KFA Blog


Senior Trading and Research Specialist

 

Influenced at an early age her father who often talked about investing and actively bought and sold stocks, Lisa developed a love of the markets. This passion lead her to a career in financial services. Lisa started in the financial services industry after college.  She began in 1990 working on the retail side. Today Lisa's main area of focus is researching new investment ideas for clients’ portfolios.  She also maintains the firm’s internal information and communication to ensure we are aware of any news regarding our investments and the impact it has on our portfolios.  Another main area of focus is on placing investment trades as well as maintaining client asset allocations that coincide with the individual objectives and risk tolerance.  She received a Bachelor's degree in Business from DePaul University in Chicago. In her spare time, Lisa enjoys spending time with her children and family, attending sporting events, and volunteering for her children’s activities.  Lisa enjoys doing yoga, walking her dog and skiing. Lisa can be reached by email at: info@kabarec.com  

Market Commentary: Q3 2017

And the Winner is _______?

 

I've ceased making predictions on things because we'll see how they turn out.
-David Plouffe

 

A lot can happen in 10 years!  Can you even think back to what you were doing 10 year ago in October?  Perhaps you were enjoying the start to a nice autumn, watching college football or taking in the fall colors.  Maybe you were planning for Halloween, Thanksgiving and Christmas.  Whatever the case maybe, I am sure you did not realize that on October 9, 2007, the stock market would peak before cascading into the Financial Crisis of 2008.  While you may not remember specifically that the market peaked in October 2007, I am sure you remember 2008, and certainly the depths of financial pain felt on March 6, 2009 when the stock market hit bottom.    

 

Now I am sure your interest is mildly piqued!  You might be thinking “Uh-Oh they are talking about the October before the financial crisis.”

Here is an interesting question posed by our friends at First Trust* – Imagine if you had a crystal ball, and knew that the financial crisis was going to happen, supposedly like Doctor Doom and others who perhaps were somewhat clairvoyant, would that crystal ball have told you to invest in the S&P 500, a 10-year Treasury Note, gold, oil, housing, or cash?   What do you think?  Be honest! 

Well, we looked into our revisionist-history-crystal-ball…. And the Winner is… the S&P 500!

“The S&P 500 has generated a total return (capital gains plus reinvested dividends) of 7.2% per year, essentially doubling in value in ten years.   Gold did well, but lagged stocks, increasing 5.7% per year.  A 10-year Treasury Note purchased that night (now coming due), would have generated a yield of 4.7%.  Oil was a laggard, down 4.3% per year.  Home prices increased about 1% per year, on average, and “cash” averaged 0.4%, both trailing the 1.6% average gain in the consumer price index.”1   

At the risk of sounding like a broken record, a skipping CD or the silence of a failed music stream (whatever your generation happens to be), we still believe that investors are better off ignoring all those pessimists who became famous in 2008-09, invest in companies, and allow world class business managers to use your money to build wealth. We believed that ten years ago, and we believe it today.

Thus, as we move into the 4th Quarter, we continue to have the same outlook: we should have a favorable market for the next 12-18 months bolstered by solid economic growth, good corporate earnings and low inflation and interest rates.  Of course, we may experience bouts of volatility and/or pullbacks while Congress muddles rather ungracefully through healthcare and tax reform, and while the Fed pundits vacillate over the pace of interest rate hikes.  Nevertheless, we will continue to stay optimistic, diversified and disciplined to achieve your long-term goals and objectives.

Happy Investing!

 

Kabarec Financial Advisors, Ltd.

 

 

*Referenced First Trust Article – dated 10/2/2017


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Market Commentary: 1st Quarter 2017

By:  Lisa Thuer - Senior Trading and Research Specialist

The dust is still settling in Washington as the new administration takes office. The markets started like gangbusters in January and February, which was based on the upbeat news that a Donald Trump presidency would result in pro-growth policy changes, which is good for the stock market and businesses as well. However, in March the markets hit the brakes when the new Healthcare Bill failed to be brought to vote. This is being viewed as, perhaps the Trump administration will not be able to get all their policies and their campaign promises passed as quickly as anticipated. Failure of the Healthcare Bill, contributed to the March stock market being a relatively flat month.

Letís review the positives that we saw in the first quarter of 2017. The technology sector was a top performer, and we were pleased that we made the decision to add to our current positions in this sector at the end of 2016. Other areas that have done well are consumer discretionary, staples, and utilities. The financial and industrial sectors continue to hold their own, as decrease in regulations will benefit the financials and infrastructure spending will be beneficial to the industrial sector. The worst performers were energy and telecommunications. However, we are underweighted in those two sectors, but our minimal exposure in those sectors are holdings that have a significant dividend yield. Small companies have had some mixed results this quarter but the forecasted future is still pro- growth. Fixed income continues to show mixed results, nonetheless we continue to hold investments in the fixed income sector that are non-traditional, income generating holdings.

