Recent Posts

Quarterly Comments: May 2017

Here we are pushing into the halfway point of this year and we have no clear indication of the likely timing or ultimate delivery on any of the anticipated “pro-growth” drivers of the surge in equity valuations of earlier in the year. What we see now is a bit of “wait and see” that has kept investors engaged but not pushing higher.

What will it take to move market complacency up or down from here? My best guess it will move up with the passage of tax reform, particularly corporate tax reform; it will likely slide down with an obvious stall or turning away from the promises of reduced regulation and tax reform or a delay or no movement on an infrastructure spending plan. We cannot rule out the possibility of a geopolitical scare that will spook an already stretched domestic stock market.

We would always prefer to be positioned to lose less. With that in mind we have been adding to cash positions to insulate our portfolios from a shock or a slow drip down. While we believe the market may have gotten a bit ahead of itself in anticipation of greater expansion and profitability to come, we fundamentally believe that our economy is growing – slowly, gradually, and in concert with the global expansion running around 3%. There is little indication of the red flags one sees when a potential bear market and recession is around the corner. The indicators we will be watching over the next few months are the following:

  1. Flattening yield curve – are short term interest rates higher than long term, 10 and 30 year Treasury rates? Currently the difference is tightening but the spread between the 2 year note and the 10 year bond is still about one point.

  2. Rising inflation - the current Consumer Price Index (CPI), as reported in our Albridge statements, is running around 1.9%, below the Federal Reserve’s target of 2%. While there was a little “scare” that inflation and interest rates were picking up steam with “too much too soon” right after the election, these concerns seem to have subsided as we have seen interest rates generally recede.

  3. Over-valuation of the stock market – As reported in the Wall Street Journal on line edition posted today, the S&P 500 Index of trailing one year P/E is 23.44. This is high, but not yet pushing into overvalued. We will be watching as the earnings part of this index, the “e” part of the ratio, are reported at the end of this quarter. If earnings move up to be more in line with the price valuations, the “p” part of the ratio, that increased on the expectations discussed above, this P/E ratio will ease back to within a comfort zone for an expanding economy.

The economy seems to be moving along at about a 2.0% to 2.5% GDP growth – not

great, but sufficient to sustain the very good employment figures that continue to trend positive. We may even see some wage growth this year as the labor market appears to be very tight. This is our “glass half full” lens through which we manage the risk assets of our portfolios. We believe that, absent a geopolitical shock, the economy will continue to grow, employment will expand, and our stock and risk assets will hold on to a better than average positive rate of return figure through the next several months. The Global growth rate, Europe in particular, is also encouraging, giving our portfolios a welcome lift that had been absent for much of last year.

To learn more about the specifics of our portfolio allocations this quarter, and our expectations for the next, be sure to join our “Listen at Lunch” call in early July. You can just listen or you can follow along with graphic slides that give you a picture of the data. Look for announcements and posting about this and other educational (and sometimes fun) events this summer on our website,

We wish you all a safe and enjoyable summer. As always, should you want to discuss your account or any of the ideas expressed in here in my Comments, please don’t hesitate to contact me.

Linda P. Erickson, CFP®



The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to the volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.


301 N. Elm Street, Suite 301

Greensboro, NC 27401

P: 336-274-9403

F: 336-273-0217


3001 Academy Rd., Suite 110

Durham, NC 27707

P: 919-595-0619

  • LinkedIn - Grey Circle
  • Facebook - Grey Circle

Advisory services and securities offered through Cetera Advisor Networks LLC, member FINRA/SIPC,  a broker-dealer & Registered Investment Advisor.  Cetera is under separate ownership from any other named entity. 

Individuals affiliated with Cetera firms are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services.

This site is published for residents of the United States only. Registered Representatives of Cetera Advisor Networks LLC may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all of the products and services referenced on this site may be available in every state and through every advisor listed. For additional information please contact the advisor(s) listed on the site, visit the Cetera Advisor Networks LLC site at