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Geneva Advisors - Q1 2015 Market Perspective

Posted by WrapManager's Investment Policy Committee
May 27, 2015

Geneva_AdvisorsGeneva Advisors provides their First Quarter Perspectives on the market.

"The relative strength of the U.S. dollar has been an important force for the market in recent periods. Stock prices are near record highs and valuations of many companies are extended. A disciplined investment process, an active investment approach and a long‐term focus will continue to be critical to achieving investment objectives.

Market Overview 

Despite intense volatility, the S&P 500 Index managed to produce a modest gain during the first quarter of 2015.

The relative strength of the U.S. dollar has been a significant force for the market in recent periods. Many economic and market forecasts had to be altered as the dollar strengthened throughout the quarter. The inherent strength of our currency was amplified by weakness in the Japanese and European currencies as they responded to easing monetary policies. In addition, more than 20 central banks across the globe undertook similar easing policies which also contributed to the dollar’s relative strengthening.

Many multi‐national American companies, in which non‐U.S. revenue is a sizable part of their business, have had to lower their earnings expectations because of the negative effect of currency translation. Additionally, increased price competition from countries with devalued currencies, which makes their products more attractive in the global marketplace, negatively affects earnings expectations for many domestic and international companies. In this environment, many U.S. small‐ and mid‐cap equities outperformed large‐cap equities.

Companies with strong earnings growth had positive returns in the first quarter, including those within the healthcare, technology and consumer discretionary sectors. By contrast, companies with value characteristics, most notably those within the Utilities sector, had negative returns.

These conditions created a favorable environment for active managers including Geneva.

Growth Strategies 

As mentioned in previous leers, growth stocks have been trading at low valuations compared to historic norms. During the first quarter, the market began to reward these companies with strong performance, which benefited the Geneva growth strategies.

Our growth strategies have large allocations to companies within the health care sector, the best performing sector in the first quarter. Demand for health care products and services appears to be on the rise as new regulations promote cost saving health solutions and the aging population continues to boost demand. Our stock selection process within the sector proved effective and we expect continued growth. 

Quality growth companies, those with dominant positions, strong earnings growth and innovative management teams, offer the opportunity for superior returns. In our opinion, high quality growth companies remain attractive relative to their own past valuations and to the broader equity market.”

Read more in the report below. To learn more about Geneva Advisors and other money managers, give us a call at 1-800-541-7774 or contact us here and one of our Wealth Manager can help answer your questions.

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Money Manager Research Geneva Advisors market perspective