Investment Insights: 1st quarter, 2014 review
By Mike Jones, posted April 17th, 2014
"Where are we now?"
That may be the most common question I get asked when clients want to know about the economy.
It would be nice if "those in the know" could simply look at the most recent data on the economy and instantly know what to do with your investment money. If that was true, investment managers could simply keep tabs on the measure of inflation, and the unemployment rate, and the most recent pronouncements by the Federal Reserve, and the direction and relative strength of corporate profits (up or down)... etc, etc.
If that's the way life worked, no restaurant would ever hire a chef. They would simply collect all the necessary ingredients and then throw them in the pot.
But that's not how the culinary arts are practiced, nor is it how money is thoughtfully managed. One has to know what to do with the ingredients.
It is the final factor in the investment management process - interpretation of the ever abundant economic data - that is the trickiest. Interpretation is the part of the investment process that, for many, looks more like art than science.
Here's a broad summary of the economic highlights from the first quarter of 2014, followed by an explanation of how the "momentum select" process (my statistical analysis) interpreted things.
- The broad market was slightly higher for the first quarter.
- Interest rates were slightly lower the first quarter.
- Unemployment rate dropped slightly.
- The Federal Reserve stated that they would cut back slightly on their quantitative easing.
- Corporate profits were forecast to be at a level over the next 12 months to price the market at 15.2 X earnings.*
For most of the portfolio models in Momentum Select, the bottom line for Q1 2014 is "stay the course."
With respect to fixed income, we remain primarily invested in corporate bonds. We are seeking to be less interest rate sensitive.
With respect to equities, we are tilting the equity portfolios toward blue-chip stocks. This was my recommendation at the end of the last quarter and it continues into the second quarter of 2014.
*Source: Argent Financial Group 2014 First Quarter Recap
Mike Jones is Managing Director / Investing Group of Argent Advisors, Inc. Email him at firstname.lastname@example.org. Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at (318) 251-5844. The opinions of any single advisor do not necessarily reflect the opinions of Argent Advisors, Inc. No forecasts can be guaranteed. Argent Advisors, Inc. does not offer tax, insurance or legal advice. The information contained in this column should not be construed as a substitute for personalized investment, tax, insurance or legal advice.