Earlier this week we held our regular “Portfolios at Panera” and “Markets on Marconi” events where the primary discussion topic was how we were allocating portfolios as we start 2017. One of the key discussion points was our current target “overweight” to stocks within our Harvest strategy and how we are structuring that allocation across U.S. and foreign stocks, and large and small companies. A question which came up at both events was “Where do you think the stock market will finish 2017?” 

Thursday morning we held our monthly “Portfolios at Panera” event – an opportunity for clients and friends to hear about what is happening in the markets and how those happenings are impacting portfolios we manage. Today’s session consisted of three main topics: Brexit, market performance for the first half of 2016, and interesting observations when to politics and the presidential candidates.

While polls and betting odds suggested the United Kingdom would remain part of the European Union, last night’s news came as a surprise, particularly to the financial markets. At The Joseph Group, our investment team is on the phone with money managers processing the impact of UK’s decision on markets and portfolios. As markets digest the news, here are some facts we are discussing as we separate the signal from the noise.

Flat. Frustrated. While these two words describe the stock market and the mood of investors respectively, it is important to be smart in responding to what the market is doing. After all, Benjamin Franklin once said, “An investment in knowledge pays the best interest.” With that in mind we share with you two crucial concepts to consider in this range-bound environment.

In the first four trading days of 2016, U.S. stock market indexes have declined approximately -5%, the worst four day start to a year for the Dow and S&P 500 in history, according to FactSet data going back to 1897.  The catalysts for the decline seem like an almost exact replay of last August’s correction – news of slowing economic growth in China, China devaluing their currency, and the Chinese government interfering with free operation of their stock market. Let’s look at each piece to discuss what is happening:

As this note is being written on the last day of the year, the Dow is down over 100 points, capping off a year of flat to negative returns for major stock indexes in 2015. Looking at how things stand in December, here are a few observations:

First the bad news. The 3rd quarter of 2015 was the worst quarter for the financial markets in four years. From July through September, most major stock market indexes experienced a correction of 6% to 10%, with areas such as energy, health care, and emerging market stocks getting hit even harder. With markets generally flat in the first half of the year, the correction in the 3rd quarter means virtually every index we look at for asset classes around the world is down 6% to 10% on a year-to-date basis.What’s the good news?

Fears of China’s slowing economy and the resulting correction it caused in late August has clearly rattled investors. Understandably, investors are asking, “what’s next?” Read about some of the key things we are looking at:

Japan is known as the “Land of the Rising Sun,” but could it also be known as the Land of the Rising Stock Market? So far in 2015, foreign stocks have broadly outperformed U.S. stocks, but European companies seem to be attracting the most attention. Japanese stocks have risen alongside Europe, but seem to be flying under the radar.

Last week we held the first of what will become a regular event – “Coffee with the CIO” – at The Joseph Group’s offices led by The Joseph Group’s Chief Investment Officer, Travis Upton. Numerous topics were covered, but two main issues were clearly on the clients’ minds – 1) the continued saga of Greece, and 2) where to play offense in order to make money in what has been a flat market.