Market forecast sunny, but risks remain

Unless you are hung up on debating the significance of closing prices vs. intraday movements, the bull market officially died on Dec. 26, 2018.

From its Sept. 21 all-time high, the S&P 500 had fallen 20.2% peak to trough (19.8% based on closing prices only) and triggered an avalanche of conversation about how soon the next recession would hit.

Fortunately, the bull has since been resuscitated.

The S&P’s 13.1% return in the first three months of 2019 is the best quarterly performance to start a year since 1998.

The dark clouds appear to have parted, but while investors congratulate each other on surviving the recent correction, don’t be lulled into ignoring the risks that remain.

To be clear, the latest rally in equities is justified. Valuations for the S&P 500 (16.6x forward earnings estimates) are fair. The Fed has committed to friendlier policy and fewer rate increases.

Equity-fund flows indicate investor sentiment remains lukewarm rather than exuberant, a positive indicator.

Like a string of 60-degree days in April, recent market movements seem to indicate more comfortable conditions ahead. But that doesn’t eliminate the possibility of a blizzard.

Here are a few items worth paying attention to:

CENTRAL BANK POLICY

The Federal Reserve’s shift from steady rate hikes to more friendly policy lit the fuse on this latest stock rally, but consider what’s behind that change: Concern that economic growth will not be strong enough to digest higher interest rates.

Fed Chairman Jerome Powell has repeatedly cited increasing evidence of a slowing global economy in his recent comments.

The European Central Bank in March reduced its economic growth forecast for the eurozone to 1.1% in the year ahead. It also announced another round of monetary stimulus that includes more loans to European banks. ECB President Mario Draghi has warned of a “persistence of uncertainties,” not exactly an optimistic outlook.

On one hand, investors (again) feel confident they are riding an easy money train created by the world’s central banks.

On the other hand, those tickets are being punched because Powell, Draghi and others foresee a steep hill yet to climb.

THE YIELD CURVE

Many economists argue an inverted yield curve is the strongest historical predictor of a recession. So, it’s notable that we witnessed an inversion on March 19 when the 3-month US Treasury bond yielded more than its 10-year equivalent.

Interestingly, the aftermath included only one ugly day for equities. The Dow fell 460 points on March 22 but has moved consistently higher ever since.

Why would investors increase risk exposure after such an occurrence?

One possibility is a fear of missing out on what could be the “last leg up” in a decade-long stock rally. History suggests it will be 12-24 months after the yield curve inverts until a recession occurs.

But is more risk a wise move at this stage of the economic cycle?

EARNINGS

The latest quarterly earnings served as a collective sigh of relief. Generally speaking, profit growth slowed, but not as much as feared.

In other words, earnings exceeded a relatively low bar. The benchmark for what qualifies as a “good earnings season” for the S&P 500 will be higher in the months ahead. Mediocre results will not be received as warmly.

TRADE WARS

The final potential land mine we will mention is also the most obvious. Tariffs between the U.S. and China remain in place on both sides, the result of which is diminished earnings and lower GDP for the world’s two largest economies.

Despite political rhetoric indicating we are close to a meaningful long-term deal, we have little evidence to substantiate such claims. If negotiations deteriorate, tensions and tariffs would again escalate and threaten the current rally.

The path of least resistance for stock prices still appears to lead higher. Even if that’s the most likely outcome, however, it’s wise to consider what could change that narrative.

Given the risks, we advise investors to avoid being overweight with their long-term equity targets. If you haven’t yet established what those targets are, it’s time to make that a priority.

 
 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Authors

Authors

Ben Marks & Brett Angel

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Director of Asset Management

Jeremy Schmidt, CFP®

About Jeremy

One of several Certified Financial Planners on our team, Jeremy’s in-depth knowledge of retirement planning is an invaluable resource to our advisors and a benefit to every client relationship. He coordinates the use of our planning software to help families organize the non-investment aspects of their financial lives like budgeting, insurance, and banking. As Director of Asset Management, Jeremy is instrumental in the macroeconomic decisions that govern the positioning of our Marks Group investment strategies.

