Second Quarter Client Letter 2017

July 10, 2017

Dear Client,

Happy Summer!

It has been an awfully good year in most of the capital markets so far. Just like a south Louisiana summer day with blue skies and bright sunshine, most stock markets have happily been rising and the economy has been chugging along. Bonds of many types have been profitable.


From an economic standpoint there has been much to be cheerful about. Corporate earnings in the first quarter came in above expectations and sharply higher than preceding quarters. Unemployment is very low and while we haven’t seen a dramatic uptick in wages we are seeing what looks close to full employment. GDP growth continues to show positive numbers even if the pace of growth is somewhat slower than we would like it to be. Good things haven’t been confined to our shores either Europe’s economy in spite of Brexit and some tough election cycles has continued to firm. China continues to grow even with concerns about banking and debt. India and other parts of Asia show steady progress and South American economies continue to improve despite the political turmoil in Brazil and elsewhere.

There doesn’t seem to be any sign of recession on the horizon as yet; the Fed continues to be both transparent about and circumspect towards the execution of rate changes. Our government is promising lower taxes and less regulation items that can cheer even the most gloomy business owner.

So what could possibly go wrong?

It’s important to remember that markets don’t move in a straight line, at least not very often. We’ve had 16 periods of downward market movement since the bull began running back in early 2009! It is entirely possible that we are ready for another and we think it a useful endeavor to remind ourselves of this every so often. Bear markets begin when markets or economies get pretty far out of alignment and while we don’t think we’re seeing any of that right now, the garden variety market correction can strike at any time.

As always our defense is two-fold good planning and diversification. In regards to the former, we certainly don’t want to get too excited about stock market gyrations that concern money we won’t be touching for a long time. We know we can’t really time the market; furthermore, we also know that over the long-term stocks tend to give superior returns in spite of that very same volatility. We’re aware that we don’t want to have to eat our “seed corn” so shorter term money should be invested in other areas.

So far this year we’ve responded to increasing valuation by seeking more conservative options in several parts of your portfolio. Early in the year we continued the process of selling high yield issues and repositioning into higher quality and floating rate bonds; this was done with an eye toward the related risks of bond investments, credit quality and interest rate risk. On the equity side, we have pared back risk in a couple of ways. First by reducing growth stocks in favor of a more balanced core approach in the large US stock segment. We also underweighted more volatile medium sized company stocks in favor of larger company stock.

We of course don’t know if the second half of 2017 will be as productive as the first. As mentioned earlier, we don’t think we’re on the verge of a recessionary time and that bodes well for the economy over the short and intermediate term. US stocks appear a bit richer than average, but that has been the case for some time. That modest overvaluation has moderated a bit in light of the robust first quarter earnings.

We’re also cognizant of the fact that reasonable investment time horizons are often greater than many folks’ attention spans. This can create volatility once someone in the proverbial theater yells “fire”! Watching that sort of “running for the exits” is always disconcerting. It is the age old story in that we tolerate shorter term volatility for longer term performance. It isn’t always fun but over time it has rewarded patient investors.

We hope the rest of this year is fruitful for you and your family and that you get to enjoy the best of what summer has to offer.

We appreciate your trust and confidence in us and we remain,

Optimistically yours,

Jeff Christian CFP, CRPC


“To sit home, read one’s favorite paper, and scoff at the misdeeds of the men
who do things is easy, but it is markedly ineffective. It is what evil men count upon the good men’s doing.” – Theodore Roosevelt

Leave a Reply

Your email address will not be published.