February 2016 Advisory Commentary

Well, if the old stock market adage “So goes January, so goes the year” holds true, investors are in for a wild ride for the remainder of 2016.

Although January ended with a very strong snapback rally, the world’s stock markets began the year in one of the most negative fashions in many decades. U.S. markets finished with losses of 5% or more across the board. Oil continued to be a negative catalyst, as it fell over 12% for the month.

Corporate earnings have continued to disappoint, as we’ve seen a drop of 4.1% in the reported results of S&P 500 companies so far this quarter. This trend does not portend well for the market’s valuation. We’ve seen share price declines help lower its price/earnings ratio, but now the earnings side of that equation is not doing it any favors. Therefore, while now cheaper than it was before, the market is still on the expensive side as far as its earnings & growth prospects go.

Gold is beginning to pop up on our opportunity screen as the world’s central banks continue to accelerate their monetary easing (money printing) in order to attempt to juice the world’s economic growth. The U.S. is attempting to move in the other direction, but the current slowdown is giving them pause as to the speed or even direction of their interest rate increases. We would need to see a little more possibility of the U.S. Dollar moving down in order to initiate a position in Gold moving forward.

Our positions in Managed Futures & Long/Short equity strategies, as well as floating-rate fixed income, have proven to be a driver of outperformance over this extremely volatile start to the year. We continue to see potential outperformance coming from these and other alternative investment areas in 2016.

Brian Weckman, RFC
Chief Investment Officer
Actis Wealth Management L.C.