August Market Update

In a week of mixed economic data releases, the US and China announced they would resume trade talks next month – pushing the S&P 500 back toward a record high and tempering market expectations for additional interest rate cuts by year end.

The two sides will resume low-level talks over the next couple of weeks, ahead of a planned higher-level meeting in Washington early next month. With the ceasefire after the June G20 meeting lasting barely a month before President Donald Trump announced a new round of tariffs covering the remainder of Chinese imports it’s important to keep expectations cautious about this new round of negotiations. The talks will come too late to prevent the planned increase in the tariff rate to 30%, from 25%, on $250bn of Chinese imports on October 1st. At best, a new thawing in the relationship might persuade Trump to delay further the introduction of a 15% tariff on roughly $150bn of Chinese imports of consumer goods and electronics which are currently scheduled to take effect in mid-December.

Any deal that would see the removal of the tariffs already imposed seems unlikely, at least within the next 12 months. At this stage, both sides have an incentive to wait until after next year’s presidential election in November. The Chinese will be hoping that Trump loses. Trump will be hoping that the ongoing conflict is a vote winner – and that if he wins, we believe the Chinese will be out of options and forced to make a deal. Ahead of next year’s election, the question is whether we will see a further escalation in the trade war, with progressively higher tariffs and the possible introduction of non-tariff measures too? Given the gradual ratcheting up of tariffs over the past two years, it would be a surprise if we didn’t see any continued escalation next year. But we suspect it will be relatively modest, particularly if signs begin to emerge that the earlier tariff rounds were weighing on the US economy.

The Economy

Mixed data reported a fall in the manufacturing index to 49.1, a three-year low, which triggered renewed fears of a recession. With the US consumer seemingly single-handedly keeping the global economy afloat, August’s retail sales figures, due next Friday, will be particularly closely watched. Core CPI inflation continued to edge higher again in August to 2.3%. CPI has been boosted by unusually large gains in used vehicle prices. With auto dealers still carrying plenty of inventory, new vehicle prices are likely to decline too. Gasoline prices fell by 3% last month as well.

The Federal Reserve

The sharp fall in market interest rates over the past 12 months is starting to support the economy, with activity growth in rate-sensitive sectors like durables consumption and housing rebounding in recent months. With income growth slowing and the manufacturing sector being hammered by weak global demand, this won’t prevent a further economic slowdown, but it does make it a little more likely the economy can weather the trade war and avoid an outright recession.

The plunge in market interest rates this year has been driven mainly by shifting expectations for Fed policy, as officials backed away from further rate hikes and then started cutting rates, with the markets ramping up expectations of further loosening to come. Following the plunge in rates since the start of this year, however, the real two-year Treasury yield is no higher now than it was in early 2017, while the actual borrowing costs facing consumers and firms are also falling sharply. Recent data suggest that the boost from lower interest rates is starting to feed through to the economy. The decline in corporate bond yields should provide some support for business equipment investment growth, offsetting some of the damage from heightened trade uncertainty.

Brexit

Earlier this week, political upheaval once again shook the United Kingdom. In a surprising turn of events, newly-appointed Prime Minister Boris Johnson’s government lost its majority after a former Conservative minister joined the Liberal Democrats. Following this shake-up, the odds of a no-deal Brexit, not so long ago a strong possibility from the hardline Conservative administration, appear to have somewhat declined. In response to this ongoing confusion, Bank of England Governor Mark Carney announced that the central bank estimates a 5.5% contraction in the UK economy in the event of a “worst case scenario” Brexit, involving severe disruption to the trade of goods and services and damage to UK financial institutions in the event of no deal. Moreover, Carney reiterated that the Bank of England would remain uninvolved in the precipitous fall of Sterling, which has declined substantially since the original vote in June 2016.

Conclusion

Realize that the media has a huge impact on your perceptions and can easily drive your decision-making process. Data shows that from 1997 to 2016, the average U.S. investor performed about 70% worse than the rate of return on the S&P 500. This data says that the average investor gained about 2.3% in annualized returns, versus the 7.7% annualized return of the S&P 500. One major contribution to this large gap is the judgment of the investor. When we react to news, we tend to make quick, uninformed investment decisions–which lead to financial losses over time. With all of the political uncertainly affecting the markets today, a resolution to one of these major issues like China or Brexit could change the picture and cause markets to rally. We feel using history as a guide, approaching your investments with balance and diversification in a portfolio you feel comfortable sticking with through various market cycles makes the most sense. We don’t recommend trying to guess the timing of the market or following someone claiming to know the future. Instead, we recommend systematically and methodically re-balancing your portfolio as the market moves up and down and take the emotional knee-jerking out of the picture. Be willing to check yourself and make sure your pre-conceived notions are not affecting your perception of the situation.

Disclaimers
Past performance does not guarantee future results, which may vary. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities-based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at www.adviserinfo.sec.gov

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy.  Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of Callan Capital, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor’s own situation.

Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS
Copyright 2019 Callan Capital, All Rights Reserved.

1250 Prospect St. Suite 1, La Jolla, CA 92037
4611 Bee Cave Rd. Suite 201, Austin, TX 78746
www.callancapital.com

July 2019 Market Update

The Federal Reserve cut rates this week by a quarter of a point. According to the Fed, the cut was a response to “the implications of global developments for the economic outlook as well as muted inflation pressures.” Fed Chair Jerome Powell characterized it as a “mid-cycle adjustment to policy” that provides some insurance to protect against downside risks.

