We would like to start our quarterly market update in a different fashion than normal. If you’ve heard someone from our firm talk about our business model, the word ‘independent’ was probably used at least once. As we embark on our 239th year of independence from the Kingdom of Great Britain, we thought it would be helpful to reiterate our firm’s independence and what that means to our clients.
• We have zero conflicts of interest. When making investments for our clients, our judgment is not clouded by incentives from other parties.
• We do not receive commissions or sales loads when making an investment.
• We do not receive ‘kickbacks’ from investment companies as an incentive to make a certain investment.
• We operate under the fiduciary standard - we’re legally obligated and proud to serve our clients highest financial interests, ahead of our own.
And now for our quarterly update on the markets:
There have been many crosscurrents this year for financial markets as investors try and navigate the short term shocks and focus on the longer horizon. As markets initially suffered setbacks as economic conditions were surprisingly weak, stocks have endured a heightened level of volatility. However, stocks have managed to rebound this quarter. Bond markets have also been stronger as interest rates remain stubbornly low. Bond rates remain low, in part, due to an accommodative monetary policy throughout the world.
Central Banks across the globe have begun to try and stimulate their economies by flooding the markets with additional money. Japanese and European monetary policy attempted to mirror US policy and spurring growth by keeping interest rates at unprecedented low levels. While this is ultimately good for stocks and real estate, the manipulation of rates by monetary leaders is causing problems for investors who rely on a steady monthly income. Consumer goods and services are on the rise; prices at the pump and at the grocery store have been moving higher this year putting additional stress on household budgets. Household expenses are increasing while wages are failing to compensate, causing people to dip into their savings or reduce overall investments to meet these shortfalls. The longer this disparity continues the greater negative impact it will have on our economy.
As you know, our economy has struggled this year to gain any momentum – illustrated by the negative growth in GDP (Gross Domestic Product) in the first quarter. A severe winter season is the most popular explanation for this slowdown and while that should be factored as one of the reasons, the bottom line is that with all the stimuli being injected into our economy, growth should be much higher.
We remain steadfast in our belief that higher risk assets are the best way to play the current market environment and we continue to maintain a higher equity allocation across all portfolios. We have increased our international weightings to capitalize on opportunities as their markets and economies grow. Our preferences remain: technology, energy and industrials while we continue to look for a rebound in the financial sector. As government oversight and investigations lessen we will increase our holdings in the financial sector. Our increased exposure to growth holdings should provide stronger returns versus value investments. For our bond investments we have increased our weightings within the corporate and mortgage areas and have also extended our durations since interest rates remain stubbornly low.
If you would like to learn more about Generation Capital Management and the value we could bring to your investment strategy, please contact us at 232-8560. We thank you for your continued support and look forward to a prosperous second half of 2014.
Scott D. Nasca, CFA President
Generation Capital Management (GCM) is an independent, SEC-Registered Investment Advisor located in Rochester, NY. Since 2003, we have provided value to our clients through a premium level of investment service and an unbiased, effective investment process. If you have questions or need additional information, please feel free to contact us at: (585) 232 – 8560. Generation Capital Management can help you meet your objectives today, tomorrow and for generations to come. We're ready to work for you.