[x_custom_headline type=”center” level=”h2″ looks_like=”h3″ accent=”true”]Firm Update[/x_custom_headline]
The end of the summer marked volatility returning to the markets that has not been seen since 2011. While global conditions will always have an impact on short term movements in the markets, we hold the view that the markets will see better returns as the U.S economy continues to show growth. Please see Dave’s market commentary below.
In terms of the firm’s progress, we continue to add new accounts and clients on a referred limited basis as we aim to keep the client/advisor ratio low. In addition, given our background on the institutional side of the markets, we are in discussions with a number of large fixed income investors. In addition, we are taking steps to bring on another experienced team member in September. More to come.
[x_custom_headline type=”center” level=”h2″ looks_like=”h3″ accent=”true”]Market Commentary[/x_custom_headline]
Dave Falicia
The last week of August and first week of September was one that could test anyone’s nerves. Uncertainty about the Chinese economy and the efforts to stabilize the Hang Sen (China) index carried over to the US markets, resulting in unusually large volatility for domestic equities. While the Hang Sen lost over 12% of its value over the month, the S&P 500 actually lost half that, yet out-performing most other markets on a relative basis.
Although very few individuals enjoy a down market like we witnessed last month, one must understand that the underlying fundamentals of the US economy reflect that of a sustainable recovery. Employment, Housing, Durable Goods, and overall sentiment about the health of the US economy are good. While the volatility experienced over the last month may be nerve racking, in the long run will it will be a distant memory. It also represents a good opportunity to dollar cost into equities and bonds at cheaper prices.
At Copper River Advisors, we continue to believe in the long term health of the US economy and expect the markets to perform well at least for the next few years.
On the fixed income side, all eyes remain on the Federal Reserve and whether the FOMC will vote to raise rates in September. Our opinion is that they probably should start the process to remove the historical level of low interest rates. The fact is that the Federal Reserve keeps one eye on what the market is doing and may hold off until the situation stabilizes.
We do not expect fixed income markets to experience wide pricing shifts from such a methodical tightening policy.
Feel free to contact us if you want more insight into markets – dave.falicia@crawealth.com.
[x_custom_headline type=”center” level=”h2″ looks_like=”h3″ accent=”true”]Product Commentary[/x_custom_headline]
Jim Etten
At CRA, we continue to focus on building individual custom portfolio’s based on a client’s age, risk level, as well as liquidity needs. Obviously, as markets fluctuate in value investors often end up rethinking or questioning their strategy. As advisors our job is to minimize stress by rebalancing and repositioning a client holdings quarterly. With 35 years of joint experience in the bond and stock markets we are confident in our ability to guide investors in reaching their goals.
Early in the summer we started investing and positioning in some of the following ETF funds to accommodate what we expected to be a volatile summer which turned out to be the case. Below are a few of the ETFs we are currently utilizing and will continue to do so based on what we see in store for the markets over the next few quarters.
Minimum Volatility ETF’s
These ETF’s makes an excellent addition for conservative investors who want to participate in the upside of the market with less downside risk. A minimum volatility ETF can be used as a core holding within the context of a risk-averse portfolio by providing a reasonable allocation to stocks with a historical penchant for lower price fluctuations.
SPLV- from Powershares is one of the largest in the group, at $4.5 Billion in assets and with a .25 basis point expense ratio it is an attractive addition to a diverse portfolio. It also pays a monthly dividend, opposed to quarterly, which is attractive to those seeking income from a an investment.
Preferred Stock ETF’s
These ETF’s invest in preferred stocks of corporations and are a solid investment choice for those looking to minimize risk and maximize income. A few quality characteristics of the investment vehicle are:
- Dividends from preferred stock are taxed at 20% rather than 39.9% for high income earners.
- Preferred stock dividends are fixed, much like a bonds.
- Preferred stock dividends carry a higher priority than common stock.
Currently we are using Blackrock’s Ishares PFF- Preferred Stock ETF (13 billion dollar ETF) in a number of accounts and will continue to add to the position for those conservative investors.
Currency Hedged ETFs
With the U.S Dollar continuing to gather strength, while currencies from Europe to Asia are weakening in value, difficulties arise for investors who wish to hold a position in these large and diverse economies. A currency hedged ETF strategy seeks to provide exposure to a region or country while hedging out any foreign currency risk.
Currency hedged ETFs can be found for most countries and regions. Two that we particularly like are:
HEZU- Ishares Currency Hedged Europe
HEWJ- Ishares Currency Hedged Japan.
On a final note, our goal for this newsletter is to keep it short in length and keep you informed on some of the ideas, products, knowledge and experience that is the basis of the firm. Please provide any feedback you may have on this newsletter, and please feel free to contact us at any time.
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