Powell suggested that this cut won’t be followed by another at the next meeting in mid-September. The statement regarding the cut offered an almost identical assessment of economic conditions to the one issued in June. Labor market conditions were described as “strong” and GDP growth as “moderate”. There was no suggestion that Fed officials were more worried about the economic outlook than they were before. That’s not a surprise since the incoming activity data have been fairly resilient over the past six weeks, with GDP growth only slowing to a still healthy 2.1% annualized in the second quarter.

The vote to cut was not unanimous, with Esther George and Eric Rosengren preferring to leave rates unchanged. That wasn’t a complete surprise since both has publicly expressed their opposition to a cut in the run up to this meeting. But two dissents are a little unusual and suggests there was a broader minority of non-voting officials who were also uncomfortable with the rate cut.

Economic Growth

The economic expansion enters its 11th year in July, making it the longest expansion since 19001. However, growth is set to decelerate further, and resume its expansion average pace of roughly 2%. Second-quarter GDP growth slowed to 2.1% annualized, from 3.1% in the first quarter, but that drop off would have been even bigger if not for a surprisingly strong gain in government expenditure this quarter. Government spending increased by 5.0%, the strongest quarterly gain in a decade.

The week ahead is the peak week in the earnings season with 168 of S&P 500 companies set to report. So far, with 54% of S&P 500 market cap in the door as of Friday morning, 77% of firms have beaten earnings expectations, compared to 69% and 74% over the past two quarters respectively. However, in absolute terms, the year-over-year gain in earnings per share is tracking just 2% for the quarter, all of which can be accounted for by a reduction in share count due to strong buybacks. This buyback effect will likely fade in coming quarters, both due to the diminished impact of cash repatriated in response to the Tax Act of 2017 and because, at higher stock prices, it simply takes more dollars to reduce share count in a significant way.

Almost 10 years of monetary stimulus, economic growth and falling unemployment have succeeded in boosting home prices, bond prices and stock prices. However, they have not had a meaningful impact on consumer prices. Oil’s collapse brought headline inflation down, and despite a temporary rebound in oil prices, it failed to lift inflation. The Fed has acknowledged this persistently low inflation by lowering its projections for year-end inflation to just 1.5%.

China and Trade 

Trump announced Thursday that he would impose a 10% tariff on a further $300 billion in Chinese imports, a move set to hit American consumers more directly than his other tariffs so far. The new import taxes, which Trump later said could go “well beyond” 25%, will be imposed beginning Sept. 1 on a long list of goods expected to include smart-phones, laptop computers and children’s clothing. “If the U.S. is going to implement the additional tariffs, China will have to take necessary countermeasures,” Foreign Ministry spokeswoman Hua Chunying said at a regular briefing in Beijing on Friday. She didn’t elaborate on what the measures would be. “China won’t accept any maximum pressure, threat, or blackmailing, and won’t compromise at all on major principle matters,” Hua said.


The Market

Long-term interest rates remain very low, especially compared to historical averages.  The 10 year treasury hit 1.84 after the tariff announcement, which means investors are guaranteed a loss in real terms after accounting for inflation). In addition, a more dovish Fed could bring short term rates even lower from here. Therefore, in this rate environment and at this stage in the economic cycle, diversification in fixed income investing outside of treasuries has become increasingly important. 

Market volatility in the fourth quarter of 2018 brought equity valuations closer to their long-run averages; however, equity markets have moved higher this year and have achieved new market highs. Although valuations do not appear to be overextended, they are not cheap either on an absolute basis. However, valuations relative to fixed income remain attractive.  It is important for investors not to be positioned too aggressively, as many uncertainties, such as the Fed’s next move, trade and growth, remain, and may cause volatility ahead.

The Debt Ceiling

The Senate passed a broad, two-year budget deal on Thursday that boosts spending and eliminates the threat of a debt default until after the 2020 election, while reducing the chances for another government shutdown. The government spends more money than it brings in through revenue, and it covers the difference by issuing debt. But the Treasury Department can only issue debt up to a limit set by Congress, known as the debt ceiling. If the debt ceiling is not lifted, the government could fall behind on some of its payments, which could spark another financial crisis.

The government now spends roughly $4.4 trillion and is expected to bring in roughly $3.5 trillion in revenue, leaving a gap of $900 billion. A number of Senate Republicans, including some who support Trump strongly on most issues, were reluctant to go along. The national debt now stands at $22 trillion, but the deal makes no attempt to rein in spending, take on entitlements, or make any structural changes many Republicans say are necessary to reform Washington’s dysfunctional budget process.

Conclusion

For investors, this has been an exceptionally positive year so far, with large cap U.S. stocks gaining more than 20%2 even as interest rates drift down in anticipation of an easier Fed. However, with a clearer big picture, we believe it is more important to take advantage of valuation opportunities both within particular sectors of the U.S. equity and fixed income markets and in lagging stock markets overseas.

1, 2 https://am.jpmorgan.com/us/en/asset-management/gim/protected/adv/insights/economic-overview

Disclaimers
Past performance does not guarantee future results, which may vary. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities-based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at www.adviserinfo.sec.gov

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy.  Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of Callan Capital, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor’s own situation.

Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS
Copyright 2019 Callan Capital, All Rights Reserved.

