Welcome Back, Readers
We apologize for the delay since our last posting as it was a busy summer. As we head into the final quarter of 2019, we want to update you on some the global macro events driving the markets, discuss what’s been propelling the bond market to new highs and highlight a few other firm developments that should of interest for our readers.
CEOs, central bankers and money managers say they’re operating in a world where they have no idea what’s coming next, leaving them with few options but to prepare for the worst. Uncertainty about a handful of unprecedented events exist to include the grinding trade war with China, the never-ending Brexit and oval office tweeting is causing gyrations to the global markets.
Corporate America is raking in eye-popping revenues, but is in a decision-making tailspin about capital deployment.
- Uncertainty is now showing up in hard data: The lack of corporate dollars being spent on factories, software or new equipment Everyone is stymied over how to make financial or investment plans, because the rules keep changing by the day.
- Businesses don’t know what to do about their operations in China, how to price their products or source their materials. And they don’t know how consumers will react to higher prices during the holiday season.
Main Street is grappling with a lot of questions, too, mostly about how to absorb the impact of tariffs. Nobody knows what to do with their money in an environment where the stock market is a roller coaster, generally doing well, but subject to wild swings.
On a positive side the U.S consumer leads the way with strong spending. Retail sales expanded in August and the U.S unemployment rate fell to a 50-year low in September to 3.5%. The U.S consumer accounts for 70% of the U.S economy and despite the headwinds the consumer has stayed strong and remained confident.
The bottom line is the trade war, Brexit and impeachment, fights that were supposed to pass by have gotten even messier and uglier in recent weeks. Even with the U.S consumer supporting the weight of what’s really working in the global economy it may not be enough to hold a stable outlook for the remainder of the year and or move the 4th quarter equity market into higher territory.
Behind the Numbers: 2019’s Deceptive Market Performance
S&P 500 Performance (YTD) is at +19% which is well ahead of the historical average of just around 10% annually. That said, many investors have simply forgotten how December of 2018 ended, with the market falling 15% in a brief 3-week period on China slowdown fears.
S&P 500 Performance (1 Year) is at +2% so yes, we are basically right back where we were a year ago October 2018.
Bond Performance has been nothing less than spectacular with nearly all fixed income assets rising nearly lockstep in price appreciation. AGG or Barclays Aggregate Bond Index (bellwether Index for Bonds) has turned in (1 Year) total performance at +12%, well above historical average of 3% to 4%. We continue that discussions below in greater detail.
Bond Market Update
As a firm we specialize in fixed income (Bonds) for both individual investors and also corporations seeking advice on their core and operating cash positions. Interest rate policy and market pricing are closely tied to our portfolio outlook and ultimately our clients asset allocation breakdown and their individual holdings. We continue to differentiate ourselves by building individual bond ladders for our investors opposed to using commingled funds and or other structured products.
Globally interest rates have been falling, with over 30 central banks around the world cutting rates in hopes of kick starting their economies amid trade issues and slowing growth. The last time so many of the world’s major economies cut interest rates in unison was during the financial crisis. Many analysts say the moves could help to stave off a painful downturn. But there is a danger: This could also tip off a monetary policy race to the bottom.
While interest rates in the U.S remain attractive on the front end of the curve we will continue to adjust our positions in terms of credit and duration as we go through this active period of Federal Reserve adjustment of policy and rates.
Copper River Update
A special thanks to BlackRock (the world’s largest investment manager ) and their RIA team ( Tom Viola and Brian McCoy) as well as the bond desk (Ryan Connors) for their partnership with the firm in terms of sourcing individual bonds as well as the use of the Aladdin Platform for running sophisticated individual portfolio analytics and risk management metrics.
The firm has to also mention Agincourt Investment Management and specifically portfolio manager Scott Marshall for their fixed income partnership with some of our our high net worth investors and corporations. We are excited to continue to work with Agincourt and leverage their decades of expertise in all areas of the bond market.
Agincourt Capital Management
Free Trades (Charles Schwab)
Charles Schwab recent dropped its trading fees from $4.99 to Zero. While this is not earth-shattering in terms of adding performance by saving a few bucks on costs it does signify the fee compression going on in the industry. In addition, it also represents a cost saving for our clients as Charles Schwab is the firms main custodian.
Charles Schwab: Free Trades
Copper River will be moving into its new office space in late November or early December depending on the construction timeline. We will be moving from our current location at 385 Inverness Parkway to the identical building next door at 383 Inverness Parkway. The new space will double the size of our current footprint and allow for continued expansion.
Copper River Advisors
Copper River Advisors is an independent Registered Investment Advisory Firm (RIA). The firm provides institutional portfolio management and investment consulting services to Fortune 500 companies, as well as custom portfolio construction for select individual investors and their families.