Investment Pulse Fourth Quarter


While the end of the year is busy with processing RMD’s, charitable gifting and loss harvesting we still find time to dedicate to research.  In the last few months of the year we heard from a wide variety of money managers and got their take on the markets.

Kathleen Gaffney, Portfolio Manager for Eaton Vance

  • Kathleen feels like they have reached an inflection point in the bond market, even though fundamentals for the economy are still positive, high yield is selling off and investors seem to be bracing for higher rates to come.
  • She feels the risk worth taking at this time is found in the equity markets in companies with good fundamentals.
  • There is so much cash on the sidelines now that every time there is a selloff in bonds causing rates to rise there are many buyers swooping in to buy up the bonds bringing the rates right back down.

Joe Zidle of Richard Bernstein advisors

Often seen on CNBC, Joe came to Detroit to share some of his company’s views of the markets in general.  They have many interesting and often differing viewpoints from the consensus. 

  • He describes the market now as a secular equity bull.  “Bull markets don't end with skepticism, they end with euphoria.  Markets can't be overvalued if people are uncertain.”
  • There is still a lack of capital spending by U.S. companies to invest in the future of their businesses.  94% of S&P 500 companies are putting money into share buybacks and dividends rather than in capital spending. 
  • He says we are still early in the business cycle.  Business cycles start here in the U.S., go to Europe and then finally the emerging markets.  They see the emerging markets and China as still “in a bubble” while Europe is still correcting.

Jeff Rosenburg CIO of Fixed Income for Blackrock

Jeff is another expert who is often seen on CNBC.  Jeff stopped worrying about bonds and learned to love them in 2014.

  • According to Jeff, where you hold your duration (by maturity) matters as much to returns as how much duration you own.  Active management can help a portfolio by managing this.
  • He says high-yield bonds will take on more interest rate sensitivity.   They tend to be shorter maturity bonds as these companies aren’t trusted enough to loan to them for longer periods of time. This will subject them to more interest rate sensitivity than normal when short rates start to rise.

Angela Palacios, CFP®is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Angela Palacios and not necessarily those of RJFS or Raymond James. Prior to making an investment decision, please consult with your financial advisor about your individual situation.