HPM Partners Insights
Fourth Quarter Market Digest
This report assesses current economic and market conditions and provides our 2017 outlook for opportunities and risks. In addition, the report includes our scorecard of last year’s projections and a performance discussion of various asset classes.
On this conference call, HPM Partners’ Chief Investment Officer, Ben Pace, provides an overview of the economy and markets, key themes for 2017, and his views about opportunities and risks.
On this interactive conference call, HPM Partners’ Chief Investment Officer Ben Pace presents the firm’s views on the state of the markets, implications for investors and key investment themes for 2016.
The recent news stories about Sumner Redstone and his empire highlight an increasing problem in 21st century America – the importance of planning for incapacity. Redstone, the 92-year old chairman and largest shareholder of two public companies, Viacom and CBS, is currently the subject of litigation in California alleging that he is incapacitated and unable to manage his affairs.
Redstone is hardly alone. In the United States, 1 in 9 people age 65 or older have some form of Alzheimer’s disease. About one-third of people age 85 or older are so afflicted. These statistics, combined with the fact that Americans are living longer and are having smaller families, mean that planning for incapacity has become just as important or even more important than estate planning at death.
December 16, 2015: The Fed’s Decision Is In
The Federal Reserve’s Federal Open Market Committee (FOMC) unanimously voted to set the new target range for interest rates at 0.25 percent to 0.5 percent, up from zero to 0.25 percent. HPM Partners CIO Ben Pace discusses the implications of the rate hike on the U.S. and global markets.
To listen to the replay, dial toll free: 1-888-403-4660
The replay will be available through January 6, 2016.
Exchange Traded Funds or ETFs combine the investment features of mutual funds with the trading characteristics of common stocks. They can be bought and sold continuously throughout the trading day, and they can also be margined, shorted, optioned and lent out to other market participants. ETFs were developed to give institutional investors passive exposure to the equity market. The first ETF brought to market was the TIP 35 ETF, launched on the Toronto Stock Exchange in March 1990.
Asset protection planning—planning to avoid liabilities, lawsuits and claims—has become a major field in wealth planning. In many respects, it is as important or more important than estate planning and income tax planning. It is especially important for high-profile figures who are an easy target for lawsuits and claims.
Market Volatility Conference Call Replay
In response to the continued market volatility, we arranged a conference call with our Chief Investment Officer Benjamin A. Pace. Held on August 26, the call was intended to address client concerns and share our views on the volatility and overall market conditions.
Global equity markets experienced another sharp selloff overnight and into this morning, with the Standard & Poor’s 500 index now having joined the Dow Jones and NASDAQ indices in a full 10% correction from their Spring highs. This is the first correction in equity prices in an unusually long four years. While we have experienced a number of 3-7% “pullbacks” over this time, these moves have generally resulted in buyers coming in and using cash parked on the sidelines to buy attractively priced stocks.
The U.S. has long been a country to which wealthy families around the world have chosen to immigrate. In recent years this movement of wealthy individuals and families coming to the U.S. from Asia, Latin America, the Middle East and elsewhere has only increased. There are numerous reasons for this movement of affluent people, including standard of living, security concerns, and business opportunities here in the U.S.
Over the past decade, wealthy families have been separating into two very distinct groups. In one group are the families who are taking advantage of developments in the law and planning to shelter vast amounts of family wealth (and sometimes all family wealth) from estate taxes and liabilities, potentially forever. In the other group are the families who are willfully or negligently ignoring this planning opportunity.
As everyone knows by now, Greece voted “No” by a margin of 61% to 38% in the July 5 referendum. The media is characterizing Sunday’s Greek referendum as a resounding rejection of the troika’s (European Commission, European Central Bank and International Monetary Fund) demands for further austerity in exchange for additional bailout funds.
A large cohort of US investors began to invest overseas at a time when the weak dollar provided a welcome boost to international returns. This trend has now reversed and the dollar is forecast to remain strong for the foreseeable future. Investors are now required to adjust to the complexities of exchange rate volatility, and to explore ways to protect portfolios from potential losses due to the strong dollar.
After two successive years of strong returns for the S&P 500 index and lackluster returns for broadly diversified portfolios, many investors are questioning the promised benefits of portfolio diversification and asset allocation. To help readers gauge whether these tools are no longer effective, we will start by going over the key precepts of asset allocation and diversification, which underpin our own approach to portfolio management.
2014 turned out to be a challenging year for investors. Expectations of a synchronous revival of global economic growth did not pan out. China struggled to maintain economic momentum while attempting to transition from an investment-driven to a consumer-driven economic model. Europe and Japan hovered close to recession, despite massive amounts of economic stimulus. In turn, the slowdowns in China, Europe and Japan had a direct impact on resource-based economies that supplied these markets with commodities and raw materials.
2015 Investment Outlook Conference Call Replay
The HPM Partners 2015 Investment Outlook conference call replay is now available. Held on January 15, our Chief Investment Officer, Benjamin Pace offered market commentary and our outlook for the year.
Happy New Year. We are pleased to introduce our monthly Economic Outlook & Market Forecast. Written by Chief Investment Officer, Ben Pace, it summarizes our views on the world economy, monetary policies and currencies, bond markets, equity markets and alternatives.
The global financial crisis of 2007/2008 and its aftermath have been a difficult time for states and municipalities. High unemployment, steep asset price declines and falling property values all reduced tax revenues, leading to layoffs and cutbacks in municipal services. Five years into the recovery, many cities, municipalities and state governments have found it hard to regain the ground they lost during the downturn.
