Stay the course, Go with the flow and Be careful

January 3, 2018

What is the investment playbook for the dawn of the New Year? Predictions for 2018 abound but none are really more than just opinions and you should remain suspect of the validity of these opinions. They often miss the mark.

Last year, the market defied everybody. Analyst’s forecasts fell way short for the stock market. Goldman Sachs and Credit Suisse, for example, predicted gains between 5% and 10 % and in the end, the final outcome was a 19% gain. (WSJ 12/30/17)

Our playbook for the early stages of 2018 is to manage present conditions and look for threats on the horizon. This means to stay the course with current asset allocations, go with the flow to find the strongest areas of the market, and pay careful attention to the warning signs, of which there are none…. right now.

Enthusiasm for the new tax bill, the belief that earnings are accelerating, and global economic growth all combine to give the stock market a decent tailwind.

By continuously upgrading investments inside portfolios to meet the demands of the prevailing economic environment, client accounts can add to the gains we have recently made. In the last two months, the dollar has fallen relative to other major currencies and this supports emphasizing areas of the market that actually benefit from a weak dollar.

The main beneficiaries of a weak dollar are industrial, basic materials, and energy companies. We intend to add more investments from these sectors.

Meanwhile, former leaders in technology and semiconductor sectors have been languishing since November. These include the eminent FAANG names. We will probably wait before making new commitments from these groups.

We definitely pause to consider the duration and the magnitude of this bull market. The market enjoyed double digit returns in seven of the past nine years. None of those years were negative. It has been a sensational run. The consistency of this market continues to be remarkable. There has not been a 3% dip in the S&P since the Presidential election, an unprecedented run. Inevitably, this bull market will tire but we want to see some distinguishing characteristics that would warrant action.

We always monitor the market’s health in order to detect emerging problems. When they happen, we will reduce equity weightings and become more defensive.

Peregrine Asset Advisers ● 9755 SW Barnes Rd. Suite 295 ● Portland Oregon 97225
503.459.4651 ● 800.278.1420 ● www.peregrineaa.com

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*Past Performance is no guarantee of future results. Investment management involves the possibility of losses. Significant general stock market moves up and down can influence the performance of client portfolios. Composite returns are based on client portfolios of over $100,000. Not all clients are included in the composites. All returns include the reinvestment of dividends. All returns are net of fees. Composite returns are derived from aggregated, time weighted returns for clients of Peregrine Asset Advisers. Individual client returns can deviate from the composite returns. While Peregrine uses the S&P 500 as a benchmark, Peregrine does not attempt to mimic the structure of this index. Individual client portfolios vary. The number of stock positions also varies per client.