Nearly a decade ago, our Federal Reserve Board of Governors (the Fed) engaged in an aggressive monetary expansion operation, which we all knew as Quantitative Easing or “QE.” To avert what many saw as the next Depression, the Fed bought trillions of dollars in U.S. Treasuries and mortgage-backed securities from December 2008 to October 2014; thereby lowering long-term interest rates, stabilizing markets, and encouraging lending. The Fed printed vast amounts of money to make these purchases on the secondary market. Within a couple years, the Fed had trillions of dollars in new assets on its balance sheet. Many pundits were alarmed and warned that this would cause rampant inflation.
The beat goes on for the second longest bull market in history. For the eighth consecutive quarter, the S&P 500 Index notched a positive return. Small U.S.
In the world of investment management there is an oft-discussed idea that blindfolded monkeys throwing darts at pages of stock listings can select portfolios that will do just as well, if not better, than both the market and the average portfolio constructed by professional money managers. If this is true, why might it be the case?
After a prosperous 2016 for equity investors, global markets sustained their upward momentum in the first quarter of 2017 with most major indices ending higher. Mounting evidence of stronger global economic growth, combined with hopes for tax reform and deregulation in the United States, lent confidence to investors worldwide. Foreign markets led the way during the quarter, outperforming U.S. stocks.
Asset class returns for the quarter were as follows:
Ever ridden in a car with worn-out shock absorbers? Every bump is jarring, every corner stomach-churning, and every red light an excuse to assume the brace position. Owning an undiversified portfolio can trigger similar reactions.
Benjamin Graham, the well-known value investor, in The Intelligent Investor created Mr. Market as an analogy to describe how the stock market works. “Every day he tells you what he thinks your interest [in your business partnership with him] is worth and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible…
Despite a tumultuous political environment, patient investors were rewarded in 2016 with healthy stock market gains in numerous asset classes. The S&P 500 Index of large U.S. stocks turned in a 12.0% return for the year, its eighth consecutive year of positive returns. Small U.S. stocks climbed even higher, with the Russell 2000 index up 8.8% for the quarter and 21.3% for the year. Other areas of the global stock market - foreign stocks and real estate securities in particular - booked more modest gains. For the fourth year in a row, U.S.
“The Dow Jones industrial average failed yet again last week to clear the magic 20,000 mark, but it will someday. Grant Webster, a portfolio manager with Dowling & Yahnke in San Diego, tells us how to invest in a record-level stock market.”
The Power of Markets
In 1958, economist Leonard Read published an essay entitled
“I, Pencil: My Family Tree as Told to Leonard E. Read.”
2016 began with a bang (in a bad way) — with the stock market falling in a hurry. In fact, it was the worst 10 day start to a calendar year in history. From the beginning of the year to January 15th, the U.S. stock market (as measured by the S&P 500 Index) had dropped over 8%. The S&P 500 hit its low for 2016 on February 11th, 6 closing at 1829.08, a decline in excess of 10.5% for the year.