Skip to main content


Optivest Wealth Management



The drop in the stock market over the last week was fast and unrelenting. Based on this reality, we want to share with you our trading activity and thoughts on the direction of the financial markets.

As outlined in our Second Quarter 2015 Newsletter, our Third Quarter 2015 Newsletter and our August 2015 Newsletter, we have been highly concerned with the U.S. stock market’s high valuations. We sold about half of our direct U.S. stock market exposure in May and June after our long-term timing indicator flashed a “sell” signal; this was the first “sell” signal in 6 years and only the 3rd in 17 years.

1August Market Update:

Year-to-date financial markets are frustrating both money managers and investors alike with flat returns. The U.S. stock and bond markets are waffling; they are either up 1%-2% or down 1%-2% on a monthly basis without any discernable direction. Unfortunately, this flat performance is also accompanied by near all-time high valuations across most financial assets (except commodities and emerging markets).

In this environment we have chosen to take profits in our potentially vulnerable stock positions, seeking equity-like returns of 5%-12% in non-correlated investment strategies. This decision has resulted in improved performance for our Optivest portfolios and reduced risk exposure via these securities. Once the financial markets pick a direction – up or down – we will adjust accordingly. In the meantime, we remain cautious with our clients’ hard-earned money.

Newsletter image

While the Greek crisis has knocked stock indexes down recently, the U.S. economy and markets have been stuck on the 50-yard line since November 2014. The U.S. stock market has been at all-time high valuations and our timing indicators set off the preliminary sell signals which we outlined in our April 1, 2015 Important Market Update and further described in our April 21, 2015 Second Quarter 2015 Newsletter. Consequently, we sold stocks throughout the second quarter and now have one of the lowest U.S. equity exposures in years. Year-to-date, stocks are flat and bonds are down despite a slow increase in business growth on “Main Street,” as forecast in our January 9, 2015 First Quarter 2015 Newsletter.

CLICK TO READ MORE: Third Quarter 2015 Newsletter – Optivest




US ECONOMY:  After years of tightly banded earning results for public companies, second quarter 2015 earnings are showing large discrepancies in results due to our strong US Dollar, drastically lower oil prices and a tightening wage market. This has caused a wider disparity in price returns that favor smaller, domestic companies that look more like Main Street. The US economy is enjoying continued modest growth but both US stock and bond prices are near all-time high valuations and are vulnerable to setbacks if the fine balance of ultra-low inflation and exceptionally high profit margins gets disruptive. (See our Important Economic Update from April 1st.)

CLICK TO READ MORE: Second Quarter 2015 Newsletter



April 1, 2015

RE: Important Market Update

Dear Client,

All good things must come to an end, even if just temporarily. The stock market has climbed admirably since March of 2009 and is now at all-time high valuations according to a number of ratios in the attached charts. Calling tops is dangerous as the market has always come back and eventually made new highs, yet there are certainly good times to take profits and become less vulnerable to stock market pullbacks… 


US Economy

2014 started with a 1.9% drop in the first quarter GDP, increased 4.6% (revised) in the second quarter, and further gained 5.0% (revised) in the third quarter. This 5.0% gain was the best quarter since 2003 (Reuters) and the fourth quarter of 2014 is expected to be strong as well. Consumer sentiment has steadily increased along with business and consumer spending; the economy is finally in a healthy recovery mode. Low inflation (helped by lower inflation in Europe and a drop in commodity prices) allowed interest rates to drop back to 2% levels on the 10-year Treasury Bond. We have now moved from a fragile economy which was threatened by rising inflation to a healthy economy likely to enjoy relatively low inflation over a couple more years. The financial markets responded with the average US stock fund rising 7.6% and most other asset classes gaining 1-5% (WSJ).

CLICK TO READ MORE: First Quarter 2015 Newsletter


US Economy –

With residential home prices at multi-year highs and the US stock market near all-time highs, you would think that inflation has picked up. However, it has not. A stronger dollar, lower energy costs, weak wage growth and 1% – 2% inflation worldwide has led to a stubbornly low 1.7% – 1.9% US inflation. Our dollar has strengthened despite our low interest rates (US 10-Year Bond yield is < 2.4%) because our interest rates are higher than in Europe and Asia and the US is a better credit risk. The Fed’s tapering of its bond buying program will end next month with very little of the “taper tantrum” that was feared.

US Economy –

The US Economy took an unexpected GDP drop of 2.9% in the first quarter. The blame was on our tough winter weather, the start of Obamacare, and uncertainty over the Fed’s tapering policies. While the economy recovered to an estimated +2% in the second quarter, most forecasters lowered their full year estimates down from the 3% range back to our recent muddle through 2% growth. Since the recession’s bottom in 2009, we have only gained a total of 11% GDP growth in 60 months – the weakest U.S. recovery ever, despite the most expansive monetary and fiscal stimulus in history.

It has been a very busy and productive first quarter at Optivest:  asset allocation and manager changes with SageView, a breakfast meeting with Mohamed El-Erian (departing CEO at PIMCO), interviews with the Wall Street Journal and Forbes, high level real estate discussions with large local owners including Rick Caruso, launching a Retirement Strategies department, joining Tiger 21 and meeting with 8 New York investment bankers conducting due diligence on our nearly $1 billion REIT.

US Economy –

After a vigorous 3rd quarter in 2013, the economy has fallen back to 6 months of slow growth and uncertainty as the new Fed Chairman, Janet Yellen, continues tapering the artificial support of the monetary system. The year has started exactly as we forecasted in our last newsletter – with a wobbly/sideways stock market and virtually every other asset class (see below) showing only slight gains of 1-3% which are the opposite of 2013. Interest rates have dropped slightly and are holding for now, but Mrs. Yellen has signaled that she expects short-term rates will rise to 3% by the end of 2015 and 4% by the end of 2016. This would only happen if the economy actually picks up organically after the Fed has stopped current stimulus.

US Economy –

The strength of the American economy picked up steam in the 3rd quarter of 2013 with a final GDP estimate of 4.1%, about double the average of the last few years. It is further estimated that the 4th quarter GDP (despite the short government shutdown) also exceeded 3%. Unemployment has dropped to 7.0% and consumer sentiment is back up to 82.5 (Reuters/University of M), up from a November dip of 75.1. This in turn has led the Fed to finally announce the start of tapering to their long-term interest rate support/bond buying program. This positive economic news was welcomed by Wall Street and pushed the S&P 500 further, up 32% for the year, while the yield on the 10-year Treasury bond crept back up to its high for the year, near 3%.