2021 was another year that was outside the norm for market returns and the more risk you took the more you were rewarded. Currently, the top-10 stocks in the S&P 500 index comprise more than 1/3rd of the entire index. In other words, a 1% gain in the top-10 stocks is the same as a 1% gain in the bottom 90%. Had it not been for the enormous returns in companies like Apple (AAPL), Google (GOOG), Microsoft (MSFT), Tesla (TSLA), and Nvidia (NVDA), the return for the year would be much different.

Download the full Quarterly Here!

We all want to make above average returns but historical valuation levels in the U.S. are at levels that are not sustainable from here over the next 5 years. All stocks eventually revert to a mean level of return. International and Emerging Market stocks continue to trade at the lowest valuation levels in 10+ years. These stocks should outperform the S&P 500 over the next 5 years on average. That is why our portfolios have a healthy allocation to these areas. Part of our job as an objective advisor is to invest where we are going and not where we have been.

We also are preparing for GDP to slow in the coming months from the mid 6s and approach high 4s by the second half of this year.  We anticipate yield curve volatility to become minimal.  Bonds will flatten if markets slow down.  Notably the 2yr-10yr yield spread has gone from 1.5 in middle of 2021 to 80bp today.  Also notable is manufacturing supplier deliveries which peaked during 2021 at 80 and now is heading in decline to 64.  This is the lowest we have seen since 2018.  The bulk of the fiscal spending was in March of 2021 to the tune of 1.4 trillion.  That too is at the tail end.

Inflation continued to expand in 2021 because of supply constraints and governments around the world stimulating their economies to battle the Covid-19 virus. This has produced the fastest pace of asset price inflation (including the stock market and real estate) in decades. While absolute levels of inflation will remain high for some time, we anticipate seeing the beginning of disinflationary pressures emerging over the course of 2022. The current consensus is that the Federal Reserve will raise rates up to 4 times in 2022. The danger is that they will over tighten which will be very bad for the markets and our economy.

To prepare for disinflation pressures, we cut our exposure to commodities and energy and shifted into traditional bonds and gold. We anticipate further increasing our gold holdings and have become more conservative with our bond holdings.  We have moved away from some alternative bonds and into more stable core positions. Since markets are dynamic, we reassess our allocations continuously and make changes in order to take advantage of assets that outperform in a slowing economy.     Happy New Year and we look forward to serving you in 2022! Please contact us if you would like to meet to discuss your portfolio, and we will help guide you with objective sound advice.


As we head into the third quarter of 2021, the domestic economic backdrop remains in a reflationary environment.  This past quarter has produced 15 all-time highs on the S&P 500 and an all-time high in high-yield bonds.  This acceleration is seen in a host of markets abroad too.  Germany, Poland, Spain, South Korea, Pakistan, and Australia (which reached all-time highs) have all seen lower volatility and higher equity trends.  As of Friday July 2nd, 66 of 103 S&P 500 companies that issued earnings per share guidance for the second quarter offered a positive outlook that exceeded consensus estimates, according to FactSet data. This would mark the highest number of S&P 500 companies offering estimate-topping outlooks ever recorded in data going back over 15 years.  Treasury yields sank across the curve, with the benchmark 10-year Treasury yield dipping below 1.48%. Major cryptocurrencies steadied after sliding approximately 50% from their all-time high in May.  Bitcoin is currently around $35,000/coin.

Download the full Quarterly here!

We are not complacent.  Many have asked us what would happen if?  We are preparing for some potential market shifts and deceleration.  These market shifts allow us to remove position gains and reallocate to where new opportunities lie.  Within our fixed income allocations, we have added, and subsequently removed our quadratic spread between the 2-10 year treasury (IVOL), added a corporate bond position (LQD) and added a pre-merger SPAC (SPAX).  This was done with the intent of collecting yield where possible, taking some bond term-risk and removing the 2-10 year spread that was being interfered with from the Federal Reserve.  We have added equity positions into energy (XLE) and Real Estate Investment Trusts (CWRE).  These assets were positioned to take advantage of the inflation that affects commodities and real assets that are appreciating from inflation, the devaluing dollar and housing supply constraints.

On the inflationary front, both pandemic dynamics and historic Fed-Fiscal policy support led to massive supply and demand imbalances. We see this flowing from the Goods to Services sectors.  This is encouraging the Fed’s “transitory” stance and leading us to anticipate longer and higher-than-usual inflation in the coming quarters.  Third quarter is primed for deceleration on a global basis.  We believe nearly every G20 country will fall into stagflation or deflationary environments. China spent the second quarter in stagflation, as they were the first to emerge from COVID’s shadow.  We believe that China will continue on this trajectory thru the beginning of next year.  We want to remind everyone that we are discussing market environments in regard to trends developing and NOT the 2-3 year outlook.  We are not entirely pessimistic on our global outlook. Europe is set to be a region with accelerating growth thru the beginning of 2022.  Europe has lagged by 6 months in comparison to the U.S. and is following a similar trajectory that the U.S. has already traversed.

