Q 1 2016 Quarter Performance Report Cover Letter (Clients)

Dear Investor:

After stumbling out of the starting gate, and breaking many “Never Before Seen Negative Starts!” to the year, capital markets smartly rebounded near the mid-point of the quarter, once again throwing cold water on obscure statistics that tend to make their way to the top of the headlines when such events occur.

As noted in greater detail in our Q 2 Newsletter, we wonder if this “Record Breaking” start was a dress rehearsal or the real thing. If it was a dress rehearsal, we would expect further choppiness, which is nerve racking at the time, but presents the best/last possible buying opportunity of this decade (hard to believe, but very possibly true.) If it was the real thing we would look for capital markets to climb back to new highs, a feat not seen since mid-2015.

Near the end of the quarter, Janet Yellen, Federal Reserve chair put extra wind in the equity market sails by all but saying there will only be two rate hikes this year, rather than four, which she had said at her first ever rate hike as president chair, in December of 2015.

Curious to IF, or how many times a Federal Reserve chair has raised rates during a presidential election year, we dug deep into the past 60 years of elections, only to find a very surprising answer. We will have full details to come on Street-cents.com and our mid-year Newsletter as we wanted to be closer to the actual election.

OUR BIGGEST CONCERN continues to be the aging business cycle. Thank goodness business cycles do not die of old age (or this one would already be dead) but the longer they go, the greater the possibility they do end.

THE GOOD NEWS is that just as business cycles do end, they start again. If we rhyme with history in any way, the slowdown lasts about 18 months and the expansion 5-7 years, odds we really like. As mentioned earlier, capital markets have not seen new highs in almost a year, making a possible slowdown already well under way.

THE BEST NEWS is we are allocated well to take advantage of opportunities as they present themselves, both domestically, internationally (which has been a laggard for some time, but may be changing) and from big and small capitalization companies.

Have a Great Spring!

Sincerely,

 

John A. Kvale CFA, CFP

Enclosure (Q1 2016 Performance Report)

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