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Securities offered through
ValMark Securities, Inc.
Member FINRA SIPC.
Advisory services
offered through
Sequoia Financial Advisors, LLC,
an SEC Registered
Investment Advisor.
Sequoia Financial Group, LLC
and related entities are separate
entities from ValMark Securities,
Inc. and ValMark Advisers, Inc.
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Client Resources
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April 3, 2007
As we settle in to 2007, I thought it would be helpful to do a quick overview of where the financial markets have gone over the last five years. Why five years? It is a somewhat arbitrary timeframe, but many market observers like to use five years because it coincides with what has been viewed as the length of a typical business cycle.
In general, the past five years have been profitable ones for both financial and real assets. But there have been disparities within the various asset classes. Value stocks have outperformed growth stocks, both domestically and in the international arena. Small capitalization stocks have outperformed large capitalization stocks again both in and outside the United States. The market has rewarded risk as lower quality assets have outperformed higher-quality assets in both the equity and fixed income markets.
The chart below illustrates these characteristics within the U.S. equity market by size (large vs. small) and style (value vs. growth), as classified by Morningstar.
This chart illustrates the magnitude by which value style stocks have outperformed growth style stocks here in the U.S. over the past five years and also how small capitalization stocks have out earned large capitalization stocks.
This result is not unreasonable considering that the world was emerging from a global recession at the onset of 2002. Value stocks, with their higher proportion of financial and economically cyclical companies, tend to experience more of a rebound in earnings than growth companies when the economy emerges from a recession. Smaller companies and higher risk debt also benefit from the rising tide provided by a recovering economy.
Coming off the bottom of the recession, the earnings gains are fast and easy, but eventually the economy reaches more of a steady state and the quarter over quarter earnings gains start to moderate. Historically, it is in this environment that growth companies tend to outperform their value-oriented brethren.
It appears that the U.S. and a good chunk of the rest of the world may be entering this phase of the economic cycle. Over the past few years, the world has witnessed collective growth unprecedented in the last 30 years. The emerging markets, such as China and India, starting from comparatively low income bases have experienced extremely rapid economic growth. Japan, riding on the back of its massive export boom to China, gave encouraging signs that it was finally emerging from the aftermath of its post 1989 financial implosion. The U.S. has enjoyed a sustained rebound while keeping inflation in check. Even the moribund European economies are, by their standards, riding a wave of economic prosperity.
There are clear signs that now the world's economy is slowing down into a “not too hot, not too cold” scenario for economic growth. While there are few, if any, absolute laws in financial markets, regression to the mean is a force that tends to reassert itself frequently in the world of money. If one believes this to be valid, then it is logical to believe that growth stocks and especially large capitalization growth stocks are coming due for their day in the sun.
Turning now to the Sequoia front, I have many updates to share with you.
The last quarter rates as our busiest quarter yet for hiring and adding depth to our team. I am excited to share with you a brief overview of each new team member.
Christina (Crissy) Kubic started with us in Akron on a full-time basis in January. Crissy previously interned with us over the Summer of 2006 and graduated Magna Cum Laude from Hiram University in December. Crissy will join the Service Excellence Group and work with Shaun Kapusinski and his team in operations and client service.
Justin Rush also joined us in January in the Service Excellence Group. Justin is finishing his degree at the University of Akron and is currently working part time. He will join us full-time in June of 2007. His office will also be in Akron.
Mark Wilcox joined our Akron team in February. Mark is a CERTIFIED FINANCIAL PLANNER™ practitioner and has more than seven years of experience in the financial planning and asset management industry. He was most recently Vice President with Manning and Napier, an institutional investment management firm. Mark is a graduate of the University of Akron and lives in Hudson with his wife and two children.
Finally, Darian Chen joined our Cleveland team in February as an investment officer. Darian is a Chartered Financial Analyst (CFA) and joins us with more than 10 years of experience in the investment management business. He has previously served as a portfolio manager for Gratry and Company, First Fiduciary and Maxus Investment Group. Darian has a Bachelor of Science Degree in Electrical Engineering from Ohio State University and a bachelor's degree in economics from Yale.
Darian's three primary responsibilities will be asset allocation strategy, individual investment recommendations, and consistent communication with our clients and our team on the investment markets and the overall economy. Darian contributed to this letter and will provide updates through our Web site, email and letters when appropriate. With our move to platform independence in 2006, we are poised to be able to offer you an even broader spectrum of investment choices. This will include a broader range of mutual funds, separate accounts, equity research and alternative investments. With the addition of Darian, as well as new additions to his team which you will hear about in the coming months, we are well positioned to provide you with research and recommendations on this broader platform.
So, as you can see, we have been busy growing our team to serve you better. The expansion of our team is consistent with our goal to consistently exceed your expectations. We appreciate you and we appreciate your business. Thank you for allowing us to serve a critical role in your personal planning and please do not hesitate to contact any member of our team with any questions or requests.
Sincerely,
Sequoia
Financial Advisors
Thomas A.
Haught CFP® ChFC
President
- Past market performance is not indicative of future results.
- Fee-Based planning and Investment Advice offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor.
- Securities offered through ValMark Securities, Inc, Member FINRA, SIPC.
- Certain insurance products offered through Sequoia Financial Insurance Agency.
- Sequoia Financial Group, LLC and related entities are separate entities from ValMark Securities, Inc. and ValMark Advisers, Inc.
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