First Quarter 2017 Commentary

During the first 100 days under the new administration, the prospect of tax reform, fiscal stimulus, and deregulation continues to drive the stock markets into record territory.  Our conversations have centered on how changes to fiscal policy and monetary policy could impact investments, from presenting opportunities to bringing forth new challenges and risks.

The push for a pro-business agenda against a positive economic backdrop is setting the stage for a tighter monetary policy.  At the March meeting, the Federal Reserve decided to raise short-term interest rates and signaled 2 more hikes to follow later this year.  As the Fed shows confidence in the economy staying on pace and outperforming their forecasts, we are likely to witness a gradual shift from monetary policy to fiscal policy, which should bode well for stocks.  On the other hand, bonds with longer duration are left vulnerable to interest rate and inflation risks.

To mitigate those risks, we are using a healthy mix of bond funds that offer flexibility against rate changes, credit quality for insurance, and a hedge for inflation protection.  We continue to favor U.S. stocks, particularly large caps that have room to grow their dividend.  Small to mid-cap companies may serve as a compliment to the multi-nationals since they derive revenues domestically and are less reliant on trade deals.  Internationally, we’ve taken a pause as political uncertainty surrounds many nations abroad.  Our approach remains defensive in keeping a balanced portfolio that can sustain all seasons of volatility.

While we have an investment strategy in place, it is still important for you to review your risk tolerance and financial objectives to determine if your stock/bond mix is in line with your goals.  If there have been any changes to your financial circumstances, please contact us.  We value our client relationship and enjoy working together with you to accomplish your financial goals and objectives. 

In closing, we have recently updated our client disclosure form, the Investment Advisor Brochure (aka ADV Part 2A & 2B).  Although we have not changed our services, fees, or the way we do business, the SEC requires us to offer you a free copy of the latest update and make it available anytime you wish to view it.  If you are interested in receiving a full copy, let us know.  You may also download our updated Brochure on our Regulatory Disclosure page or the SEC public access site: