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Client Letter November 2015: Shaken Not Stirred

Client Letter November 2015: Shaken Not Stirred

James Bond usually gets roughed up pretty good as he goes about his missions, but invariably comes out golden in the end. And like 007’s infamous martini, global stocks markets were shaken in August and September, only to recover vigorously in October as the S&P had its best month since 2011 with an 8.4% return.


After correcting 11.5% in August and September, global stocks came roaring back in October. The total US stock market index, which in addition to the S&P 500 includes medium sized and smaller companies, jumped 7.9%. The total International Index, which includes both developed and emerging markets, recovered 6.3%. The rally continued into November and, as of this writing, the S&P is just about 1% below the high price reached in late July.


Another development of note, the NASDAQ 100 Index finally regained the high it had reached in 1999 during the technology and biotech boom.


Among asset classes, it’s worth noting that energy shares led the recovery in stocks.


Bonds have been mostly flat during recent months, but we note that some of the higher risk bond categories, like Loomis Bond and Fidelity New Markets Income invest in, rebounded sharply along with stocks in the last month.


All told, a portfolio allocated 60% equities and 40% bonds produced a return of 4.8% last month, but is up just about 1% in the year to date period.


Overall, corporate earnings for the third quarter are coming in much better than feared in the face of a global slowdown, strong dollar and drop in oil prices. While earnings will decline about 5% compared to Q3 2014, if you take the drop in oil profits out of the numbers, earnings actually had a small increase.


Among individual stocks, Microsoft rallied 19% in October on better than expected earnings and a huge boost in the dividend. Ditto for General Electric, which jumped 15%. The best performer though was Dupont, which rocketed 30% on news that seems to indicate the company may be in play. Finally, Chevron gushed 15% on stabilizing expectations. The laggards generally were drug and biotech stocks which responded to Hillary Clintons pledge to stem price gouging. Novartis stock dropped -1.62%

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