A couple of weeks ago, we raised a little cash in the vast majority of our client accounts. In the grand scheme of things, it was relatively minor across the board. While we would ordinarily send out an email detailing our actions, we didn’t this time as we didn’t want anyone to misprocess our actions as “the sky is falling.” Thus far, the trade has been mostly a wash in terms of overall portfolio performance.
Currently, the general consensus of our investment team is we would be more inclined to reduce our overall allocation to equities than add to it, at least in the short-term. However, no one believes a massive correction is imminent either. The reason is pretty simple: the economy appears poised for continued moderate/mediocre growth. This should provide a base, of sorts, for corporate earnings. As long as this remains in place, another 2008 or even 2002, which is what most investors fear, isn’t terribly likely outside of a major, global conflagration.
Even so, in order for the markets to have another strong leg up, two things must happen: 1) 1Q 2017 reported earnings have to come close to or exceed some pretty lofty expectations, and; 2) at some point in the not so distant future, Washington HAS to start addressing and/or tackling some measure of meaningful tax reform. I am not sure which is more important than the other, as they are both critical.
First things first, it is too early in the 1Q earnings season to make a clear determination, but initial observations suggest things are at least okay. Tax reform? As I type, I am not clear on where that stands other than the somewhat vague promises about ‘later this year’ and ‘not before August or September.’ Perhaps I have missed a story with specifics or didn’t get the meeting invite from the White House; I don’t know which. …Read More…
The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.