Recovery after a Rocky Start – Highlights from Edgemoor’s April 2016 Newsletter

In this latest installment of our quarterly report, my colleagues and I share some observations on the first quarter of 2016 and offer our outlook for the economy and markets.  Click here to go to the full report on our website.  Following are a few highlights:

  • Stocks plunged to begin the year and then rebounded to finish the first quarter about where they started.  Continued declines in oil prices, expectations of more rate increases from the U.S. Federal Reserve, and slowing growth in China were the main issues weighing on the markets.
  • We expect more volatility ahead but also see reasons to expect modest gains for stocks, and we think most of the good economic and earnings news will come in the second half of the year.
  • We think the U.S. economy will remain on its path of slow, steady expansion, but prospects are mixed elsewhere in the world.
  • Based on recent comments from the Fed reflecting some concerns about the domestic and global economies, we now believe there may be only one or two Fed rate hikes through the end of 2016.
  • The imbalance between supply and demand for oil and other commodities will likely linger, keeping prices low until global demand picks up, supplies tighten, or both.
  • Reasonable current valuations – the market currently trades for a multiple of earnings (about 17) that is roughly in line with its historical average – and the potential for better earnings provide support for higher stock prices.
  • Please visit our new website at www.edgemoorinv.com and share with your friends, but do not call with comments on our pictures!

As always, feel free to contact us if you have any questions or comments.  For more information, visit our website.

Jordan Smyth and the Edgemoor Investment Advisors Team

Posted in Edgemoor Insights | Leave a comment

March Madness: Complete Your Financial Four Bracket

Who said financial planning can’t be fun?  Click here to fill out your Financial Four bracket and compare your results to those of advisors and others.  Good luck!

Posted in Financial Planning | Leave a comment

What Buffett Wouldn’t Do

In anticipation of the release tomorrow of the latest annual letter from Berkshire Hathaway’s Warren Buffett, click here to read some good advice from Buffet’s letters and other comments over the years.  The first point is probably the most immediately relevant in this time of heightened market volatility:

Games are won by players who focus on the playing field — not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.

Posted in Uncategorized | Leave a comment

Behind the Market Pullback

Fidelity recently published an overview of two factors behind recent stock market struggles: falling earnings expectations and tightening liquidity across global financial markets.  The only one of the author’s three pillars that is currently supporting the markets is valuation, which he deems to be reasonable.  His conclusion is that investors should stick with proven, long-term strategies, despite these short-term pressures on the markets, and he sees liquidity conditions improving soon.  Click here to read the full report.

Posted in Edgemoor Insights | Leave a comment

A Year to Forget – Highlights from Edgemoor’s Winter 2016 Newsletter

In this latest installment of our quarterly report, my colleagues and I share some observations on the fourth quarter of 2015 and offer our outlook for the global economy and markets. Click here to go to the full report on our website.  Following are a few highlights:

  • Stocks rebounded in the fourth quarter but finished 2015 essentially flat.  The U.S. Federal Reserve, energy, and China provided the major themes for the year.
  • Now 2016 has gotten off to a rocky start, with China’s currency moves and related concerns about this largest of emerging economies rattling markets.  Another concern is that oil prices remain low, which is good for consumers but bad for energy producers, and the ultimate impact on the global economy of energy sector woes remains to be seen.
  • We are modestly bullish on prospects for 2016 and expect continued support for stocks from improving economic conditions in the United States, worldwide central bank policies that will encourage further economic growth globally, and reasonable equity valuations. Risks and concerns in 2016 will echo those from last year, namely the path of interest rates, the direction of oil prices, economic conditions in China, and geopolitical issues in the Middle East.
  • We believe stock valuations are reasonable. The S&P 500 index currently trades for a multiple of about 16 times estimated earnings for the coming year, close to its historical average.
  • Given today’s historically low interest rates, we still favor other income investments, such as preferred stocks, convertible securities, utilities, real estate investment trusts, and other securities with higher yields, over bonds.

As always, feel free to contact us if you have any questions or comments.  For more information, visit our website.

Jordan Smyth and the Edgemoor Investment Advisors Team

Posted in Edgemoor Insights | Leave a comment