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

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US SIF Member 2017

Transition

 

2013 Quarter 4 Market Review

Happy New Year!

The beginning of any new calendar year is often a time of reflection. People tend to look back on their personal events over the past twelve months and make new resolutions to do things differently in the coming year. In some cases, these resolutions fail miserably, but sometimes real personal transitions are made. In our family’s case, a transition in 2014 seems to be forced upon us. My wife, Jodi, and I are looking into the new year and anticipating:

  • Our first full year as grandparents;
  • Our oldest son, his wife and new baby moving to Madison, WI;
  • Our daughter, recently graduated from college, moving to Minneapolis, MN with her first “career” job;
  • Our youngest son will graduate from Germantown High School and will be attending an out-of-state college;
  • We will become “empty-nesters” in the fall.
Transition in Investing

Change brings both trepidation and excitement, and I think both of these emotions should be in play for investors in the coming year. 2013 was a GREAT year for the U.S. stock market, with an annual return greater than any year since 1997 and the thirteenth best calendar year return on record (since 1925)! It is clear that most investors were not expecting such a thundering stock market a year ago, as net flows into stock funds did not turn positive until summer. Signs of domestic optimism now abound. According to the latest Moody’s Survey of Business Confidence, “businesses are feeling as upbeat as they ever have in the 11-year history of the survey. Sales and pricing are sturdy, and hiring is much improved, with a strong nearly half of respondents now hiring. Expectations abosut conditions for the first half of the next year are especially optimistic. The economy appears to be kicking into a higher gear, as there are no discernible blemishes in the survey results.”

The rest of the world has not kept up with the U.S. in the past couple of years. While the European crisis is over, due to a softening of their austerity demands of a few years ago, their stock markets have not yet fully recovered. The economic revival in Europe helped lift the global composite of leading indicators in 2013 and the global economy is expected to grow in 2014. It seems that the global stock markets might be poised for increased valuations in the near future.

While the developed economies are in growth mode, the emerging markets growth continues, albeit at a slower pace than in recent years. Commodities prices have fallen along with emerging markets demand. An increase in interest rates last summer caused most bond investors to see a decrease in value over the past year.

It indeed feels like a time of transition…which is not always easy!

Fourth Quarter 2013 Review

The U.S. stock market finished the year strong with all sectors generating nice gains. The best performing sectors included Industrials (+13.5%), Technology (+13.3%) and Consumer Discretionary (+10.8%). The “worst” performing sectors during the quarter were Utilities (+2.8%), Telecom (+5.5%) and Energy (+8.4%).

While U.S. stocks were the clear winner in the fourth quarter, stocks of developed foreign countries also posted strong returns and emerging markets stocks generated modest gains. The broad commodities market continued its downhill slide and has now completed three consecutive years of losses.

The bond market had mixed results in Q4, as bond funds continued to experience net fund outflows. Given the economic optimism, corporate and high yield bonds saw positive returns. The U.S. dollar was mixed during the quarter, generally weakening versus European currencies and strengthening versus Japan and emerging markets currencies. Overall, most balanced portfolios again enjoyed gains during the quarter.

Here are the returns for select market indices for Q4 and calendar year 2013 (as stated in U.S. dollars):


Outlook

Other than elevated U.S. stock market valuations, it is difficult to find economic indicators that point to a downturn, and 2014 could be the best year for global GDP growth in quite some time. Central banks around the world are “fixing the game” to keep interest rates low and encourage investment in riskier asset classes. While the U.S. Federal Reserve has announced a “tapering” of its bond-buying program, this does not mean that it will be selling bonds but simply that it will be buying fewer bonds…this is still an accommodative stance and there is still no evidence of an inflation threat. After the federal government sequestration forced reduced spending last year, there will be less fiscal drag in 2014. Household net worth in the U.S. is at an all-time high, which should drive consumer spending. Housing affordability is at a very low level and inventories are still low, which should lead to a continued resurgence in the housing market. Business spending typically lags an economic recovery, as companies first hire back workers and then spend on equipment, technology, etc. The unemployment situation is improving and the U.S. unemployment rate fell to a new post-recession low of 6.7%; however, some of the improvement stems from a contraction in the labor force. Nonetheless, it is expected by many economists that the U.S. will hit an all-time high in total private payroll in the coming year.

There remain short and long-term risks to investors. With higher stock market valuations, it is unlikely that U.S. stock market returns will approach those of 2013. Valuations of international stocks appear much cheaper than U.S. stocks, but the slower growth in emerging market economies may cap potential returns in these markets. Higher interest rates would continue to dampen fixed income total returns. The triple-threat of demographics, deficits, and debt are still issues to be reckoned with over the longer term.

As the market transition takes place, many investors will realize that they were too late to participate in most of the rally. The U.S. stock market has now soared by 173% since the bottom in March of 2009. Our clients have participated in the rally because we advocate for diversification and adhere to the discipline of rebalancing. However, if the higher stock valuations and other risks (known and unknown) lead to some downside surprises, a diversified portfolio will limit volatility. Investing in times of transition can be tricky, so prudence is advised.

Thank you for being a client of Falcons Rock. We wish you a healthy and prosperous 2014!

Greg Wait, President of Falcons Rock

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

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