When markets begin to decline, particularly after extremely long periods of advances, there is a rush by the media and financial bloggers to proclaim “patience.” These claims are generally accompanied by advice to just “hold on” to investments and ride out the volatility over the long-term. After all, the index always rises, right?

Sage Advisory Services was founded in 1996 by Robert G. Smith, III and Mark C. MacQueen with a simple mission: to better meet the unique investment management needs of institutions and individuals through industry-leading analytical services, innovative investment solutions and an unwavering focus on risk management. I spoke with Bob Smith about Sage’s strategies and how they are helping advisors achieve their clients’ investment objectives.

I’m going to proceed to give you an updated version of my speech from one month ago at the Strategic Investment Conference. It actually has (as you will see) more relevance today than it did a month ago. We have edited the transcript so that the speech is much shorter and tighter; and of course, going back over it, I came up with a few thoughts here and there that I would like to have inserted in the original. I like this updated version better than the transcript. Like St. Paul, I guess taking the time to organize my thoughts and perform numerous edits does improve my message.

From a labor market perspective, we think it is hard to justify maintaining interest rates at zero or to pursue a negative-interest rate policy in the United States. We would argue the Fed should be raising rates sooner rather than later to avoid losing credibility.

After much volatility last week, investors now hold their breath as they await the fate of this Thursday's Brexit vote. US Investment Strategist Kristina Hooper says it looks to be a potentially history-making week that could reverberate throughout the world's capital markets.

Earlier this year, we presented an analysis of Brexit and discussed potential risks to the U.K. political system and economy from leaving the EU. However, there is also an under appreciated risk to the EU. The problem can be summed up in this question—what if the U.K. leaves the EU and prospers? This has the potential to be a major problem for the postwar European political environment. In this report, we discuss the role of the EU in shaping the European postwar geopolitical environment and the multiple threats Britain’s exit presents for the EU. We conclude with the impact on financial and commodity markets.

Not only will Donald Trump win the November election, but his victory will propel U.S. economic growth higher, according to Jeffrey Gundlach. Trump will fuel a debt-driven increase in government spending, which Gundlach said will push GDP growth to levels reminiscent of the Ronald Reagan era.

Imagine the collapse of an extended speculative tech bubble, resulting in a broad economic recession. Imagine if the Federal Reserve had persistently slashed short-term interest rates during the downturn, to no avail, leaving rates at just 1% by the time the S&P 500 had lost half of its value and the Nasdaq 100 collapsed by 83%. Imagine that the Fed kept rates suppressed, in the initially well-meaning hope of encouraging lending, growth and employment. Imagine that the depressed level of interest rates made investors feel starved for yield, and drove them to look for safe alternatives to Treasury bills.

Of the last few weeks, I have touched on the impact of valuations and forward returns. However, it is not just valuations that are an issue, but also the surge in corporate debt, balance sheet leverage combined with declining profitability which is a result of weak economic growth. All in all, such a combination of factors have historically been associated with “bear markets” in equities.

Nearly halfway through 2016, most of the issues we faced at the beginning of the year remain today.  With little overall market movement, the two most popular averages, the S&P 500 and DJIA, are little changed on the year – both up a small yet positive 1.5%.

I’m going to do something a little different in this letter in that I’m going to borrow wholesale from Neil Howe’s speech at my conference and his voluminous writings in order to give us a view of what to expect in the next five to eight years. And given that the Brexit vote looms next week and that it’s part and parcel of what Neil is talking about, I will offer some final thoughts on Brexit. That should be enough to keep us occupied for the next few minutes.

A review of the month’s market-moving events across countries and asset classes.

This week’s economic calendar is back to normal, with Wednesday’s FOMC announcement the highlight. Last Friday’s trading put the Brexit effects on the front burner, so I expect two themes for the week ahead. The first few days will be all about the Fed and any hints about the pace of rate increases. After the Fed meeting the emphasis will shift to the Brexit build-up, culminating next week. Expect some punditry magic. The regular Fed experts will morph into Brexit gurus by Thursday morning!

If you’re a serious investor—and because you’re reading this, I have to assume that you are—gold is looking more and more like a crucial trade. Only two weeks remain before United Kingdom voters decide on whether the country will continue to be a member of the European Union (EU) or become the first-ever to leave it. The “Brexit,” as it’s come to be known, is arguably the most consequential political event of 2016—perhaps even more so than the U.S. presidential election in November—with far-reaching implications.

China’s integration into the world economy began decades ago, but its integration into the global financial system is relatively new.

Real estate is slated for classification as a stand-alone sector at the end of August, a change that recognizes its distinct characteristics and prominence in the global economy. Over the past 15 years, real estate investment trusts (REITs) have increased their share of equity investment worldwide. “Institutional investors may consider combining direct real estate in their home markets with an allocation to global REITs as a way to help accelerate diversification of their real estate portfolios,” writes Sebastien Lieblich, global head of real estate research, who in his latest post discusses developments that are enhancing the sector's viability.