Any pullback in the markets that we have seen recently can be viewed as a pause in the markets, because bull markets often take a breather. As much as we would all love to see the markets continue to go up, we also know it is not realistic. Investing on political noise at home and abroad can be detrimental to a portfolio. We know that there are many good things happening here in the U.S., Technology innovations, medical breakthroughs, and oil production, just to name a few, but the good tends to be overshadowed by all the noise in Washington. As we have mentioned before, the media tends to focus on the negatives.

There will come a time in the future for us to start dabbling in investments outside of the U.S. as we continue to watch and monitor other areas of the world. For the last several years, we have been reluctant to any foreign investment because of their uncertainty.

Our outlook continues to be relatively optimistic, especially if Washington can put some of this political gridlock aside and focus on getting something done. It would be positive if we could see some, Tax Reform, the easing of some regulations, as well as some type of Healthcare Reform, and it would be best if it came sooner rather than later. Good things are already happening with a pickup in business as well as consumer confidence, along with job creation and wage increases. Regardless of what happens in Washington D.C., companies will continue to innovate and produce, life will not come to an end.

As always, should you have any questions, comments or life changing events that you need assistance with, do not hesitate to contact one of the KFA team members. It is always good to review your own risk tolerance that may change overtime. Are you able to weather the markets ups and downs and focus on your goals? Letís talk about it, please give us a call, Mike Kabarec has been doing this for 35 years. He has seen lots of different markets through his career, he might not have all the answers, but he does have a lot of answers. 

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2017 has Begun

By:  Lisa Thuer - Senior Trading and Research Specialist

 

What a contrast from how last January started. It is almost the reverse of stocks that were down last year are up this year. As we have stated before, last year was a difficult year to navigate. You may ask yourself, won't this year be just as difficult with the new regime now in office? What happens now and where do we go from here?

 

Earnings season is upon us and corporate earnings have thus far been positive. Businesses are optimistic with potential tax cuts, infrastructure spending, employee benefit costs and reduced regulation. Bringing earnings back from overseas would be a bonus for shareholders and the stock market. However, this all takes time and we still need to keep both hands on the wheel. We know in the political world not everything gets done as planned nor as fast as we would like it to.

 

So regardless of your views on our current Commander-in-Chief, we still want America to succeed and we are all Americans. We all want our portfolios to increase regardless of who is in office. Now with all the election noise behind us and some will probably continue, we are moving forward. Towards the end of last year we started adjusting investments going into 2017. There will be additions to current holdings and reducing others. We still continue to like dividend payers, technology, consumer discretionary, financials (regional banks), and small companies. We will continue to hold alternative investments, however we will be reducing our holdings and allocating funds towards growth or income based the portfolio. As stated above, we will remain diversified and weather the storms and the tweets. 

 

As always, do not hesitate to contact us should you have any questions or would like to come in and meet with a KFA team member.


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Market Commentary: 4th Quarter 2016

By:  Lisa Thuer - Senior Trading and Research Specialist

The year 2016 started out by taking the polar plunge.

China came out with disappointing manufacturing data, sending all markets on a free fall. Analysts and economists reports stated slower earnings and economic growth. The Federal Reserve, after raising rates a quarter point in December refrained from raising interest rates a second time, stating that the economy was too fragile. Yet they were calling for 2-3 rate hikes in 2016, but they only raised rates once. Early in the year markets rapidly dropped day after day, at the same time, oil hit a low of $26 per barrel. Were we on the brink of a recession?

Then in February the whipsaw came; new data stated a recession was less likely than feared and the markets rebounded, however not all sectors participated. Healthcare and FANG (Facebook, Amazon, Netflix, andGoogle) stocks were not taking part in the rally, yet utilities and telecom were skyrocketing. There was a flight to safety and value on the forefront.

All was going well until the next big uncertainty hit the market – Brexit! The markets were rattled leading up to Brexit. As the election was nearing the polls were stating that the U.K. would remain in the Eurozone. The markets reacted positively, but then the votes were tallied, and we soon learned that the polls were wrong. The U.K. voted to leave the Eurozone; the markets were shocked and once again plunged. Financials took a beating and the Federal Reserve decided not to raise interest rates at that point and furthermore no rate hike was insight. We were in uncharted territory and everyone was predicting we are on the brink of a disaster. Once again, this wiped out all of the market gains. After some digesting, all wasn't as bad as first stated, and the market hit the road running, we were upward once again.

As if all this news wasn’t enough for the markets to digest, America was in a very unusual presidential election year. A New York Business Man running against a Woman, with political experience.  But there is no need to go into details about that, as we all know the outcome. Everybody we talked to could not wait for the election to finally be over. But, once again the polls had it wrong, which again sent the markets into a tailspin.  As the market did a complete turnaround and climbed to new highs. Based on optimism, equity markets climbed as the bond prices fell. KFA was feeling a little overdone in both areas and we wanted to let the markets settle down just a bit before jumping back in with both feet.

