Category: Newsletter

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Section Summary

• Passive v Active Investing – Has the debate moved from a thoughtful discussion to fact? What are the risks of a one-sided discussion as passive flows dominate active? Are we in a passive bubble?
• Market Notes – Despite a considerable amount of political items filling the front pages and taking up time on television, market participants continued to weigh economic trends and corporate progress when voting their opinions. Over the long-term we think this is the most prudent course of action.
• Equity & Fixed Income Comments – We continue to favor emerging markets and small- to mid-cap companies among foreign equities and large-cap companies among domestic equities. We continue to scale back corporate credit and favor high quality corporate bonds where we do have exposure. We moved to underweight interest rate risk.
• Research Focus – We visited the Putnam Tax-Free High-Yield team during the quarter and share our takeaways from this “boots on the ground” part of our research.
• Client Focus – What does it mean to be a Fiduciary? We discuss Department of Labor change and our beliefs.

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Section Summary

• Reform – At the start of 2017, consumers and businesses were excited by the prospects for an aggressive, pro-growth fiscal agenda coming from Washington. Optimism was tempered by a mix of potential impediments to future growth expectations.
• Market Notes – The S&P 500® Index earnings growth rate for the first quarter is estimated to be +8.9%. If this growth rate materializes, it will be the highest year-over-year earnings growth for the index since the fourth quarter of 2013.
• Equity & Fixed Income Comments – We did not make any large changes to portfolios in the first quarter because our outlook has not changed meaningfully.
• Research Focus – There is nothing wrong with the methodology of the Morningstar Star Rating. The flaw is how it is used.
• Client Focus – Dynamic Total Return is our most recent investment management offering. An overview of the investment strategy is included in our newsletter.

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Section Summary

• Buffet Wisdom – “We have no idea – and never have had – whether the market is going to go up, down, or sideways in the near or intermediate-term future. What we do know, however, is that occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable. And the market aberrations produced by them will be equally unpredictable, both as to duration and degree. Therefore, we never try to anticipate the arrival or departure of either disease. Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
• Market Notes – During the fourth quarter, the clearly dominant headline was the U.S. presidential election. By the time this newsletter reaches you, we will be talking about President Trump. His victory contributed to some surprisingly dramatic movements in equity and fixed income markets as “consensus” thinking seemed to rally around some major themes.
• Equity & Fixed Income Comments – Market volatility provided us with the opportunity to make some strategic adjustments to client portfolios during the quarter.
• Research Focus – We review the Anatomy of an Investment Decision we recently made in client portfolios to provide insight into our decision making process.
• Client Focus – Behavioral biases are arguably one of the most harmful detractors to long-term investment compounding that an investor can experience. And unfortunately they are numerous. Combating these biases can be simple if you establish a plan, invest long-term and do your homework. That is the basis of what we do at Entasis.

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Section Summary

• Market Performance – Too often the “market” is only discussed in the context of highly publicized indexes such as the S&P 500 Index. Portfolios and investment opportunities are influenced by a much broader set of circumstances. Use our return table for a better understanding of the how the “market” performed beyond the headlines.
• Market Notes – We do not draw conclusions every quarter. We are long-term investors. We use quarterly information on a few core market drivers to help shape our assessment of long-term trends relevant to client portfolios.
• Equity & Fixed Income Comments – In these sections we provide a review of market results and discuss how we are currently positioning our investment portfolios.
• Research Focus – All of our research and investment decisions made for client portfolios is done in-house. In this section we provide a review of the process behind a recent decision.
• Client Focus – We believe that too many investors do not have clear answers to how much they are paying for financial advice or how fees are calculated on their accounts. In this section we provide some context. Contact us to talk about how we can improve your experience.