Spring Newsletter, First Quarter 2015
Quarter 1, 2015
Many of us wondered if it would ever arrive; but at long last, spring seems to have come to New England. It has been a long, hard winter for clients all over the country; and we hope you are getting a chance to enjoy the warmer weather. A bright spot over the long winter months has been the domestic equity markets. While we expect corrections from time to time, we continue to feel we may well be in a major bull market which has longer to run.
We continue to look for opportunities in the stock market as pullbacks and sector rotation provide a chance to buy in at an attractive price. Our risk averse, momentum driven strategy leads us to look for stocks which have just broken out into a positive trading pattern, and are selling fairly near a point of strong support on the downside. If we are wrong, we will be able to minimize loss; while a fresh breakout can provide room for above average growth.
On the interest rate front, the Fed is now saying it expects to begin raising rates this year. As we have mentioned before, the unusually long period of very low rates in the U.S. increases the risk of downside volatility in the bond market as rates rise. At the same time, International actions may tend to increase demand for certain U.S. debt instruments among investors buying global fixed income.
The European Central Bank has announced a Quantitative Easing program for 2015 and 2016, which calls for the purchase of government bonds seemingly far in excess of the net new supply of those investments for that period. The result is likely to be lower yields on Eurobonds. Several fixed income analysts expect the appeal of U.S. corporate bonds to increase, especially shorter term bonds, and possibly high yield issues, as well as those on the bottom tier of Investment Grade.
Zane E. Brown, Fixed Income Strategist at Lord Abbett, says in a newsletter dated April 17, that while the fed may raise short term rates, “the ECB’s program will provide a head wind, if not an offset” affecting the price of longer term maturities and lower quality credit issues. We would expect that a number of cross currents in our own and the wider global economy will mean good values can be found in the fixed income market; but a nimble and flexible strategy in selecting the right types and sectors in the bond market will be important.
Looking forward to the summer ahead, The Galarneau Group will be a sponsor for the Portland Chamber Music Festival this year. Concerts are scheduled at the Abramson Center on the Portland campus of U Maine. We will be hosting a reception and concert performance for our clients and their families. The Festival dates are August 13, 15, 20, and 22; and we will not know on which evening our event will take place until early June. We’ll send out more details at that time, but wanted to share this exciting news with you early. We hope that many of you can invite friends and family, and join us for a special summer evening.
Thank you for your continued trust in us. Please know how much we appreciate your business. Should you have any questions or concerns about your accounts, or the outlook for the investment markets, don’t hesitate to call. Meantime, we wish you a warm and joy filled spring.
The Galarneau Group