A day to Honor Our Veterans

While WWI was called “the war to end all wars,” it failed to do just that. By the early 1950s, millions of Americans had served in WWII in the Korean War. So, in an attempt to be more inclusive and honor this younger generation of veterans service, Armistice Day was changed to Veterans Day June 1, 1954.

In November 1919, President Wilson proclaimed November 11 as the first commemoration of Armistice Day with the following words:

To us in America, the reflections of Armistice Day will be filled with solemn pride in the heroism of those who died in the country’s service and with gratitude for the victory, both because of the thing from which it has freed us and because of the opportunity it has given America to show her sympathy with peace and justice in the councils of the nations

Today we honor all those who have fought valiantly so that we may continue to live free.  Please take a moment to reflect on the extraordinary freedoms we enjoy as Americans and the brave men and women who have fought and continue to fight to protect them.

SEI Campus

NAMCOA works with SEI Trust Company to assist our investors manage wealth and provide trust services.

Since 1968, SEI has been a leader in the investment services industry, recognized for its history of innovation. Many of SEI solutions are unique, combining advice, investments, technology, and operations into comprehensive solutions designed to help us help our clients make better financial decisions, achieve their life and wealth goals.

SEI serves a broad range of clients, including banks, trust institutions, wealth management organizations, independent investment advisors, retirement plan sponsors, corporations, not-for-profit organizations, investment managers, hedge fund managers, and high-net-worth families.

SEI manages or administers approximately $1.3 trillion in hedge, private equity, mutual fund and pooled or separately managed assets, including approximately $399 billion in assets under management and $880 billion in client assets under administration, as of June 30, 2021.

SEI is a public company and is listed on the NASDAQ exchange under the symbol SEIC. Their main office and corporate headquarters is in Oaks, Pennsylvania, USA, near Philadelphia. They also operate from offices in Canada, Hong Kong, Ireland, South Africa, and the United Kingdom. Below is a nice video virtual tour of their Pennsylvania campus.

Client Note July 2021

August 5, 2021

July saw another positive month for most US equities.  The S&P500 gained 2.3%, led by growth stocks.  Top sectors were technology, healthcare, and utilities.  A return to growth stocks by investors aided technology shares, while a decline in interest rates gave a lift to utilities.   Energy and value stocks were down on the month, alongside emerging market equities.  And finally, large cap stocks dramatically outperformed small cap stocks. Essentially, it’s a moderate investors market.  The riskiest areas, like small cap and emerging markets, after a stellar start to the year, have been very much sideways the past few months, while the broad indexes continue to grind upward.   Energy is similar in having had a dramatic beginning of the year and now, since early June has been consolidating.   I am optimistic that the areas that have been languishing the past few months are near the end of this consolidation and should see higher prices into the third quarter.

Bond prices have generally risen as interest rates have fallen.  Junk bonds were flat while higher quality bonds saw price gains.  Given the weaker small cap performance and junk bonds underperformance, markets appear in a slightly risk-off mode, even as the major stock indexes continue to climb.  This is generally reflective of the doubt regarding the continued rapid economic growth experienced over the past 12 months.  Riskier stock price stopped going up in March, bond yields peaked in May, and only recently we have gotten worse than expected economic data in a lower revision of Q2 GDP growth and a few misses in employment data.  PMI and ISM indicators are meeting and beating slightly, almost exclusively due to ‘prices paid’ factors.  Higher prices are a positive, even if selling a similar amount of product.

Inflation, on a year over year basis is running “hot”, posting a 5.4% (CPI June). CPI for May was 5%. July is expected to be 5.3%.  There are two key items to remember when looking at inflation data.  The US was only starting to come out of lockdowns last summer (case effects) and the federal government was sending checks to all households (direct stimulus), working and non-working.  This glut of cash has caused serious anomalies in the CPI figures.  Used car prices up almost 100%.  New cars up 7% and travel costs up substantially, from depressed levels.  Today, supply chains and businesses have re-opened to a large extent and there are no more checks forthcoming.  I expect inflation numbers to come down substantially for the remainder of the year, which should support bonds, dividend paying stocks and to a lesser extent, precious metals.

Looking ahead, I maintain my upward bias towards stock prices, with the caveat that we will likely see more volatility, 2-4% weekly variations perhaps.   Interest rates could ease further as economic data comes in slower and slower, as we have now passed the peak growth period.  The US economy will continue to expand, albeit more slowly.   If we could see mid- and small- cap stocks do some catching up, it would give me more confidence that financial markets have more room to the upside, but this has yet to take hold.