A native of Bismarck, ND, Jeremy went to college at the University of North Dakota where he graduated with a degree in Financial Management and a stubborn devotion to UND hockey. Jeremy is also an alley cat who bowls a 165 average. He lives in Plymouth with his wife Brooke, daughter Bryn, and sons, Lucas and William.

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Founder/Chief Investment Officer

Ben Marks

About Ben

Ben’s tenacious commitment to our clients’ prosperity rightfully makes him the namesake and founder of our firm. Decades of industry experience and a nuanced understanding of the capital markets make him well-equipped to be our Chief Investment Officer. Ben oversees the composition of our client portfolios and drives the strategic direction of Marks Group. He co-authors our monthly newspaper columns in the Star Tribune and has received accolades from the Wall Street JournalBarron’s, Minneapolis/St. Paul Business Journal, and others.

Ben regularly volunteers with Minnetonka High School’s “Vantage Professional Studies Program” as a mentor, Shark Tank judge, and guest instructor teaching financial literacy. An avid mountain biker and cross-country skier, he is passionate about supporting healthy outdoor activities. Ben spearheaded a community effort to build mountain bike trails at Lone Lake Park in Minnetonka. He is also a Trustee for the American Birkebeiner ski race Endowment.

Ben and his wife Brenda enjoy spending time with friends and family at their Lake Namakagon cabin in northern Wisconsin. Always up for a challenge, Ben began learning German during the pandemic. It’s a skill that comes in handy when visiting their daughter Amanda, who lives and works in the Bavarian Alps. Ben’s other adult children, Adam and Rachel, live near Minneapolis. He and Brenda recently welcomed their first grandchild.

Founder/President

John Feste

About John

Dating back to his time as a 17-year-old Marks Group intern, John has committed nearly 30 years to our company and to his clients. His contributions to our firm’s strategic direction helped Marks Group be named one of the 50 Fastest Growing Private Companies in the Twin Cities by Minneapolis/St. Paul Business Journal in 2022

John has a big heart and leads our company’s charitable and community efforts. He served on the board of directors at St. David’s Center for Child and Family Development for many years. He has coordinated fundraising efforts on behalf of Children’s Hospitals and Clinics of Minnesota, where he was a patient as a child. John is also a member of the Young Presidents Organization (YPO).

A lifelong Minnesotan, John enjoys spending fall mornings in a duck blind. He lives in Deephaven with his wife Katie and their three children, Frank, Jane and Catherine.

Principal

Pat Deeg, CFP®

About Pat

Pat sets the standard at our firm for hard work and dedication to his clients. He also has a knack for developing deep, trusting relationships. After nearly two decades of advising clients, Pat remains committed to honing his skillset and finding new ways to add value to the families he serves.

Pat leads our firm’s new business initiatives and spends most of his time creating complex solutions for high-net-worth families and institutions. He is detail-oriented and takes a holistic approach to the sophisticated needs of each client. Pat’s knowledge and proficiency around multi-generational planning, trust and estate matters, tax minimization strategies, and philanthropic giving helped land him on Forbes list of “America’s Top Next-Gen Advisors” (2021) and “Best-In-State Advisors” (2020-2023).

A Minnesota native, Pat makes time for wakesurfing, golf, and pheasant hunting as much as possible. He graduated from St. Mary’s University in Winona, MN. Pat and his wife Kelli live in Deephaven with their two daughters, Grayson and Logan.

Senior Wealth Advisor

Matt Arnold, CFP®, MA

About Matt

Leadership, expertise, and a commitment to improve the people he works with are the attributes Matt brings to Marks Group. His approach prioritizes financial planning in every relationship to make sure investment strategies align with client needs, even as those goals change through the years. The CERTIFIED FINANCIAL PLANNER™ designation next to Matt’s name demonstrates his knowledge of our industry, but it’s the desire to educate others that sets him apart.

