Presentation Transcript

1. Bi-Monthly Market Review “Investing Under Rising Interest Rates” (Finding the Right Balance of Risk and Reward) January 16, 2014 Kevin M. Wilson, PhD Chairman/CEO Ted A. Pavlovich, WMS President/Wealth Mgmt. Advisor Office: 218-464-4399 Toll Free: 877-327-5062 Fax: 218-464-4397 Email: info@bluewater-cap.com www.bluewatercapitaladvisors.com 1405 Medical Arts Building 324 W. Superior Street Duluth, MN 55802 1
2. Introductionted a. pavlovich 2
3. Short Term There Are Conflicting Signals
4. Markets Could Correct, But May Not
5. New EmployeesAnd Consultantskevin m. wilson 5
6. Stock Picking Under Rising rates KEVIN M. WILSON 6
7. First, Let’s Consider Recent Market History S & P 500 Yield Spreads 7
8. In Periods of Very High Rates, Equities Were Best (But With The Caveat That Volatility Was High)
9. As Rates Rise, Inflation Could Take Off As Well; The Standard Market Result Would Be Falling P/E Ratios (Cheaper Valuations)
10. As The Following Slides Show, However, Tactical Allocation Could Have Yielded Decent Returns, Even In The Volatile 1970s
11. Asset Allocations Must Change To Include An Adjustment For Rising Rates
12. Emerging Markets May Not Do Well… …But Certain US Sectors (Tech/Healthcare/Tele./Energy) Could Outperform Near Term
13. Navigating in a Risky Bond Market TED A. PAVLOVICH 13
14. Shorter Durations Are Required 14
15. Floating Rate Loans And High Yield Bonds May Do Well HYB’s FRL’s 15
16. As Long As High Yield Bonds Have Short Durations, Returns Should Be Acceptable 16
17. Convertible Bonds Behave Oddly, But Could Do Quite Well Over Time
18. THE ROLE OF CASH AS RATES RISE KEVIN M. WILSON 18
19. Although Returns To Cash Are Likely To Be Poor, They At Least Are Not Volatile
20. Once Rates Move To The High End, Only Market Timing And Radical Allocation Strategies Are Likely To Work -9% (+3% to -9%) -12% (+20% to -14%) -7% (+36% to -35%)
21. Over the long term, stocks should strongly outperform other assets Bonds should underperform, except for TIPS, FRL’s, and CB’s Cash holdings will have negative returns but could play a bigger role Real estate may be an important alternative asset class The ability to pivot allocations at inflection points will be critical Summary KEVIN M. WILSON 21
22. q & a KEVIN M. WILSON TED A. PAVLOVICH 22
23. Disclaimer This report is provided for informational purposes only and does not constitute an offer or solicitation to purchase or sell any security or commodity and is not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. Any opinions expressed herein are subject to change at any time without notice. Information has been obtained from sources believed to be reliable, for its accuracy and interpretation are not guaranteed. Investing in securities involves risk, including possible loss of principal. Past performance should not be taken as an indication of guarantee of future performance and no representation, express or implied, is made regarding future performance. The firm does not provide tax advice; clients should contact their attorney, accountant, or other tax adviser regarding tax matters. “BWCA is a state registered investment adviser in all states in which it is required to be registered. All Blue Water Capital Advisors’ customer assets are held in the customer name with Fidelity Institutional Services, clearing through National Financial Services (NFS), Member SIPC, a Fidelity Investments Company as Qualified Custodian.” 23