Newsletter 3rd Quarter 2016
As we write this, the Chicago Cubs have just won the World Series, after being down 3 games to 1, in extra innings, following a rain delay. They have not won a World Series since 1908. The nation will also be electing a new president, marking the end of what many feel is the most unusual and stressful campaign in memory. The year 2016 has been marked by events which seem to defy the odds and take prognosticators by surprise. Perhaps the most surprising thing about 2016 is the extent to which our markets have taken all this in stride. Of course the year is not over yet; and as we have seen, anything can happen.
We find ourselves thinking and reading about what 2017 may hold for the financial markets. Our economy is still experiencing growth, but at a rate so slow that the Fed has been cautious about raising interest rates. The year ahead will likely see a continuation of a slow economic growth and slowly rising interest rates. This scenario would make the U.S. attractive to foreign investors looking for growth, and bond buyers searching for a reasonably safe yield. As Europe begins to deal with the post Brexit world, analysts expect a negative interest rate scenario in Europe, and aggressive QE bond purchases. The U.S. Dollar should remain strong. Japan and China well continue to wrestle with slow economies.
This scenario should favor U.S. centric growth stocks, and those with growing dividends in a yield starved environment. Companies who do a global business could underperform for much of 2017. On the bond side, diversified baskets comprised of shorter term U.S. debt including corporate, government, and perhaps a high yield component, may offer decent yield and low volatility, in an environment of cautious interest rate increases by the Fed and very low rates abroad. Municipal bonds are still offering favorable yields compared to similar quality and maturity taxable bonds. The supply of new issue bonds could continue to lag demand in 2017. We can see in our own state the lower number of bonds coming to referendum vs. 2 or 3 years ago. The municipal bond market tends not to be affected by global volatility. We regularly examine investment grade muni bond inventories for good value.
As we look ahead to 2017, we cannot predict where we are going; but we do know where we are. Our new office in North Yarmouth is up and running! We are eager to have you visit our new space, and are planning our annual Holiday Open House for Friday, Dec. 2 to welcome all to our new space and share a celebration of the season. Save the Date cards are enclosed. We plan to start earlier in the day this year, continuing into the evening, so that those who would rather not be traveling after dark this time of year can enjoy the festivities. The Open House is a highlight of our holiday season. It gives us a chance to visit with and thank all of you for doing business with us and extending your trust. We look forward to seeing you there, or if not, spending some time on the telephone before year-end.
A word about our quarterly Performance Reports for those of you who have accounts in our managed models: First Rate Advisor, the vendor who provides the data for these reports to NFS, has been experiencing software issues since late May. The issues affected the accuracy of the data; so we have not sent out reports for the 2nd quarter. The fix for their problem involved all new software. This will provide us with dependable data and enhanced report features, with less lag time after the quarter end than we had been experiencing. The downside is that they are not quite done testing the data to be sure it is accurate. We have had several conferences with them in recent weeks, as we are now through the 3rd quarter. We have been assured that they will be ready to provide the new reports for year-end. We have added ‘New and Improved Performance Reports’ to our Christmas List, and hope Santa will deliver them to us to share with you on a timely basis.
We wish you all a Happy Thanksgiving, and look forward to seeing you at the Open House. Please remember we are now at 11 River Basin Ln, N. Yarmouth. Our toll free number has not changed, but our local number is 207-846-8787. If you didn’t receive or have misplaced our new business cards, please give us a call. We’ll be happy to send some out to you.
Warmly;
The Galarneau Group
