2018 Q1 Recap & Market Outlook

Capital Market Action Summary

Volatility is Back.

After a 2017 marked by record low volatility in the capital markets and an upside surprise in performance, 2018 began with a return to the levels of volatility closer to historical norms. January saw a continuation of the hot stock market only to see gains erased in February and most indexes turning negative in March. The chart below from Charles Schwab illustrates the relative calm in the markets which ended in late January with a selloff in stocks and a spike in the VIX Volatility index):  

vix and s&p changing environment.jpg

We still believe that the underlying economy and fundamentals remain sound and that the fiscal stimulus effects of greater spending and the implementation of lower corporate tax rates should keep domestic stocks above water for the near future. Abroad, both developed market stocks and emerging market stocks started the year in much the same fashion as their domestic counterparts with developed market stocks just slightly trailing US stocks and Emerging Market stocks just ahead of both.

The downturn wasn’t confined to equities. Bonds also saw a challenging environment as rates shot up (+.50% on the Ten Year Treasury Rate by mid-February) on inflation concerns and the expectation of continued Federal Reserve rate hikes. In fact, this was the first time in the past four Fed rate raises where we actually saw the bond market respond to rising rates. The bond market was also hit with a slight pullback when credit spreads widened in the correcting market. We believe that the Fed will continue to raise rates in 2018 and that credit spreads (the rate over Treasuries demanded by investors for taking on credit risk) are still too tight and offer more risk to the downside than possibly helping high yield bond total returns.

As we’ve been saying for some time, the bulk of the risk we see in the capital markets is derived from geo-political concerns and we began to see evidence of that in the first quarter of 2018, with North Korean sabre rattling and the potential of a trade war with China spooking the markets. We believe much of the rhetoric is part of President Trump’s negotiating tactics: start on the end of the spectrum, act aggressively and then move to the middle to get a deal done. We will see if that is the case with the potential trade war with China, but unless China devalues their currency in response to US tariffs, we don’t see a meaningful trade war erupting as there are already exemptions being carved out for Canada, Mexico and potentially Europe. However, there will likely be some fear and panic as we move through the negotiating process. Even still, we are long way from the true trade wars of the distant past as evidenced in this chart from Blackrock:

shifting trade winds.png

Additionally, over the past sixteen months where we witnessed record low volatility despite the political turmoil in Washington of an ever-changing cabinet and no clear agenda. However, we are now seeing the market begin to react to political miscues, tariff announcements, and data scandals such as Facebook. While the swings can be concerning, it is normal market behavior. Plus, all is not negative in Washington. We’ve seen a recent spending bill that should quiet shut-down fears and provide fiscal stimulus to the economy and the switch to a new Federal Reserve Chairman, Jerome Powell, who seems up to the job thus far.

In the end, the first quarter proved challenging for almost every asset class as evidenced by the index returns detailed below. Nevertheless, the cooling off of a red hot market and the Federal Reserve raising rates can be expected.

Major Index Returns for the First Quarter of 2018

·         S&P 500 Index (Large Cap Stocks): -.76%

·         Russell 2000 Index (Small Cap Stocks): -.08%

·         MSCI EFAE Index (International Stocks): -1.53%

·         Barclay’s Aggregate Bond Index (Fixed Income): -1.46%


While we are starting to see some signals that we are late in the economic cycle, we believe that markets will benefit from the recent tax reform, spending plans and continued trend of deregulation. Additionally, the recent correction along with the earnings revisions have brought the S&P 500 back down into a more normalized valuation. Much of the performance of 2017 was the pricing in of tax reform which investors knew would have a large impact on stock prices given the resulting impact on earnings. The two charts on the following page demonstrate just how impactful tax reform was to earnings:

earnings census.png

We feel that the global bull market is nearing the end, but is not over yet and that investors need to remain invested as market timing is a very difficult, and oftentimes costly event. Remaining in the market even when it is at heightened valuations still breeds better results. Goldman Sachs illustrated this perfectly in their study of what would happen if an investor consistently cashed out when valuations were above the 90% mark and bought back in when they reverted to the 50% mark. As you can see below, investors would have been better off remaining invested rather than selling and waiting for more attractive valuations:

sell high buy low.png

The biggest risk we see for returns in 2018 is policy mismanagement from the central banks. If rates are raised too quickly, we could see the return of recessionary forces. On the flip side, if the central banks remain accommodative in a time of low unemployment, we could see economies overheat and bubbles form. Beyond central bank actions, we also see risks of North Korean military tensions and a potential trade war with China as the other immediate concerns.

