- A change in our investment positioning. Our Investment Strategy Team has agreed to shift about 2% from cash to high-yield municipal bonds in the High Net Worth Portfolios. Even in the likely case of rising interest rates, we expect high-yield munis should provide positive tax-equivalent returns well ahead of cash returns. Given recent and ongoing improvements in state and local finances, we believe the credit risks are very manageable.
- U.S. stocks jumpy so far this year, with frequent daily moves of over 1%—largely due, we feel, to the U.S. dollar rise and oil price dip that have wreaked havoc with earnings expectations, employment gains, and economic growth. Stability in oil and currency markets could help but it may take a few months to absorb all of the implications from these dramatic price changes.
- The Fed decides not to decide—yet. This week, the Fed signaled it would wait until at least June before raising short-term interest rates, but it wouldn't be more definitive. The data-driven central bank's overall positive view of the economy was offset by its acknowledgment that the slow pace of inflation will likely slow further before picking up. Hints of rate hikes in time for summer may not come to pass until the fall. The wait-and-see game continues.
- Will a Seattle Super Bowl win mean a bull market? So goes a theory of stock market performance, which holds that if the winner were a (pre- or post-NFL merger) NFC team like the Seahawks,¹ stocks would be up that year—or down, in the case of an AFC winner. As of 2009, the theory was correct for 43 years (81%).² Still, it's a random correlation, not a scientific causality. The NFC Giants won in 2008—and we all remember what happened to stocks that year!
¹ The Seahawks were born in the AFC but have come of age as an NFC franchise, a status that last year's equity performance confirmed.
² "Wall Street bulls should hate the J-E-T-S," by Chris Isidore, CNN Money, 1/22/2010.
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