Insights

Monthly Market Updates

Future Fret

12.2017

As the year comes to a close, prognostications for 2018 already are filling up our inboxes. We hope to spare readers another choice of whom to believe. Any meaningfully specific views we might share are no more likely to come true than the various others we’ll read over the next few weeks. The question on many minds, of course, is, “how will my portfolios perform next year?” We can only be abundantly honest and suggest that it’s impossible to know in absolute terms. Instead, we think a better idea would be to establish a level of ease with a range of market outcomes and align portfolios such that they might fall within that zone of comfort. Though the if-we-only-had’s are somewhat unavoidable, acknowledging potential fears and regrets in advance may leave us better off in the longer run and more relaxed in between.

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Time Can Mend

11.2017

To date, the U.S. equity market has recovered from all major and minor downturns. Even so, a time will come again when we are in the middle of an extended downturn. That presents a conundrum: How do we prepare otherwise risk-tolerant individuals to remain in markets that have treated them badly? We think the answer includes regular reminders about past market volatility as well as the illustration of the idea that the achievement of long-term gains may well require enduring stretches of heightened market volatility and extended declines. In this month’s commentary, we seek to revisit the worst of what we’ve experienced over the past few decades. Our intention is to remind readers about past market tumult and those subsequent recoveries. The upshot is that our investment time horizon is an important consideration when estimating our tolerance for market risk.

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Q3 2017: Quarter in Review

10.2017

With few grand shifts in themes over the past three months, global investible markets provided reasonably generous returns for the inherent risks they present. Solid gains seen across the board, broad-market investors may have been pleased with the results, driven by coordinated global macroeconomic growth and durable corporate fundamental strength. It seems many continue to believe great risks lie just around the corner, and that markets will turn quickly and furiously once those risks come into view. With more than a few major market meltdowns in our mental history books, we know there are reasons to be both optimistic and vigilant. But, such always is the case, in our view. That thinking driving our approach to investment management, we continue to recommend careful review of tolerance for market risk. The intention of such reviews is to provide a source of confidence that, whatever path markets will take, we may participate in a manner appropriate to our individual goals for growth and appetites for volatility.

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Progress Documented

10.2017

Managing client investments since 2007, Signature Resources Capital Management has generated nearly a decade’s-worth of investment management results. Chronicled in a series of individual total return histories, called composites, those past results may be viewed as representative of the market-relative performance of our style of investing. While not necessarily indicative of what returns we may expect to see in the future, we present our composites as demonstrative of the virtues of our investment philosophy and methodology.

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Gliding Home

09.2017

Risk is as much a part of investing as is return. Two sides of the same coin. In many cases, it is likely that individual tolerance for market risk will wane over time. Often due to age-induced pragmatism, we might like our portfolios to become less volatile as our demands for the security of the amount of those funds we have managed to accumulate grows. A progression in portfolio exposures from higher to lower overall expected portfolio risk can be labelled a “glidepath.” This glidepath expresses the past and potential future mix of exposures in the portfolio in order to set expectations for relative potential risk and return. In this month’s commentary, using the more recent past performance of U.S. equity and fixed income investments as a guide, we seek to show the relative potential risk and return impact of incorporating a glidepath into an investment process.

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Horizon Beyond the Peak

08.2017

All the talk about record market highs makes for a bit of discomfort. It can only be down from here, right? In truth, we can never be sure what the markets will do tomorrow, next week or next year. That in mind, we believe the proper approach seeks to invest according to an individual’s investment time horizon and comfort with market risk. With longer time horizons, in particular for those with continued future expected savings, even substantial near- and medium-term downturns may be resolved with time. And the prospects of missing out on additional gains may be seen as just as harmful to potential future wealth.

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Q2 2017: Quarter in Review

07.2017

The second quarter of 2017 proved fruitful as political trends in Europe were more favorable than some had feared, while aspirations for global macroeconomic growth remained positive atop seemingly more auspicious public policies. Risks both obvious and unknowable abound, but so do reasons for optimism with regard to the supports for potential further investment gains. Even so, such progress leads us to remind readers that returns do not come with guarantees and that now is as good a time as ever for an examination of portfolio allocations in the context of risk tolerances and investment time horizons.

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Enhancing Tilts

07.2017

The SRCM Investment Team maintains a vigilant watch over the mutual fund and exchange traded fund (ETF) landscape to ensure that we may maintain what in our view are the most relevant and cost-effective investment exposures within our portfolios. In that tradition, the Team has identified a range of exposures that provide more attractive positioning, a more favorable overall expense proposition or both. As we move forward through the year, our Advisors will be happy to discuss these incremental shifts with readers. While we remain true to our long-term, risk-conscious, fully invested investment philosophy, we believe that both watchfulness regarding present portfolio exposures and mindfulness to identify potentially more advantageous portfolio positioning should continue to benefit our clients.

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Maintaining Perspective

06.2017

On May 17, the S&P 500 Index dropped 1.82%. Day-after headlines were hardly subtle as breathless TV anchors whipped up anxiety like so much fresh cream. Compared to what’s proved a relatively tranquil year or so, the drop was noteworthy. But, while it might not have seemed such at the time, the day’s decline was not so far out of the ordinary as to be considered extreme in the context of the last near century’s-worth of market activity. This month’s commentary seeks to offer some of that longer-term context as a reminder that markets do sometimes experience substantial declines and that it’s been some time since we have experienced an onerous level of red. Though we may find solace in the equity market’s long-term positive bias, the shift in tenor highlights the need for regular reassessment of comfort with market risk.

