actually pretty close to their long-term averages, and not necessarily overvalued on a relative basis. [+] Read More

The Dow Jones and the S&P 500 have hit fresh all-time highs this year,1 and mutterings of stocks being “overvalued” have started to sprout in the media. As a result, you may be wondering if this means it’s time to review your current asset allocation. A closer look at the numbers, however, shows that stock valuations are actually in-line with historical averages. JP Morgan Research puts this all in perspective by analyzing current valuations and comparing them with the 25 year averages for stocks, and what they found is that they are almost the same. [+] Read More

As we enter the second half of the year, there are three main things you should be factoring-in to your portfolio strategy: 1) The Possibility of a Stock Market Correction A significant amount of time has passed since the last sizable market pullback (10% or more), and history tells us one could be on the way.1 2) You May Not Have Enough International Exposure International stocks have not rebounded as quickly as US stocks during the recovery, and the case for international growth looks strong at the moment. Yet, many US investors remain under-allocated to international equities.1 3) Adjusting Your Portfolio from a Risk-Managed Perspective This is a constant with investing, but as we enter the 5th year of this bull market it becomes increasingly important. Consider tactical money manager strategies with the ability to go to cash in the event of a prolonged market downturn.1 [+] Read More

The first half of the year was positive for stocks and most of the fixed income markets, and economies around the world showed signs of continued recovery and expansion – a good start to the year.1 Global Economy Performance and Outlook (Click chart for larger version) Source: J.P. Morgan Global Economic Research, J.P. Morgan Asset Management. Forecast and aggregate data come from J.P. Morgan Global Economic Research. Historical growth data collected from FactSet Economics. Guide to the Markets – U.S. Data are as of 6/30/14. As we look ahead to the back half of the year, there are three topics many investors are wondering about. We break those down below and assess what we think the market impact could be. 3 Factors that Could Affect the Investment Landscape Will Interest Rates Start to Rise? Interest rates are currently near historical lows, and actually fell slightly in the second quarter.1 However, Federal Reserve policy discussions indicate they could potentially tick higher over the course of the year. As always, it’s important to understand how rising interest rates would affect your fixed income portfolio. [+] Read More

Does the old Wall St. adage of “sell in May and go away” really work? We will cover that in a moment, but first we think it is more important to focus on a key point – It doesn’t make sense to try and time the market over such a short period of time in the first place. A prudent investment approach should be based on your goals for your assets and a longer-term outlook for the markets, not on a historical adage and set of data that may or may not have much predictive power. A strategy that works only sometimes and has no basis on the current market environment is probably not good enough to drive investment decisions for your portfolio. The “sell in May and go away” strategy certainly did not work last year. In the May – October period, the market rallied +10%:1 S&P 500 from January 1, 2013 – December 31, 2013 (Click chart for larger version) Source: Federal Reserve Bank of St. Louis, S&P Dow Jones Indices LLC. [+] Read More

One of the distinguishing features of the Great Depression was marked deflation from 1930 – 1932, with prices falling precipitously (-30%) over that time.1 Deflation spiraled, and the stock market and investor portfolios tumbled with it. With recent headlines citing deflation as a concern, we’re taking a moment to remind investors about the negative effects of deflation, its present-day risk in the global economy, and what steps investors concerned about deflation can take in their portfolios. What is Deflation and How Does it Affect the Economy? Deflation occurs when prices of goods fall on a broad scale, usually due to sharp declines of money in circulation or because of a big spike in the supply of goods with little supporting demand.2 The key phrase here is “broad scale.” The prices of flat screen TVs might fall year-over-year, for instance, but that’s more likely because of productivity gains and innovation within that sliver of consumer goods than it is a broad-scale economic issue. [+] Read More

The below chart spells it out pretty clearly—the Emerging Markets (in blue) have widely underperformed US stocks as measured by the Dow (in red) over the last two years: 2-Year Performance of Emerging Markets (EEM) vs. Dow Jones Industrial Average (DJI) Blue - Emerging Markets, Red - Dow Jones Industrial Average (Click chart for larger version) Source: Yahoo! Finance Not only have Emerging Markets been underperforming, they’ve just plain struggled. As an investor you probably see this and wonder - what’s the next move? Do I cut my losses and sell out? Or could this be a buying opportunity? [+] Read More

As we approach the New Year, it’s a good time to take a closer look at the more impactful themes and stories we think investors should consider when preparing their 2014 investment strategies. Here are five that we believe could impact the market and investor portfolios moving forward. Be sure to discuss these with your Financial Advisor to see if your investment portfolio is prepared. 1) How the Janet Yellen Federal Reserve Could Affect Your Portfolio If Janet Yellen gains Senate approval in the coming days to become the next Federal Reserve (Fed) Chair, she’ll take over on February 1.1 Investors are almost certain to watch her closely from day 1, searching for any kinds of policy-setting signals she might give. We believe the key factors to watch are how and when she intends to pare back the quantitative easing programs, better known as QE. Based on Yellen’s testimony before the Senate Banking Committee, her letters to lawmakers, and her track record, she appears in favor of continuing stimulus measures. This could mean an extension of the current quantitative easing programs with the Fed also holding their benchmark interest rate close to zero throughout all of 2014, which could be a positive for the economy and for portfolios.1 On the other hand, if market participants believe the Fed to be paring back those programs prematurely, it could be a negative event for the markets. Investors should speak with their financial advisor to find out if their portfolios are positioned with these monetary policy outcomes in mind. [+] Read More

WrapManager’s Weekly Summary of Market and Economic News The Bellwether US 10-Year Treasury Hit 3% on Thursday Interest rates continue to move higher as the economy recovers and as the Federal Reserve provides additional hints that they plan to “taper” their economic stimulus measures. Some people are concerned that rising interest rates could stifle the recovery of the housing market as well as general business activity.1 While that may be true to a degree, we also believe there are at least 4 Reasons Rising Interest Rates Aren't Necessarily a Bad Thing. In Spite of Rising Interest Rates, US Auto Sales Continue Booming In the month of August, new car sales rose 17% to 1.5 million, which is the highest level of sales since 2007. This is a good indication that the auto sector has moved past the recession and recovered in full. Analysts expect that close to 16 million cars and trucks will be sold in the US this year. Toyota, General Motors, Nissan, Honda, Chrysler, and Ford all posted double-digit gains for the month.2 [+] Read More