With a Master’s degree in Education from St. Mary’s University, Matt is a natural teacher. He created Marks Group Retirement University to make it easier for families to educate themselves on retirement-specific financial topics. He also holds a Journalism degree from the University of St. Thomas, where he was a starter and captain on the Tommies basketball team.

Matt grew up in Hopkins and currently lives in Chanhassen with his wife Jessica and their two daughters, Lauren and Kate. Both girls play basketball and it’s no surprise that Matt volunteers his time as coach.

Senior Wealth Advisor

Brett Angel

About Brett

In his 12 years with Marks Group, Brett has become a leading voice in our client communications. His journalism degree from the University of Minnesota and professional experience make Brett well-suited to share insight about investing, economic trends, and personal finance. He authors or co-authors the majority of our Marks Group publications, including newspaper columns in the Star Tribune, our Monthly Market Recap, and our economic Perspectives & Outlook

Clear communication is also at the heart of Brett’s client relationships. He is a big believer in one of our core principles that investors need to understand exactly what they own, as well as why they own it. This applies to the families he works with as well as our institutional clients who have partnered with Marks Group.

Brett grew up in Racine, Wisconsin, working summers in the bindery of his family’s small printing business. His personal resumé includes paid employment as the lead performer in an opera, country club sous chef, and college football beat writer. He is a lifelong soccer player, dedicated Gopher fan, and occasional golfer. Prior to joining Marks Group, he spent five years as an investment advisor in UBS Financial’s downtown Minneapolis office. Brett lives in Edina with his wife Kristen and their two children, Walter and Genevieve.

Wealth Advisor

John Hanten, CFP®

About John

John describes himself as an “extreme extravert,” which makes sense when you consider he grew up as the youngest of six kids. He learned at an early age how to stand out in a crowd. John was recruited to Marks Group in 2021 after spending two years at Carlton Investment Services Group. He has also worked at Morgan Stanley and Merrill Lynch. 

The most recent CERTIFIED FINANCIAL PLANNER™ added to our team, John works closely with John and Pat managing client relationships and developing new business. Engaging with new people and helping them tackle financial challenges is what he enjoys most about our business.  

John attended high school at St Thomas Academy and graduated from Creighton University with a finance degree. He is a past president of the Saint Thomas Academy Alumni Association. He is also a member of the Minnesota Zoo Associates Board and involved with the Alzheimer’s Associations. John and his wife Maddie live in St. Louis Park with their two Labradors, Millie and Lou. 

Director of Operations/CCO

Erica Lewerenz

About Erica

When we began our search for a Director of Operations, we knew we needed someone with a serious attention to detail. Sure, Erica has 12 years of public accounting experience, routinely worked 60-hour weeks during tax season, and earned a double-major from Concordia College (in Moorhead, MN). But when she explained to us the difference between knitting and crocheting, then clarified the intricacies of cross-stitching vs needlepoint? Well, she got the job. She is proficient at all of them, by the way.

Erica’s responsibilities include: Managing our Human Resources, leading the firm’s accounting responsibilities, and striving to ensure that Marks Group remains compliant with all the industry rules and regulations. She has also proven most adept at resolving the inevitable IT issues. Before joining our team in 2016, Erica spent the prior three years as a Senior Associate at national accounting firm BDO.

If knitting isn’t your thing, Erica is equally happy to discuss the merits of whether James T. Kirk or Jean-Luc Picard was the better captain of the Starship Enterprise. She and her husband Mike own every film in the Star Trek series and originally met at a local science-fiction convention. They live in Shakopee with their two cats, Dresden and Dax.

Wealth Advisor

Samantha Thorn, CFP®, CPA (inactive)

About Samantha

One of the many benefits of hiring Sam was that our team got younger and smarter at the same time. When Sam joined Marks Group, she brought with her a Bachelor’s Degree in Accounting (St. Cloud State), a Certified Public Accountant license (inactive), and a CERTIFIED FINANCIAL PLANNER™ designation. You would never guess she grew up on a farm in Byron, MN, racing Go-Karts with her four siblings.  

