The SUBText: December 22, 2016

Posted on Posted in The SUBtext, Wall Street

It likely all of our clients thought we’d gone dark due to the upcoming holidays. Our clients are an astute bunch… that’s exactly what happened. However, we’re not going to let important year-end points go unnoticed.

The most-questioned position in our portfolios is undoubtedly in fixed income/bonds. We’ve kept maturity on a very short leash. Below, one can see why:

This is a picture of the total bond market index (NYSE: BND). The post-election plunge is exactly what concerned us, because conditions were ripe for it regardless of the election’s outcome. Remember how the market hates uncertainty? That doesn’t limit itself to stocks alone, and a lame-duck administration is as uncertain as it gets.

“Record highs” on US indices are grabbing headlines, and that’s great. However, we’re going to wait to see specific policy initiatives before we discuss allocation changes; we’re already well-represented in the equity space.

TL, DR: We were ready for bonds to stumble; they did. We’re not getting hot and bothered over “record stock markets,” and neither should you until we’ve got facts.

Of course, we’re here all day for your questions.
Dennis Crowley, MBA

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