Ten Years of Active Investment Management

October 31rst marked the ten-year anniversary of Pinnacle’s Global Investment Performance Standards (GIPS) compliant track record. That’s a big deal in the institutional investment community — it means that we’ve met the GIPS standard for reporting performance (often required by institutional investors). It also means that we have a legitimate ten-year track record, which is a long time in the investment business. If nothing else, we can show investors our performance over several different market cycles, which is a very useful way to evaluate a firm’s investment process. Importantly, we also have the same investment team today that we had a decade ago. After all, what good is a ten-year track record if the analysts who are responsible for the past returns are no longer at the firm?

Searching for Market Signals in a Sea of Noise

Markets are volatile and in corrective mode, and investors are nervous. Are we witnessing the start of a cyclical bear market, or is this just another correction within a bull market and an opportunity to add risk assets to our portfolios? These are the questions the Pinnacle Investment Team is wrestling with right now, and they’re critical as we position portfolios for our clients.

What Does the Election Mean for the Market?

The 2012 election is over and we now know who our president will be for the next four years. We’ve received questions from clients asking what we think the market is likely to do in light of  the election. While we don’t pretend to be political pundits, it appears that the balance of power in Washington has not changed: The Republicans hold the majority in the House, the Democrats hold the majority in the Senate, and President Obama will remain for another term. The stock market is likely to refocus on what kinds of policies may actually be implemented going forward. Campaign rhetoric is mostly just that – rhetoric. Now comes the reality of trying to pass specific pieces of legislation. Given a still divided Congress, that will likely entail a fair amount of compromise on both sides. The question is whether compromise is even possible considering that the people who couldn’t cut a deal last year are still in office.

Market Technicians Are Getting Grumpy

A client with a technical eye recently sent me a chart of the S&P 500, wondering what I thought about the classic triple top pattern that had formed through September and October. So it was perfect timing when the guys at the Stock Trader’s Almanac (who produce great work) wrote about this pattern in their latest piece. They believe it’s an ominous sign for the markets, especially as we enter 2013, and this seems to be a popular opinion among technicians.

Searching for a Performance Tail-Wind

For the past three years our insistence on maintaining a globally diversified portfolio has not been especially helpful in outperforming our blended benchmark on a consistent basis. If we use the EAFE Index (the MSCI Europe Australasia Far East Index) as a proxy for international markets, the returns versus the S&P 500 Index (the stock index in our benchmark) look unattractive:

Pinnacle’s Employment Model

Some of the most widely followed measures of U.S. employment, such as jobless claims and payrolls, can be particularly volatile from one month to the next. Some of the volatility is due to seasonal effects and can be smoothed out through seasonal adjustments. However, these adjustments require one to make assumptions that can be somewhat arbitrary and are therefore often the subject of criticism. Throw into the mix the fact that we’re less than a month away from the presidential election and things can really get confusing.