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Capital Markets Outlook: The Economy and the MarketsSubmitted by Townsend Asset Management Corp. on August 4th, 2016
We had a great turnout on Thursday, July 28th for our bi-annual overview of the Capital Markets. Here are some of the key points that Gerald Townsend presented:
- The US economy is showing signs of improvement. Wages have increased helping retail sales to rise.
- With lower mortgage rates, now is an excellent time to refinance home loans.
- The market places a premium on consistency (for example, stocks like Proctor & Gamble or General Mills.) Also, lower volatility stocks have attracted investors but now demand a premium to own them. When everyone starts looking for the same good thing, it can get expensive. Some shunned stocks can turn out to be a better deal.
- The fallout from the Brexit vote has been fairly short-lived. The result surprised the market causing the immediate dramatic drop, but then it soon rebounded.
- Most do not expect the Fed to increase rates until December. If rates go up, it will likely be very small and the market is expecting it.
- Over the past 12 months more conservative portfolios, which are heavier in bonds, have outperformed more aggressive portfolios.
- There is more opportunity for value in sectors that have not performed as well, for example financial services as opposed to utilities, which are now overvalued.
- Municipal bonds are offering higher after-tax yields than government bonds.
In summary, Gerald:
- strongly favors stocks over bonds;
- indicates “safe” stocks are looking less safe because of the high premium to own them;
- suggests looking for opportunities in foreign markets.
Bonnie Mole is Client Service and Communications Manager at Townsend Asset Management Corp. Email: Bonnie@AssetMgr.com