• The last time the S&P 500 index saw a start as strong as this year was 1991.  With a gain of over 9% YTD, it is the eighth best start in the index’s history.  Looking at similar periods, the median return for the remainder of the year was 8% (source:  Bespoke Investment Group).

 

  • Everyone gets a trophy this earnings season-or at least a pass. Companies that reported upside surprises for Q4 saw their share prices rise 2% on average that day.  Those that missed estimates barely moved (source:  FactSet).

Will This Rally Fade Like Early 2018?

We also saw a strong start last year with the S&P 500 up 7% at the then all-time high on January 26th.  The surge out of the gates was followed by 10% and 19% corrections later in the year.  Are we in for a similar fate this year after such a strong start?  Let’s look at a few market pillars and why we conclude this year appears to be different:

Valuation – The forward P/E for the S&P 500 in January 2018 was over 18x, dropped to 13x in December, and now stands at 15.8x.  This is lower than the five-year average and slightly higher than the ten-year average.  As we showed in the earlier February commentary, stocks have retraced back to the long term earnings trend line.  Stocks appear fairly priced at these levels.

Sentiment – The well-known and respected AAII survey shows bullish sentiment about 40%, right at the historical average.  However, bearish sentiment is well below the historical average of 30% at 23%.  Investors have been turning more bullish since the December low but are not overly optimistic like they were a year ago.

The CNN Fear/Greed Index is showing a moderate Greed rating, up from Fear just a month ago.  Last year the January high was accompanied by extreme Greed, as well as at the subsequent September 2018 all-time high.

Technical – Not all the technical damage to the market has been repaired, but the price chart (a supply/demand indication) is looking much better.  (For a review of technical analysis, see the December 2018 Market Commentary at  https://mailchi.mp/45dd75abe6a8/2ll24qleyd-2884001).  The S&P 500 is now comfortably above the 50-day moving average but is bumping up against resistance at the 200-day moving average.  A break above that level could lead to a retest of the all-time high, about 7% above current levels. 

 

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Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

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This is achieved through an ongoing assessment of market risks given your specific financial situation and goals.

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Leadership Team

Richard Furmanski

Richard Furmanski

CFA

has been a portfolio manager and analyst for over 35 years. He manages conservative, tax-efficient portfolios for both pre-retirees and retirees. His lower risk approach appeals to investors who want less volatility and competitive risk-adjusted returns.

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Mary Ellen Adam

Mary Ellen Adam

Director of Operations

has been in office administration for over twenty years. Her experience includes customer service, firm operations, and office administration. She interacts with our clients on a day-to-day basis and handles any requests that may arise.

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Frequently Asked Questions

If you can't find the answer to your questions here, feel free to give us a call at 847-847-2505

Do you manage both stock and bond portfolios?

Yes. We build a portfolio of conservative, high-quality stocks and hold them for the long-term. The average holding period is 4 – 5 years. Our focus is on stocks that are suitable for retirement portfolios.

Our high-quality bond portfolios are designed to provide both income and stability of principal. Bonds provide the anchor for balanced accounts (those holding both stocks and bonds).

What is your investment philosophy?
We take great care in purchasing only high-quality stocks and bonds intent on a multi-year holding period. Portfolio turnover and taxable realized gains are modest in comparison to other active managers. We do not time the market but will become more defensive, in terms of stock holdings, when market conditions warrant.
Will the portfolio be managed in accordance with my financial goals?
Yes. Each of our clients has a custom-tailored portfolio. These custom portfolios are designed to meet specific client objectives with a thoughtful approach to specific constraints such as risk tolerance. And as each client’s situation changes, the portfolio does as well. There is no cookie cutter approach.
What kind of expertise do you have and how can that help me in difficult markets?
We have been working with high-net-worth clients like you since 1982. Over that time we have helped them to navigate several bear markets and financial crises (including the stock market crash of 1987). We hold the Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP) designations.
Are you sensitive to taxes when managing portfolios?
Yes. Our holding period for an individual stock averages 4 plus years which means our turnover is low and realized gains can be carefully managed. Further, where possible, we tax loss harvest small losses as a way of offsetting gains taken elsewhere in the portfolio.
How have you performed?
Results will differ by client and the level of customization but we have provided competitive investment returns for many years.
How do you charge for your services?
We charge a management or consultant fee based upon the size and level of customization of the account. As the account grows, we benefit together.

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