Most investors recognize two main categories of stocks, growth stocks and value stocks.  But a third category, momentum stocks, have caught fire in recent years – both in popularity and performance.  Momentum stocks are the stocks that have recently done the best.  That is, buy the winners hoping the outperformance will continue.  This strategy has worked in large part during this bull market but sharply reversed last week.  Low-momentum stocks outperformed high-momentum stocks by the most since 2009, while value stocks outperformed growth stocks by the widest margin since 2001!
 
Why the sudden shift?  Before last week, investors appeared to be betting that bond yields would fall due to a slowing economy on the brink of recession.  But last week rates rose sharply.  Quickly the future looked less dark, so investors sold their defensive positions (many were high-momentum stocks) and bought depressed value stocks that will benefit if a better economic outlook lifts everything – mainly financials, industrials, and energy stocks.
 
Timing value-growth cycles can be as impossible as market timing – even though growth stocks have outperformed handily in this bull market.  That’s not always the case.  Value stocks will again have their day.  Was last week the beginning of a style shift?  Too early to tell.  The best thing investors can do is to stay diversified – have both growth and value stocks in a portfolio – especially if they are retirement assets.  Having both styles reduces volatility and ensures you own today’s winning style – and realizing it can change tomorrow.
 
High-momentum stocks, however, are a different story and can be dangerous to buy in conservative portfolios – mainly because many of them are detached from any rational valuation.  To buy a stock just because it has outperformed is silly in our view. High-momentum stocks take the escalator up and the elevator down.  Chasing road runners can be hazardous to a portfolio’s health.

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As expected, the Fed cut the Fed funds rate yesterday by ¼%, the second rate reduction this year.  Fed Chairman Powell gave a positive assessment of the domestic economy but lowered rates anyway due to global economic slowing and trade concerns.  He also reiterated that the move is an insurance-style cut and not the beginning of a pathway to zero interest rate polity (ZIRP).  Investors, however, expect at least one more decrease later this year.  That would leave little ammunition for the Fed if confronted by a recession. 
 
The need for yesterday’s cut is questionable.  Further cuts are not necessary unless the economy takes a quick turn south – very unlikely in our view.  Fed Chairman Powell was right not to signal more rate cuts by year-end.

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Knowledge – Results

Experts in Risk Management

Are you prepared for the next market correction or financial crisis?

Real Retirement Solutions

designed to improve
  • Wealth Preservation
  • Management of Risky Assets
  • Peace of Mind

This is achieved through an ongoing assessment of market risks given your specific financial situation and goals.

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Professional Expertise

Leadership Team

Richard Furmanski

Richard Furmanski

CFA

has been a portfolio manager and analyst for over 35 years. He manages conservative, tax-efficient portfolios for both pre-retirees and retirees. His lower risk approach appeals to investors who want less volatility and competitive risk-adjusted returns.

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Mary Ellen Adam

Mary Ellen Adam

Director of Operations

has been in office administration for over twenty years. Her experience includes customer service, firm operations, and office administration. She interacts with our clients on a day-to-day basis and handles any requests that may arise.

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Frequently Asked Questions

If you can't find the answer to your questions here, feel free to give us a call at 847-847-2505

Do you manage both stock and bond portfolios?

Yes. We build a portfolio of conservative, high-quality stocks and hold them for the long-term. The average holding period is 4 – 5 years. Our focus is on stocks that are suitable for retirement portfolios.

Our high-quality bond portfolios are designed to provide both income and stability of principal. Bonds provide the anchor for balanced accounts (those holding both stocks and bonds).

What is your investment philosophy?
We take great care in purchasing only high-quality stocks and bonds intent on a multi-year holding period. Portfolio turnover and taxable realized gains are modest in comparison to other active managers. We do not time the market but will become more defensive, in terms of stock holdings, when market conditions warrant.
Will the portfolio be managed in accordance with my financial goals?
Yes. Each of our clients has a custom-tailored portfolio. These custom portfolios are designed to meet specific client objectives with a thoughtful approach to specific constraints such as risk tolerance. And as each client’s situation changes, the portfolio does as well. There is no cookie cutter approach.
What kind of expertise do you have and how can that help me in difficult markets?
We have been working with high-net-worth clients like you since 1982. Over that time we have helped them to navigate several bear markets and financial crises (including the stock market crash of 1987). We hold the Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP) designations.
Are you sensitive to taxes when managing portfolios?
Yes. Our holding period for an individual stock averages 4 plus years which means our turnover is low and realized gains can be carefully managed. Further, where possible, we tax loss harvest small losses as a way of offsetting gains taken elsewhere in the portfolio.
How have you performed?
Results will differ by client and the level of customization but we have provided competitive investment returns for many years.
How do you charge for your services?
We charge a management or consultant fee based upon the size and level of customization of the account. As the account grows, we benefit together.

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