The surprising Brexit vote heightened investor anxiety heading into an uncertain July. After recovering from the Brexit losses, the S&P 500 proceeded to post seven records in ten days. Ironically, markets typically find a way to inflict the greatest pain on the largest number of investors. July was no exception. The S&P 500 soared to multiple records highs. From there, fundamental data began to emerge justifying the new stratosphere of equity prices.

Let’s review some of the key market drivers:

· The June U.S. employment report stated 287,000 jobs were created and the unemployment rate remained below five percent. After a dismal May report, this news lifted the market.

· Central banks around the globe are continuing to support accommodative monetary policies and low interest rates. This has and will continue to support global equity prices.

· The Federal Reserve takes another pass on raising the U.S. Fed Funds rate, electing not to upset the apple cart.

· Corporate earnings are beginning to turn the corner. A stable dollar and stable oil prices are helping corporate earnings. Better than forecast results from companies like Microsoft, Morgan Stanley, and Apple are supporting the stock market rally.

· The housing sector may be on a low trajectory, but it is climbing. Housing starts rose 4.8 percent in June. For the second quarter as a whole, housing starts averaged 1.160 million for a 0.8 percent gain from the first quarter.

The U.S. stock market continues to post impressive gains. The S&P 500 gained 3.69 percent for the month, reaching a new all-time high. For the year-to-date period through July, the S&P 500 has increased by 7.66 percent. The small-cap Russell 2000 Index rallied 5.97 percent just this month. These new record levels represent a bullish breakout beyond past resistance levels. Technically, look for the market to continue higher. International equities also had a solid month. The MSCI EAFE and Emerging Market index posted monthly returns of 5.07 and 5.03 percent respectively.

The bond market demonstrated once again that low global interest rates are here to stay. Central bankers around the globe are marching to the same beat by supporting low interest rates to spur domestic economic activity. The central bank action in the United States, Europe, Japan, and China are assisting stock prices while keeping bond yields unattractive. The 10-year government yields in Germany, Switzerland, and Japan are currently below zero in negative territory. It is not a surprise that investors are looking to stocks for returns. The yield on the 10-year U.S. Treasury note traded in a very tight range, starting the month at a 1.49 percent yield and ending the month at a 1.46 percent yield.

With interest rates so low and stock prices at record highs, investing confidently is more of a challenge. Now is the time when you need to lean on a long-term consistent investment approach. Sitting on the sidelines in cash is expensive and being all-in the stock market can be nerve racking. The best answer lies in a balanced approach utilizing cash, bonds, and stocks weighted according to your personal risk tolerance while owning some safe assets to generate steady income if needed. Our strategic portfolios are built to manage risk and to navigate uncertain markets. Stay your course and stay invested; the future may be brighter than the one you imagine.

MARKETS BY THE NUMBERS:

To expand on these Market Commentaries or to discuss any of our investment portfolios, please do not hesitate to reach out to us at 775-674-2222

The votes have been counted and the Brits have opted to leave the European Union (EU). The market rally leading up to yesterday’s vote was based on the consensus opinion that Britain would vote to stay in the EU and life would continue virtually unchanged. Instead, the anticipated uncertainty of the vote itself has been replaced with new uncertainties:

· Will the breakup be amicable?
· Will other countries follow Britain and go it alone?
· Is a recession coming to Britain and other European countries?
· Will the next leg of a strong U.S. dollar reignite a headwind in our equity market?
· Is the Federal Reserve now on the sidelines for the remainder of 2016?

We sit today with more questions than answers. Past history tells us markets do not like surprises or uncertainties. Since we now have both, expect more volatility in the coming days.

It is important to put today’s headlines into perspective of the overall market and our portfolios. The S&P 500 has been moving higher since mid-February 2016 and was approaching its all-time highs. Yesterday alone the S&P 500 was up 1.30% on expectations Britain would stay in the EU. The S&P 500 opened today down 2% on the news of the vote, a net 0.70% decline. While further short-term downside is likely it is important to consider how your portfolios are reacting to the current headlines. Within the Gradient portfolios, we own diversified portfolios built to smooth out the ride in volatile times. We are NOT over-allocated to international markets in any of our portfolios.

The Tactical Rotation Portfolio (GTR) is and has been invested in the S&P Low Volatility (SPLV) exchange trade fund (ETF). On a relative basis this holding will likely outperform the broader market in a volatile time. The Endowment Portfolios also hold SPLV and a currency hedged ETF (DBEF) which will benefit from the stronger dollar. Within the Endowment series, gold is held in the alternative asset category, a clear winner today. The fixed income portfolios are benefiting from the flight to quality and lower interest rates around the globe. No one likes losing value, but cushioning the blow helps emotionally.

Remember this is not the end of the world but rather a journey to a slightly different world. If you are truly a diversified long-term investor with a solid financial plan, you are accustomed to the noise and will allow your portfolio to work for you over time. If you are inclined to react to headlines, try to temper your reaction by making minor adjustments versus wholesale changes to your portfolio. This is not the first and won’t be the last world event…..recall past events like Greece, the U.S. Fiscal Cliff, the downgrade of U.S. debt, etc.

For those looking for technical insight, there is a first level of support for the S&P 500 in the 2,002 to 2,020 range and then again at the 1,929 to 1,947 range. The chart below highlights those levels. We will watch the markets and these levels carefully in the coming days and weeks.

As active portfolio managers we will be looking for opportunities in the coming days and weeks to take advantage of any unwarranted price corrections.

To expand on these Market Reflections or to discuss any of our investment portfolios, please do not hesitate to reach out to us at 775-674-2222