Global Market Commentary

February 19, 2016

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Market Summary 

Some market sectors have become very good values.  Others need to fall more in price to become attractive.  Seeing the outsized declines in energy, technology, and other sectors has made us quite certain that some values have been attained in certain sectors.  We are focused on technology, social media, cybersecurity, and other sectors which have excellent tailwinds.  As they become more attractive, we plan to add them to client portfolios.  We will use dips to buy them as they develop value characteristics.  Fear is rampant among those who do not closely watch the economic data and are instead are swayed by the news.  Wild news reports abound that promote the fear of a recession in 2016, yet a thorough analysis of current economic data and their trends indicate that the odds of a recession in 2016 as no more than 20 percent.  Still, the Fed seems to be stepping away from its role as an “anxious parent” who would immediately act to soothe any market fear and volatility.

Oil is in the process of a base-building, as are commodities in general.  The once-in-50-year boom in commodities caused by China’s entry into a massive manufacturing and infrastructure phase has ended, and although the growth in China continues, the country no longer needs large quantities of imported commodities (coal, iron ore, and copper) to move ahead.  Excess capacity is gradually being removed, and the glut of raw materials on the market will gradually disappear.  Oil is probably near a bottom, and if it gets to the low $20s/barrel, will be a very attractive investment.  Gold has moved ahead nicely, and gold shares have done even better.  A return to a strong Dollar will put pressure on gold’s rise; any decline of 1/3 to 1/2 of the rally to a price in the range of $1200 to $1160/oz. should provide an opportunity to add to gold positions.

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