1250 Prospect St. Suite 1, La Jolla, CA 92037
4611 Bee Cave Rd. Suite 201, Austin, TX 78746
www.callancapital.com

June Market Update

In last week’s meeting between Presidents Trump and Xi at the G-20, both sides agreed to resume negotiations and hold off on imposing new tariffs. Trump pledged not to introduce the much feared 25% tariff on an additional $300bn in Chinese imports as trade negotiations continue. Had those tariffs gone into place, they had the potential to do significant damage to second-half economic and earnings growth prospects.

As a result, Wall Street opened at a record  on renewed hopes of a US-China trade deal after the leaders of the world’s two biggest economies agreed to restart negotiations. The S&P 500 rose 1.2%, enough to make a new high in opening trade. Technology stocks are also up after the U.S. reversed policies preventing American companies from selling software and equipment to Chinese telecommunication giant Huawei. The tech-loaded Nasdaq Composite made an opening gain of 1.8% on the news.

The good news caused China’s renminbi to strengthen after haven assets like gold weakened today on hopes of a US-China trade deal on the horizon. China’s CSI 300 index of major Shanghai and Shenzhen-listed stocks rallied 2.9%. Haven assets lost some luster, with gold falling 1.1%. The yield on the 10-year US Treasury rose 1.2 basis points as investors continued to move out of the debt. We’ve been here before, however, and many analysts are warning that a trade deal between the US and China remain elusive, and that recent economic indicators were still weak.

Economic Growth

We continue to expect Gross Domestic Product (GDP) growth to slow in the second half of this year, which may prompt the Federal Reserve to cut interest rates. The Fed signaled at the June Federal Open Market Committee meeting that interest rates are likely to be cut over the coming quarters. Although markets are convinced the first cut will come in July, we still think that a temporary truce in the trade war means it is more likely that cut will be delayed until September. Regardless of the exact timing and overall magnitude of the coming rate cuts, the substantial drop back in long-term borrowing costs that we have already seen is a good reason to believe that economic growth will enjoy a modest recovery from mid-2020 onwards.

It was inevitable that GDP growth would slow once the impact of last year’s fiscal stimulus began to fade, particularly as the full impact of the Fed’s interest rate hikes is still flowing through. That drag from an increasingly more adverse policy mix has been exacerbated by a slowdown in other parts of the global economy in the second half of last year, particularly in Europe and China.

While this week brought some more positive news on investment, the modest gain in real consumption in May, together with revisions to previous months’ data mean second-quarter consumption growth now looks set to be 3.8% annualized, a little weaker than the 4% gain we had predicted.

Consumer Confidence numbers this coming Tuesday and Consumer Sentiment numbers on Friday should remain at high levels. If consumer spending continues to grow solidly, the economy should be able to avoid recession. And if there is no recession, earnings should continue to grow, however slowly.

Recent manufacturing momentum has slowed markedly. Over the past few quarters, there has been a notable deterioration in the distribution of global growth, with the services sector continuing to look relatively healthy but the manufacturing sector coming under a great deal of pressure. We believe this is largely due to dovish monetary policy globally and the continued tension of the trade wars. The uncertainty is dragging on business confidence, business investment and exports. Manufacturing momentum can be a good proxy for what we can expect GDP growth to look like. Policy uncertainty remains elevated, and when businesses are not confident in the outlook, the first thing they typically pull back on is investment spending. Although it feels as if we are making forward progress on trade relations with China, and there should be more clarity on the Brexit timetable, there are still a number of issues that remain unresolved. As such, while global manufacturing may begin to show some signs of life in the coming months, the more important issue for investors will be whether uncertainty is rising or falling.

Oil Prices

Oil prices are up, OPEC and its allies look to extend supply cuts until at least the end of 2019 at their meeting in Vienna this week. Oil prices climbed, boosted by brighter prospects for global trade as well as an extension of production cuts by Opec+. Brent crude oil, the global benchmark, rose 2.3% to $66.24 a barrel. Iran – under U.S. sanctions alongside OPEC ally Venezuela – joined top producers Saudi Arabia, Iraq and Russia in supporting an extension of a supply cut deal until at least December.

Bond and Stock Market

Usually, stocks go up when investors are increasingly bullish about the economy, and Treasury bond yields typically fall when investors are increasingly bearish about the economy, but these two effects are happening simultaneously. The apparent contradiction is difficult to reconcile.  The conflicting signals in the stock and bond markets may simply be a short-term anomaly.  It is really too close a call, for now, as to whether the stock market or the bond market has it right. Consequently, investors should not bet too heavily on one outcome or the other but rather remain well diversified.

For long-term investors, it is important to emphasize that the global economy trends upward over long-time horizons. We believe most successful investors will likely be those who focus on valuation rather than timing.

Disclaimers
Past performance does not guarantee future results, which may vary. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities-based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at www.adviserinfo.sec.gov

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy.  Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. The CSI 300 Index is a free-float weighted index that consists of 300 A-share stocks listed on the Shanghai or Shenzhen Stock Exchanges. Brent Crude is a major trading classification of sweet light crude oil that serves as a benchmark price for purchases of oil worldwide. The Nasdaq Composite Index is the market capitalization-weighted index of over 3,300 common equities listed on the Nasdaq stock exchange. An investor cannot invest directly in an index.

This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of Callan Capital, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor’s own situation.

Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS
Copyright 2019 Callan Capital, All Rights Reserved.

