jim kuntz

Summer is behind us, here comes the Election

by Jim Kuntz on September 9, 2016

We hope your Labor Day was a relaxing one.

August was especially quiet for the financial markets.  Stock market trading volumes were the slowest in decades.  After late June’s BREXIT volatility, the markets in late summer were on their best behavior. Unfortunately, this welcomed breather is likely to be temporary, as we now head into fall, the election, and a new U.S. President in 2017.  September and October have some additional notoriety as two of the more volatile months in a typical calendar year.

The predominant influence on the world’s financial markets continues to be driven by the monetary policies of the United States, Europe and Japanese Central Banks.  $12.7 Trillion of sovereign government bonds from Northern Europe and Japan, with negative interest rates, are driving investment capital flow into stocks and real estate, in addition to our own 10 year U.S. Treasury Bonds (currently yielding  1.6%).  Ned Davis Research states: “47% of global sovereign bonds yield less than 0%. 80% of global yields are under 1%. 96% are yielding less than 2%.”

The U.S. economy is currently in its eight year of growth, the fourth longest expansion since World War II.  The longest was in the decade of the 1990’s, when we rode the technology boom.  Since the sub-prime banking crisis and recession in 2008-9, our economy has mustered an annual 2.1% growth rate, the worst post-World War II recovery.  Despite the slow growth environment throughout the global economy, the developed world’s Central Banks will continue trying to stimulate economic growth through low-interest rate monetary policies and financial market manipulation.

When we began 2016, the U.S. stock markets experienced the worst start to a year in history.  Most of the “market’s fears” did not play out as anticipated.  Oil bottomed in mid-February and concerns about a commodity price slump eased, as energy prices stabilized and began to recover.  The surprise Brexit vote certainly created some drama, but as we stated in late June “markets are resilient and eventually right themselves to find equilibrium.”  With better oil price stability, the improved economic momentum of the U.S., China and most of Europe have reduced anxiety over a possible deflationary spiral. Overall American corporate health remains strong, as most S&P 500 companies enjoy solid balance sheets.  Our Pacific Wealth Management portfolios are appreciating nicely, as stocks, bonds and gold are all benefiting from these healthier financial markets.

We expect Janet Yellen and the U.S Federal Reserve Bank will likely wait until December before raising interest rates again.  Meanwhile, the world will be watching the final months of a painfully long U.S. presidential election.  Despite the fact Trump is likely to tighten the race between now and November 8th, a Hillary win looks like it is being priced into current markets. The Wall Street consensus perceives a Clinton administration as more predictable than Trump, and therefore more desirable.   All eyes will also be looking at the outcome of the congressional races to see if the Republicans maintain their conservative majority. With clarity on the political front, the markets will then focus on whether a new government in Washington, D.C. can successfully implement some long-awaited fiscal spending initiatives on infrastructure, education and research to help our country grow in the years ahead.

The choppy financial markets we have experienced over the last 12 months will likely continue into 2017. Pacific Wealth Management portfolios are built to effectively weather this volatility and preserve wealth, while delivering competitive long-term investment returns.

This commentary contains forward looking statements and opinions. These opinions may not develop as predicted. It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market.

Financial Market Comment

by Jim Kuntz on April 20, 2016

Investors who only check market prices at the end of every quarter, may easily conclude the first three months of 2016 were uneventful, as stock market values finished March relatively close to where they began in January. However, as you are likely aware, global stock markets in early 2016 were unusually volatile, declining over 10% to start the year, then bouncing in mid-February and rallying through March, to end the first quarter recouping most of their earlier declines. As interest rates declined, bond investments delivered positive returns in the first quarter and helped cushion the stock market’s swings in our portfolios. After rising nicely in January and February, Gold has been able to hold its recent gains and once again, is viewed as a “safe haven” asset for many investors.

The major catalysts for the rebound in stock values include; a growing belief that oil prices have begun a sustainable recovery, better than expected economic reports, and supportive monetary policy announcements from the central banks of the United States, Europe and Japan. Janet Yellen reiterated, while acknowledging improvements in the American economy, she is also focused on weaker international growth and assured the markets that future interest rate increases by the Federal Reserve Bank will be slow and gradual. The markets were also helped in March, when Europe’s Mario Draghi, announced the European Central Bank would cut interest rates further and expand their bond buying efforts (Quantitative Easing) to keep their interest rates low.

Although encouraged to see the stock market rebound, we expect relatively weak first quarter corporate earnings results and more volatility in the second quarter. The trajectory of those earnings should improve as we progress through the year if the following two trends occur: oil prices continue to stabilize and the strength in the U.S. Dollar begins to abate. The magnitude of recent market swings has been dramatic and affirms our view we are in a risk-on/ risk-off environment, rather than one with a definitive positive or negative trend. That said, we see a low probability of recession over the next year and a global and U. S. economy that continues to grow slowly. Our economy is being helped by the combination of low mortgage rates and energy prices, low unemployment and finally some healthy consumer income growth.

The presidential election politics and distasteful mud-slinging will likely create uncertainty for investors as we progress into the summer and the party conventions. That uncertainty should dissipate as the election approaches and we get more clarity on the likely winner and the next resident of the White House. History has shown us that the sitting President’s political party has little impact on long term investment performance.

Market corrections are an inevitable part of investing. Our well diversified portfolios are designed to dampen the magnitude of corrections, in any and all markets, to tolerable levels so our clients can stay the course. We remain dedicated to assisting families meet their long-term financial goals and objectives.

Market Comment

December 8, 2015

We hope you enjoyed your Thanksgiving holiday and have plans for more fun, rest and relaxation as the holiday season continues and 2015 winds to a close. This year has been challenging for investors as nervous financial markets continue experiencing uncomfortable levels of volatility. Declines in stock market values over the summer were initially precipitated […]

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James Kuntz is Once Again Named One of San Diego’s Top Wealth Advisors

March 27, 2014

Pacific Wealth Management’s James Kuntz is once again named one of San Diego’s Top Wealth Advisors. Online PR News – 27-March-2014 –James Kuntz, CIMA®, Managing Director of Pacific Wealth Management®, an independent boutique wealth management firm that provides investment management services to preserve and grow wealth, once again, has been named a Five Star Wealth […]

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