san diego wealth advisor

Market Commentary from Pacific Wealth Management

by Jim Kuntz on June 22, 2016

Since January of 2015 U.S. stock investments have experienced some significant ups and downs and, now 18 months later, are sitting today at around the same levels.  As we described in our last commentary, the financial markets in 2016 have wrestled with conflicting expectations for growth and inflation.  Globally, economic growth has slowed while the central banks of Europe and Japan continue to print money and buy their own government bonds in the hopes of creating stronger economic growth and stubbornly elusive inflation. As anticipated, the near term market outlook remains quite cloudy, with anemic corporate profit growth, the imminent Brexit vote that will decide if the UK will leave or remain in the European Union, in addition to a very unsettling presidential election landscape in the U.S.  All these factors continue to create a lot of uncertainty for investors.

We have discussed on numerous occasions how the financial markets become uncomfortable with uncertainty and the resultant increased levels of volatility.  U.S. Treasury bonds and Sovereign Government bonds have been the “safe haven” place to hide from the recent drama and uncertainty. Throughout the world today there are approximately $10 Trillion of sovereign government bond debt with negative interest rates.  The negative interest rates in European and Japanese bonds have encouraged more investment into our relatively higher yielding U.S. Government bonds.  These conservative bond investments have been appreciating in value again this year and delivering healthy returns, as U. S. bond yields move lower.   10 Year U.S. Treasury bond yields are down to levels we last saw in 2012. Gold has also been a beneficiary of this year’s uncertainty regarding the global economic outlook.  Recently gold has been consolidating its gains from earlier in the year.

The world economy has been resilient to shocks over the past several years.  Recent reports on energy demand indicate the global economy should continue to expand slowly.  This increasing global demand for oil and gas has been helped by countries like India, which has overtaken China as the main source of oil demand growth.  India is expected to surpass Japan in 2016, becoming the world’s third largest consumer of energy behind the United States and China.  Our research suggests oil prices are likely to be above $50/barrel at year-end.  Our energy infrastructure investments in pipelines and storage facilities are benefitting from the rebounding oil and gas prices and performing well this year.

As the leading economy in the world, the U.S. is benefitting from the solid underpinnings of low unemployment, wage growth and consumer balance sheets that have been boosted by the improvement in home prices and stock market values.  Household spending and retail sales, in our consumer services focused economy, are increasing.  Despite tepid manufacturing industry performance and declining business spending, most economists expect the American economy to continue growing at around 2% this year.   Many of the present uncertainties should be resolved as we move into the latter part of 2016.  Investors are likely to see easier year over year corporate profit comparisons together with resolutions to the concerns we noted above, especially clarity on the next President of the United States.

We hope you have plans for some fun in the sun this summer.  Please call us if you have any questions regarding your wealth planning or the financial markets.

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.

Financial Market Comment

February 29, 2016

As February winds to a close, the financial markets continue experiencing higher than normal levels of volatility. Since our last update in January, global stock markets have ridden a rollercoaster mostly tied to the ups and downs of oil and gas prices. The significant decline in energy prices have certainly resulted in earnings setbacks for […]

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Financial Market Comment

January 19, 2016

We hope you and your families had an enjoyable holiday season and were able to find time for some relaxation and fun. The financial market volatility in 2015 was challenging, but the start to 2016 has been decidedly worse. Stock markets around the world have declined sharply to begin the year with multiple triple-digit down […]

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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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Pacific Wealth Management Market Comment

December 23, 2014

Last December, Ben Bernanke announced the Federal Reserve Bank would begin winding down their latest and largest round of U.S. Government bond market manipulation, before 2014’s year-end. This created considerable nervousness for investors as American stock market performance had clearly become dependent on the controversial policy. As we highlighted in previous posts, our central bank […]

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News from Pacific Wealth Management

November 25, 2014

DEL MAR, CA, November 25, 2014 – Pacific Wealth Management®, a Del Mar, CA-based independent wealth management firm providing investment management services to preserve and grow wealth, is pleased to announce another successful and sold-out National Multiple Sclerosis Society Dinner Gala Auction on November 22nd. This 28th Annual MS Dinner Auction raised more than $500,000 toward creating a world […]

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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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