EQM Capital Blog

EQM Capital LLC – Weekly Market Recap 4/17/15 – China and Greece, Oh My!

Posted by on Apr 17, 2015 in EQM Capital Blog

Flag-Pins-China-Greece

Stocks tumble on Friday

A sharp decline on Friday driven largely by overseas concerns left U.S. stocks lower for the week.  Earlier in the week large-cap benchmarks had climbed near their all-time highs.  The small-cap Russell 2000 Index, which is less impacted by foreign exposure, fared somewhat better and remains considerably ahead YTD. Investors also had earnings news to digest as the first full week of earnings season kicked off.

Early earnings reports not as bad as feared

Some positive, or at least, better-than-expected earnings reports drove markets higher early in the week. As always, results were not uniform, but in general most reports were not as bad as many had feared.  On Friday,  FactSet calculated that earnings in the S&P 500 had declined by 4.1% during the first quarter, seeing the first quarterly decline since late 2012 but still better than earlier estimates.

Oil stocks rise given evidence of lower supply

Better news on the energy earnings front helped drive energy stocks higher and bolstered overall sentiment. Energy stocks and oil prices surged mid-week, supported by news of a dip in North Dakota oil production. While producers had cut back on drilling operations, U.S. supply had continued to grow. Traders were encouraged to finally see evidence that production curbs were having an impact on supply.

China and Greece concerns

On Friday the market reacted to new Chinese trading regulations cracking down on margin lending.  There was also increasing speculation that Greece would be unable to make scheduled payments on its bailout loan. Investors are concerned that Greece will default on its debt and abandon the Eurozone making a “grexit”.

U.S. Stocks1
Index2 Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 17,826.30 -231.35 0.02%
S&P 500 2081.18 -20.88 1.08%
NASDAQ Composite 4931.81 -64.17 4.13%
S&P MidCap 400 1515.92 -18.66 4.37%
Russell 2000 1252.47 -11.93 3.97%
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.

The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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Read my latest articles from The Street and Seeking Alpha

Posted by on Apr 15, 2015 in EQM Capital Blog

For my latest articles on The Street and Seeking Alpha, click below:

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EQM Capital LLC – Weekly Market Recap 4/10/15 – Time for the Q1 Earnings Bonanza!

Posted by on Apr 11, 2015 in EQM Capital Blog

 factsetQ1-2015

Earnings season is upon us!

The large-cap benchmarks experienced healthy gains for the week as investors awaited the full onslaught first quarter earnings releases. Large caps outperformed their smaller-cap counterparts, thanks in part to the strong performance of GE. This was the reverse of the recent trend that had U.S. small-cap stocks beating large-caps year to date given their reduced exposure to overseas sales, which are under pressure from the strong U.S. dollar.

Investors shrug off disappointing jobs report

Stocks opened lower on Monday as traders had their first chance to digest the previous Friday’s weak jobs report. The market quickly regained its footing, however, as  investors appeared to conclude the pullback in the labor market was just an aberration and maybe even a positive for stocks if it delays the Fed from raising interest rates.

Blame it on the weather

While the poor jobs report will undoubtedly figure into Fed thinking, it is unlikely to change their broader view of the economy. It is likely that bad weather played a role, with employment growth especially weak in weather-sensitive areas of the economy, such as construction and lodging.  On Tuesday, the Labor Department reported that job openings had increased to their highest level since January 2001, serving as another signal that the labor market remains on track.

Earnings growth is expected to slow in Q1

Alcoa unofficially kicked off the first-quarter earnings season following the market close on Wednesday.  Although their earnings beat estimates, disappointing revenue gains caused the metal giant’s stock to trade down on Thursday. Current FactSet analyst estimates predict S&P 500 company earnings will decline by 4.8% year-over-year.  That would be the worst showing since the 3Q 2012—but roughly half of that decline is due to falling energy sector earnings.

Pockets of earnings strength

According to FactSet estimates, Health Care is expected to exhibit the strongest earnings growth this quarter (+10.7%) led by Biotech and Health Care Technology.  In the Financials sector, earnings growth is also projected to be strong (+8.2%) helped by Banks and Diversified Financials.  As mentioned, Energy is the biggest growth detractor, expected to be down 64.9% year-over-year.  Excluding energy, S&P 500 earnings growth is projected to be +3.3%.  Similar to last quarter, companies are likely to blame earnings shortfalls on slower global economic growth, a strong dollar, and lower oil prices.

U.S. Stocks1
Index Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 18,057.65 294.41 1.32%
S&P 500 2102.06 35.10 2.10%
NASDAQ Composite 4995.98 109.04 5.49%
S&P MidCap 400 1534.58 10.37 5.66%
Russell 2000 1264.40 8.98 4.96%
This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.
1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.

