Market Commentary
The Pause That Refreshes
Overview- The equity market continued its ascent during the first quarter, but it is showing signs of needing a pause to refresh. Below are the factors that may give the market a break from its current uptrend. Valuation- While market valuations are expensive, valuation is rarely a harbinger of short-term changes in the market. Expensive valuations generally presage the possibility of muted future long-term returns. We believe it is unlikely that the equity market will be able to match the performance of the last 5-10 years over the next 5-10 years. The path to more moderate returns can take any of an infinite number of paths, both higher and lower, but rich valuations are a reminder that a balanced portfolio of both stocks utilizing all factors, size, domicile, and style - along with bonds – will provide a smoother ride than just large cap technology, which has been the driver for the past 4 years. Economy- We see mostly positive economic signs. Most economic data we follow does not suggest that a quick slowdown is imminent. The personal savings rate, at a low 4%, is now at almost the all-time lows before the Great Financial Crisis in 2008. Personal Expenditures, as a result, are on the rise, and this is driving the economy higher. However, while we see signs of cracks in the economy such as rising bankruptcies, and credit card charge-offs, the overall economy is doing well. We can only surmise that this is evidence of a “K” [...]