We also recommend staying in short term bonds until we see an additional rate raise or two from the Fed. At that point, we will consider adding back core and municipal bonds to our client portfolios as both have heightened interest rate sensitivity.

In summary, we continue to have a positive outlook for risk assets, but feel that investors should look to diversify away from US stocks to those with more attractive valuations to take advantage of the global economic growth. With the specter of 2-3 more rate hikes from the Federal Reserve in 2018, we intend to remain in less interest rate sensitive bonds until rates climb further reducing interest rate risk and increase cash flows. We also remain committed to our MLP position for now as we feel that it is only a matter of time until investors return to the sector. The secular case for master limited partnerships continues to improve and we feel that prices will catch up soon enough. Lastly, we anticipate an uptick in inflation in 2018 and expect our allocations to commodities to move up as they are one of the best inflation hedges available to investors.


Past performance is not necessarily indicative of future returns.  The performance described in this report is based on investment selections for the period in question.  There is no guarantee that these same investments will continue to perform as described.  All investing carries a risk of loss, including principal that clients should be prepared to bear.  Clients are advised to inform us of any changes in their circumstances,as such changes may materially alter the appropriateness of the investments selected by Ferris Capital.   





Ferris Capital Announces Key Promotion

MARLBOROUGH, Mass., March 20, 2018 /PRNewswire/ -- Ferris Capital, LLC (http://www.ferris-capital.com) is pleased to announce that Eric Ganeles has been named to the Firm's Investment Committee.

David Ferris, CEO and CIO of Ferris Capital said, "This appointment reflects the Firm's commitment to recruiting and retaining highly talented professionals to ensure we continue to anticipate and meet the wealth management needs of each of our clients."

A seasoned wealth advisor, Eric works primarily with clients needing intergenerational wealth services, estate and financial planning, as well as investment management services.  Eric has over 35 years of investment experience, beginning his career at the New York Stock Exchange, and then spending the last 25 years as a Vice President with Fidelity Investments' Private Client Group.  Eric has a Master of Science in Finance, with Distinction, from Brandeis University International Business School, and is a mentor to current graduate students.  He is a member of the CFA Society Boston.

About Ferris Capital

Ferris Capital (http://www.ferris-capital.com) located in the MetroWest suburbs of Boston, practices a new kind of wealth management; hands on, active, determined and personal – one that takes nothing for granted and leaves nothing on the table.  If your wealth is involved, we're involved.


Ferris Capital, LLC
Bob Whelan, SVP Business Development
(508) 281-7115 https://www.linkedin.com/in/bobwhelan/

Original Article from PR Newswire; https://www.prnewswire.com/news-releases/ferris-capital-announces-key-promotion-300616820.html?tc=eml_cleartime

SOURCE Ferris Capital, LLC

Related Links


Ferris Capital celebrates another milestone

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Dave Ferris and client.JPG
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Ferris Capital proudly celebrated five years of exceptional service to our clients and the community this past Thursday. David Ferris and the entire team took this opportunity to thank everyone for helping us succeed and invited all to join us in a wonderful wine and food celebration in the lobby of our beautiful Marlborough, MA office.

Once again, thank you for helping us make the past five years so successful!


Ferris Capital Counselor Leah Upton becomes a Certified Divorce Financial Analyst

MARLBOROUGH, Mass., Oct. 3, 2017 /PRNewswire/ -- The Institute for Divorce Financial Analysts™ (IDFA™) is pleased to announce that Leah Upton of Ferris Capital in Marlborough, MA recently completed a specialized educational program in professional divorce analysis and is now a Certified Divorce Financial Analyst® (CDFA®).

