• Home
  • Firm
  • Services
    • Services Summary
    • Retirement Planning
  • Portfolio
    • Our Investment Approach
    • Socially Responsible Investing
  • Custom Approach
    • Difference
    • Financial Planning
    • Retirement Planning
  • Articles
  • Blog
  • Fees
  • Contact
Montecito Capital Management I Investment Advisors


Investment Insights & Financial Facts for the Month of October

10/1/2015

 
-U.S. economic GDP growth has trucked along in the 2% range with low rates of unemployment; but job growth is still limited to service sector jobs which pay lower wages. Reported inflation has been muted and commodity prices have largely be in free fall. The Federal Reserve is poised to nudge interest rates, but has deferred making the first increase given fragile global economic pressures.

-Early indications from the third quarter earnings season point to resilient corporate profits despite concerns about global economic growth.  Of the 58 companies in the S&P 500® Index that have reported results, 81% exceeded EPS estimates while 50% exceeded sales estimates.  Still, earnings are expected to decline for a second straight quarter.

-The analysis by Envestnet found advisors beat market benchmarks by an average of +3% a year. Tax benefits alone provided by financial advisors added up to more than +1% over the broad market annually from 1994-2014.  A further +0.44 of added value came from regular rebalancing of a portfolio.  Other outperformance attributes included asset allocation and fund/security selections.

-To help reduce portfolio markets risks, investors often turn toward “safe haven” assets such as government bonds and exposure to the US dollar (e.g. safer US markets versus their riskier counterparts) and/or shifting their allocations weightings toward defensive stocks versus cyclicals. However, we have been seeing correlations rise between equities and the traditional perceived “safe haven” assets. For this reason, we believe that for multi-asset portfolios are a more effective tool to mitigate volatility, particularly in a market environment where conventional asset allocation views on “safe haven” assets is changing. In short, true diversification comes from an unconstrained approach to multi-asset allocation.

- Quality company stocks matter!  One study, Novy-Marx’s 2012 “The Other Side of Value: The Gross Profitability Premium,” showed that profitable firms generated significantly higher returns despite having higher valuation ratios.  In addition, in a late 2013 PIMCO paper by Gordon and De Rossi, “The Profitability Premium in EM Equities,” PIMCO showed that profitability tends to be persistent and underpriced.  There is a profitability premium for investors to capture.  Though we select individual quality stocks, we also use these exchange traded funds (ETFs): We invest in a variety of domestic high quality ETFs including Vanguard Dividend Growth (VIG), iShares MSCI USA Quality Factor (QUAL), ProShares' S&P 500 Aristocrats ETF (NOBL), Wells Fargo Adv Glo Div Opp Common (EOD) and Global X ETF SuperDividend (SDIV).

-Certain stock sectors outperform others when Fed rate increases (expected in Dec) and these include: large established technology, financial and consumer oriented business entities. Consider these equity sectors for overweigh allocations as rates increase.

-The S&P 500 lost -2.6% over the month of September 2015 and dropped -6.9% over the last quarter.  There has been a flight to safety in stocks toward megacap blue chip stocks.  We have been overweight large stocks with sold balance sheets that operate profitably and have a history of dividend growth.


    Follow us on Twitter: @MontecitoCapMgt

    Monthly Archives:
              

    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015

    Categories

    All

    RSS Feed

We Would Love to Have You Visit Soon!


Hours

M-F: 6:30am-6pm

Telephone

1-805-965-7955

Email

contactus@mcapitalmgt.com