We are very excited to announce the addition of Gretchen Regan, CFA, to our Investment Advisory team at Hotaling Investment Management.
Gretchen’s financial industry foundation of more than 20 years will offer our clients an even greater Hotaling proprietary experience. Bruce Hotaling, Managing partner of Hotaling Investment Management shares, “We are very lucky to have Gretchen on board. Her strength in equity analysis coupled with her personal approach to managing clients’ investments will be a huge asset to our team.”
Before joining us, Gretchen worked as a Quantitative analyst at Chartwell Investment Partners covering Large Cap Value, Small & Mid Cap Growth, and Small & Mid Cap Value Investments. She spent 15 years in the Quantitative Research and Analytics group at Macquarie Investment Management, Americas (formerly known as Delaware Investments) specializing in quantitative methods, equity analysis, model building, data gathering, reporting and automating, attribution analysis, and risk exposure assessment.
Gretchen is a Chartered Financial Analyst (CFA) and holds a Bachelor of Science degree from the Pennsylvania State University in Management Science and Information Systems. She is a member of the CFA Society and CFA Society of Philadelphia.
Growing up on the Main Line, she now lives with her two children in Devon, Pennsylvania. Outside of the workplace, Gretchen enjoys golf, fitness, skiing, beaching and hiking. She is also committed to coaching youth athletics, fostering confidence and teamwork among young girls.
Hotaling investment Management is happy to introduce our newest addition to Hotaling’s investment advisory team, Jesse S Cooper. Jesse has quickly become instrumental to many of the firm’s activities. He is becoming familiar with our firm’s clients while working with the team on trading, research, reporting, operations, and technology.
Prior to joining Hotaling, Jesse worked at JP Morgan within Institutional Asset Management overseeing fund compliance with the Volcker Rule – part of the Dodd-Frank Wall Street Reform Act of 2010. Previously, Jesse worked in strategy and litigation consulting with Charles River Associates and Keystone Strategy in Boston.
Jesse holds a Bachelor of Science degree in mechanical engineering and mathematics from Tufts University in Massachusetts and a Master of Science degree in financial economics from Columbia Business School in New York.
A native of Schuylkill County, Jesse now resides in Philadelphia with his wife Tara. Together, they enjoy outdoor activities year-round (skiing, tennis, hiking, biking, and swimming) and time with family and friends.
Hotaling Investment Management Proudly Sponsors the 12th Annual Plein Air Festival, Wayne Art Center
En plein air is a French expression meaning “in the open air”, and refers to the act of painting outdoors with the artist’s subject in full view. Plein air artists capture the spirit and essence of a landscape or subject by incorporating natural light, color and movement into their works.
The high point of plein air art came with the emergence of Impressionism in the mid-to-late nineteenth century. Artists of that period who painted outdoor landscapes included Monet, Renoir, Pissarro, Cezanne and Van Gogh. Interest in outdoor painting has remained constant since the twentieth century. Today’s artists carry on the traditions of these past masters by capturing light and movement in landscapes that can only come from seeing the subject outdoors in its natural form.
The last twenty years have seen a resurgence of interest in plein air painting in the United States. During this time, groups of plein air painters began gathering together to paint at single locations or within certain geographic boundaries. These “Paint Outs” are now very popular and give artists a chance to share their talents and creativity with the public and with one another.
Let’s hope March of 2018 was an anomaly. Just as signs of spring were beginning to appear, folks living in the northeast and mid-Atlantic encountered what was likely their first ever cyclone bomb. Exhausted from shoveling snow, they were then clobbered by three more nor’easters in a three week span. It could be we need to place more trust in Punxsutawney Phil’s early February predictions.
The unpredictable nature of these storms reflects closely the unsettled activity in Washington, which is becoming so chaotic it looks to be finally having the effect on financial markets many had feared back in November 2016. Stock prices, measured by the S&P 500, have begun to mimic both the unforgiving nature of recent weather – and the chaos inside the beltway. Stocks fell in March by 2.7%. This is on the heels of a 3.9% decline in February. Year to date, stock prices are down 0.76%.
For some context, over the last 30 years, the S&P 500 has produced an average return of 12.2%, with an annual standard deviation of 17.3%. There have been 5 years (17% of the time) when the return to stocks was negative, and in those years, stock prices fell on average 16.6%. After a larger than average 21.8% return in 2017, stock prices may be reverting to the mean.
On a more granular level, the stock market looks to be attempting to assess the potential damage from a trade war. Old school protectionism is the latest contrivance out of Washington in hopes of making America great again. Restrictive trade, whether it leads to a trade war, will put the brakes on the positive effect foreign competition has on holding down price inflation.
The recent stock price volatility highlights the concern that fractured global supply chains may negatively impact US corporate margins. Free trade is proven to stimulate economic growth. Higher tariffs will eliminate the process of comparative advantage that allows all parties to benefit from globalization. If the root of the problem is infringement of intellectual property rights, then that needs to be addressed directly, without the random and damaging effects of trade warfare.
Recent economic data has not been compelling and the nine year expansion is long in the tooth. Employment levels are high, so high investors have been on alert for signs of inflation. The brutal stock sell-off in early February was ignited due to clear signs of inflation based on reports of increasing wages. Stock investors are well aware, if a cycle of higher inflation has begun, the Fed will continue to raise interest rates.
The yield curve has shifted upward, and flattened. This is a mixed signal. It may well be telling us growth expectations have deteriorated. The Federal Reserve has raised rates now for the sixth time since the first 0.25% hike in mid-2015. Expectations are for 3 hikes this year and 3 more in 2019. Ambitious fiscal spending, at this late point in the economic cycle, will support the Fed’s hawkish position. The ballooning deficit, continued deficit spending and higher interest rates will raise the probability of a slowdown (recession) sometime in the near future.
The other curiosity I’ve discussed before is the perpetual weakness in the US$. It has been in a steady decline since the November 2016 election. The higher interest rates available in the US would support buying dollars. On the contrary, global investors have been selling US$s, and buying yen and euros. It’s not clear what is causing this, though it’s likely related to increased tariffs, restrictive immigration and rising deficits. The persistent US current account deficits are spurring talk the US$ may not be the safe-haven it once was.
The current backdrop is mixed. Earnings estimates remain high and stocks are not excessively expensive with the forward P/E multiple in the 16x range. Volatility has risen, making stocks harder to own. From a contrarian perspective, this is constructive. Yet, if the earnings forecasts falter, for whatever reason, this will spell trouble for stock prices. With the high level of volatility, and two successive down months in stock prices, we are taking a more constructive stance, and will become more cautious if conditions persist. Please feel free to call us if you would like to discuss further or if your investment parameters have changed since we last spoke.
Bruce Hotaling, CFA