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00Fourth Quarter 2016 Investment OverviewThe global economic performance remains flat, inflation is muted and bond yields are near all-time lows. Uncertainty abounds: The US elections are a little over a month away, capital spending is slowing and job growth is still lackluster. Clearly, we are in the later stages of the current business cycle. However, since this cycle has been so slow, we anticipate that the late stage conditions may persist much longer than typical. Election year politics and markets. This is a unique presidential race in that each candidate has left strong negative impressions with large blocks of voters. Regardless who wins it appears safe to assume that the period following Election Day will be volatile.right419735Capital Spending. Orders for new capital equipment have been one of the few bright spots over the last seven years. The chart shows a boom in capital spending, flattening then a steady decline. Current levels of capital spending are still healthy and may persist for an extended period of time. Were we to experience a sharp downturn in this series we would become more concerned about the possibility of recession. Industrial Production of Consumer Goods really didn’t recover partly because much of that has been outsourced to other countries. The remainder is explained by the large component of consumer staples that are relatively insensitive to changes in the overall economy.Jobs. During this entire cycle job growth has been stubbornly weak. Despite some modest improvement Labor Force Participation remains near its lows of the past 40 years. Without some form of stimulus this pattern is expected to persist. The official level of unemployment is around 5%. Full employment is typically felt to be obtained around 4%. The current numbers significantly understate the number of people that have taken jobs well below their skill levels and does not take into account those that have ceased looking for jobs altogether. Since the bulk of economic activity is driven from consumer spending, it is likely that growth will remain flat indefinitely.Monetary Policy. The Fed has kept rates low for so long it seems, to many, that we are “due” for a rate increase. The Fed Board of Governors has yet to build a strong enough consensus to go ahead. The economy just doesn’t seem resilient enough to absorb monetary tightening. To its credit the Fed has kept this economic cycle afloat singlehandedly with easy money. Fiscal policy has accomplished little in growth stimulus. Eventually the economy will need to be weaned off cheap money. Again, policy seems unlikely to change much any time soon.Fixed Income. Despite the overall stagnation that we discussed, there is still a lot of movement below the surface. Credits can change and the yield curve can shift dramatically with changes in investor attitudes. We carefully weigh these risks and take care to be diligent in making new purchase selections in line with our clients’ needs. Stocks. Since we are in an environment of flat growth, we are emphasizing companies with less than average economic sensitivity, strong credit quality and above average growth in future sales. We are also seeking to increase dividend yields where practical in order to boost total return. Our sectors of emphasis are Healthcare, Utilities and Consumer Staples. Clients with taxable accounts will find your Realized Gain and Loss Statement through the first three quarters of 2016 enclosed. You may wish to share this information with your accountant and advise us of any tax planning as soon as possible. Also, we would like to remind our IRA clients if you need a distribution from your IRA, please notify us prior to December 1, 2016 in order that processing is accomplished in a timely manner.For those clients already receiving their statements via our new ShareFile portal, we hope you find it easy to use. If you have any questions or concerns about the secure portal we have created for you please let us know. Also, if you are currently receiving statements via hard copy and would like to know more about our secure electronic delivery method please contact us anytime. As always, we appreciate the opportunity to be of service to you. Please call us anytime to discuss your account, particularly if you have any changes in your goals or lifestyle. We extend a special welcome to the many new clients who have joined the Arbor family in the last quarter. If you know someone or any organization that you believe would benefit from our services, please mention our name. We would be honored to have more clients like you.Sincerely,Gerald T. Cole, CFA September 2016Chief Investment OfficerThis report has been prepared by ARBOR CAPITAL MANAGEMENT for distribution only under such circumstances as may be permitted by applicable law. It has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. It is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, except with respect to information concerning ACM, its subsidiaries and affiliates, nor is it intended to be a complete statement or summary of the securities, markets or developments referred to in the report. The report should not be regarded by recipients as a substitute for the exercise of their own judgment. Any opinions expressed in this report are subject to change without notice and may differ or be contrary to opinions expressed by other business areas or group of ACM as a result using different assumptions and criteria. ACM is under no obligation to update or keep current the information contained herein. ACM, its directors, officers and employees, or clients may have or have had interest or long or short positions in any securities or other financial instruments referred to herein, and may at any time make purchases and/or sales in them from time to time. Neither ACM nor any of its affiliates, nor any of ACM’ or any of its affiliates, directors, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this report. Additional information will be made available upon request. Past performance is not necessarily indicative of future results.For investment advice, clients or interested persons should contact their Arbor Capital representative.Lawrence T. McGowanMatthew J. WilkinsonLeo Mesa, CFP100 Corporate Pkwy, Suite 136100 Corporate Pkwy, Suite 136790 Juno Ocean Walk, Suite 600Amherst, NY 14226Amherst, NY 14226Juno Beach, FL 33408(716) 446-9111(716) 446-9111(786) 202-0602ltmcgowan@mjwilkinson@lmesa@ ................
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