Your job as an investor is to remain patient amidst the volatility and know that we are positioning for market changes and managing the portfolios effectively and incrementally.  As we stated before, we continue to see growth and inflation, we just need to be aware that some shifts may occur.  We would be happy to chat with you at any time and we look forward to the conversation.


As we begin the second quarter of 2021, we are excited to share that we have moved into a new office, located at 1331 Lake Dr. SE, Suite 100 – in Eastown. We are proud of our new office and look forward to having you visit. Now to the market. Let’s start with some market indicators and data. This will provide an overall sense of what the markets have done and what we believe they will continue to do in the next quarter and into the remainder of 2021.

Download the full Quarterly HERE.

The 1st quarter ended with some episodic and non-trending volatility. At the same time, we have seen significant appreciation and increased trading volume in multiple markets areas. We continue to see an uptick in inflation and economic growth. Consumer confidence increased according to the University of Michigan Current Conditions Report and Expectations Report (up 7 and 9% respectively for the month).  Unemployment is at 6%, and GDP is up 4.3% for the year.  Real GDP year over year is up 11%+.  All 11 sectors of the S&P 500 are up in the first quarter of 2021!  Energy, Financials and Industrials have been the leading sectors with returns of 30.34%, 16.38% and 11.54% respectively.  Year to date, the S&P 500, foreign and emerging markets are all positive, to the tune of 7.4%, 4.3% and 4%.  In the U.S., the leading asset class has been in the small cap space, up 14.4%.  Another notable event in the first quarter is the disparity in growth and value names down the market spectrum from large to small companies, illustrated in the chart below.  Lastly, the Barclays Aggregate Bond Index is -3.4%

Large Cap11.3%0.9%
Mid Cap13.1%0.6%
Small Cap21.2%4.9%
First Quarter Disparity in Growth by Sector

So, what does this all mean?  We believe we are in a growth and reflationary environment.  To put it neatly, we have a massive easing of money and pent-up global demand.  In the U.S., we are expeditiously breaking free of the virus’ constraints as more people are vaccinated.  In the U.S. over 20% of the population have been vaccinated and approximately 100 million American’s have received the first dose. Locally speaking, DeVos Hall has the ability to vaccinate 20,000 people a day.  These vaccinations locally, nationally, and eventually globally, will significantly improve commerce.  We believe that Europe and the rest of the world will lag by about 5 months.  As the U.S. and the world finds their footing, so too will investment capital markets.  We believe that in the next several months we will see global supply chain issues resolve and that there will be a massive increase in inventory levels.  This is a market, that Wallstreet likes to call “risk on”.  Depending on their risk tolerance this is a period of time when an investor should strategically allocate their portfolio to more risk where they can.

This growth and reflationary environment started the last half of 2020 and continues.  This is a relatively short period of time where commodities, equities, credit, and foreign currencies will appreciate.  We believe that during this reflationary trade, technology (even though expensive), consumer discretionary, industrials, financials and energy will appreciate.  We also believe this is a short period to avoid utilities, REITS, Consumer Staples and Healthcare. 

While we don’t have a crystal ball, we maintain our conviction that value and emerging markets should outperform over the next 3-5 years. Markets overall are trading at the highest valuations in decades which is concerning. These high valuations are countered by unprecedented involvement by the US congress with fiscal stimulus and changes to monetary policy by the federal reserve that are driving markets higher which may continue for some time. We are living through an unprecedented time in our country, and we are honored to guide you through this period.


Out with the old…in with the new!


Happy New Year!  We are thankful for this year’s opportunities and for making it thru a very challenging chapter.  We are optimistic for the anticipated vaccine.  We look forward to returning to a life and community that is more open, and we are excited to rebuild.  We all hope 2021 is that new beginning.

In the world of financial planning, there is a calendar year reset that occurs as well.  It’s a new tax year.  Health care deductibles reset, and it is time for new contributions to IRAs, 401ks, and HSAs.  We look back on the returns for 2020 and strategize for the year ahead.

By investment standards, 2020 was a rollercoaster of change and volatility.  COVID-19 brought a swift decline in the financial markets.  The Fed produced trillions of dollars in stimulus and markets ultimately recovered.  By year end, most indexes ended the year in positive territory.

Facebook, Amazon, Nvidia, Google and Tesla led the U.S. stock market into a manic exuberance.  Investment professionals and individuals alike were excited by these tech giants and about their prospects of market dominance.  Let’s face it, the world has changed expeditiously in the past few years.  Tech companies are positioned to propel us into the future.  The question becomes, how much are you willing to pay for these future hopefuls.  Prices of these stocks are expensive.  In fact, all other investments, globally and domestically paled in comparison.  Even the other 490 stocks that make up the broad U.S. large cap market haven’t compared.  Take a look at the following chart.

YTD Tesla has risen 657% and approximately 1100% in the past 18 months.  Here are a couple of numbers to stew on.  Tesla market cap has increased by $500 billion in 2020.  According to the market, Tesla’s value has surpassed that of the nine largest car companies globally.  This includes Volkswagen, Toyota, Nissan, Hyundai, GM, Ford, Honda, Fiat Chrysler, and Peugeot. To bring these numbers into context, Tesla only made ~1% of the total vehicle sales in 2020 or approximately 500,000 vehicles.  We are of the firm belief that those returns won’t continue along the same upward trajectory forever.

