Investment Recap Fourth Quarter 2017

“It’s the economy stupid”. This phrase has been bandied about recently to try to explain what some have called a stock market “melt up”, despite continued turmoil in Washington, D.C. The phrase was first used by Bill Clinton in his successful 1992 Presidential contest against George H. W. Bush. Naysayers have called stocks expensive for a year or two, all the while data show that approximately $0.5 trillion has come out of stocks, since 2008 (much of it going into bond funds in that same time frame).
Again, our stocks nicely outperformed our benchmark for the year, which was up over 21%. Our outperformance in 2016 was explained by market leadership favoring Value and Small Cap stocks. In 2017 market leadership was focused more on Growth and Large cap stocks, yet we did well, due to superior stock selection.
To reiterate a point we have made on past occasions, money flows into stocks have been quite subdued until recently and we finally see broadening interest in undervalued market sectors like Energy as well as individually underpriced opportunities. Stock selection has come back in vogue and stock pickers like ourselves are benefitting from the changed environment.