The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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EQM Capital LLC – 1Q 2015 Quarterly Client Letter

Posted by on Apr 3, 2015 in EQM Capital Blog

The first quarter of 2015 was marked by lots of ups and downs due to fluctuations in oil prices, currency, and interest rates. Here’s a recap of the quarter in five easy charts. A picture is worth a thousand words!

Link to 1Q 2015 Quarterly Client Letter

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EQM Capital LLC – 2014 Market Year in Review

Posted by on Jan 9, 2015 in EQM Capital Blog

A Good Year for the Market, but not Diversification

2014 was another good year for the U.S. stock market, but most investors were not able to fully participate in the market’s gains. The S&P 500 Index was up more than 13% for the year, but according to a study from SigFig, the median investor’s investment account rose only 4% last year.

sigfig

The U.S. stock market was the place to be in 2014. While U.S. large cap stocks achieved double-digit returns, bonds and small cap stocks were only up in the single digits, and international stocks were actually down for the year.

Asset Class Index 2014 Total Return
Large Cap S&P 500 13.7%
Small Cap Russell 2000 4.9%
Bonds Barclay’s Aggregate Bond 6.0%
International MSCI EAFE -7.4%
Emerging Markets MSCI Emerging Markets -4.6%

Source: Morningstar
Performance Disclosure:  The performance data quoted represents past performance and does not guarantee future results.

In short, 2014 was a year that did not reward diversification. However, we know that over the long-term, portfolio diversification is very important in order to maximize return and minimize risk. Putting all your eggs in one basket may pay off in the short-term, but it is not a prudent long-term strategy.
Why is it important to be diversified? It is all about correlation. If all your portfolio assets move in the same direction in relation to each other, if they are “correlated”, then you are not sufficiently diversified. What diversification provides in essence is an “insurance policy” in down markets.

Year in Review

As anticipated, the U.S. economy showed marked improvement this year. Employment levels and new job creation are strong. Wages are finally starting to move up. And the latest quarterly GDP number came in at a very robust 5%. Most recently, low energy prices have provided a nice tailwind for the economy particularly in consumer-related areas like retail. Thanks to lower prices at the pump, consumers have more cash in the wallets to spend.

But there were also some big surprises last year.

• Whereas the U.S. economy has been steadily improving, Europe, Asia, and many other economies have not kept pace. Their recovery has stalled and as a result, international markets and investments have significantly lagged the U.S. markets.
• For most of the year, the big winners of 2013, small cap stocks have not kept up with the overall market and are up only marginally for the year.
• Interest rates have NOT moved higher! This was one of the biggest surprises of this year. Despite progress in the U.S. economy, slow economic growth overseas and declining energy prices are keeping interest rates low.

Outlook for 2015

What’s in store for the markets next year? Here’s what most market strategists expect:
• Interest rates will rise - At some point, given the current strength of the economy, the Fed will begin slowly raising interest rates.
• Non-U.S. markets should improve – International growth should begin to recover as other countries implement stimulus measures similar to what succeeded in the U.S.
• Oil price will stabilize – Oil prices should begin to stabilize as supply-demand imbalances finally work themselves out.
• U.S. still strong – U.S. companies should continue to hire and invest in their future growth, which is good for stocks, corporate earnings and the general health of the economy.
• Housing recovery continues – Despite higher interest rates, the housing recovery should continue given strength in the job market and improved consumer confidence.
• More of the same in the first half – During the first half of the year, the U.S. continues to look like the place to be, but opportunities may emerge outside the U.S. by the second half of next year.

Here’s to a happy, healthy and prosperous 2015!

The opinions expressed above should not be construed as investment advice. This article is not tailored to specific investment objectives. Reliance on this information for the purpose of buying the securities to which this information relates may expose a person to significant risk. The information contained in this article is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations on which one should rely for financial, securities, investment or other advice or to take any decision. Readers are encouraged to seek individual advice from their personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. Information provided, whether charts or any other statements regarding market, real estate or other financial information, is obtained from sources, which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this post should be interpreted to state or imply that past results are an indication of future performance.

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15 Investing Ideas for 2015

Posted by on Dec 17, 2014 in EQM Capital Blog

Here are some investing ideas for 2015 from US News and World Report.

I am quoted on investing in regional banks.

Bank on regional banks.

Within the banking sector, look beyond the big players. “Shares of regional banks are particularly leveraged to rising interest rates,” says Jane Edmondson, founder and CEO of EQM Capital, a wealth management firm in San Diego. She’s also portfolio manager of the EQM Capital Mid Cap Quant on Covestor, an online investing marketplace. “The ongoing housing recovery has improved the quality of their balance sheets, positioning them for growth,” she says.

Click here to read the full article

 

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