History Has Steered Folks to Environmental, Social and Governance Investing.
In this Milwaukee Journal Sentinel article from July 15th, Tom Saler explores socially responsible investing (SRI) and breaks down some recent high-profile examples.
Read July article.

 

New Firm Targets Socially Responsible Investors.
In this article from January 9th, Milwaukee Journal Sentinel reporter Kathleen Gallagher explores Greg Wait's launch of a new company that combines socially responsible investing and online investment advice.
Read January article.

 

Investment Trends, with insights by Greg Wait. In the Milwaukee Journal Sentinel's October 17th article, Kathleen Gallagher and Greg Wait discuss the recent rise of environmental, social and governance, or ESG investing. Greg provides insight into how reduced risk and improved returns are causing money managers to include ESG investing in their portfolios. Read October article.

 

Responsible Investing: Creating Financial and Non-Financial Value by Greg Wait. Do investors sacrifice returns in pursuit of their goal of advocating for a better world in which to live?
Learn more.

 

Ten-Year History of Investment Manager Performance by Greg Wait. As part of our process, we have conducted investment manager research and due diligence resulting in manager or fund recommendations to our clients. Here are our findings.

 

The month of September, 2013 marked the 10-year anniversary of Falcons Rock serving our clients and building relationships. We are grateful for all the years of friendship, loyalty, and support, and look forward to our next decade!

 

Investment Trends, with insights by Greg Wait. In the Milwaukee Journal Sentinel's July 20th article, Kathleen Gallagher and Greg Wait discuss the rising U.S. Treasury rates and using duration as a measure of risk. Greg's comments relate to whether we'll be "looking back on this short-term increase in yields as the warning shot for the much-anticipated longer-term rise in interest rates." Read July article.

 

Dec 9, 2012, Journal Sentinel's Kathleen Gallagher interviewed Greg Wait on current Investment Trends. Read the full article: "Low-quality stocks continue to provide strong returns."

 

We've Grown! Meet our new investment consultant: Tony Sebranek.

 

Investment Trends column of Milwaukee Journal-Sentinel shows Top-Down investment strategies are achieving positive results.
Read article on Top-Down Investing

 

Additional articles in the Milwaukee Journal Sentinel featuring Falcons Rock:
One is a fascinating story about a Mequon drug development company, which has a few of our clients as private investors.
Read article about our angel investors

 

Another features us in the Market Trends column: Strategy targets uncertain economy - and how Falcons Rock confronts specter of slow growth.
Read how we help clients get ready

 

There is a great deal of debate in the investment industry regarding active vs. passive (indexing) investment management.  We researched this topic and the results might be surprising to you.  Please see our research paper on this subject...more

 

We have experienced interesting situations with our clients. To update you on our firm’s activities, check out examples of recent work we have done for our clients...more

Get quarterly market reviews direct from Falcons Rock President, Greg Wait.

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US SIF Member 2017

Presidential Musings

 

2012 Quarter 3 Market Review

We are enjoying an absolutely spectacular autumn season here in Wisconsin! Temperatures have been moderate and the colors are bursting from our trees and landscape, making travel around the state a pure joy. Impact of Presidential Campaigns on US EconomyFall is my favorite time of the year…except every four years when we are all subjected to the political campaigns and the media outlets incessantly barking at us about how completely incompetent and immoral each of the candidates is. It is tiresome…

As you might imagine, our clients' opinions run the length of the political spectrum. I consider our clients to be intelligent, well‐educated, hardworking people and I respect each of them enormously. I also respect their political opinions and assume that they did not come to their viewpoints lightly. I believe they gather information from sources they deem to be credible, although such credibility is sometimes difficult to discern.

Campaigns, commentators, pundits and analysts make as much noise as possible to get the attention of their audience. Campaigns want to fire up their voters and the media wants ad revenue. The Pew Institute estimates that only 17 percent of political coverage actually addresses meaningful issues of policy. Economic data can be presented in ways that may help either party make their case on how they are going to "fix" things, which is one reason we now have a whole new industry devoted to "fact checking" the claims of politicians.

Investment Perspective

From an investment perspective, having a Democratic or Republican President has historically had almost no influence on the returns of the U.S. stock market. There have been numerous studies conducted over the years that typically illustrate there has been no ascertainable difference in average stock market returns, based on the party sitting in the White House, since the early 1900s. Of course, the results vary based on the specific time period measured, so I consider these studies to be inconclusive and frankly inconsequential. Every President has an enormous incentive to oversee a growing economy and stock market, yet we still have frequent recessions and bear markets. A President can exert influence, but the economy and markets are simply too complex for a U.S. President to drive their behavior.

