Weekly Market Commentary
with Scott McCaghren & Tony LaPorta
We will be delivering this week’s market analysis via written commentary, returning to the audio portion next week.
The summertime seemingly always presents commentary challenges which are typically due to a boring marketplace. We believe this to be a good thing as boring markets allow investors a chance to reset their portfolios and minds. On the flip-side of this, certain strategies that we deploy become more difficult to locate positions with the proper risk/reward relationships. We tend to re-position those portfolios into different strategies just like we re-position our models into a more dividend-oriented allocation.
Lack of investor participation across the major indices is to blame for the seasonal sideways to higher price action throughout the summer months. Many will notice the recent re-balancing that we conducted in order to accommodate such an environment, with a few additional adjustments coming down the pipe. We believe that the new structure of the portfolios will be beneficial over the new eight weeks or so as we prepare for that participation to pick back up around late August.
We have discussed our viewpoints on longer-term projections for the overall equity markets for several months now. It is clear that as long as the Fed is willing to remain accommodative surrounding interest rates, markets will continue on a higher trajectory due to lack of competition for investment dollars. However, this does not mean that it will be as simple as “close your eyes and buy it”. Inflation will be a key component in future bouts of volatility that could be on the horizon.
In order to combat the inflationary reactions against the equity and treasury markets, we have/will be incorporating some commodity exposure to properly offset potential pressure against the broad marketplace. With all of that being said, we do not expect this to be a parabolic overnight type of event. It is much more likely to be a gradual pendulum type of relationship between interest rates and inflation as the Fed walks the tightrope of “yield-curve control”. However, the commodity exposure has several other factors that we look to push prices significantly higher regardless of inflationary issues.
All-in-all, we are still very much looking for the remainder of the year to remain positive with the likelihood of similar performance next year. It has been exciting to watch the new additions into the portfolios with several new additions coming soon.
As always, we continue to monitor all equity, treasury, commodity, and currency conditions in order to efficiently deploy capital as well as protect invested assets.