Sam’s passion for research and analytics add a new dimension to our Marks Group expertise. In addition to her professional certifications, Sam has taken classes in data science, a field of study that seeks to organize large quantities of information in a way that leads to more efficient solutions. Sam will tell you she likes numbers and appreciates how even small inefficiencies can have a big impact over time. That’s the kind of thinking that leads to high-quality financial planning for our clients.

Sam’s work experience includes time as a staff accountant at two local accounting firms. She also spent nearly six years at Murphy Pohlad Asset Management before joining Marks Group in 2019. She and her husband Tony live in Byron with their daughter Mackenzie.

Lead Trader

Nick Slettum

About Nick

With more than 20 years working in trading and operations, Nick’s attention to detail, analytical eye and problem-solving skills are invaluable to Marks Group. As our lead trader, Nick ensures timely execution of all securities transactions in clients’ accounts. He constantly monitors our proprietary investment models and is a member of our Marks Group Investment Committee.

Since graduating from the University of Wisconsin-La Crosse with a degree in Finance, Nick worked with Norwest Bank, US Bancorp and Piper Jaffray before joining our firm in 2014.

His knack for precision execution also serves Nick well on the softball diamond and as acting Grillmaster for the postgame tailgate. Nick and his wife Sara live in Maple Grove. They have two daughters, Sofia and Sabella.

Portfolio Manager/Sub-advisor

Seth Cogswell, MBA

About Seth

Seth took over as portfolio manager for Marks Group Core Equity, our flagship strategy, in Spring 2017. His management style includes a rules-based method of managing risk that added more discipline to the process of screening, selecting, and monitoring individual stocks on behalf of our clients.

Before joining forces with Marks Group, Seth lived in New York for 14 years, where he was a lead portfolio manager at Trillium Asset Management. He graduated from the University of North Carolina with a degree in Operations Research and earned his MBA from The Wharton School in Pennsylvania, whose alumni include Warren Buffett and Elon Musk. Seth is the founder of Running Oak Capital, where he refined his efficient growth investment strategy and earned the attention of his Wharton professors.

Seth was born in Maine and spent his early years in Ohio, though he considers himself to be from Asheville, North Carolina, where his family moved when he was 9. Despite his accomplishments, Seth will tell you his wife Jena, a Minnesota native, has the more impressive resumé. Jena was an All-American soccer player at UNC and played midfield for the US National Team. Together, Seth and Jena have celebrated the birth of three children (Raleigh, Finn, and Isla) and two National Championships for the Tar Heels. They now live in Edina.

Portfolio Manager/Consultant

Bill Patterson, CFP®, MBA

About Bill

Since January 2015, Bill has served as lead portfolio manager of our Marks Group Tactical Equity strategy. His approach focuses on “stalwart stocks,” meaning high-quality companies with strong franchises run by shareholder-oriented management. Our most actively-traded strategy, Tactical Equity also contains several “special situation stocks,” including some more likely to be involved in mergers or acquisitions.

Bill’s investment style is agnostic to traditional benchmark weightings. He is comfortable concentrating exposure in specific sectors or asset classes to maximize value. He is a student of the global economy and believes macroeconomic trends are an important contributor to investment returns.

A Chartered Financial Analyst (CFA®), Bill is the founder of Second Avenue Capital and previously managed a long/short equity portfolio at Deephaven Capital. He graduated from the Harvard Graduate School of Business Administration and has more than 35 years of experience in the financial industry.

Bill enjoys golf, CrossFit, hockey, and skiing with family and friends. He and his wife Joanne have three adult children and live in Edina.

Director of Client Service

Jeremy Netka

About Jeremy

When Marks Group had a job opening for a client onboarding specialist, our Chief Investment Officer already had his ideal candidate in mind. Jeremy worked five years as a senior banker and brokerage associate at Wells Fargo’s Minnetonka branch and Ben, who lives down the road, was a frequent visitor. Jeremy made such a positive impression that Ben recruited him (successfully) to Marks Group in early 2018.  