All that said, it is still interesting and fun to look at stock market returns during political campaign seasons, so I did some analysis on the returns of the S&P 500 Index during the terms of our last four Presidents. Our last four Presidents include two Democrats and two Republicans; with a total of six terms between them…two each for George W. Bush and Bill Clinton, and one each for George H.W. Bush and Barack Obama (almost…he's one quarter away from finishing his current term).

Out of curiosity, I also plotted the returns of the MSCI All‐Country World Index (ex‐U.S.) to get a comparison of non‐U.S. stock markets versus the U.S. stock market during these periods. Our last four Presidents span the period from 1/1/1989 to 9/30/2012 and we've experienced both bull and bear markets during this time frame. See the charts below for more in-depth results.

Presidents' Full Term Returns vs. Non-US
Periods ending September 30, 2012Presidents FUll Term Returns Chart

Presidents' Term-by-Term Returns vs. Non-US
Periods ending September 30, 2012Presidents Term by Term Returns

Investment Growth: US versus Non-US
January 1, 1989 to September 30, 2012Investment Growth Comparison - US vs non-US

RISK / RETURN
January 1, 1989 to September 30, 2012RISK RETURN

Here is a summary of the research:

  • The U.S. stock market, as measured by the total return of the S&P 500 Index, delivered very strong results during the terms of Presidents Obama, Clinton, and George H.W. Bush.
  • The U.S. stock market experienced losses during both terms of George W. Bush.
  • The volatility (standard deviation) of the U.S. stock market increased during the first terms of both George W. Bush and Barack Obama.
  • During the entire period measured, an investment of $1,000 in the U.S. stock market would currently be worth nearly $9,000.
  • U.S. stocks delivered greater returns than non‐U.S. stocks during the terms of Presidents Obama, Clinton, and George H.W. Bush.
  • Non‐U.S. stocks generated better returns than U.S. stocks during both terms of President George W. Bush.
  • During the entire period measured, an investment of $1,000 in the non‐U.S. stock market would currently be worth about $3,000.

Interestingly, Franklin Templeton recently conducted a survey of 1,000 investors and asked whether they thought the S&P 500 Index was up or down during each of the past three years. 66 percent of those investors surveyed thought the stock market was down in 2009 (it was up 26.5%), 48 percent thought the market was down in 2010 (it was up 15.1%), and 53 percent thought the market was down in 2011 (it was up 2.1%). With so many investors believing incorrect information, it is not surprising that $170 billion has been pulled from stock funds over those three years. Much of that money has been sitting in cash earning a negative real rate of return. Short‐term fears impede the progress of investors in their pursuit of long‐term goals.

What does all of this mean for the upcoming Presidential election?

Probably nothing. Although politics do matter to an extent, they are not the be-all, end‐all when it comes to investing. On average, stock market returns are positive regardless of whether a Republican or Democrat is in the White House, as well as whether they have full or split control of Congress.

Third Quarter 2012 Review

The U.S. and global stock markets came roaring back in the third quarter, following a dismal second quarter, and year‐to‐date returns are in the positive double‐digits. The announcement by the Federal Open Market Committee that they will begin purchasing mortgage‐backed securities and continue Operation Twist, as well as European Central Bank policies that have helped bring down debt costs, seem to have encouraged risk‐taking again in the markets.

Commodities also rallied, with their biggest quarterly gain in nearly two years. It appears that the "risk‐on" sentiment of investors boosted their appetite for most sectors within the commodities markets.

Bond returns were also positive during the quarter, but with a wide divergence among sectors, as momentum favored risker credits with longer durations. Yields continue to be historically low, with the "real" yield of 10‐year U.S. Treasuries at ‐0.27% (yes, that is a negative real yield) as of September 30.

Here are the returns for select market indices for Q3 2012 (as stated in U.S. dollars):2012 Qtr 3 Returns on Market Indices

Outlook

Many investors look at the current political landscape and are frightened. Congress has not been this polarized since the Civil War, and both Presidential and Congressional approval ratings are below their long‐term averages (most notably Congressional approval ratings at about 12%). I believe it is part of our job at Falcons Rock to sort through all the daily noise and focus on data and issues that are relevant to helping our clients achieve their investment goals. In the end, I would not bet against people like our clients and our nation's business leaders. The U.S. has shown resilience in the face of adversity many, many times throughout its history, and I believe our people and our free‐market economy will continue to prevail in the future.

It is a privilege to have you as a client of Falcons Rock. Happy voting!

Greg Wait, President of Falcons Rock

Gregory D. Wait, President
Falcons Rock Investment Counsel, LLC

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