Ms. Upton is trained to provide financial analysis and assistance to people going through a divorce.  She evaluates both short and long-term tax implications of dividing property and the financial impact of various settlement options for dividing marital property (including pensions) and child and spousal support payments.  Developing comprehensive insight of the financial effects of divorce can save valuable time, money, and distress, especially if the process is conducted early in the legal proceedings.  

"Misinformation and misconceptions about the divorce process can be detrimental," says Leah Upton (CFP®, CRC, CDFA®).  "We examine and analyze the financial issues of a divorce, providing our clients and their lawyers with data to help strengthen their case.  We help our clients avoid the common financial pitfalls of divorce by offering valuable insight into the pros and cons of different settlement proposals."

IDFA™ trains professional – financial planners, accountants, and lawyers – to determine the financial needs and outcomes for couples after divorce.

Founded in 1993, IDFA™ currently has more than 2,000 CDFAs across the United States and Canada. The number of professionals receiving the CDFA® designation continues to grow at nearly 15% each year. The designation and this niche industry are expanding rapidly as more people across the country search for alternative divorce processes – from collaborative law to mediation – rather than litigating their case using lawyers as their only line of defense. For more information about IDFA™ or the CDFA® designation, visit www.institutedfa.com

About Ferris Capital

Ferris Capital (http://www.ferris-capital.com) located in the MetroWest suburbs of Boston, practices a new kind of wealth management; hands on, active, determined and personal – one that takes nothing for granted and leaves nothing on the table.  If your wealth is involved, we're involved.

Ferris Capital, LLC
Bob Whelan, SVP Business Development
(508) 281-7115

Original Article from PR Newswire


SOURCE Ferris Capital, LLC

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Ferris Capital sponsors golf outing to benefit the families of fallen DEA agents at Cyprian Keyes

Ferris Capital is once again proud to be the primary sponsor of the New England Field Division DEA Fundraiser for Survivors yesterday at Cyprian Keyes Golf Club in Boylston. This continues to be a great day every year, for a truly worthwhile cause. The firm hopes to be able to support the cause again next year. 


 Pictured (from left to right); Matt Elsenbeck, Andrew Vernazza, Andy Brody & Matthew Russell of Ferris Capital

Pictured (from left to right); Matt Elsenbeck, Andrew Vernazza, Andy Brody & Matthew Russell of Ferris Capital



Ferris Capital, LLC Adds Industry Veterans

Ferris Capital is pleased to announce that Bob Whelan and Eric Ganeles have joined the Firm. Bob joins as Senior Vice President-Business Development and will be responsible for heading all of Ferris Capital's business development activities, from the creation of new business channels to the development and management of new opportunities.  Eric joins as Senior Vice President, Wealth Management and will lead efforts in working directly with the Firm's high net worth clientele.

Silicon Valley Wine Auction 2017 - Benefiting the Silicon Valley Education Foundation

Ferris Capital was again a sponsor at this year's Silicon Valley Wine Auction.  The 2017 event was held at the stunning Runnymede Farm in Woodside, California.

While this is a gathering to enjoy fantastic wines produced from vineyards right in the Santa Cruz Mountains, this event's primary focus has continually been to raise funds to benefit the Silicon Valley Education Foundation (SVEF).  The SVEF's focus is a nonprofit resource and advocate for students and educators. SVEF is dedicated to putting all students on track for college and careers, focusing on the critical areas of science, technology, engineering, and math (STEM). 


 David House (Brocade Chariman / SVEF Board) & Dave Ferris (CEO - Ferris Capital)

David House (Brocade Chariman / SVEF Board) & Dave Ferris (CEO - Ferris Capital)

NFL RB LeGarrette Blount helping Make-a-Wish

NFL Running Back LeGarrette Blount & Ferris Capital CEO David Ferris celebrate a great evening helping to raise funds for Make-a-Wish of Massachusetts and Rhode Island. Ferris Capital was one of the sponsors at this year's Make-a-Wish Gala and hopes to create an annual tradition of participation for this cause. 

LeGarrette Blount

Happy Holidays

As 2016 draws to a close, we want to take a chance to say "thank you" to all of the families that allow Ferris Capital to serve as their Fiduciary.  We hope that 2017 is filled with health and prosperity. 

