PORT. MODEL PERFORMANCE
| YTD | 3 MONTH | 1 YR | |
|---|---|---|---|
| AGG. GROWTH | 7.4% | 6.3% | 17.2% |
| GROWTH | 4.2% | 4.4% | 11.3% |
| BALANCED GROWTH | 2.9% | 3.5% | 8.8% |
| BALANCED INCOME | 2.3% | 2.9% | 7.9% |
GENERAL BENCHMARKS
| YTD | 3 MONTH | 1 YR | |
|---|---|---|---|
| s&p 500 | 6.5% | 7.8% | 14.9% |
| bond index | -2.6% | 0.4% | -1.6% |
BLENDED BENCHMARKS
| YTD | 3 MONTH | 1 YR | |
|---|---|---|---|
| AGG. GROWTH | 6.50% | 7.80% | 14.90% |
| GROWTH | 4.68% | 6.32% | 11.60% |
| BALANCED GROWTH | 3.32% | 5.21% | 9.13% |
| BALANCED INCOME | 2.41% | 4.47% | 7.48% |
IMPORTANT DISCLOSURE
Investing involves risk and may result in a loss. Past performance is no guarantee of future success.
Clients of Lighthouse Capital who are invested in one of these portfolios may experience different performance than what is quoted here. The difference in performance may be attributatble to expenses; withdrawals; contributions; and/or timing of trades. For client-specific performance you should log on to your account at www.lighthousecapllc.com.
Prospective clients should request a copy of our firms ADV, and should consider all the risks prior to investing. A copy of our ADV may be obtained by going to our website, www.lighthousecapllc.com.
Below is a Q&A with Lighthouse Capital ’ s perspective on the markets thus far in 2018, and wh at is anticipate d for the second half o f the year. Some of these statements are forward looking and/or contain our opinion regarding investments a nd should not be considered fact.
Q: How has the stock market performed in 2018?
A: The stock market is +2.81% year to date1. Annualized, this is a rate of return of just less than 6%.
Q: What has been the biggest contributor to the success of the stock market this year?
A: Company earnings continue to be the main driver behind the success of the stock market, as we continue to see a majority of companies within the S&P 500 report earnings that meet or exceed expectations.
Q: Why have company earnings been so positive?
A: It is due to several factors, including sustained low unemployment levels, the low interest rate environment, and lower than expected inflation levels. Lower than expected inflation is probably the most intriguing, as we believe that changes to our economy over the last decade has quietly contributed to keeping inflation in-check. As we have transformed our economy to more e-commerce, this has spurned a tremendous amount of competition and in-turn kept prices down in certain industries and thus contributed to keeping the overall inflation figures lower than expected.
Q: Is the end of continued economic growth in sight?
A: While it appears to be in-sight, it does not appear to be in near-sight. Most of the leading economic indicators continue to show signs that there may be meaningful economic growth ahead.
Q: Is a trade-war with China, or with other countries, a likely prospect to roil the stock market?
A: In the near-term it certainly provides headline risk to the market, but we do not see a long term trade-war playing out with China, or any other country. This Administration’s brash approach to renegotiating our trade deals seems consistent with their negotiating style, but ultimately, we think it is just that – a negotiating tactic. At this time, we see the hostile public talk from all parties involved in foreign trade deals as posturing and we anticipate these trade-war risks will subside prior to the U.S. mid-term election.
Q: How have bonds performed this year?
A: In general bonds have declined by about 2% year to date. 1 This is the Total Return of the S&P 500 from January 1, 2018 through June 26, 2018.
Q: Why have bonds declined - aren’t they supposed to be a safe investment?
A: Yes, they are still considered a safe/low volatility investment, but they are not insulated from negative returns. Bond performance has declined due to higher interest rate bonds entering the market.
Q: If interest rates are expected to rise, why should we continue to hold bonds?
A: As mentioned above, bonds do still play a safety role within portfolios as they will likely provide a cushion when/if we hit a recession. If we were to hit a recession, the fed would likely be inclined to decrease interest rates, which would produce the opposite return results of what is occurring right now. The likelihood of hitting a recession in the near-term remains low, but this is generally very difficult to forecast the timing of. Accordingly, we maintain a portion of bonds in almost all portfolios, in the event of an unexpected turn in the economy. And remember, “a bad day in the stock market, is a bad year in
the bond market.”
Q: What indicators do we look at to determine if a recession is near?
A: Historically, when the 2 year and 10-year US treasury rate inverses, this has indicated that our economy is about 12 months away from a recession. What we mean by inverse, is when the 10 year interest rate is less than the 2 year interest rate. Right now, these rates are still about 0.50% a-part in the favorable direction. If/once we see this inverse relationship occur, we will likely then become increasingly defensive in our portfolios.
Q: Overall, how do we think the stock market will perform for the remainder of 2018?
A: While there are no guarantees, we do believe that we will see plus returns for the remainder of the year, although it may be a choppy ride at times. When valuing the stock market on a price per earnings (p/e) basis, which is one of the more popular valuation metrics of the market, the market is cheaper today than it was at the beginning of the year. Historically, when p/e valuations drop but actual stock prices increase, this can be an indicator of a healthy economy and market. Accordingly, we do believe it is possible to see meaningful growth out of the market in the final six months of the year. Disclosure: The views and opinions shared herein are those of Lighthouse Capital, LLC, and are subject to change at any time and without notice. The information contained herein is for educational purposes only and should not be considered as an offer and/or advice to invest in any particular way. Investing involves risk and may result in a loss.