Markets Soar in an Imperfect Economy
The stock market reminded us again this past year that a perfect economy is not required to push stock prices higher. Rather, prices climb on signs of incremental improvements. One by one the concerns that dominated the headlines at the start of the year—Federal Reserve interest-rate increases, recession risk, and trade disputes—reversed, faded, or improved. And as that occurred, investors […]
What the markets are telling us
What is one to make of the markets over the past six months? First the stock market fell 20% and bond yields declined, both correctly predicting a slower economy. Then in late December the stock market, in an apparent vote of confidence in the economy, began a rally that has taken it back close to its all-time high.1 The bond […]
Understanding Your Risk Capacity
We all face risks as investors. Stock market volatility, interest rate changes, and permanent loss of capital are just a few of the many risks we confront in pursuit of satisfactory investment returns. And avoiding investment risk, unfortunately, only exposes us to yet another risk—the risk of not earning sufficient returns to meet our needs. But how much risk […]
The Spending Question
How much can I spend each year without depleting my portfolio? It’s a question we hear often from clients. While the question is simple, calculating the answer is not. One conservative answer is to spend only the income your investment portfolio generates. Unfortunately, making this strategy work in today’s low-yield environment requires a very large portfolio relative to your […]
Our Long-Term Outlook
It’s not just people who like to take time off now and then. Apparently, volatility also enjoys some time off—at least that’s what this past year’s stock market performance would indicate. Instead of being subjected to the usual bouts of volatility, the U.S. stock market has been on an uninterrupted 14-month streak of positive returns.1 And positive results were not […]
The Economics of Natural Disasters
Before starting this quarter’s discussion, I first want to extend from all of us at Goelzer our heartfelt sympathies to those who have suffered due to the terrible devastation caused by the recent hurricanes and earthquakes. The past two months have been a time of tragedy, frustration, and sadness for many people. We are aware that many of you were […]
Managing Bonds When Interest Rates are Rising
“Higher interest rates may be coming.” That was the forecast we shared on these pages one year ago. Our forecast was based on expectations for higher inflation in the near term and changing demographics over the longer term. Since that time, the Federal Reserve has raised the target for the federal funds rate (an overnight lending rate) by 0.5% and […]
Recent Stock Market Rally — Too Far, Too Fast?
The U.S. stock market was both a volatile and rewarding place to invest in 2016. Thanks to a sharp year-end rally set off by the U.S. elections, stocks as measured by the S&P 500® Index provided a total return of 11.95% for the year. That satisfactory result should please investors. Yet, what would a stock market rally be if it […]
Low Interest Rates Require More Savings
Central bankers across the developed world continue to rely on low or even negative interest rates to spur economic growth. The resulting low returns on bank accounts and bonds, they believe, will cause individuals to spend more and save less.1 And this increase in spending will in turn boost economic growth. This all sounds logical coming from the mouths of […]
Focusing on Your Earnings
The chart below shows both the monthly prices and forward 12-months earnings for the S&P 500 Index since January 2000. What the chart makes clear is the stock prices and earnings move together. In fact, the two have a correlation of +0.8, which is quite significant considering that the measurement for correlation range from +1.0 when two items move perfectly […]
Higher Interest Rates May Be Coming
Markets have a way of wearing people down. By moving in one direction or staying within a range over an extended period, markets convince people that the present trend is the only plausible one. This scenario describes the current low interest rate environment. When the Federal Reserve first cut the federal funds rate to zero in 2008, most investors […]
Too Much, Too Many
Since the start of the industrial revolution, people have worked to become proficient at mining, manufacturing, financing, and selling all types of goods. It became evident this past year that our proficiency has led, at least temporarily, to too much production. As a result, much of the world now has too much of too many things. This current condition […]
The Role of Stocks in Meeting Your Income Needs
Many investors are concerned with how to secure a reliable and growing stream of income. At Goelzer Investment Management, we believe the key to meeting your income needs, now and in the future, is making an income-oriented stock portfolio a core element of your investment strategy. This may sound strange, for conventional wisdom dictates that you should invest in […]
Managing through Volatile Markets
Volatility is back. The stock market’s mostly smooth climb higher since 2012 was interrupted this past quarter with stock prices, at the worst point, declining by 10% over the course of just four days.1 Volatility, of course, is defined by price movements in both directions, to which the market complied with large single-day fluctuations throughout the quarter’s second half. Not […]
