October 15, 2014 Published by Lindsay Bourkoff

We wanted to convey our thoughts on current market conditions. For the past 3 years, the stock market has been particularly calm, without even a single 10% correction. That has been an abnormality, and for the past few weeks, the market has experienced an uptick in volatility.

Despite the volatility, the data shows that the U.S. economy is on sound footing and an improvement is still underway. We believe that this is a healthy pullback in the midst of a larger bull market.

As we have discussed before, we remain optimistic about the future of U.S. companies and their prospects for growth. Here are some of our reasons:

  • Low Oil Prices: The recent pullback in oil prices is good for the economy and the U.S. consumer. Lower oil prices means more money in people’s pockets which is similar to a tax-break that encourages greater spending. Similarly, low energy costs boosts the manufacturing segment in the economy and encourages growth.
  • Low Rates:  We have seen unprecedented low rates with the 10-year Treasury bond falling near 2.00%. These low rates combined with accommodative monetary policy by the Federal Reserve helps encourage borrowing and greater investment.
  • No Signs of Recession: We do not see the threat of recession on the near horizon. The many variables that cause a recession and choke off growth are not present. For example, high inflation, commodity shocks, monetary tightening, and a downtrend in the index of leading economic indicators are not manifest. We continue to watch these variables closely for any changes.

As value investors, we believe that these market corrections represent opportunities to buy assets at better prices.

Please feel free to reach out to us with any questions or concerns that you may have.

Best,

Steve, Zach, & Lindsay

 

The opinions voiced in this material are for general information only. Statements of forecast are not guaranteed to occur, and trends are not guaranteed to continue. All performance referenced is historical and is no guarantee of future results.


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