2016 is now behind us and as we reflect on our portfolios, not only did the economists predict incorrectly, so did some analysts, but we at KFA, also erred on the conservative side. Financials tanked after Brexit in the uncertainty of how banks would be affected by the change. But after the US election of Donald Trump –so far financials have been leading the way. Healthcare stocks took a beating for most of 2016, but since the election we are starting to see some recovery in that sector also. We can’t help but wonder; had Hillary Clinton won… would we be seeing the same results, she made it clear that she was very much against Drug Company’s price gouging. We are not saying that Trump isn’t against price gouging; he just took a different approach on the subject.

In an effort to keep risk out of our clients’ portfolios, it may have kept us from partaking in some of the upside of the market recovery. However we feel that this is a small price to pay for what could have turned in a different direction. We had certain situations that did go south last year, and we wanted to do what we could to make sure that our clients were protected. Even the best of economists and analysts had a hard time forecasting last year, and some were just down right wrong. It was definitely an unusual time. We are seeing that the portfolios which benefited most last year are the ones that did nothing from start to finish and just rode the markets ups and downs.

2017 is now upon us, and this January in comparison to last January, we are seeing a reversal in the markets, we are also seeing green lights ahead. Some areas of interest to KFA are Aerospace, Defense, and Financials (in particular regional and smaller banks). Along with Information Technology (IT), Infrastructure and Small Companies ,while holding on to our Large Cap Dividend payers, which will benefit investors if the overseas earnings are repatriated, bringing offshore monies back to the U.S.

We continue to look for preservation of capital and yield as our conservative portfolios continue to hold a larger portion of their portfolios in these areas. Alternatives and Market Neutral holdings continue to be a part of our portfolio to keep a balance to the uncertainty that always faces us. Bonds and bond funds are known to be less volatile- however as of late even they have seen more volatility than normal.

If only we had a crystal ball to help us predict the future, life would be so much easier. But for now,

we need to go by research, and sometimes even gut feelings, and the knowledge that we need to make money for our clients while we are protecting them from markets down falls.

With the start of a New Year, please consider that this is a good time for clients to review your portfolio risk tolerance. Have you had any life changing events last year or an upcoming event that you know about that has changed or may change your needs? Whichever it may be, the start of the year is always a good time to revisit your risk tolerance.

If you would like to come in, or have a telephone conference with a KFA team member, please feel free to contact us, we love hearing from our clients. KFA will work with you to make the necessary risk adjustments to your portfolio. As always, we thank you for your confidence in us and we look forward to 2017 being a great year! 

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Will the Election Ever be Over?

By:  Lisa Thuer - Senior Trading and Research Specialist

We are a week away from a historical Presidential Election. A new twist seems to take place on a daily basis in both camps of Clinton and Trump. Unfortunately the market does not like the uncertainty that is taking place. These volatile times make investing in the near term a very difficult time to deal with the volatility and the fear of the unknown. Each candidate has their own agenda.  How much they will be able to get done in Washington also depends on if we remain a balanced government with Congress or if it will be one-sided. Approaching Election Day, we thought it would be clear as to which direction the markets will be heading. However, everyday there seems to be a new headline leading to more uncertainty.

Healthcare has been a drag on our portfolios this year. It is one sector that had been hit hard at the beginning of the year and was not able to bounce back as other sectors did.  The healthcare sector is filled with innovation and advancements allowing people to live longer and cures for cancer and other diseases to name a couple. Baby boomers and our aging population are all benefiting from the advancements taking place in this sector. Unfortunately, the elections are wreaking havoc in this area and the regulations that may be implemented are unknown. We have made a decision to reduce the risk going into the Election next week by taking healthcare off the table. Pharmaceuticals and Biotechnology will continue to be volatile in the coming months. We still believe this is an area of growth in the future; however we will sit on the sidelines and wait for all the regulatory issues to fall in place.

The rest of our portfolio will remain invested in the current asset allocation of stocks, bonds and alternatives and we will not make any further changes until after the Election. Even with the volatility that will take place in the coming days and weeks, it is built to weather the storm. The talk has been swarming that there will be a tax repatriation holiday where multinational companies will be able to bring back foreign profits to the U.S. at a favorable tax rate. This would benefit the U.S. and us as investors by encouraging the corporations to spend and create jobs along with a possible one-time special dividend to shareholders. Therefore we are willing to be patient in the remainder of our portfolio and do not want to be out of the markets when this does take place.

In the meantime, we appreciate your confidence and support through these difficult market times. Should you have any questions, please feel free to contact one our KFA team members.


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