Michael Rivero: Americans herded into “giant human ranches called cities,” far less resilient & unprepared for the coming breakdown.

Make no mistake, China’s oil demand is still massive, second only to the U.S. But it has begun to contract in recent months, and there to offset the difference is India, who is expected to have the fastest growing demand for crude between now and 2040, according to the International Energy Agency (IEA).

Many wealthy US investors want to give substantial sums to family during their lifetime, while preserving their flexibility, in case they need the money later. That’s fine: Large annual gifts can go a long way to helping your children get started on their careers,buy homes, or simply live more comfortably. Here are several tax-efficient strategies to consider.

Coaches tell athletes that if they still have any energy left when they head back into the locker room when the game is over, they haven’t played hard enough. You’re supposed to leave it all on the field. That’s pretty much how I feel right now, so I don’t have a lot of energy to write a new letter. But thankfully, the comments we received from my May 15 letter, “Life on the Edge,” were among the best we’ve ever had. So I am going to reproduce them and maybe add a few responses of my own in between.

Keeping the financial markets on their toes as investors head into summer, the Fed's most recent speakers have elected to take on a more hawkish tone. Was this coordinated? Or, did they just get lazy and borrow each other’s notes?

A calmer tone prevailed across markets in April despite major central banks choosing to pause from adding substantial support. Mixed economic data underscored a tepid fundamental backdrop. The market rally continued in April, though underlying sentiment may have cooled more than the rally suggested.

“Invest in good companies, don’t use leverage, invest in liquid investments, don’t do private deals and light a candle and pray for a positive outcome.” -Leon Cooperman, Omega “Debt drains away vital resources from economic growth. Fighting a debt crisis with more debt is doomed to failure, yet that is not only what global central banks did during the crisis but long after markets stabilized (though the crisis never truly ended, just slowed). This was an epic policy failure that continues today.” -Michael Lewitt, The Credit Strategist

This year’s first quarter is one for the history books. Not only did gold appreciate at its fastest pace in 30 years, but demand for the yellow metal was the strongest it’s ever been on record. Let me repeat that: the strongest it has ever been. Demand surged 21 percent from the same period a year ago, according to the latest World Gold Council (WGC) report. Most of this demand was driven by investment, with net inflows into gold ETFs reaching 363.7 tonnes, a seven-year high.

The past five years have been challenging for long-term value-based asset allocation. We do not believe this constitutes a paradigm shift, dooming such strategies in the future. The basic driver for long-term value working historically has been the excessive volatility of asset prices relative to their underlying fundamental cash flows, and recent history does not show any evidence of that changing. Outperforming the markets given that pattern requires either betting that the excessive swings will reverse over time or accurately predicting what those excessive swings will be. The former strategy amounts to long-term value-based investing, while the latter requires outpredicting others as to both what surprises will hit the markets and how the markets will react to them. Our strong preference is to focus on long-term value, despite the inevitable periods of tough performance that strategy will entail.

This is the final installment in my series of articles on fairly valued mid-cap selections. My inspiration to produce these articles was at the request and suggestion from regular readers who were frustrated at the lack of coverage and/or articles on mid-caps. To accommodate those requests, I screened through the S&P 400 mid-cap index with the assumption that it represented a credible universe of high-quality mid-caps. The fact that I was only reviewing the S&P 400 index was missed based on many comments received on my previous articles in this series. In other words, I only included fairly valued research candidates that are members of the S&P 400 index in this series.

In streetball parlance, active managers have thrown up enough bricks to host a masons’ convention. Marking the worst relative quarter since 1998, less than one-in-five large cap managers, and only 6% of large cap growth managers, outperformed the S&P 500® Index in the first quarter of 2016. We don’t put much weight on just three months of performance data but, despite what Mark Twain writes, statistics don’t lie: fewer than one-quarter of managers outperform their benchmarks over the long-term. With such disappointing outcomes, the economic value of our profession will remain in question and cheap beta will look relatively attractive.

It can be difficult to adjust to the end of a good run. For years following the financial crisis of 2008, investors benefited from a rally in financial markets facilitated in part by expansionary policies of the Federal Reserve and other central banks around the globe.

Last Thursday was session 53 in the “buying stampede” and it was going along swimmingly. Well, I guess the surprise “no stimulus” announcement out of Japan caused an early morning stutter-step, but the equity markets seemed to stabilize after a somewhat weak opening. In fact it caused one market wizard to comment, “I love this market. Bad earnings can't take it down. Remember, the move most people least expect is the DJIA going right through all of that overhead supply and making all-time new highs. I'm in the minority camp, expecting major new highs. Buy in May and don't go away!”

Today we are going to explore how demographic change impacts growth.