We have recently been asked, “Why do we need bonds in a portfolio, especially now?”  Prevailing thought is that if interest rates go up, the price of bonds will surely go down.  Interest rates are almost at zero and inevitably they will go up.  We have had low interest rates for a decade and near zero rates for a year.  Stocks have beaten bonds by 90+% over the rolling average of the past 100 years.  Given where interest rates were, 30-year treasury bonds still produced a total return of 18.88% for 2020.  However, bonds play an important role in a portfolio’s stability.  When equities are bullish, the case for bonds is challenging, but when markets selloff, it is conceivable to experience a 60+% drop in a portfolio without bonds.  We like to think of bonds as an insurance policy.  This insurance policy also allows us to buy equities when markets sell off.

A few salient points that we like to remind folks: we can’t time the market and there isn’t a correlation between GDP and Equity returns.  Earnings look back and stock prices are an anticipation of what the stock earnings and company growth will look like in the future.  If we were to try and time the market this year, many investors would have taken money out when their portfolios plummeted and would have resisted putting money to work when the pandemic was saddling the world with depression like statistics.

So where is the opportunity today?  We see an opportunity in emerging market equities that have been underperformers for several years.  Specifically, we are focused on value categorized companies.  For the past 10 years, we have seen a stark disparity between the returns of value and growth companies.  Value names have experienced their worst decade in history and to further the pain they have just experienced their worst 12 months in history.  We see this underperformance as an opportunity to reallocate portfolios that were in favoring domestic growth equities and shift them towards more international and value-oriented names.  In regard to fixed income, we are favoring some credit risk in exchange for term risk. Currently, inflation remains tepid.  Although current spreads between conventional treasuries and TIPS have widened to 1.8% in the later part of 2020, this is well below the 2% fed target.  If inflation does increase, term risk will weigh more on the fixed income portfolio.

Current portfolio changes for 2021

In order to best position our portfolios and to take advantage of where we forecast returns to come from in the near future, we have made the following adjustments for the first quarter 2021. We exchanged our passive positions in MSCI EAFE Growth and Value for an active position in Oakmark International Value fund.  We added positions to the Sharepost 100, a late-stage private equity fund and the Columbia Dividend Income Fund.  We also increased our positions in Robinson Municipal Bond fund and the ATAC Rotation fund and decreased our positions in Fidelity Conservative Income.



The markets remained resilient through the end of September.  Following four straight weeks of losses, all major market indexes are positive year-to-date.  Specifically, the S&P 500 remains at a positive 3.5% through the 3rd quarter.  The following sectors, Technology (26%), Consumer Discretionary (21%), and Consumer Services (7%), have all generated positive YTD returns.  Current unemployment has fallen to just below 8%. The economy has returned approximately half of the payrolls lost at the start of the pandemic.  Certain economic indicators such as consumer spending, manufacturing demand and durable-goods growth point toward an economy that is recovering.

The quarter was not without its challenges.  The Billy Joel song “We Didn’t Start the Fire” rings in our heads.  Government stimulus, Supreme Court nominations, elections, coupled with the COVID calamity continue to create commotion and noise.  One concern is that while some economic indicators are improving, they are experiencing it at a slower pace than we would like to see.  Although stock market indexes are positive, some sectors, Energy (-48%), Financials (-22%), and Real Estate (-8%), have suffered year-to-date.  Disney announced that 28,000 furloughed workers would permanently lose their jobs.  American and United Airlines cut more than 35,000 jobs.  Positive sentiments in the housing sector have waned.  Housing starts slowed to 0.9% below the July 2019 numbers and 0.01% below the August 2019 numbers.  Furthering the concern, lumber prices have slipped into backwardation pricing, where future bundles are being priced at discounts to current prices.  This may foretell weaker demand.  All the economic stimulus and early access to retirement accounts pushed CPI upward.  This data lends itself to the growing concern that inflation will rear its sleepy head.

Continuing coronavirus challenges persist as well.  The coronavirus has claimed more than 200,000 lives in the U.S.  Although the number of reported cases in the U.S. has leveled off, hotspots are reemerging in the Midwest and even in New York City.  The U.K. is planning for a second shutdown.  France recently reported its highest number of daily cases.  Many are still fearing winter flu season is upon us and the dreaded “second wave” will be inevitable.

Interest rates remain at historic lows and the dollar continues to weaken.  As we write this newsletter, the current 30-year mortgage rate is at meager 2.25%!  The debt markets are so starved for yield that investors have been willing to accept a 30-year bond with a paltry yield of 1.3%.  The demand is further illustrated by the +25% total return of the long bond.

We do believe there are pockets of the market that continue to signal opportunity.  We believe value-oriented companies, specifically in the international value sector, look to be positioned for strong positive future returns.  Antithetical to this, growth companies, globally, continue to price at historically high multiples.  It is our belief that returns will be more pronounced in the value sector in the near term.   Our investment portfolios currently reflect these sentiments.  Please feel free to reach out to us to review this unique situation.  Stay safe