News

A Middle Ground for Investors

News
A Middle Ground for Investors -- finding the middle ground

Choices are about to be made. Central banks and legislatures seem poised to decide what they want to do. For central banks, “plentiful liquidity helped governments, businesses and households survive lockdowns. Cash flows collapsed but bankruptcies barely increased.

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Investment Strategies and Tactics in Tricky Times

News, Quarterly Market Perspectives
investment strategies and tactics - image of dollar sign in maze

As we wait for the financial world to react to events while unsure of what theme or themes will predominate economic thought in the future, there are some strategies and tactics to keep in mind during tricky times. A popular endowment model strategy is rebalancing a portfolio. As different sections of a por tfolio gain value quickly, or slowly, or even regress, the original, and hopefully optimal, asset allocation percentages change to something different. At various times, perhaps annually, the increased percentages are sold down to their original allocation and the funds raised are reinvested in the decreased percentage assets, thereby rebalancing. As a tactic to make some investors comfortable with the risk profile of their portfolios, this works. However, one author points out that he has “yet to see a study that shows it improves your returns,” and in fact it sometimes can mean “missing out on big returns.”[1] 

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Economic Growth Accelerating

News, Quarterly Market Perspectives
Economic growth accelerating - image concept for growth

With the pandemic subsiding and economic growth reaccelerating, a Bloomberg survey of economists expects US real GDP to grow a robust 6.6% this year and 4.1% next. The economy (as measured by real GDP) is expected to have surpassed its pre-pandemic peak in the second quarter of 2021. The S&P 500 Index returned a strong 14.4% through the first half of the year to close at a record high. Pent-up demand and federal stimulus funds have meant that demand for goods and services has recovered much faster than supply. Businesses can’t hire workers fast enough and they’re struggling with supply chain bottlenecks. Strong economic conditions drove the Consumer Price Index (CPI) up 5.4% year-over-year in June, following up 5.0% y/y in May. While many economists had been expecting some inflation, these inflation statistics were higher than most of them, including many Fed officials, anticipated.[1] The CPI excluding food and energy was up 4.5% y/y in June, reaching its highest level since 1991.

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Regulatory Oversight and Inflation

News, Quarterly Market Perspectives
Regulatory Oversight and Inflation - Sizing up the risk of inflation falls on another large federal bureaucracy, the Federal Reserve

Measuring the effects of increased oversight and regulation brings us to the fiduciary rule: always putting the client’s interest ahead of our own. Since this is part of the Investment Company Act of 1940, we at Woodstock have been complying with this rule for all of our registered investment company life. We plan to follow it in the future.

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The Woodstock Advantage: Fiduciary Duty

News, Quarterly Market Perspectives
The Woodstock Advantage - your investment manager is able to take taxes into account

A number of the advantages of being at Woodstock often go overlooked. Under the Investment Company Act of 1940, your investment advisor owes you a fiduciary duty, which means putting your interest before his, hers, or the firm’s interests. Being invested in an individually managed account (“IMA”) at Woodstock means that you own the assets in your portfolio, unlike in a pooled investment vehicle where you are probably merely a creditor of the real owner.

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2021 Economy Could Soar: Pandemic Recedes

News, Quarterly Market Perspectives
2021 economy could soar - the US economy is expected to perform at the strongest growth rate in nearly 40 years

Over the past year the American economy has confronted unprecedented challenges. We haven’t seen the likes of COVID-19 during our lifetimes, with a severe human toll of more than 559,000 deaths in the United States and 2.8 million globally,[1] and the financial impacts it has had on all of us. As the COVID-19 pandemic began to rage early last year, individual state-mandated shutdowns across the country brought the US economy to an abrupt halt and caused a short but deep economic recession. Notably, by early April 2020, about 300 million Americans in 43 states and Washington, D.C. — over 90% of the population — were under stay-at-home or shelter-in-place directives to help contain the spread of the virus.[2]

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Household Wealth & Income Inequality

News, Quarterly Market Perspectives
Household Wealth & Income Inequality -- how to make the US tax system more fair

Understanding when news is good probably requires disregarding what’s called the “precautionary principle,” which is the rule that “strongly encourages caution among regulators working in any field with scientific uncertainty.”[1] Throwing caution to the wind, let’s look at the state of US household wealth and income inequality. The US Federal Reserve’s March 2021 quarterly release of household net worth data showed that “the value of Americans’ total assets minus their liabilities swelled to $122.9 trillion” at the end of 2020, up from $111.4 trillion at the end of 2019.[2] Further, when US Census Bureau data are adjusted to count all of the government’s transfer payments as “income” to recipients and when taxes paid are counted as “income lost” to taxpayers. then “income inequality” is lower than it was 50 years ago.[3] 

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