Jeff Benjamin

Investment Insights: The Blogblog

Jeff Benjamin breaks down the game for advisers and clients.

What we'll remember about the markets in 2015

Some highs and lows, swings and misses

Dec 29, 2015 @ 9:05 am

By Jeff Benjamin

Reflecting on 2015, I'm inclined to dub it the year of “It's about time.”

After years of taunting and teasing, the Federal Reserve finally pulled the trigger in December with the most hyped 25-basis-point interest-rate hike in history, leading the financial markets to immediately start speculating on when the next hike would occur.

That was probably not what the Fed had in mind, but that's what happens when your monetary policy involves amassing a $4.5 trillion balance sheet through three rounds of quantitative easing on top of a zero-interest-rate policy.

The fact that both the stock and bond markets promptly shrugged off what was the first rate hike in nearly a decade suggests that the Fed might have been overthinking things a bit and probably should have been more aggressive.

The House Financial Services Committee threw investors a bone in December with a rare showing of bipartisan support for a better way to determine if somebody is qualified to invest in certain products and strategies.

The stated objective is to redefine the meaning of “accredited investor” so that people who aren't rich, but who are pretty smart, can invest just like rich people.

Under current rules, that designation is limited to people who have $1 million in net worth, excluding the value of their house, or who make $200,000 annually.

The new proposal would allow brokers and advisers to participate in private investment offerings, and provide such access to individuals determined by the Securities and Exchange Commission to have the right amount of investment savvy. This is progress, but it still has a long way to go before anything really changes around these antiquated rules.

Nothing rattled the financial advisory ranks in 2015 quite like the threat of giant robo-advising machines taking over the universe and sending warm-blooded human advisers off to become greeters at Wal-Mart.

With major players like Charles Schwab & Co., the Vanguard Group and BlackRock openly embracing robo-services, the initial hysteria seemed to subside to a more rational level of just regular anxiety, with some advisers even embracing the technology at their own firms.

In October, the SEC paved the way for major growth for investment crowdfunding platforms by approving expanded retail access to private equity investments through the fast-growing network of public platforms. Considering the deliberate nature of the SEC, and its penchant for protecting small investors, this one is a bit of head-scratcher. Nevertheless, as crowdfunding makes an aggressive push into the retail-investor market, financial advisers would be wise to get up to speed on the new distribution channel.

As a grown-up, I realize the financial services industry is about making money, and that often entails finding creative ways to stay competitive, which is the only way I can explain the October launch of a separate account strategy by EQIS Capital Management that invests only in companies with female chief executives.

Paul Schatz, president of Heritage Capital, summed it up best.

“I'm not a fan of gender-based investing, because I think men and women have equal intelligence,” he said. “The plumbing may be different, but men and women have the same ability to lead a company.”

In fairness, but only loosely related, a study by Morningstar found that portfolios managed jointly by both women and men across broad categories averaged equal or better returns than portfolios managed singularly by women or men.

Morningstar also marked the year by scoring all mutual funds and ETFs based on the environmental, social and governance impact of the underlying holdings.

The scores were praised by some advisers, who have clients that place a high value on ESG causes. But, as with similar social, religious or environmental screens, the jury is still out on whether this is the best way to generate a positive investment return or save for retirement.

And finally, nobody's perfect, but when somebody is wildly wrong they deserve special attention.

In March, Euro Pacific Capital chief executive and global strategist Peter Schiff shot down the notion that the Fed would raise rates in 2015 by claiming the Fed is more likely to launch a fourth round of quantitative easing.

“This is not a recovery, it's a bubble, and I think the Fed is fearful of pricking it,” he said.

We already know how that turned out.

Also in March, T. Boone Pickens, founder and chief executive of BP Capital, predicted that oil would reach $75 a barrel by the end of 2015. The price of oil was $59 a barrel at that time, and it is currently hovering below $37 a barrel.

Mr. Pickens might have missed the mark on oil, but he did correctly read the political winds regarding the Keystone XL Pipeline project, which was ultimately blocked by President Barack Obama after being approved by both houses of Congress.

“I'm about to give up on Washington being able to figure anything out,” Mr. Pickens said in March. “You can't have a five-minute discussion in Washington about oil, because in three minutes they'll run out of what they know.”

Happy New Year.

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