San Francisco, Calif. (June 2, 2011)– Stone & Youngberg, a leading financial services firm and the nation’s top underwriter of California and Arizona municipal bonds over the past five years, is pleased to share the following market commentary from the firm’s Asset Management Group regarding the Uneven Economic Recovery and Risk Management Strategies.
Global equity markets drifted lower in May as the signposts that have been indicating growth are now indicating slower times ahead. In an uneven economic expansion soft patches, as we’re experiencing now, begin to feel like another recession is all but certain. We’re not yet convinced, though we will continue to challenge our assumptions as we survey potential risks on the horizon.
We indicated last month that a correction in commodity and equity prices would coincide with a rebound in the US Dollar.This has certainly been the case in May as the US Dollar rebounded +1.2% against the broad G-7 currency basket. As expected, commodity prices took the brunt of the selling pressure and ended the month down -5.0%. International and emerging markets posted the weakest equity returns for the month down -2.8% and -2.6% respectively, while US equities were down just over -1.0%. Fixed income markets and US REITs posted positive returns during the month as the table below details.
We have maintained that broadly diversified, balanced portfolios that include liquid alternative investments will perform well in the year ahead. In our more active portfolios, we have strategically positioned assets to benefit from an overweight posture in US equities and an underweight posture in international and emerging market equities. We continue to focus on these themes in the coming months.
Additionally, we have been advocating that investors position their investment portfolios inline with not only their financial objectives but also their risk objectives. It remains a common misconception that higher risk equals higher returns, yet Wall Street firms continue to message this to investors. This would be true if markets went in only one direction – “up!”
Since markets do not move in a single line upward, successful long-term investors recognize the need to implement risk management strategies that forego upside returns in order to protect against downside losses.
Given this uneven economic expansion, we have been analyzing both broad risk indicators as well as our asset allocations to help us assess the risk management strategies currently employed. As such, we are seeking to rebalance our positions in liquid, alternative investment strategies and anticipate new opportunities for investors in the coming weeks.In the meantime, we may carry larger cash balances in portfolios.
We’ll continue to evaluate the evidence as it’s presented and promptly communicate any changes to our investment strategy.
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About Stone & Youngberg Asset Management
As a complement to ourfixed-income brokerage services,Stone & Youngberg offers fee-based asset management to individuals and institutions. Our approach relies on reducing volatility and minimizing exposure to risk. This is designed to increase the probability of meeting our investors’ financial objectives. Disciplined risk management, planning, and communication are essential in formulating long-term, successful investment strategy.
To learn more, please give us a call or visit www.syllc.com/amg.