I have attached our Mid Year Market Commentary 2014. The overall theme of the newsletter is that the U.S. economy could possibly see a growth spurt starting later this year and carrying into 2015. This is in part due to three factors in our opinion:
- CEO’s seem to be tired of worrying about regulation and tax policy and are starting to take action to promote growth. Mergers & Acquisitions have increased significantly from 2013. Companies are taking advantage of record low interest rates to lock in 3% money for many decades to come. This will enable them to buy back shares and invest in future growth – and hopefully continue to produce job growth in our economy.
- Valuations are still reasonable in U.S. stocks and bonds are entering a very precarious environment as the Federal Reserve starts to slowly let interest rates move up. The eventual rotation out of bonds could be a historic event and could provide more fuel for further gains in stocks.
- Global markets have stabilized in 2014 – Emerging markets, Europe, Japan and other countries have taken pro-growth action and the data is looking more and more positive as the year progresses.We also highlight the list of geopolitical tensions in Iraq, Israel and the Ukraine. These threats seem contained at this time but if any of them spiral downward and we have a major military conflict or a spike in oil prices the market momentum could be derailed. We will be watching these issues and the global economic data and provide updates each week.
Overall, we feel any short term pullback would be a buying opportunity and continuous rebalancing will enhance our portfolio returns for the foreseeable future.