1250 Prospect St. Suite 1, La Jolla, CA 92037
4611 Bee Cave Rd. Suite 201, Austin, TX 78746
www.callancapital.com

May Market Update

Trade was the big theme this month once again, with China suggesting it could restrict exports of rare earth elements to the US, as well as a rise in US-Mexico trade tensions Thursday night. Consequently, the prices of oil and other industrial commodities fell, while the price of gold was lifted by a jump in safe-haven demand. Looking ahead, we suspect that any further increase in trade tensions could continue to weigh on the prices of industrial commodities but may provide a boost to gold and silver prices.

The bond market also appears to recognize the danger, with the 10-year Treasury yield plunging this week even before the news of tariffs on Mexico. Ten-year bond buying has actually pushed the yield on long-term U.S. Treasury bonds beneath the yield on short-term bonds. This phenomenon is known as an inverted yield curve, and it is one of the most reliable indicators that the American economy is headed for a recession in the near future. The logic behind this correlation is that in ordinary times, investors will demand a higher yield on long-term bonds than short-term ones, since locking your money into a Treasury for a decade is riskier than doing so for just three months. Federal Reserve drastically raises benchmark interest rates, then that bond will plummet in value.

Therefore, if investors are willing to pay a premium to tether themselves to today’s interest rates, they seemingly believe that inflation isn’t budging for a long time, and that the Federal Reserve will actually be cutting interest rates in the near future — something that the central bank rarely does in the absence of adverse economic developments. The inversion of the yield curve isn’t a new story. The yield on ten-year Treasury notes dipped below the yield on three-month ones in March But this inversion has deepened significantly in recent days.

Mexico and Trade

Trump announced late on Thursday that he would use emergency powers to levy a 5% tariff on all Mexican imports from 10th June onwards, in response to the migrant crisis at the southern border, with the tariff rising in 5% increments every month until it reaches 25% by October. President Donald Trump’s shock announcement of tariffs on Mexican imports could be challenged by Congress, but the possibility that both Mexican and Chinese imports might be subject to a blanket 25% tariff presents a significant additional downside risk to the US economy. With imports from Mexico worth $350bn annually, a 25% tariff could raise $90bn in customs duties and increase domestic prices by at least 0.4%, with the motor vehicles and electronics sectors most exposed. US exports to Mexico, equivalent to 1.3% of GDP, could be hit by retaliation, although Mexico is unlikely to risk a full-blown trade war by responding in kind as the peso has already fallen by 3% since the announcement.

Much like his earlier promise to close to the Southern border, Trump’s latest threats could amount to nothing. The move may be an attempt to force Congress to approve the US Mexico Canada Agreement (USMCA) trade deal, with the White House also announcing yesterday that it will send the agreement to lawmakers within 30 days.

China and Trade

On May 10, the U.S. took tariff rates on $250 billion of Chinese exports to 25%. Retaliation was swift, with China raising tariffs on certain U.S. goods in a range from 5% to 25%. The stock market plunged on Monday, as China responded by raising the tariffs despite Trump warning Chinese officials not to retaliate.

The latest escalation in trade tensions could become a bigger drag on the US economy than previous rounds of tariffs. A 25% tariff on all imports from China would be equivalent to a tax worth 0.6% of GDP, only part of which would be offset by an increase in farm aid. Together with a further hit to US exports from Chinese retaliation, the overall damage to the economy could be as large as 0.7% of GDP. China already levied tariffs on two-thirds of US exports but targeting the remainder of US goods could hurt China more than the US. Those goods include high-tech machinery, semiconductors and other electronics, which Chinese firms would struggle to buy from elsewhere.

A meeting between Trump and Chinese President Xi at the G20 meeting in late June may result in some sort of deal or at least a pause to hostilities. But there is now a serious risk that within another couple of months, tariffs will cover all US-China bilateral trade.

The Fed and Trade

The markets are increasingly betting that escalating trade tensions will be enough to convince the Federal Reserve to cut interest rates, with fed funds futures showing that a 25bp cut before the end of this year is now fully priced in, and more than two cuts expected by the end of 2020. Trade tensions present a downside risk to that forecast, but we think rate cuts will soon come onto the agenda regardless of whether the dispute with China is resolved.

Brexit

Prime Minister Theresa May said last week she would step down as leader of the Conservative Party and then as prime minister, after repeatedly failing to get her Brexit plan through Parliament. May said it was in the “best interests of the country for a new prime minister” to lead Britain through the Brexit process. “I feel as certain today as I did three years ago that in a democracy, if you give people a choice you have a duty to implement what they decide. I have done my best to do that. I have done everything I can to convince M.P.s to back that deal. Sadly, I have not been able to do so.”

She announced plans to step down as the leader of the Conservative Party on June 7, with the process to replace her beginning the following week. She will remain as prime minister until a new leader is chosen, probably by the end of July. Britain has taken several economic hits recently, and business leaders are worried about the prospect of more gridlock in Parliament, potentially leading to a harmful “no deal” Brexit on Oct. 31.

Conclusion

May marks the first monthly loss for the market in 2019. That’s a sharp shift from stocks’ record setting run so far this year. The S&P 500 hit an all-time high on April 30, back when investors had factored in a resolution to Trump’s trade wars. Investors have been shifting money into bonds over concerns that economic growth will be hindered by the ongoing trade war. While this may present an opportunity for disciplined investors, it’s best to stay the course and watch cautiously until more political uncertainties draw closer to a resolution.

