In Perspectives

Since my last post reflecting on market behavior in the first half of the year, U.S. equities have continued their upward climb.  The three most commonly quoted U.S. stock indexes – the Dow, the S&P 500, and the Nasdaq – all hit record highs at the same time last week.  This is a feat that hasn’t been seen since the heyday of the tech boom in the late nineties, giving many investors déjà vu this past week and renewing concerns about the health of the stock market.

While U.S. equity valuations do appear high relative to recent historical averages, we believe it is important to view the state of the stock market in the context of the broader capital markets.  Unprecedented monetary policy by central banks across the globe has created trillions of dollars’ worth of negative-yielding government bonds and has left interest rates at exceptionally low levels.  Investors seeking any kind of meaningful return simply cannot find it in cash or fixed income investments.

Consequently, equities continue to appear attractive relative to most other investable asset classes.  This relative attractiveness is likely a major driver of the equity market’s resilience after the January selloff and then again after the initial Brexit shock in late June, and with the Fed likely to keep the pace of further interest rate hikes exceptionally slow, we do not see a driver for this environment to change in the near future.

Another critical factor to bear in mind is that the underlying economic trends in the U.S. continue to appear broadly supportive, which also helps to backstop the stock market.  Wage growth is finally picking up and the employment picture overall remains solid, which means that consumers are now more financially stable than they were in years past.  Household data shows that consumers used much of the recovery to add to savings, and now that wage growth is returning and housing continues to improve, more families are willing and able to take on debt again.  The fact that these trends are occurring while interest rates remain near record lows should be supportive to consumption going forward, which in turn will provide support for company earnings.

Finally, perhaps the most important contrast between today’s market and that of the late 90s may be the intangible but significant difference in investor attitude.  While the tech bubble (like many bubbles) was characterized by overenthusiastic participants convinced there was nowhere to go but up, investors today are notably skeptical about the market’s prospects.  Although it seems counterintuitive, this absence of blind euphoria may actually be a positive indicator for the future.

We believe it is always prudent to approach investments with a good amount of skepticism, and the fact that this behavior seems to be widespread right now may actually indicate that the market is healthier than it first appears.  Correlations between stocks are decreasing and dispersion is increasing, indicating that investors are actively seeking out specific companies that appear attractive rather than passively purchasing the entire market and accepting the bad with the good.  This should eventually reward prudent investors that have an eye on value and are willing to seek opportunities through the headline noise.

Legacy Trust and Your Right to Financial Privacy

At Legacy Trust we have established policies and practices that respect the financial privacy of all individuals who use our trust company. We believe it is critical to comply with the laws and regulations designed to secure your financial privacy. Your relationship with us as our client is very important to us, and we want you to understand our policies and practices about handling your information.

This Policy applies to you – This Policy applies to our relationships with individual clients who inquire about or obtain products or services from us for personal, family and household purposes.

Strict security measures – We take the security of information very seriously. We have established security standards and procedures to prevent access to client information. We maintain physical, electronic and procedural safeguards to guard client information.

Limited employee access – We have established procedures to limit employee access to information to only those employees with a business reason for accessing such information. We educate our employees about the importance of confidentiality and client privacy. We take appropriate disciplinary measures to enforce employee responsibilities regarding client information.

Why we collect information – We collect information about you to:

  • accurately identify you;
  • protect and administer your records, accounts and funds;
  • help us design or improve our products and services;
  • understand your financial needs;
  • save you time when you apply for new products and services; offer you quality products and services; and comply with certain laws and regulations;

We collect information – We collect and maintain your personal information so that we can provide investment management and other services to you. The types and categories of information that we collect and maintain about you include:

  • Information we receive from you to open an account or provide investment advice or other services to you (such as your home address, social security number, telephone, financial information and investment objectives).
  • Information that we generate to service your account or from our transactions with you (such as account statements and other financial information).
  • Information on your transactions with nonaffiliated third parties.

We have established procedures so that the financial information we collect is accurate, current and complete. We are committed to work with you to promptly correct any inaccurate information.

Our selective sharing of information – In order for us to provide investment management and other services to you, we do disclose your personal information in very limited instances, which include:

  • Disclosures to nonaffiliated companies as permitted by law, including those who help us service your account (such as providing account information to brokers and custodians).
  • Other limited disclosures as permitted by law, for example, required reports to government entities.

We do not share your information with third parties for marketing purposes. We do not sell your information.

Former clients – If you end your relationship with us, we will continue to adhere to the privacy policies and practices described in this notice.

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USA PATRIOT Act

Important Information About Procedures For Opening A New Account

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.

What this means for you: When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

We apologize for any inconvenience this may cause; however, federal law prohibits us from waiving these requirements.

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