The stock market hates uncertainty; that fact has been established from the day one. If the rest of the investing public hasn’t heard about “Brexit” vs “Bremain”…it’s not necessarily a bad thing. There is always something to worry about and now with a vote by the United Kingdom to leave the European Union the potential implications and chants of uncertainty will continue to create worry and panic.

Ironically enough, even amidst all the doom and gloom, the world is not that much different than before the vote. Although the U.K. surprised many with its vote to leave the EU, this decision and the potential fallout will take a couple of years to fully play itself out. Even though there will clearly be political uncertainty and initial volatility (which is natural)…the UK will have two years to negotiate the terms of its exit and establish a new relationship with the EU. Although there won’t be a shortage of opinions, this doesn’t imply an automatic death to the stock market!

It’s times like these that are EXACTLY why people overreact and make critical mistakes. Once people get over their initial reaction (shock, surprise, fear etc) the markets will see relief in knowing there is a result and a definitive decision. In other words…there will be some basic element of certainty and that allows markets to naturally correct and go back to moving based on actual fundamentals as opposed to speculative forces or fear.

What should one do in the near-term and will this lead to something worse?

1. Like any market correction or initial shock, don’t overreact and sell. Doing it within hours of an event is the ABSOLUTE worse time to make a move or any adjustment to your portfolio.

2. While today (Friday) is likely to see some major volatility and market pressure, it could also snap back quickly. Although we could see continued selling pressure into early next week, there could also be a strong bounce. Any such “bounce” doesn’t necessarily point to things being back to normal but gives you a chance to adjust and assess that the world will continue spinning.

3. There obviously could be spillover into other parts of the globe; certainly in the near-term with massive overreaction to this news. Eventually markets go back to working on fundamentals and as always this will provide an opportunity for those with discipline to make strategic decisions.

4. As with some points of uncertainty there comes a result of actual certainty! In other words, shock and surprise like this may mitigate worries of another kind. For example: All the concern about the Fed raising rates should lessen now and we’ll also see yields on Treasuries head lower. We correctly calmed investors about a June hike and that proved out just as today’s news all but guarantees no Fed decision to increase rates in July.

5. Lastly, where there is trouble there eventually comes opportunity. Look at the asset classes that will get initially dinged the most (obviously Europe and some Emerging Markets). Last month we “tapped the brakes” on our International allocation and this allows us to ‘go shopping for things that are on sale.’ That being said, you’ll want to eventually reallocate by selling some of what goes up (alternatives, bonds etc.) and buy what has been hit.

Remember, in times like these people almost always make the worst decisions. This is the perfect opportunity to try something different and calmly navigate the waters.

Like any uncertain or potentially challenging situation, “this too shall pass”…

Are you ready for some surprises and wild finishes? That’s what March Madness brings each and every year! It’s also an opportunity to take a high level view of the current investment environment with what lies ahead.

Six years ago we became the first Registered Investment Advisor to use the NCAA basketball tournament as a way to show our readers a forward-looking view on the stock market. We break down and assign each of the four “regions” with an asset class and then pick teams (companies) that we think have the best chance at doing well relative to others.

This year we will dive right into our investing bracket looks and how we think the remainder of 2016 will play out.

Click here to see the entire bracket.

To set the table let’s take a quick moment to recall last year and the undefeated Kentucky team. They came into the Final Four 38-0 and were a virtual lock to win it all but as you may remember the Wisconsin Badgers shocked everyone and provided the surprise millions of fans tune in for every year! This type of “upset” is exactly how we think 2016 will pan out in the Large Cap asset class.

Large Cap

Five years from now people will look back at 2015 as a year that the stock market extended its bull market run for one more year. Investors will exhibit a short-term memory lapse and forget that it actually was a very rough year with heightened volatility, the first correction, and a market that actually turned in negative numbers if you looked “under the hood”. The problem is…most people will not remember this and only look to see the S&P 500 finished positive +1.38%.

Without the “FANG” stock phenomena, however, 2015 would have been very negative. In other words, the index was falsely propped up by some mega cap names like Facebook, Amazon, Netflix, and Google (ergo the acronym “FANG”). Without the massive performance that these companies returned, the average breadth of the market was negative and dismal.

Key Match-up:

#1 Amazon (AMZN) vs. #6 Lockheed Martin (LMT)

As you’ll note in the above bracket we have Amazon (AMZN) continuing to outperform the vast majority of the market until it runs into Lockheed Martin (LMT). Simply think of Amazon as last year’s Kentucky and Lockheed Martin as Wisconsin…



If you’re smart…does it imply that you’re always right? In many instances that may often be the case, but when it comes to investing, some of the most brilliant people on the planet are reduced to buffoons by irrational and unpredictable markets. When you add in a 24/7 media cycle and the fact that human beings are emotionally driven creatures…your IQ (or stubbornness) can actually work against you.

As huge fans of behavioral finance we also want to once again remind you that your own brain (whether it be “smart” or pedestrian) is wired to connect certain dots even if the conclusion is wrong or completely random. One famous adage will serve as the theme for this entire article:

“Even a broken clock is right twice a day.”

Take a brief moment to read the following article that surfaced last week:

First and foremost the article opens with two paragraphs that reek of “rear view mirror” methodology. This mindset sounds intelligent at face value but when it comes to a dynamic investing environment there is zero predictive power in looking at what has happened as a measure of what will happen.

Secondly, the article then alludes to John Hussman, who…like the author and many other pundits, believe we are on the brink of a -50% or more “crash”. Allow us to be blunt since very few are… This type of financial journalism is complete hogwash and a total waste of your time!

Before you spend one more minute reading articles and viewing well presented charts from “smart” analysts and forecasters…take a hard look at their track record. We’re not questioning whether a guy like John Hussman is intelligent; he undoubtedly is but why are we led to chug his (or anyone’s) Kool-Aid simply because they got one market call right? Once you’ve read our broken clock quote again, a quick peak under the hood of John Hussman’s performance and track record will change your mind.



The stock market has been rather nasty as of late so let us switch gears and touch on a topic that most investors avoid yet need to pay more attention to. After all, what exactly happens to your investments when you’re gone? Do you actually need a living trust or would a will suffice? We reached out to Mindy Baldwin, an estate planner in Rancho Santa Margarita for expertise on this topic:

The terms “will” and “trust” come up often when doing estate planning. Many people assume that these terms mean the same thing and use them interchangeably. However, wills and trusts are different documents that are used in different circumstances.  


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