Every year we try to remember to be grateful for all of the many ways we are fortunate. In this spirit, the employees of Ferris Capital traditionally each sponsor a local child that is less fortunate for the Christmas holiday.  Pictured above is the very generous program that our employees participated in for 2016. We hope that the children sponsored this year enjoy these gifts and the holiday. 

We all look forward to continuing this tradition next year, and hopefully expanding its reach. Happy Holidays!

What a Trump Presidency Could Mean for Investors

A Letter from the CEO, David Ferris to clients on November 9, 2016

The last year has proven to be a contentious one for our nation in a number of ways. Whatever side of the divide we find ourselves, there is solace today in the hope that we as Americans along with President elect Trump can bridge divides and address the number of issues that we as a nation face. No matter which way you voted in the election, you are undoubtedly aware that there will be changes which impact our nation and national economy. Here at Ferris Capital, we serve as your Fiduciary. Part of that responsibility is to take emotion out of investment decisions. In doing so we look at underlying fundamentals,  valuations, and a plethora of trends across investment locations and sectors.

Our experience has taught us that we could see immediate volatility around the election and geo-political risks as a whole. As such, we have taken measures to de-risk client portfolios. As I mentioned earlier in the year, Ferris Capital’s Investment Committee has been making a concerted effort to reduce risk while increasing income/yield in a low-yield/low-return environment. We have also been running higher than “ normal” levels of cash, cash-alternatives, and ultra-short bonds in all client portfolios. Just this week (on Halloween), we reduced our successful allocation to Alliance Bernstein High Yield Municipals by 50%, and had decided to wait out the election results in cash. Also, as I communicated in earlier communications, we had reduced S&P 500 exposure in favor of High Yield Bonds and cash.

I also want to remind our clients that it is not always about where you are invested, but rather where you are not. For our conservative clients we have no allocation to Small-Cap stocks (a portfolio component more prone to volatility than Mid and Large-CapStocks). Our moderately aggressive investors also have a greatly reduced weightings. We also have no allocation to Emerging Market stocks. This has proven to be an important omission, that I will outline in sector comments below.

The immediate impact of this election is that we expect a volatile market environment for the remainder of this year. As we saw with the “Brexit” vote, the markets detest uncertainty. Analysts world-wide will attempt to decipher what a Trump presidency will do in the near-term that will alter global trade, as well as the domestic economy. It is our InvestmentCommittee’s opinion that once these details begin to take shape, markets willstabilize, similar to the aforementioned U.K. referendum.  Our Investment Committee had researched the potential impacts of a Trump win ahead of the election and made sure that we were positioned well for that outcome. Some of the findings were:

  • Stocks - Volatility will likely increase as investors try to parse through how Trump policies will impact global markets and the impact on a Fed rate raise in December.
  • US Dollar -  Negative due to protectionism fears and anticipation of deficit spending (Cutting taxes, boosting spending).
  • Bonds – There would be a short term “Flight to “quality”. Flows to Treasuries could temporarily increase, reducing yields and increasing prices. However, US government bonds could see a similar impact as the dollar in the long term due to potential tax cuts and spending increases.
  • Emerging Markets – NEGATIVE outlook due to fear of collapsing trade deals. IMPORTANT NOTE: Ferris Capital has no allocation to EM Stocks for clients as we identified this sector as not having the requisite risk/reward profile for investment.
  • Energy – POSITIVE outlook for metals, oil, and coal due to potential regulatory changes. IMPORTANT NOTE: We recently added MLP’s to portfolios as they are offering yieldsof approximately 7% and have been severely punished over the last 24 months. We will consider using cash reserves to add to our existing allocations if fundamentals dictate.

As with any period of significant change, it is important to let the facts and fundamentals win out when making decisions. That is why we continue to take a measured approach to constructing your portfolio. Our Investment Committee will certainly be vigilantly watching these results in the coming months and years to determine their impact on markets. In the short-term, we are confident in our portfoliosand do not want to react harshly in either direction based on one (albeit major) event. The Investment Committee will look for ways to take gains where appropriate, cut losses when necessary, use cash strategically and ultimately focus on our clients long-term goals.

In the interim, if you have any questions or concerns, please feel free to reach out to me or any member of our team to discuss.


Dave Ferris