Disclaimers
Past performance does not guarantee future results, which may vary. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities-based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at www.adviserinfo.sec.gov

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy.  Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS
Copyright 2019 Callan Capital, All Rights Reserved.

1250 Prospect St. Suite 1, La Jolla, CA 92037
4611 Bee Cave Rd. Suite 201, Austin, TX 78746
www.callancapital.com

April 2019 Market Update

The 3.2% Gross Domestic Product (GDP) gain recorded for the first quarter was much stronger than had been expected just a few weeks ago. However, much of the growth was due to gains in the volatile inventory and international trade categories. These trade and inventory gains are likely to be at least partially reversed in the second quarter. In addition, March data due out this week on real consumer spending, construction activity, international trade in goods, and wholesale and retail inventories could result in a downward adjustment to first quarter GDP estimates. Lower than expected income tax refunds could sap consumer momentum as could recent increases in gas prices. Overall, it appears that growth is still on pace to round out the year at 2% on average.

The U.S. economy added 275,000 private sector jobs in April, according to a report released yesterday, signaling continued strength in the labor market. The ADP National Employment Report, a closely watched gauge of private sector hiring, blew past economists’ expectations. ADP’s analysis is released two days before the Labor Department’s monthly employment report and is considered a key preview of the federal government’s measurement of the hiring situation.

Corporate Profits

Solid GDP growth in the first quarter, combined with slower gains in employment should boost Non-Farm Business Productivity for the first quarter to 2.3% year-over-year, its strongest gain since 2010. In addition, relatively mild wage growth should limit the gain in Unit Labor Costs to just 0.2%–its slowest pace in four years. This suggests companies may be able to sustain positive profit growth in the quarters ahead, as businesses are continuing to restrain labor costs.

164 S&P 500 companies are set to report their first-quarter earnings this week. It appears that S&P 500 operating earnings per share will see a small year-over-year increase in the first quarter. With just over 50% of market cap reporting on Friday morning, 78% of firms had beaten analyst earnings estimates. Even with moderate economic growth, year-over-year profit growth should stay positive for the first three quarters of this year.

The Federal Reserve

This week’s decision by the Federal Reserve affirms the March’s meeting outcome signaling no rate change for the rest of 2019. In the previous meeting, the Fed said low inflation, weak global growth, and tightening financial condition warranted a pause in interest rate hike cycle. The Federal Open Market Committee statement also mentions that it will be patient as it weighs a future interest rate move. On the economic front, the Fed noted that economic activity “rose at a solid rate.”  The global risks which have caused the Fed to pause last year have moderated. The market continues to bet on a rate cut, but the odds of it happening reduced after the Fed’s press conference.

Inflation

Federal Reserve Chairman Powell, speaking at a press briefing Wednesday following the Fed’s decision to leave its benchmark interest rate unchanged, downplayed a recent slide in U.S. inflation, saying “transitory” factors may be dragging it down. His comments helped reverse a drop in bond yields while sending stocks lower, as investors pared back expectations of a rate cut. Inflation has retreated further from the Fed’s 2% target, catching the attention of President Donald Trump, who has been critical of the central bank’s past rate hikes. Trump tweeted on Tuesday that the economy could go “up like a rocket if we did some lowering of rates, like one point, and some quantitative easing.”

Global Markets

Aggregate GDP growth in Emerging Europe appears to have slowed from 1.9% year over year in Q4 to around 1.3% year over year in Q1. While we don’t anticipate much of a rebound in the coming quarters, it does at least appear that the slowdown in regional growth is bottoming out.

Amid global trade tensions that remain unresolved, political turmoil in places like Italy, France, and the U.K., and a slowing China, the global economy is facing a slowdown. We have seen manufacturing activity dip into contractionary territory in many regions, most notably China, Germany, the Euro Area, Taiwan and Korea. Headwinds remain for the global economy which will likely slow but not stall in 2019.

Conclusion

We will continue to monitor our quantitative and dynamic business-cycle models throughout 2019 to maintain a structured approach to how we assess the risks unfolding in the economy, and the opportunities for dislocations versus market pricing. As we move closer to late-cycle economic conditions, we think it makes sense to maintain flexibility and a focus on our asset allocation portfolios in order to take advantage of what we expect will be a dynamic and more volatile environment in 2019.

Disclaimers
Past performance does not guarantee future results, which may vary. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at www.adviserinfo.sec.gov

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy.  Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS
Copyright 2019 Callan Capital, All Rights Reserved.

1250 Prospect St. Suite 1, La Jolla, CA 92037
4611 Bee Cave Rd. Suite 201, Austin, TX 78746
www.callancapital.com

March 2019 Market Update

The incoming monthly activity data suggest that GDP growth has slowed from 2.6% annualized in the fourth quarter to only around 1.5% in the first. The rebound in consumer confidence suggests that consumption will continue to recover from the plunge in December, while a potential trade deal with China could give a temporary lift to exports. The sharp fall in the trade deficit in January was mainly due to a larger than expected drop in imports. Nonetheless, with imports on pace to be flat or to have fallen slightly in the first quarter, net trade is on track to be a positive for first quarter GDP growth. It is certainly possible that growth picks up again in the second quarter.
However, with the fiscal boost having faded and the continued slowdown in durables consumption, a sustained recovery looks unlikely. We expect GDP growth to remain below its 2% potential pace this year, ruling out any further rate hikes from the Fed and ensuring that market expectations of rate cuts will continue to grow. While the economic slowdown has been widespread, it has been particularly tough in Europe and, to a lesser extent, Asia. The U.S. economy has held up relatively well, despite many political uncertainties.

