WBI Investments

The good news is household net worth as a percentage of disposable personal income has never been higher.1 The combination of both the bond and stock markets and the housing price recovery is sitting at all-time highs has allowed Americans’ wealth to soar.

England votes to leave and markets around the world shudder… The surprise at the polls reinforces the growing dissolution and distrust of ineffective big government and its institutions. We have seen similar populous angst play out recently in the presidential primaries in the U.S.

If we put hope and wishful thinking aside and look at what the economic and corporate data tells us, the U.S. economy is flirting with recession and markets are due for a bear market correction of 30-50%. The U.S. and global economies are growing more slowly than forecasted just a few months ago. Data indicates that instead of getting stronger, macro trends are getting weaker.

Over the past 35-40 years, the industry and media have told investors to invest passively, or to buy and hold. We believe this approach is flawed and hurting rather than helping people invest successfully. The passive, buy and hold concept was developed in response to the damage inflicted on investors and the mutual fund industry in the 1970s.

Since the beginning of 2016, investors have awakened to the limits of central banking monetary policy to increase faltering worldwide economic growth. It appears, the global central bank experiment of zero interest rate policy and quantitative easing over the past seven years has not built a sustainable economic recovery.

In response to the 2008 Financial Crisis, governments around the world led by the U.S. Federal Reserve adopted zero interest rate policy (ZIRP) and quantitative easing (QE) monetary policy tools to try to stabilize the financial system.

In response to the 2008 Financial Crisis, governments around the world led by the U.S. Federal Reserve developed a series of monetary policy tools to try to stabilize the financial system. The two primary policy tools they have employed are a zero interest rate policy (ZIRP) and quantitative easing (QE). We believe that these policies have created a high-risk paradigm for investors who have come to believe that easy monetary policy can drive asset prices higher, forever.

Today’s investor doesn’t have to look far to find someone predicting dire consequences just around the bend. Forecasts of impending doom have been around a long time. According to legend, Cassandra was a Trojan princess cursed by the god Apollo with the ability to see the future, but to have no one believe her.

The global market meltdown is turning into a rout as investors who ignored the warning signs of overvaluation, weakening earnings/revenue trends, and deteriorating internal market dynamics may now be heading for the exits. As advisors and investors try to rationalize asset allocation and equity market exposure, they may deem it appropriate to stick with investments in countries with the strongest economies. Reasoning, stronger eco-markets should behave better than markets in countries with economies under pressure.

Imagine a very nice family living in a very nice neighborhood in an especially beautiful and very nice home. They have lived there for a little over seven years now, and have been very happy. A few years ago they invested in finishing the basement, turning it into a beautiful family space with an entertainment center, exercise equipment, and separate room for the furnace and hot water heater. They even added a pair of sump pumps to protect their investment. Because their home made up a big part of their family wealth, they paid for homeowners’ insurance every month.

Are you a better than average driver? According to a number of survey results, a lot of drivers think they are. A Survey by PublicMind at Fairleigh Dickinson University found that 68% of the drivers polled considered themselves above average, 30% considered themselves average, and just 1% considered themselves to be below average. (1% were unsure or refused to answer.)

After last year's robust stock market performance, returns this year seem a bit meager by comparison. This is especially true of the kind of big, blue chip companies that make up the DJIA, which is up only 1.51% for the first half of the year. This may be one of the reasons behind the topic of conversation that seems to be popping up more frequently lately. Many investors including many conservative investors appear to be asking themselves if they're being too cautious now that some of the major stock indices are hitting all-time highs.

The world of investing has changed dramatically. Over the past decade, many investors have discovered that conventional passive growth stock approaches failed to meet their goals. Following a buy-and-hold approach, investors suffered losses of as much as 51% during the 2000 through 2013 period. We believe conventional portfolio theory regarding the benefits of diversification has been broadly misinterpreted to mean that market returns will bail you out, and so investors should not worry about short-term losses.

"Past performance is not indicative of future results." Investors have seen that warning countless times, but do they believe it?