Adam Waszkowski, CFA

Advisory and Consulting Services offered through NAMCOA® (Naples Asset Management Company®, LLC). NAMCOA is a SEC Registered Investment Adviser. Information presented is for educational purposes only for a broad audience.  The information does not intend to make an offer or solicitation f​or the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. NAMCOA® has reasonable belief that this marketing does not include any false or material misleading statements or omissions of facts regarding services, investment, or client experience. NAMCOA® has reasonable belief that the content as a whole will not cause an untrue or misleading implication regarding the adviser’s services, investments or client experiences.  Please refer to our Firm Brochure (ADV2) for material risks disclosures. Performance of any specific investment advice should not be relied upon without knowledge of certain circumstances of market events, nature and timing of the investments and relevant constraints of the investment. NAMCOA® has presented information in a fair and balanced manner. The opinions expressed herein are those of the firm and are subject to change without notice. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass.  Any opinions, projections, or forward-looking statements expressed herein are solely those of author, may differ from the views or opinions expressed by other areas of the firm, and are only for general informational purposes as of the date indicated.  NAMCOA® may discuss and display, charts, graphs, formulas and stock picks which are not intended to be used by themselves to determine which securities to buy or sell, or when to buy or sell them. Such charts and graphs offer limited information and should not be used on their own to make investment decisions. Consultation with a licensed financial professional is strongly suggested. Please remember that securities cannot be purchased, sold or traded via e-mail or voice message system.  For more information, please visit www.namcoa.com

Retirement Plan Custodians

NAMCOA can work with virtually any record-keeper/custodian, as in the case of retirement plans, the plan sponsor has the final choice and selects their record-keeper/custodian. NAMCOA has never received commissions from any custodian, of any type, our competitive fees can be paid out of plan assets and/or be direct-billed. 

In alphabetical offer, the retirement plan custodians we currently work with are:

  • Ascensus
  • AssetMark
  • Empower
  • ePlan
  • Fidelity
  • Paychex
  • SEI Private Trust Company
  • The Pacific Financial Group

Collectively, these custodians are also Platform Managers and provide related investment advisory and performance measurement services that may be provided through their third-party platform. These Platform Managers are responsible for managing model portfolios, taking into account each client risk profile and input from NAMCOA Advisor.

2021 Interactive Broker Awards

So for Interactive Brokers, industry Awards in 2021 are not in any short supply. One of the custodians NAMCOA uses, has achieved yet another award from Barons, for being the Best Online Broker – 5 out of 5 stars#1 for Active Traders, #1 for Information, #1 for International and #1 for Trading.

Interactive Brokers is a global custodian of client assets, and offers a transparent, low commissions and financing rates, support for best price execution, and stock yield enhancement program help minimize costs to maximize client returns.

With Interactive Brokers, our clients can invest globally in stocks, options, futures, currencies, bonds and funds from a single integrated account. Multiple currencies are available and assets can be denominated in multiple currencies.

Through Interactive Brokers, we can access market data 24 hours a day and six days a week in 135 Markets, 33 Countries and 23 currencies.

Other 2021 industry Awards for Interactive Brokers noted below.

Client Note May 2021

June 8, 2021

After a brief pullback in early May, the S&P500 continued is upward grind, managing to eke out a slight gain, .66%, for the month.  Foreign shares did much better with Europe up more than 4% on the month.  Precious metals were the big winners with gold up 7.6% and silver gaining 7.8%   Precious metals outpaced other commodities, which generally fell during May.  Lumber is almost 25% below its peak in early May.  After an initial rise, bond prices were flat as interest rates stabilized. 

We may be seeing the initial switch back to technology and small-cap stock outperformance after a few months of underperformance.  Technology shares fell sharply early in the month and despite a solid rebound ended down 1.2% on the month.  However, since mid-May, the value-over-growth meme that we have seen the past few months has begun to reverse.  Small stocks and tech have begun outpacing cyclicals/value.   I expect this to continue through the summer.   Stocks remain in an uptrend.  Technology and small companies are seeing prices revived; gold has caught back up to equities and interest rates have been easing.   Sentiment indicators have moved from short term negative to neutral.  For me, this means the market has room to move up as it climbs a ‘wall of worry’ regarding inflation.  Once no one is worried, and everyone has ‘bought in’, THEN we need to be concerned as there will be fewer buyers left to buy.

The main, seemingly only topic, in the news is inflation and the employment situation.  The current narrative is that inflation is being caused not only by supply chain issues, but also by wage pressures.  The idea behind wage pressures is that, if wages continue to climb, prices for goods and services will increase as well, resulting in inflation. 

There is littlereason to think that the pace of wage increases coming out of the recession will continue to climb at the current pace after this summer.   We still have more than 7 million fewer people working than at the end of 2020.   During the recession low wage areas like food service and hospitality bore the brunt of the layoffs.  As people leave unemployment benefits, their new wages will be very similar to the benefits they have been receiving.  Some may earn less.  We are now seeing the peak of wage gains and expectations.  Upward pressure will ease over the summer hiring season ends and bottlenecks dissipate.

