FALLing Forward

Summer has finished with a bang, but felt more like a whimper.  Kids are back in school, business activity is quietly accelerating and Fall is eagerly anticipated.  While many, if not most, investors/traders were enjoying vacations, the financial markets slowly maneuvered their way to significant levels.  Without much of a break, the stock market found its way to all-time highs.  For over three months the direction of both the bond and stock markets were predictable.  While, in our minds, not a defensible move from an economic view, these assets acted with a mind of their own.  We believe two major contributors were behind this: noticeably low volume, which historically leads to outside volatility, and the talk of the Federal Reserve changing their position on efforts to stimulate the economy. 

Ostensibly, the view that Mr. Bernanke and his band of money men would be “tightening” their control of the economy became the topic on the mind of most people.   The term “taper” is now a household verb.  It is amazing how the media can create a swell of awareness on a topic that, until then, was completely off the radar. 

As we write this, the Federal Reserve Board “shocked” everyone and announced that they will NOT be slowing their buying of bonds.  The market seemed to get an immediate read on this as a great thing, and reacted accordingly: straight up.  As cooler heads prevail, the reality of why they are not reducing their purchases is causing a sincere debate on the true health of the economy.

We have said many times, we are neither Bullish nor Bearish Investors.  We are Stewards.  As such, we have and will continue to build and manage your portfolio in a way that allows us to sidestep most of the volatility and carry on with our plan to generate a predictable return with the majority of the portfolio.  This allows us to meet the needs and expectations of our clients without fear of what may or may not happen in the short term periods of financial market instability.

Items to watch:

      Interest Rates:

Taper, no taper.  She loves me, she loves me not.  With all eyes now firmly fixated on the Federal Reserve and their every move, it has become clear that the markets are watching this closely.  We have said for years that one of, if not the most, influential pieces of market returns and stability is the direction of interest rates.  Even more impactful than the absolute rate, is the movement and velocity of rates.  As Americans quickly adjust their “norm” to the prevailing interest rate environment, most unfortunately push their spending and their budgets to that number.  The fact that rates are low is not as impactful as the fact that they have stayed low for an extended time.  By now, most have fully adjusted their day to day lives to the fiscal environment.  Whether it is intentional or not, America and most of the world now function with a reliance on credit availability and its perceived benefit.  Think of it like a parachute, when rates go up, regardless of how fast or powerful the mass, it does cause a change.  That said, for the car guys, the amount of change is a function of the power, rather than torque of the mass.   

 

      War (Middle East)

While this has always been a reality in modern history, it is another reason for volatility.

 Debt Ceiling

This will be the big issue in Washington.  By all accounts, this is a partisan debate and will not go without quite a fight.  The political banter with cause some short term effect, but long term should not have great significance.

There continues to be opportunity; we are committed to looking, researching and finding it where we can, in order to add stability and predictability to portfolios.

On the idea of opportunities, we are very excited to share with you some of our new endeavors.  You may have noticed, at the top of this letter, our new logo.  This graphical upgrade is part of our effort to present Criterion’s simple and unique style in a fresh way to each of our valued clients, as well as to new relationships that we continue to build.  Along with the logo and all-new communication materials, we are in the process of developing a more robust internet presence through an upgraded website and a social media strategy.  This effort is done to enhance and support our client service and allow for efficient communication and information flow.  In the near future, we will be introducing our newest personnel addition to you.  This new position will be critically valuable as we move ahead and the gentleman stepping into that role is very talented and experienced. 

Our firm is vibrant and these are exciting days here.  We are investing in our firm’s technology, resources and, most importantly, talented people in order to appropriately serve our clients with excellence as we grow with new ones; most of whom arrive as a result of your referrals.  Many of you have introduced us to your valued relationships and we welcome them.  It is a privilege to work with like-minded people who desire to be wise and careful with their finances.  We are committed to our model of specific, effective wealth management for a select group of clients.