The plethora of earnings’ reports has kept us busy through the first couple of weeks of May. Speaking of earnings, many companies did not report robust growth either in revenue or earnings. In general, it was a lethargic first quarter (ending March 31st). The market reacted by declining during the first three weeks of May. The Federal Reserve also contributed to the downturn by indicating that it was more likely than not to raise rates in June. With that said, it is interesting just how strong the market has rebounded over the past few days. It could be somewhat of a relief rally in that fears of a recession have now abated and the price of oil has stabilized. That fact that buyers have stepped in to support market dips is encouraging.
The economic picture continues to show gradual improvement and is also showing some mild inflationary pressures. The dollar has declined a bit in 2016 and this has the effect of making our exports more affordable. A weaker dollar will also help large, multi-national companies post better revenue growth. The rising dollar in 2015 dampened reported revenue growth when translated back into dollars. Retail sales have been a bit weaker than expected during the first part of 2016, but it may be too early to call it a trend. The savings rate continues to climb in the U.S. and consumers continue to look for bargains. We believe the “great recession” has had an impact on the public and a higher savings rate is one of the results.
Our Endowment Model approach continues to serve as the basis for the financial plans we develop for our clients. Using this approach should provide them with the cash flow needed to:
- Meet your minimum monthly expense outlays with no market-related risk, and
- Enjoy some discretionary spending on items or trips. We refer to this as your “play check”.
The third leg of this model involves investing in the stock market. This conjures some level of fear in many of you. Therefore, at Netzel Financial we offer three strategies within the stock market. These strategies can best be described as:
- “Core” Approach:
- This strategy is designed to return 8-12% per year (over a 3-5 year time period), but also tries to lower volatility. It involves more transactions and the use of an inverse ETF to provide profits during bear markets. This strategy should outperform during bear markets, but lead to lower returns in a strong, bull market.
- This strategy is designed to lower volatility in your portfolio and return 5-8% over a 3-5 year time period. This strategy will typically fare better during bear markets, but under-perform in a bull market.
- This strategy doesn’t worry about volatility. It is more focused on a good, long-term return. Although there are no guarantees, the 3-5 year return on an annual basis should outperform the first two strategies. Clients need to be comfortable with the inherent declines that occur in the market from time to time.
Jim Gentrup, CFA Steve Netzel
Portfolio Manager President
Netzel Financial Netzel Financial
Securities offered through Kalos Capital, Inc. at 11525 Park Woods Circle, Alpharetta, Georgia 30005, (678) 356-1100. Netzel Financial is not affiliated nor a subsidiary of Kalos Capital, Inc. or Kalos Management, Inc. Steven M. Netzel is licensed to solicit and sell securities and advisory services in multiple states. Please contact our office for the list of states. Investment Advisory Services offered through Val Vista Capital Management, a wholly-owned subsidiary of Netzel Financial. Val Vista Capital Management is a Licensed Investment Advisor (RIA) in Arizona. Steven M. Netzel and Jim Gentrup, CFA are both Investment Advisory Representatives (IAR) of Val Vista Capital Management. Netzel Financial, Val Vista Capital Management and Kalos Capital, Inc. do not provide tax or legal advice. The opinions and views expressed here are for informational purposes only. Please consult with your tax and/or legal advisor for such guidance.