Nearly 10,000 workers will reach the magic age of retirement every day over the next decade. However, research shows that only 18 percent are confident in their ability to accumulate sufficient assets for a sustainable retirement. This may result in a lower standard of living, or the likelihood of working much longer than expected. It’s a sobering dose of retirement reality for many that “75 is the new 65”!
During the global financial crisis of 2007/2008, central banks around the world undertook a coordinated campaign to inject vast amounts of liquidity into the global financial system to forestall a global economic meltdown. While these measures helped to avert catastrophe, they sparked widespread fears that the additional liquidity would unleash high inflation, or even hyperinflation, down the line.
Family wealth management solutions require broad and integrated expertise provided by highly credentialed professionals who have the ability to relate to the family as confidantes and to offer objective advice on a human, financial and intellectual level.
Most public and private companies offer lucrative compensation and benefit-plan packages to attract and retain top professionals. However, few companies provide the services of a professional financial advisor with a comprehensive understanding of how the company’s various plans work, as well as the expertise to ensure that company’s professionals maximize the value of these benefits and overall wealth creation.
Forty years ago, the world suffered a major shock, when the Arab members of OPEC, the oil cartel, instituted a boycott of oil sales to the US and Western nations as punishment for their perceived support of Israel in the 1973 Yom Kippur War. Although the boycott was short-lived, it was quickly followed by a tripling of oil prices by OPEC and oil was transformed from a mundane commodity into a political weapon.
Global markets don’t stand still. Neither should your portfolio’s asset allocation. For 2014, we believe that differences in valuations, central bank policies and economic growth will create pockets of opportunity in stocks and bonds, but that overall, stocks will again outperform bonds. We believe investors should be prepared to fine-tune their portfolios as opportunities or risks arise.
Happy New Year. As we do each year, we want to share our views on the economic and market outlook for 2014, and to highlight the key opportunities and risks that we foresee for the coming year.
World markets posted strong returns for 2013. We enter 2014 amid broad anticipation that last year’s strong returns have laid the foundation for further gains in the coming year. We expect the US and other developed markets to outshine emerging markets again this year, while the outlook for bonds is mixed at best.
Comprehensive financial planning requires attention to detail and timely decisions. We encourage our friends and family to review their financial situations with a professional wealth advisor at least once a year, and especially at year’s end, which is often the best time to assess opportunities to reduce current and future tax liabilities. Below, we highlight basic financial planning steps that can materially influence lifetime financial goals, financial security throughout retirement and the amount of wealth transferred to heirs. Assess especially the three main areas of financial planning: tax, retirement, and estate planning.
HPM Partners is proud to introduce our first issue in Worth Magazine’s Leading Advisors Program!
Bond markets appear to have reached an inflection point in the second quarter of 2013. After several years of favoring bonds as a safe alternative to stocks and other investments, investors abruptly reversed course in June. In the final week of June alone, over $23 billion was pulled from bond funds, the second largest weekly outflow on record.
Many of our clients are already familiar with the use of alternatives or specialty strategies as a way to enhance returns, gain exposure to returns uncorrelated to traditional stocks and bonds, or to act as a diversifier to reduce overall portfolio risk within their portfolios. Historically, exposure to these specialized strategies could only be obtained via private partnerships whose high investment minimums, illiquid terms and specific net worth requirements made them inaccessible to smaller investors.
Global markets were roiled last quarter by the mere suggestion from Chairman Bernanke that the US economy was looking healthy enough for the Fed to consider easing back on the stimulus programs that have injected liquidity into the US financial system since the 2008 financial crisis. Instead of being viewed as a positive development, namely that the US economy was recovering nicely and no longer required massive government support, Chairman Bernanke’s hint of a tentative timeline for winding down Fed bond purchases caused a widespread sell-off in global equity and bond markets.
Emerging markets are an integral part of global portfolios today. Returns among US, developed non-US and emerging markets equities are now closely correlated, and the diversification benefit of investing in overseas markets is greatly reduced. Now that emerging markets are part of the mainstream, investors are exploring other markets that can offer attractive returns and potential diversification. In this report, we will review the opportunity in the so-called “frontier markets.”
Happy New Year. As we do each year, we want to share our views on the economic and market outlook for 2013, and to review some of the key opportunities and risks that we foresee for the coming year. On the back of last year’s strong returns, we see clear signs that the global economy is finally on the mend. Our 2013 outlook can be characterized as a world of lessened risk and potentially lower return.
The US government and taxpayers face three major political and fiscal events going into 2013. First is a series of tax increases under “Taxmageddon.” These include the expirations of the 2001/2003 Bush tax cuts and the 2% temporary cut in the payroll tax at year-end, together with new healthcare-related taxes on higher income taxpayers that go into effect in January.
The term exorbitant privilege was first used by French President de Gaulle and Finance Minister Giscard d’Estaing in 1965 to describe what they saw as the great advantages conferred on the dollar by reserve currency status. Reserve currency status confers by the privileges and obligations on the host currency. Indeed, as we will discuss, reserve currency status may be both a curse as well as a blessing for the dollar.
Each year round this time, there is media buzz around the old Wall Street adage, “Sell in May and Go Away.” We are hearing considerably more buzz this year based on the large run-up in markets in Q1 and the subsequent sell-off in April, a lot of market observers are talking about using the Sell in May phenomenon to protect portfolio gains going into the summer.