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Transcript
2014 Headwinds, Tailwinds, Trends, Strategy
Daniel Roccato
Adjunct Professor of Finance and Economics, Rutgers
University School of Business
President, Quaker Wealth Management, LLC
Securities & Advisory Services Offered through VSR Financial Services, Inc., A Registered Investment Adviser
and Member FINRA/SIPC. Quaker Wealth Management is not owned or controlled by VSR” .
2014 Headwinds, Tailwinds, Trends, Strategy
This commentary contains opinions and analysis that are provided by the presenter for informational purposes only and should
not be used as the primary basis for an investment decision. Please consider your individual investment objectives and risk
tolerances before making investment decisions. Not all strategies discussed may be suitable for all investors.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension
risk. In general, bond prices rise when interest rates fall and vice versa. This effect is more pronounced for longer-term
securities.
Investing involves risk including loss of principal. Please consider your individual investment objectives and risk tolerances
before making investment decisions. Not all strategies discussed may be suitable for all investors.
Mutual Funds are offered by prospectus. Before investing, investors should carefully consider the investment
objectives, risks, charges and expenses of the fund which are outlined in the prospectus. Please contact your representative or
the Company to obtain a prospectus. Please read the prospectuses carefully before investing or sending money.
Securities & Advisory Services Offered through VSR Financial Services, Inc., A Registered Investment Adviser
and Member FINRA/SIPC. Quaker Wealth Management is not owned or controlled by VSR” .
2014 Headwinds
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Bull market is 4 ½ years old; the average bull market since 1900
lasted 2.1 years. 1
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Market is not cheap.
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Current PE is 18.5 vs. historical average of 15. 2
Current dividend yield is 1.98% vs. historical average of 4.3%.
2
The job market remains weak, particularly middle class jobs.
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Participation is at 30 year low (63% vs. 61% in Italy). 3
If participation rate was still 67%, unemployment would be 11%. 3
Demographics, delayed entry to work, 8.8 million on disability vs. 4.4 in 1978.
4
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After a binge of record earnings, corporate profits will slow.
•
Fed will reduce stimulus.
•
Our President and political leaders are small. Our challenges are big
(healthcare, taxes, education).
1.
2.
3.
4.
Investor.fisherinvestments.com
Standard and Poors
US Dept of Labor and US Dept of Commerce
QWM research
2014 Tailwinds
•
Consumer debt has shrunk to pre-crisis levels thanks mostly to
mortgage defaults.
•
The “wealth effect” - $77 trillion of household net worth.1
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GDP is growing at 3.4%, unemployment is declining.2
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The U.S. remains a popular choice for foreign investment.
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Interest rates and inflation remain low.
•
Housing has stabilized, though some markets remain weak
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2.
3.
Weak household growth – 36% of millennials live at home. 3
Federal Reserve Bank
US Dept of Commerce
Huffington Post
Macro Trends
•
The ongoing emergence of the global middle class.
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There are now 65 cell phones for every 100 Africans.1
15 million cars sold in China in 2012 (GM sold 1.3 million). 2
Huge opportunities for US companies – KO Europe sales down 2%, India up 22% 3
Global Demographics
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Japan – decline of 284,000, 24% over 65 only 4% under 3 (diapers vs. depends).4
USA
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Birthrate is at a historic low (1.9 vs. 2.1); number of elderly at historic high.
1.9% fewer high school seniors in 2013 5
Older and poorer 5
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1.
2.
3.
4.
5.
1
65+ is 12% of population, will be 20% in 2030
Wealth is becoming a barbell
46 million (15%) in poverty ($23,500 for a family of 4)
09-11, the avg net worth of 8 million wealthiest households surged from $2.7 million to $3.2 million; for the 111 million households that make up the
bottom 93 percent, avg net worth plunged from $140k to $134k
USA regional differences will accelerate (NJ vs. Nevada).
Renting and multigenerational homes are the new normal.
Surplus of workers, but a shortage of skills (e.g. engineers, farmers).
The “baby bust”, over-expansion and an unsustainable economic model, means
pain for colleges (1.9% fewer high school seniors).
New energy sources and efficiency gains will reshape the economy.
World Bank
Motor Authority
Coca Cola
Telegraph UK
Stateimpact.npr.org
Investment Strategy
•
Beware of the yield trap and financial hucksters!
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Fixed Income Ideas
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Stay away from long maturities/durations
Core should be high quality, short-term bonds/funds
Add some spice - global bonds, closed-end muni funds
Stock Ideas
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Non-traded REITs, DPPs, annuities
Core should be high quality, dividend stocks/funds
Overweight sectors with good cash flow and dividends (energy, pharma, utilities,
telecom)
Spice with Emerging Markets
Avoid “momentum” stocks, IPOs
Alternatives
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Avoid hedge funds, non-traded REITs, and anything illiquid
Be wary of commodity stories