In February 1990, the Voyager 1 space probe reached the outer edge of our solar system. NASA commanded it to take a last image of Earth from 3.7 billion miles away. The planet is only a small speck from that distance.

Is gold, often scoffed at as being an unproductive asset, more productive than cash? If so, what does it mean for asset allocation?

Manufacturing is dying on a global basis, according to Bruce Greenwald, and its collapse will mean the demise of economies – like China – that are highly dependent on exported goods. Contrary to what Robert Gordon and others have contended, productivity is growing in the manufacturing sector – roughly twice as fast as the demand for those products. If third-world countries don’t adjust their economies to reflect this reality, Greenwald said it would be a “crisis greater than global warming.”

Today, my plan was to highlight two of my favorite analysts, Dr. Lacy Hunt and Dr. Gary Shilling.  But that plan has changed and importantly, I believe, what I share this week can give us a better understanding of the structural issues we face.  And how they might be fixed.  Listening to Bloomberg’s Tom Keene early this week, I stood quiet as he interviewed Daniel Alpert.

Most economists and financial writers agree that the US has the strongest economy among the developed nations, even though we’re only growing at about 2%. Despite the slow growth, most don’t believe we are facing a recession anytime soon. However, most economists and financial writers also agree that a serious external shock could quickly throw the US economy into a recession and take most of the rest of the world with it.

Mid-cap stocks are often overlooked by investors and not widely covered on Wall Street or many financial websites and blogs. However, I consider it a mistake because there are many mid-size companies that are attractive long-term investment opportunities.

In framing different retirement income strategies – and the trade-offs they entail – it’s important to scrutinize the measuring stick used to evaluate the outcomes. The best retirement income strategy will depend on whether you measure based on wealth, spending, probabilities of success, magnitudes of failure or utility functions that weigh both the upside and downside risks!

My 18-year-old son, Matthew, came to me asking about how the economy works.  This summer he will be an intern and task one prior to his start date is to read “How the Economic Machine Works.”  There is much we can learn from history and it makes sense to study the research from some of the brightest amongst us.  From there, he and I will begin a dialogue.

In this week’s letter we will take a quick look at the condition of a slowing global economy (the IMF just downgraded its own forecast this last week). Then we’ll grapple with a Plan B scenario, because I have a confession of sorts: I am not entirely optimistic that Congress and the new president can get their act together, so I offer a proposal from former Oklahoma Senator Tom Coburn as to what we, the people, can do to actually change the country’s direction without having to depend on a Congress that may prove dysfunctional. Again.

Dovish comments and actions by central banks, including the Federal Reserve, helped sustain the market’s rally. Fundamentals still indicated tepid growth even as global risk appetite built further through the course of the month. March highlighted that shifts in political trends could feature prominently in the remainder of the year.

If you sell when the market no longer represents “value”, when do you buy back?

The $2.6 billion deal, awaiting shareholder approval in June, would create the fifth-largest U.S. airline by traffic and result in a much more competitive player, especially on the West Coast. (Alaska is based in Seattle, Virgin in San Francisco.) According to the Wall Street Journal, Alaska’s annual revenue could grow 27 percent because of the deal.

Encouraging fundamentals and positive developments in broadly-used sector classifications and US tax structure bode well for Real Estate in 2016.

This is a complimentary issue of Bob Veres' Inside Information. The lead article defines the robo-advisor challenge as nothing more than the next evolution of professional software—I call it Software 2.0—with intelligent built-in capabilities. The article looks at how the venture capitalists who funded the robo-platforms identified three significant weaknesses in the advisor profession they hoped to disrupt. As it turns out, instead of disrupting us, they did us all a big favor. By exposing certain weaknesses, the venture capitalists showed us several ways to increase your top-line revenues without any additional labor from you or your staff.

“Now these monetary institutions are expected to continue producing miracles. But their ability to repeatedly pull new rabbits out of their policy hats has been stretched to an increasingly unsustainable degree.” -Mohamed A. El-Erian, The Only Game in Town

he last time gold had a quarter this strong, Ronald Reagan was a year into his second term as president, the Soviet Union was taking its final gasp and the U.S. was still reeling from the Challenger explosion. Year-to-date, the yellow metal has risen 16.5 percent, its best three-month performance since 1986, mostly on fears of negative interest rates and other global central bank policies.

With 2 1/2 months to go before the Brexit referendum it is anybody's guess what the outcome will be. In this month's Absolute Return Letter we take the rare opportunity to comment on a political event. Regardless of where you reside, the result is likely to be important for you. Like most things in life, the choices are not black and white. Enjoy the read.

Despite challenges, we maintained a slightly overweight view on lower volatility and directional hedge funds; meanwhile certain areas within private debt appear attractive.

Global equities—particularly those in developed markets outside the U.S.—may provide more opportunities over the coming 12 months.

In our view, using a bond index fund today exposes portfolios to greater interest rate risk without commensurate compensation in the form of yield.