DOLLARS & SEN$E: Slight domestic improvement in second quarter

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Investment Consultant, Gary Goldberg Financial Services

For this month’s column, I thought I’d share our official client newsletter, as written by our five member Investment Committee. If your portfolio isn’t positioned for these changes, consider our complimentary portfolio review.

A rough winter, a west coast port strike, weak corporate earnings, volatile interest rates, and rising tensions with Russia were all part of the landscape in the first half of 2015, leading to a go-nowhere market. After a dismal first quarter for the U.S. economy, where GDP shrunk by 0.7 percent, things appear to have improved a little. As winter weather waned and spring arrived economic activity recuperated, employment rose and markets started to stabilize as well. While overall sentiment improved, investors were, and are still worried about an eventual interest rate hike by the Federal Reserve, keeping market volatility elevated. Moreover, in recent weeks Greece has once again taken center-stage in global markets, as ongoing distrust and differences once again raise the prospect of a Greek debt default and possible exit from the Euro and Eurozone. Most meaningfully, oil prices did stabilize, while the U.S. dollar rally paused and interest rates moved marginally higher. The stabilization of oil prices is particularly meaningful, as the energy sector was being deeply impacted by the 50 percent + fall in prices, leading to significant lay-offs. The pause in the U.S. dollar rally is also welcomed news, as it eases pressures on U.S. multi-nationals and their foreign earnings. The slight rise in interest rates, which has mostly been confined to U.S. Treasuries may make for a good cocktail hour discussion but really is a non-event for our economy.

Looking Ahead:

While headwinds remain plentiful, there is an increasing sense that the U.S. stock market is set to rise and reach new all-time highs in the second half of the year. The arguments and concerns investors and prognosticators have been having for the past several years will continue. However, as has been the case for the past few years, continuing strength in the global economy coupled with an absence of inflation and better than forecast corporate earnings will ultimately defy market bears and push stocks higher. In the short-term, the more than likely debt default by Greece could add strains to cause heightened market volatility, but we expect this to be short-lived. Now that the European Central Bank is fully engaged in its version of quantitative easing and Europe as a whole is benefiting from significantly improved fundamentals (compared to 2 years ago), even a “GreExit” is unlikely to prove more than a transitory issue for markets. In spite of our overall optimism for the U.S. and global economy and the U.S. stock market, we continue to be cautious in our investment approach. We maintain our focus on high-quality dividend paying stocks and a large-company bias in our portfolios. Our thesis is based on our view that while the fundamentals of the world are improving and markets should rise as a result of this, the timing of this is unpredictable. Hence, there is a possibility that markets will remain range-bound for some time longer, an environment in which dividends have historically played an overwhelming role in portfolio’s total return figures.

Christopher Hanly is an investment consultant with Gary Goldberg Financial Services in Suffern and can be reached at (845) 368-2900 ext. 247 or


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