Jeremy quickly distinguished himself at Marks Group and was promoted to Director of Client Service in 2021. Our company’s transition to a new custodian (Fidelity) would not have been possible without Jeremy’s hard work. He remains instrumental in helping new clients get up and running quickly and efficiently. New account paperwork, 401(k) rollovers, establishing online access, beneficiary info, statement preferences, and banking info… Jeremy has you covered. 

He grew up in Mound, MN, and has a degree in Finance from the University of Minnesota – Duluth. Jeremy and his wife Katie live in Plymouth with their son Hudson.

Client Service Coordinator

Janet Jakobitz

About Janet

The first person you see when visiting our Minnetonka office is likely to be Janet, who joined Marks Group in 2017 after five years at another local investment firm. As our Client Service Coordinator, Janet works closely with the rest of our team to satisfy a wide range of client needs including deposits, IRA contributions, and rollover checks. We also have Janet to thank for keeping the office’s candy dishes and beverage fridge well stocked. 

Janet and her husband Dan have lived in Minnetonka for more than 30 years and when something in their house needs fixing, word is Janet’s the one willing to get her hands dirty. The two of them spend summer hours in their backyard garden and, if the harvest is good, giftwrap jars of homemade raspberry jam to fortunate friends and family. They’ve also been season ticket holders to Gophers basketball games for more than a quarter-century. Now that’s loyalty. 

Client Service Associate

Holli Hausladen

About Holli

Some fortunate timing allowed Marks Group to add Holli to our client service team in 2021. She was moving to Minnesota after working 3 ½ years with Wells Fargo Advisors in Marshalltown, Iowa. Luckily for us it all worked out, even if Holli and her husband Kyle had to move 250 miles north during a Minnesota winter.

Holli coordinates with the rest of our service team to fulfill daily requests from clients and advisors, including deposits/withdrawals, opening new accounts, satisfying RMD’s, and everything else that goes on behind the scenes. “I really enjoy helping clients and building relationships, Holli says. “Not only helping them reach their goals, but learning about their families and what’s important to them.”

Holli grew up near Des Moines and graduated from Iowa State with a Bachelor of Science degree focused on apparel merchandising and design. She spent three years in charge of floorplans and seasonal store design at Younkers department stores.

Holli and Kyle stayed in a 130-year-old family farmhouse until buying their own property near Buffalo, MN, where they now live. They enjoy camping with their daughter Kali and three Border Collie rescue dogs, Cysco, Avo, and Socks. Holli and Kyle got married in Glacier National Park and have traveled to Yellowstone, the Grand Tetons, and Badlands National Parks. They even renovated a 1980s Starcraft pop-up camper for their next adventure. 

Client Service Associate

Jesse Gamble

About Jesse

We didn’t realize until after we hired Jesse that Marks Group was creating a rivalry zone. Jesse graduated from the University of Iowa while our other Client Service Associate, Holli, graduated from Iowa State. The two of them work exceptionally well together although we’ve never seen them next to each other on a Saturday in the fall.

Jesse started at Marks Group in 2021 after three years as an investor services representative at Sit Mutual Funds in downtown Minneapolis. He graduated with an Economics major from Iowa even though he grew up in Ames and his mom went to Iowa State. Exceptional service has long been the expectation at Marks Group and Jesse is a big reason why that remains the case. “I like helping people out,” says Jesse. “Being someone they can rely on to provide support and solve problems.” 

If you think keeping clients happy requires heavy lifting, you should see Jesse in his off time. His pandemic project was powerlifting, a commitment that requires waking up at 4:30am four days a week for gym sessions. He “sleeps in” until 6am on weekends before tuning in to Formula One racing.

Jesse grew up playing hockey and has played in the Pond Hockey Championships on Lake Nokomis. He’s also a pro hockey fan and an avid gamer. He lives in Golden Valley.