The star of Friday’s employment report was the annualized year-over-year increase in average hourly earnings. The 2.9% increase helps the Fed in their efforts to normalize rates as target inflation seems to be within reach. But not so fast. The new administration’s fiscal policies will determine how much growth we can look forward to and policies that encourage protectionist behavior might slow growth. A stronger dollar will also be closely watched. It’s all about the demand. Whether it’s from tax reform, lessening the regulatory burden, increasing wages, improving the consumer’s balance sheet, or simple confidence, until there’s more demand from the consumer, producing more doesn’t seem to make sense.
We have begun the process for rebalancing our Salt Creek portfolios. The expectation is for very few changes to the policy allocation. Sortino Investment Analytics (SIA) will soon begin their analysis of the fund data (3 years of monthly performance data for over 4,000 funds) and return to us those funds that will fall into solution. Pending any exceptions after our qualitative overview, we’ll have all client portfolios rebalanced by the 1st of February with the solutions provided to us by SIA. Performance is always at the front of any discussion surrounding investment management. It holds true for SCI as well. Day to day, or week to week performance is of minor concern because of the noise and expected volatility in our markets (21% annual volatility for the S&P translates into an expected move of greater than 29 S&P points 1 out of every 3 days). Looking at quarter to quarter performance gives a better indication of how things are going and don’t forget the importance of the policy allocation. Micro and macro performance attribution is something we look at diligently in our efforts to help you help your clients meet their objectives. Thank you to all who joined us on our conference call last week and again thanks for your confidence in SCI.