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Comforting Numbers

05.2017

Experts agree: What tomorrow holds no one knows. Most experts, anyway. As we discussed last month, some folks appreciate more, some less, of the volatility that comes with an unknowable tomorrow. Still, market history has shown ways one can reduce the overall level of risk for a given level of return. A foundational tenet of our approach to investing, enhancing diversification, is one method to deploy while seeking to dampen the impacts of uncertainty in our day-to-day investment experience and potentially increase total return. For us, that means not only buying myriad U.S. stocks of all sizes and sectors. We also can seek diversity overseas. After a long spell of U.S. equity market outperformance, however, the chorus of investment isolationists has grown larger, their refrain louder. Nonetheless, while domestic stocks and bonds are likely to remain the core of our holdings for the foreseeable future, we continue to believe there are benefits to come from global-minded investing.

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Q1 2017: Quarter in Review

04.2017

It did not take long for the post-election euphoria to wane. Ostensibly created by the expectations for growth-oriented legislative and regulatory shifts, investor enthusiasm was met with the reality that the outlook for investible markets remains a bit muddy. The world is not as safe as it has ever been, equity markets are not as inexpensive as they ever have been and central bank policy, while suggesting stability going forward, still might be cause for disruption. And yet, while the jubilation may not be as widespread, investors do not seem to have turned to dismay. Indeed, first quarter performance proved rather fruitful and there are reasons to be a bit more positive from a fundamental standpoint as we head further into 2017.

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Expect Return? Respect Risk

04.2017

With investing come no guarantees. Nonetheless, a few reasonably sound principles so far have stood the test of time and form the core of our Investment Approach. The first element of our approach involves the mapping of combinations of broadly diversified global equity, fixed income and other exposures to specific risk-tolerance levels to formulate our range of investment solutions. Reiterating that return and risk are two sides of the same coin, this month we want to demonstrate how this component of our investment approach translates into the asset allocation decision.

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Labels Can Be Misleading

03.2017

We’re never surprised to see several “growth” exposures in prospective client portfolios we review. Naturally, Growth sounds so much more interesting than Value. But these names, which we’ll define shortly, can be deceiving. In fact, the return series for Growth-oriented portfolios generally are not as attractive as those built to emphasize less-expensive stocks. What might seem a more fashionable label often ultimately isn’t so functional when it comes to meeting long-term financial goals. Function is our sole focus when building investment solutions.

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One Strategy for All

02.2017

With changes in weather, we change our clothes. The more wide-ranging and unpredictable the patterns, the bigger our closets. So it goes with our investments. Markets never fail to press for change of fashion and function, as shifts from balmy rally to stormy correction can come swiftly. And our natural response to an abruptly changing environment, depending on the direction, is to duck and run for cover or to drop the coat and umbrella for shorts and sunglasses. But, what if we build our investments with an all-weather attitude in mind? That basic mindset defines our investment approach.

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Q4 2016: Quarter in Review

01.2017

The U.S. election seemed to dominate capital market movement during the fourth quarter of 2016, as investors first withdrew from risk markets leading up to the decision then embraced them after Donald Trump succeeded in defeating Hillary Clinton to become America’s 45th President. While strength in the U.S. dollar masked otherwise robust global equity market returns in the aggregate, our tilts to relatively inexpensive (known as, “value”) and to small-capitalization stocks boosted portfolio returns, versus the broader markets. While equity markets were positively affected by optimism regarding a Trump administration, fixed income markets were adversely affected by concerns regarding potential policy shifts. Investors began to anticipate higher macroeconomic growth mixed with higher inflation and higher domestic government debt, as well as a less accommodative monetary policy stance from the Federal Reserve. Longer-maturity bonds suffered the most, while corporate exposures fared better on account of the potential for faster growth to boost business activity and profit.

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Returns Commensurate with Risk

01.2017

Capital markets may always reflect the aggregate expectations of investors, but those individual expectations can and will change. Sometimes those changes can come quickly with the resulting market impacts at the same time dramatic and confounding. The final months of 2016 brought with them ample reminder of these truths. Market trends after the November Presidential election left many wondering whether their portfolios should adjust to some new realty, particularly on the fixed income side of the ledger. As we wrote in last month’s commentary, we do not presently believe any marked change in expectation or allocation is warranted. Furthermore, for those still worried about the future for their bond investments, we take the opportunity this month to provide some additional perspective on the important role fixed income can play in a portfolio.

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Unexpected. Not Surprising

12.2016

With all matters investment related, we seek to avoid surprise when the unexpected happens. This objective promotes a healthy skepticism of the consensus view and supports a calm demeanor in the presence of market instability. Even more, measured thinking encourages a heavy emphasis on risk measurement and control, a central tenet of our approach to investment management. Though the approach is not fail proof—we are human, after all—the intention at least ensures we maintain a proper perspective in all our work.

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A Signature Discipline

11.2016

Our approach to investment management seeks pragmatism in concept and efficiency in practice. It is grounded upon more than a century of market history and informed by our collective decades of investment and advisory experience. Executed with cost effectiveness and practicality in mind, our methodology acknowledges the give and take of return and risk inherent to all investments and is designed to be applicable to a very wide range of individual investment scenarios.

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Themes in Review

10.2016

Capital markets entered the third quarter of 2016 recovering from the turmoil impelled by the United Kingdom’s surprise vote to depart from the European Union. Nonetheless, equity markets generally saw reasonably strong gains in the third quarter, with fixed income markets generally tracing a path to green as well. Helped that fears of “Brexit” contagion quickly subsided, as broader hopes of further accommodation from global central banks and twinkles of light among various global and regional macroeconomic indicators instilled greater calm. Monetary policy followed through on those hopes, generally speaking, while trends in macroeconomic data provided a generally stable to modestly positive backdrop for equity markets to retain a positive bent. This, despite continued weakness in corporate profits, which intensified the upward pressure on equity valuations.

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