& Strategic Views
Themes this quarter should sound familiar since they are the same issues that have plagued investors for a while now: Federal Reserve monetary policy, trade disputes with China, and Britain’s never-ending exit from the European Union. The combination of these factors has begun to hamper global economic growth, as seen in the slowdown in manufacturing activity.
The U.S. economy is performing better than most. The 2019 GDP estimate for the U.S. is … more >
Congratulations are in order…the end of the second quarter marked the longest economic expansion since 1854! Thus far, the U.S. economy and capital markets have climbed the proverbial “wall of worry” for all of 2019. In our last letter we referenced the Federal Reserve’s change in expectations from potentially three rate hikes in 2019 to possibly a rate cut if justified by economic conditions. This led the stock and bond markets to … more >
“We have met the enemy, and he is us.” Walt Kelly
The dramatic market volatility at the end of last year applied pressure to the Federal Reserve and the Fed subsequently “re-evaluated” its restrictive monetary policy stance. When officials met in mid-December amid market turmoil, a few members of the committee were signaling up to 3 rate increases in 2019. The market, however, was loudly protesting such a policy considering signs of a global economic slowdown … more >
South Dakota vs. Delaware Situs – Which is Better?
The topic of South Dakota as a favorable trust situs often leads to a discussion comparing the virtues of South Dakota versus Delaware. Which jurisdiction is better? Why South Dakota?
Since abolishing the rule against perpetuities in 1983, South Dakota has worked diligently to become the most trust-friendly situs in the nation. The following table compares South Dakota and Delaware with several of the most important situs considerations. … more >
Unlike the first three quarters of the year, market results during the fourth quarter were substantially negative for stocks and positive for bonds. The trade conflict with China and the Federal Reserve’s persistent effort to follow through on “normalizing” monetary policy led to a significant pullback in the stock market and a corresponding rally in high quality bonds. We will expound below, but resolution to one or both issues will be necessary for stock markets … more >
At first glance, market results during the third quarter pleasantly surprised us but given the strong economic data, the moves appear justified. That said, our 2018 expectations for equity returns have been exceeded and we still have three months to go. Bonds, while slightly negative for the year, have held up well considering the path of the Federal Funds rate. Interest rates have moved higher and appear to continue that trajectory. Of course, concerns persist … more >
While the first quarter of 2018 reintroduced volatility into the markets, the second quarter seemed to offer a glimpse of stability. Riskier assets in general saw strong returns while the more conservative fixed income markets were flat/slightly negative. The U.S. economic picture remains robust with historically low unemployment and growth projections in the 3% range for the year. These strong dynamics have yielded elevated consumer confidence and support optimistic expectations that the good economic news … more >
For the first few weeks of 2018, equity markets echoed the same trend we saw in 2017: steadily marching higher in the face of both good and bad economic/political news. Beginning in early February, markets began to behave differently with dramatically higher volatility. There have been many reasons discussed by financial pundits for why this change occurred, with the most likely culprits being the Fed’s tightening monetary policy (to contain inflation), Washington trade policy negotiations … more >
As we close the door on 2017, we look back a bit surprised at the magnitude of the rise in global markets. Riskier assets appreciated almost across the board – perhaps no greater example of 2017 “animal spirits” is the headline grabbing emergence of cryptocurrency trading. For stocks, favorable earnings and low interest rates drove valuations higher and led to record highs for most indices. Bond markets struggled to find equilibrium while … more >
The third quarter was (again) characterized by the lowest stock market volatility in decades, coupled with an increasingly volatile bond market. Corporate earnings in the second quarter increased approximately 10% year-over-year, which reinforced the narrative that the economy continues its slow but improving growth trajectory. As expected, The Federal Reserve has laid out a plan to continue tightening monetary policy with both rate increases and balance sheet “normalization.” The net result is a … more >