The key idea is that wages and prices dropped dramatically and have now rebounded.  This base effect, comparing last year to this year is very substantial.  The error is assuming this pace of gain will continue. The rate of increase in employment, wages, inflation and possibly, earnings will likely level off and slow.  How stock prices react in that environment will be interesting.  Sustained higher stock prices due to low inflation/low interest rates, or will slower growth be seen as a risk to earnings and thus stock prices.

Adam Waszkowski, CFA

Advisory and Consulting Services offered through NAMCOA® (Naples Asset Management Company®, LLC ). NAMCOA is a SEC Registered Investment Adviser. Information presented is for educational purposes only for a broad audience.  The information does not intend to make an offer or solicitation f​or the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. NAMCOA® has reasonable belief that this marketing does not include any false or material misleading statements or omissions of facts regarding services, investment, or client experience. NAMCOA® has reasonable belief that the content as a whole will not cause an untrue or misleading implication regarding the adviser’s services, investments or client experiences.  Please refer to our Firm Brochure (ADV2) for material risks disclosures. Performance of any specific investment advice should not be relied upon without knowledge of certain circumstances of market events, nature and timing of the investments and relevant constraints of the investment. NAMCOA® has presented information in a fair and balanced manner. The opinions expressed herein are those of the firm and are subject to change without notice. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass.  Any opinions, projections, or forward-looking statements expressed herein are solely those of author, may differ from the views or opinions expressed by other areas of the firm, and are only for general informational purposes as of the date indicated.  NAMCOA® may discuss and display, charts, graphs, formulas and stock picks which are not intended to be used by themselves to determine which securities to buy or sell, or when to buy or sell them. Such charts and graphs offer limited information and should not be used on their own to make investment decisions. Consultation with a licensed financial professional is strongly suggested. Please remember that securities cannot be purchased, sold or traded via e-mail or voice message system.  For more information, please visit www.namcoa.com

Client Note April 2021

May 10, 2021

The close of April brings us 1/3 of the way through 2021.  After a very rapid start in January and subsequent pullback, April was a strong month across all asset classes.  For the month, the S&P500 gained 5.8%, gold gained 3.8%, corporate bonds gained 1% and long-term Treasuries gained 2.4%. Stocks in Asia have weakened while European shares have been catching up to the US.  Portfolios gained in April and the average Moderate portfolio is up 6% year to date.

We are still in a “value over growth” market, where traditional industries like materials, industrials, financials, utilities are outpacing the growth areas like technology and biotech.  We had been in a market were large-cap growth” (aka technology, aka FAANG) and small-cap stocks had been dominating, but since mid-February markets have been driven by dividend paying stocks and other cyclical areas.  This will likely continue until evidence that we are not going to grow as rapidly as investors currently believe.   Friday’s massive miss in unemployment (1million new jobs expected; 266,000 actual) may be the first data point that could show a much more moderate pace of growth going forward.

The still high expectations of rapid growth see inflation data as evidence that the economy is about to run red-hot.   If we read below the headlines, we can see that commodity prices like lumber are being driven by more than US housing demand.  A years-ago beetle infestation in Canada has limited US lumber imports; sawmill shutdowns due to Covid, AND housing have been sources of supply disruption.  The combination has pushed prices to extreme levels.  China is the world’s largest consumer of raw materials.  China’s early control of Covid-19 and truly massive stimulus spending (approximately 10% of GDP in 2020) has underpinned demand for such commodities and agricultural products.    This makes much more sense than inflation driven by US aspirations to get back to pre-Covid levels, which saw sub-2% growth for several years.  In addition, supply chain disruption due to a varied array of local shutdown conditions across the US has made year over year comparisons and identifying specific bottlenecks a challenge.   Currently, China’s credit impulse is on the wane, while US stimulus takes the reins in 2021.  US stimulus usually takes longer to impact the economy, however.  In the longer run, the US needs to maintain our reserve currency status—by creating enough US dollars for the rest of the world to use—but that is a topic for another day.

I expect forward-looking estimates of growth in the US to decline to more normal levels and at the same time, interest rates and inflation expectations to decline moderately.  Interest rates have been sideways now for almost 10 weeks. I will be looking for further confirmation of this in economic data into the end of the quarter.

 

Adam Waszkowski, CFA

 This commentary is not intended as investment advice or an investment recommendation. Past performance is not a guarantee of future results. Price and yield are subject to daily change and as of the specified date. Information provided is solely the opinion or our investment managers at the time of writing. Nothing in the commentary should be construed as a solicitation to buy or sell securities. Information provided has been prepared from sources deemed to be reliable but is not guaranteed by NAMCO and may not be a complete summary or statement of all available data necessary for making an investment decision. Liquid securities, such as those held within managed portfolios, can fall in value. Naples Asset Management Company, LLC is an SEC Registered Investment Adviser. For more information, please contact us at awaszkowski@namcoa.com.