Q1 2012 Market Commentary
David Y. Sun, CFA®

First of all, we would like to thank our clients for their support and patience during our transition. We recognized that it was necessary to establish a new firm to support our business philosophy of providing investment services at a personal level as we continue to grow. Even though our firm may be new, all of the consultants on our team have been together for at least 10 years, a few of us for over 20 years. Our firm has been named after Ellis Island where many individuals entered this great country “Seeking Opportunities in a New World.” We feel that in a world which is constantly changing, our goal is to envision what the future holds and to determine as to what opportunities may exist for our clients. You should know that our team is currently comprised of eight consultants and four staff members with plans to add one consultant on the west coast and another staff member in our main office over the summer.

Our prediction of 13,100 on the DJIA was reached during the first quarter of 2012 and many of our readers have reached out to us asking where the market will proceed from current levels. Nothing has changed fundamentally to warrant any adjustments to our target. Many of the companies we follow are trading close to fair market value relative to fundamentals so our belief is that current market levels are where they should be in the near-term. If markets continue higher, overvaluation may be a factor and the same applies in the other direction. We need to look at earnings reports for the first quarter to see how current economic conditions may have impacted earnings and to hear what companies may be predicting in the near future.

Due to extreme pessimism regarding global economic growth, a few sectors and companies we follow continue to be negatively impacted. We will maintain long-term holds on such positions at depressed levels due to current valuation and the anticipation of an improvement in economic conditions. As mentioned in a prior commentary, we believe that certain areas of growth around the world will only counteract other areas of weakness, resulting in slow overall growth. We are waiting for the moment where world economies grow in tandem signaling the next global growth cycle. This may take two to three years to develop and the expected growth rate will probably be in the range of 3% to 4%.

We continue to maintain a balanced approach during the strong first quarter recognizing that many negative issues still exist. Many of our positions, including mutual funds and ETF’s, have performed well relative to benchmarks. We are content with first quarter results and recognize that our cautious allocation decision is one of the major factors creating the short-term drag in portfolio returns relative to the recent run-up in equity markets. We must not forget this cautious approach will benefit portfolios during downturns associated with expected volatile markets.

We are hoping to complete all aspects of our transition within the second quarter. If you have any questions concerning our transition or your portfolio, feel free to contact your consultant or our office at 484-320-6300.

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