July 2014 Market Review Newletter

Market Review

The Bull moves on and up. NO intended humor. Well maybe. The broad index for the US market is up 7.11% YTD, with Mid Cap Value leading the way with a 9.87% gain; Small Cap Growth being the lowest performer with a positive 1.72%. The debate now being discussed among investment circles is, are the markets too high or is it going to keep going. Having just returned from the Morningstar Investors Conference in Chicago the answer depends on who you talk to. A lot of very smart people arguing both sides. Barring an international shock I lean toward the camp believing it is going to keep its upward motion. There are pockets of value left and inflation is starting to show up here and there; specifically food. The broad food index is up 2.5% for the year but the sub components of meat, poultry, and eggs is up 7.8%. This will be passed on to consumers and, like gasoline, affects everyone. As prices rise, so will the market. Add to this the amount of liquidity the Federal Reserve has pumped into the system and its commitment to keep interest rates low and finally the economy will be getting better. All these things create an environment, which I believe, will cause the market to continue its climb.

Having said that, Davis Funds recently published research following the market vs the predictions of investment professionals and found it not very precise, almost no correlation. As Warren Buffet has said “In the 20th century The United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11497”. Given this history we will have some drops but the long term trend is very clear. We will continue to look for pockets of value for you, which should continue the good risk adjusted returns we have had.

Again I thank you for the trust you place with us.

Yours truly,


Willis Ashby, CFP®

Research data from Morningstar Advisors Research & TD Economics

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