Ahhhh. It’s that of time of year. We hope everyone has a wonderful vacation planned this summer. Whatever your vacation plans may be, there was likely discussion among all the travelers in your group about where to go. Here at GreenPort, we’ve been discussing our summer travel plans. Should we take your investments overseas and give them some international exposure or stay right here in the U.S.A? While we think your investments would enjoy themselves and experience personal growth in both places, it’s becoming increasingly more desirable to vacation at home rather than go global. Besides, who doesn't love a good staycation? Our reasoning is that the synchronized economic global growth that has been present since 2016 is starting to become noticeably more disperse across regions and countries. In our 2018 outlook we expressed our preference for stocks over bonds. We saw an improving global economy that would be beneficial to world equity markets. With the slightly more attractive valuation overseas and comparable European growth, we recommended the overweight to stocks be invested in Europe.
Recently, U.S. GDP growth is becoming noticeably stronger than European growth. After this month’s record jobs report the Atlanta Fed moved their forecast for Q2GDP to 4.8%. That’s an astonishing number. We are highly skeptical it will be achieved, however it does confirm what appears to be a surging U.S. economy.
While we do think the repatriation of foreign money through the TCJA has benefitted U.S. corporations, it’s likely the Federal Reserve is who we should be thanking. We know we are starting to sound like a broken record at this point, (for the millennials, records are how us older folk listened to music before streaming and iTunes), but we need to say it one more time. The low interest rate policy the Fed has had in place since 2008 has been hurting, not helping the economy. Now that the Fed has started to normalize short-term rates we are seeing a return of normal lending and finance, as opposed to financial engineering like buybacks, mergers, and acquisitions. This is leading to organic economic growth. At GreenPort, we believe that asset allocation is the key to a successful investment plan. The strategic (long-term) asset allocation of our Core Portfolios are based on the long term risk premium of each asset class. We also believe that tactical (short-term) asset allocation further benefits the investor’s return. Our shifts in tactical asset allocation are infrequent, usually once or twice a year, but meaningful. It reflects our view that a meaningful shift has occurred in our investment thesis since our beginning of the year outlook. We will be reaching out individually to clients in our Core Portfolios over the next week or two. We will be maintaining and, in some cases, adding to the equity overweight. However, we will also be repatriating much of our international stock exposure back into the U.S. As always, please don’t hesitate to call, email, or drop by with any questions. Thanks The GreenPort Team