2019 Q1 Quarterly Update

Global equity markets rebounded in the first quarter of 2019, and have now recovered almost all the losses they suffered in the last quarter of 2018.  Some have attributed market advances in the first quarter of 2019 to the decision of the Federal Open Market Committee to pause its “quantitative tightening” program, signaling Fed fund rates may steady at 2.5% through 2021. During the quarter, the 10-year Treasury yield fell below that of the 3-month Treasury for 5 days, temporarily inverting the yield curve and prompting terror in the financial community at the prospect of a recession. This was another example of a market “head fake,” as US equity markets continued to rise.

While global equity markets posted gains in general during the first quarter of the year, US stocks outperformed international stocks. The Dow Jones 30 Industrial Average, an index that measures the daily stock movement of thirty large companies, registered a gain of +11.81% versus a loss of -11.31% for the previous quarter; the broader S&P 500 Index, which captures 500 leading companies, exhibited a similar pattern, with +13.65% in Q1 2019 following  -13.52% in Q4 2018. Small capitalization stocks, as represented by the Russell 2000 Index, slightly outperformed large cap, increasing +14.58% for the quarter after a decline of -20.20% for the preceding ninety-day period. The DJ US Select REIT Index (Real Estate Investment Trusts), which serves as a proxy for direct real estate investment, surged +15.72%, compared to -6.61% over the preceding three months. The MSCI All Country World Index, a barometer of equity-market performance throughout the developed and emerging countries (including the U.S. and Canada), posted a gain of +12.33%. While international markets delivered positive results, they lagged the US. The MSCI Europe, Australasia and Far East Index, which measures performance of large and mid-cap securities across 21 developed markets (excluding the U.S. and Canada) rose +10.13% in the quarter, after having given up -12.16% in local currencies and -12.50% in US dollar terms during the fourth quarter of 2018.

In the bond market, the Fed’s decision not to increase interest rates led to a decline in US Treasury bond yields and a rally in bond prices. The 30-day Treasury Bill produced a +0.58% return. The broader US bond market, as measured by the Bloomberg Barclays U.S. Aggregate Bond Market Index, returned +2.94%. Globally, government bond yields continued to decline. Fears of recession in Germany, the Eurozone’s largest economy, saw 10-year German government bond yields slip into negative territory, a pattern not seen since 2016. Meanwhile, 10-year Japanese government bond yields remain at 0%, possibly reflecting a weaker outlook on exports and output. We reference the FTSE World Government Bond Index to measure global bond performance: it posted a first quarter return of +2.33% in local currencies and +1.74% in US dollar terms.

As is manifest in the foregoing, quarterly returns are terrifically volatile, and are therefore of limited use – or even, of negative use – in monitoring and understanding the actual performance of a portfolio. Over the trailing twelve months, we have observed that, for a cross section of client portfolios, returns are a few basis points better than zero. The wonderfully positive returns of the first quarter of 2019, following close on the heels of the bloodletting of the fourth quarter of 2018, left most portfolios unchanged over the past twelve months.

What’s New at Schultz Collins?

We are delighted to announce that three new members have joined our firm.

Jessie TurnerJessie M. Turner, Administrative Assistant: Ms. Turner joined Schultz Collins at the beginning of 2018 as a part-time Administrative Assistant, while finishing up her Bachelor’s degree at San Francisco State University. Now that she is a Baccalaureate in Art History, Jessie is a full-time employee, and continues to expand her knowledge of the investment world. As a member of both the trading and accounting departments, she provides an extra pair of eyes and thoroughly checks to make sure all incoming and outgoing transactions are accurate. Her routine tasks include reviewing trades, receiving payments, maintaining client records, and assisting with operational projects. She provides front-desk reception for the San Francisco office and serves our clients as a Notary Public. Jessie enjoys knitting and working with the ceramic wheel.

Matthew EckmanMatthew S. Eckman, Advisor: Mr. Eckman joined Schultz Collins in August of 2018. As an advisor, he participates in every aspect of portfolio supervision for the firm’s clients, and brings the latest academic insights to the firm’s practice of financial planning and provision of client services. He is a member of the Financial Planning Association, and is pursuing CFP® certification.

Prior to joining SCI, Mr. Eckman worked for almost two decades in the healthcare sector in various capacities: as Head of Financial Risk for the multi‐billion‐dollar procurement portfolio of global biotechnology firms Genentech and F. Hoffmann‐La Roche; as a biotechnology equity research analyst at US investment bank Piper Jaffray; as a management consultant on competitive intelligence at Fuld + Company; and as a cancer research scientist with the Howard Hughes Medical Institute at the Massachusetts Institute of Technology. He has spoken nationally and internationally on the topics of corporate financial risk and the impact of private equity investments on corporate financial health and stability. His research has been published in Cancer Research, Molecular and Cellular Biology, Journal of Biological Chemistry, and Molecular Cell.

Mr. Eckman holds a Bachelor of Science in Biochemistry & Molecular Biology (Magna Cum Laude and With High Honors) from the University of Georgia and a Master of Science in Financial Planning (With Highest Honors) from Golden Gate University. In his spare time, Mr. Eckman enjoys spending time with his wife and young daughter, visiting wine country, and traveling. He looks forward to resuming old hobbies, like photography and playing golf, and tackling new ones, like woodworking.

Jennifer WeirJennifer M. Weir, Advisor: Ms. Weir joined Schultz Collins in November of 2018. As an advisor, she participates in all aspects of the firm’s existing client portfolio supervision needs, and is focused on business development opportunities with both institutional and individual clients. She is active in the financial services community, and is a member of the Financial Women of San Francisco Fundraising Committee, the 100 Women in Finance Northern California Education Committee, and the CFA Society of San Francisco.

Prior to joining SCI, Ms. Weir was an Investment Analyst at Ashfield Capital Partners as a member of the Large Cap Growth and Global Growth Equity investment team, with a focus on Consumer and Healthcare companies. She served in sales, marketing and client services, also at Ashfield, and before her tenure at Ashfield worked with several mutual fund companies based in Canada.

Ms. Weir earned a Bachelor of Commerce (Honours) degree from the University of Manitoba and a Master of Science in Financial Analysis degree from the University of San Francisco. Jennifer enjoys spending time with her husband and three young children. She loves the outdoors and being active with family and friends, including hiking, skiing, and stand up paddle boarding on Lake Tahoe.

The recent superlative additions to our team manifest our deep commitment to our long term future as your advisor. With your help, trust and support as our valued client – for which I thank you, and for which we are all grateful – Schultz Collins continues to develop, to grow, and to serve ever more clients as their trusted advisor and investment fiduciary. As we look to future generations of advisors and clients, I have every confidence that our tradition of adamant devotion to the best interests of our clients will continue, and flourish – to their benefit, so to ours, and so then to the benefit of other, future clients, now unknown to us.

 

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