The Market
U.S. stocks edged lower last week, with some sector volatility (financials, industrials) and significant price swings in bonds. Disappointing European manufacturing data in combination with a more “dovish” Fed led the 10-year treasury yield to fall the most in two years and U.S. investment grade bonds to rise the most in four years. The Fed’s revised economic projections, which now imply no rate hikes this year, together with the announcement that it will halt its balance sheet run-down in September, came as a positive surprise for the markets.

Yield Curve
Last week a closely watched economic indicator, the yield difference between the 3-month T-bill and the U.S 10-year inverted. Normally a yield curve is upwards sloping as long-dated bonds are inherently riskier than short-dated bonds due to the risks associated with time. An inverted yield curve is where yields of short-dated bonds rise above the yields on long-dated bonds, historically this has been a sign of an impending recession. Historically, equity returns post-inversion are quite strong. Since the 1970’s when the 3-month T-bill and the U.S. 10-year inverted it took on average another 350 days before the equity market peaked, with an average return of 22%. While the market performance following inversions historically has been positive, it doesn’t always happen so we encourage investors to remain cautious. With that in mind, investors shouldn’t immediately change their portfolios, however, a slightly more cautious stance at this late stage in the cycle may be warranted.

Trade
Media reports indicate that the U.S. and China are close to agreeing to a trade deal. China is set to boost market access for U.S. firms by cutting tariffs and easing foreign ownership rules, as well as strengthening protection of intellectual property. China has also agreed to not deliberately devalue its currency. China is also pledging to ramp up purchases of US goods. In return, the U.S. will not pursue further tariffs on Chinese goods and will remove most, or all, of the punitive tariffs currently in place.
The tariffs don’t appear to have had much impact on the economy anyway. Firms absorbed part of the impact by cutting margins and the tariffs were offset by an appreciation of the dollar against the renminbi (yuan). Core inflation is lower now than when tariffs were first imposed. US exports to China did drop in the second half of last year, but that was due largely to direct intervention by Chinese authorities, which cut off purchases of US energy and agriculture. Even if those tariffs were reversed, it would likely only add only a few tenths of a percent to annualized GDP growth.

Brexit
The EU granted a short extension on Brexit, pushing back the deadline by at least two weeks, from March 29th to April 12th. The postponement removed the risk of the UK leaving the EU without a deal this past Friday. However, Parliament is still facing the same four Brexit options it always has; deal, no deal, revoke Article 50 or a significant delay to Brexit by an extension of Article 50. Meanwhile, the economy seems relatively resilient to the Brexit uncertainty.

Eurozone
The European Central Bank (ECB) reverted to a stimulus monetary policy, lowering rates in an unexpected move as the bank made sharp cuts to its forecasts for both growth and inflation this year. The announcement sent the euro down 0.6% against the dollar. Mario Draghi, president of the ECB, said economic data showed a “sizeable moderation” in growth. Expectations on economic growth in the euro area are now 1.1% this year, down from earlier forecasts of 1.7%. The extent of the measures announced by the ECB underline its concerns over slowing growth in the eurozone. Its decision to push back on any plans to raise rates anytime soon follows similar moves from central banks around the world, including the US Federal Reserve and the Bank of England.

Conclusion
While predicting market movements perfectly is impossible, it is possible for long-term investors to prepare for changing economic conditions. We believe owning a diversified portfolio with the right mix of equities and bonds for your comfort with risk helps alleviate the negative effects of volatility on your portfolio over the long term.
Volatility is a normal part of investing, and we expect periodic swings in asset prices as the cycle continues to age. What’s important to remember is that despite some weaker indicators, the economic fundamentals still appear positive, and occasional pullbacks in the market are normal and to be expected.

Disclaimers
Past performance does not guarantee future results, which may vary. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at www.adviserinfo.sec.gov

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS
Copyright 2019 Callan Capital, All Rights Reserved.
1250 Prospect St. Suite 1, La Jolla, CA 92037
4611 Bee Cave Rd. Suite 201, Austin, TX 78746
www.callancapital.com

February Market Update

The Fed
Fed Chair Jerome Powell reiterated the Federal Open Market Committee’s“patient” mantra in his testimony to Congress today. He also emphasized that any future policy moves would be “data dependent”. Powell stopped short of resounding the dovish comments from New York Fed President and FOMC Vice-Chair John Williams, who said that GDP growth or inflation would have to materially surprise on the upside to warrant any further rate hikes this year. Data due this Thursday are likely to show GDP growth at 2.5% annualized in the fourth quarter, but it is expected that growth may drop below 2% for the first quarter.

The Market
The Fed’s new cautious stance towards rate hikes should help subdue longer-term U.S. Treasury yields. Short duration bonds also tend to perform well late in an economic cycle, while core fixed income protects portfolios heading into a downturn. We remain cautious, the U.S. equity market is higher quality and has defensive characteristics. However, international equities show long-term growth prospects and cheap relative prices, making them a potentially valuable long-term investment.

The Economy
Non-farm payrolls increased by 304,000 jobs in January, well above expectations of under 200,000. The unemployment rate rose to 4.0%, largely due to effects of the recent government shutdown. Wage growth was steady, increasing at 3.2% year over year. Gains in both payrolls and wages should bolster consumer spending and thus overall economic growth in 2019. However, employment is a lagging indicator, so the impressive gains we’ve seen recently likely reflect the acceleration in growth from 2Q and 3Q of 2018.

Trade
Trade talks with China continue in DC next week, with President Donald Trump saying he may let the 1st March deadline “slide”. A final agreement won’t be made until Presidents’ Trump and Xi meet in person, which won’t happen until after the deadline. With both putting their reputations on the line, any deal probably has a good chance of sticking.

Brexit
Earlier this week, U.K. Prime Minister Theresa May said there’s a possibility of delaying Britain’s departure from the European Union which is currently planned for March 29. This is the first time she’s been open to pushing back the deadline but with Parliament expected to oppose leaving with no deal, there are little options left on the table. The extension could potentially buy her time through the end of June, however, the European Union would still have to approve any delay and they have made it clear they would require a plan for how the delay would lead to a resolution.

Conclusion
For investors, all of this is a mixed bag. On the one side, economic growth seems to be slowing both in the U.S. and internationally, although it should stabilize if we can achieve more certainty over future trade relationships. On the other side, sluggish demand is holding both central banks and inflation in check and thus should ensure a generally low interest rate environment. However, with real bond yields at still very low levels and forward P/E ratios on stocks now back above their 25-year averages, expected returns from here from U.S. bonds and stocks should be modest, highlighting the importance of broader diversification to both reduce risk and enhance overall returns.

Disclaimers
Past performance does not guarantee future results, which may vary. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at www.adviserinfo.sec.gov

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS
Copyright 2019 Callan Capital, All Rights Reserved.

1250 Prospect St. Suite 1, La Jolla, CA 92037
4611 Bee Cave Rd. Suite 201, Austin, TX 78746
www.callancapital.com

January 2019 Market Outlook

January 2019 Market Outlook

At the Fed’s next policy meeting later this week, the Fed is likely to reiterate its current stance that it will be patient and wait to hike interest rates further. Stock markets have recovered most of the losses from December and credit spreads have narrowed again, suggesting that fears of an imminent US recession have eased. However, the ongoing quarrel over the national budget and the possibility of another government shutdown along with the continuing weakness in global economic data are good reasons to stick with a balanced portfolio.
The Fed is expected to leave rates unchanged this week and is also likely to signal that a March rate hike is off the table. With equity markets rebounding from their recent lows, economic growth solid, and core inflation close to 2%, we still think the Fed will raise rates once more at their mid-year meeting.

Democrats and the President agreed to reopen the government on Friday, after a lengthy shut down. However, the temporary agreement will bring them back to the negotiation table with a new deadline of February 15th. If the president and congressional leaders don’t reach a compromise on border security spending by that time, the same nine departments and dozens of agencies will be shut down again. If Congress and the President are unable to reach a long-term solution, another shut-down could end up having a noteworthy negative impact on first-quarter Gross Domestic Product (GDP).

The shutdown has also made it hard to judge how the economy is performing due to widespread disruption in data releases but the data that has been released has been relatively positive. The surge in payroll employment and manufacturing output in December shows that the economy finished 2018 on a strong note, and fourth-quarter GDP growth is estimated to be close to 3% annualized. The shutdown, however, appears to have hit consumer confidence. As investors focus on the things that could go wrong with the economy, we have missed all the news relating to its resilience and strength. For example, despite the partial government shutdown, initial claims for jobless benefits hit 199,000 in the week ending January 19, the lowest since 1969. And auto analysts are forecasting solid sales of cars and light trucks for the month. In other words, the data has yet to show justification for decrease in consumer sentiments.

On the continuing trade war, Chinese Vice-Premier Liu He is expected in Washington on Wednesday as part of the ongoing negotiations. Those talks are even more pressing after Wilbur Ross, US Commerce Secretary, suggested that the two sides were still “miles and miles” away from a deal. It is expected that the negotiators will come up with a group of proposals to present to both presidents to further a final deal by the March 1st deadline. If negotiators fail to reach an agreement by the deadline, Trump has promised to raise the tariff rate on $200 billion in Chinese imports from 10% to 25%.

Slower global growth and the stronger dollar may cause a slowdown in US export growth this year. Together with the domestic pressures from the fading fiscal stimulus and tighter monetary policy, that adds to our view that GDP growth will slow below its potential pace in the second half of the year. Fed Chair Jerome Powell stated that his “principal worry is…global growth”. Nonetheless, the Purchasing Managers’ Index (PMI) data shows that most global economies are still in expansion mode, with a few notable exceptions such as Italy, Taiwan and Korea. International equities remain attractive over the long-run as valuation measures suggest that international stocks are cheap relative to both the U.S. and their long-term histories.

On one hand we are dealing with some headwinds with rising interest rates, political discourse, and slowing global growth. On the other hand, all of this uncertainty has brought opportunity. Market volatility in the last quarter of 2018 brought equity valuations closer to their long-run averages, quelling fears that the equity market is overvalued. This was not only due to market corrections, but also to very healthy profits. The earnings yield on stocks is still higher than the yield on BAA corporate bonds, making stocks cheap relative to bonds. We remain balanced in our portfolios to maintain a durable portfolio able to withstand short-term turbulence while focused on the long-term horizon.

Disclaimers:
Past performance does not guarantee future results, which may vary. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at www.adviserinfo.sec.gov

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS
Copyright 2019 Callan Capital, All Rights Reserved.

1250 Prospect St. Suite 1, La Jolla, CA 92037
4611 Bee Cave Rd. Suite 201, Austin, TX 78746
www.callancapital.com

December 2018 Market Update

Our confidence in our long-held view that a shifting policy mix will cause economic growth to slow in 2019 has only strengthened in recent months. The turmoil in markets suggests that others are anticipating the slowdown as well. As the fiscal stimulus fades and monetary tightening intensifies, we expect GDP growth to slow coming into 2019 and 2020. In addition to slower growth in the rate-sensitive components of GDP, we also expect the stronger dollar and weaker global economic growth to weigh on export growth in 2019, with net trade being a small drag next year. However, the likelihood of a full-blown recession remains small.

The largest downside risk to the economic outlook for next year is a worsening of the US-China trade dispute. There are many ways that the current ceasefire could fall apart, but both sides appear to be pushing hard for a lasting deal. Although the recent ceasefire by Presidents Trump and Xi in the US-China trade dispute already appears to be on shaky ground, the odds of a lasting deal are likely higher than many suspect, primarily because Trump is staking his own reputation on this deal. If a deal can be reached, we might end up seeing a small positive effect on next year’s outlook. Markets are also eyeing possible spill-overs from a disorderly Brexit or an Italian debt crisis.

Another major downside risk is the likelihood of a lengthy Federal shutdown that may develop into another debt ceiling crisis. A partial shutdown could begin as soon as December 22nd if no deal is reached between President Trump and the Democrats and could become progressively more severe in the first half of next year resulting in an extended Federal shutdown and a renewed debt ceiling crisis.

The weakness of CapEx intentions can be partly explained by the rise in corporate borrowing costs. Bond yields remain fairly low by past standards, but they look set to rise further over the coming quarters. We expect higher borrowing costs to become an increasing drag on business investment over the next 12 months. In particular, non-investment grade bond yields have surged in recent months, in part due to fears that the collapse in oil prices could trigger defaults in the energy sector.

Still, neither the weakness in core inflation nor the recent turmoil in financial markets are likely to prevent the Fed from raising interest rates again at next week’s FOMC meeting. We expect the Fed to hike interest rates again in the first half of next year, before slowing economic growth forces the Fed first to stand pat in mid-2019.

What does this mean for the markets? Much of the economic uncertainly we are seeing is priced into the market and is the reason for the current volatility. As the uncertainty resolves itself, we should see the market respond accordingly. A deal reached by the US and China would have positive effects for the markets, as would a budget deal in Congress or the Fed turning dovish. While it may be difficult to remain calm during a substantial market decline, it is important to remember that volatility is a normal part of investing.

Data is as of December 17, 2018
Past performance does not guarantee future results.
Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at adviserinfo.sec.gov.

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services.

The views expressed are those of Callan Capital, LLC. They are subject to change at any time.

November 2018 Market Update

This year has marked the 10th anniversary of the onset of the global financial crisis which precipitated a bear market in equities around the world and the biggest global recession
since the Great Depression. While both financial markets and economies have fully recovered from this trauma, its memory continues to induce a more cautious attitude
in the markets.

October finished as the worst month for global equities since 2012 with all major markets closing lower for the month. Investors grew more concerned that corporate earnings had peaked for the cycle, while ongoing geopolitical risks continued to dampen investor sentiment. Sovereign bonds did not provide a hedge against the equity moves. Yields remained well supported as central banks did not waver in their plans for policy tightening.

Investors should recognize that a low interest rate environment, combined with a long bull market in stocks, limits potential portfolio returns going forward. However, with both the U.S. and global economies growing, opportunities remain across the spectrum of global financial markets, and, while the bull market in equities is old, our baseline forecast incorporates an economic slowdown rather than an outright recession. However, there could be a significant risk of the latter developing in late 2019 or in 2020. With limited signs of any major imbalances, asset bubbles or credit build-up, however, we would expect such a recession to be modest.

So far this year, U.S. equities have outperformed their international counterparts. This is, in part, because of a stronger U.S. dollar and may also reflect some investor caution on the
potential impact of a trade war on corporate profits overseas. In the long run, slowing growth in the U.S. and a rising trade deficit could cause the dollar to fall, amplifying the return on international equities. Conversely, we believe, despite some hiccups this year, that economic growth should remain strong in both developed and emerging economies over the next couple years, boosting corporate earnings. Broad valuation measures suggest that international stocks are simply cheaper, both relative to U.S. stocks and relative to their own long‐term history. Consequently, while international stocks have been disappointing so far this year, we believe it is important for long‐term investors not to be under‐weight this asset class relative to a normal portfolio.

Looking forward to the rest of 2018 and beyond, we still think the global economy and current valuations justify a diversified approach to long‐term investing. However, as
interest rates and equity prices rise, it will become increasingly important for investors to move back to a more balanced approach to investing. As the expansion and bull markets continue to age, it will be important to pay more attention to protecting your portfolio than to capturing gains.

 

Important Disclosures:
Data are as of November 14, 2018
Past performance does not guarantee future results.
Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at adviserinfo.sec.gov.

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services.

The views expressed are those of Callan Capital, LLC. They are subject to change at any time.