News & Press

State of the Economy: April 2018

Published 04-15-2018


Published 1.8.2018

Stock Market in Correction… And it’s About Time

January started the year with a bang. World economies clearly were in growth mode, interest rates low and earnings marching ever higher. In walks February and March with dark clouds dominating the once rosy landscape. Trade wars and higher interest rates can have a negative effect on earnings and the economy. These factors and a slew of others have contributed to the volatility of major markets. February and March experienced dramatic market movements with the quarter ending on a negative tone. The question is, “what’s next and what should investors do now?” Let me give you a hint of Lido’s position –FINALLY!

If an investor is asking what should we be doing now and what’s next, it only begs the question, did your investment strategy plan for today’s market? Investing is about pro-activity, not reaction based on emotion. Those that are investing using past information are said to be investing using a rear-view mirror. This is not the Lido Way.

Year to Date Major Market Average Returns 

Through 3/31/2018

S&P 500  |  -0.76%

MSCI ACWI ex US  |  -1.08%

US Aggregate Bond  |  -1.47%


State of the Market: If unemployment is low and companies world-wide are growing why are we seeing such violent moves in the market? 

As a leading indicator, the market seeks to anticipate what is going to happen, not what has already happened. In general, domestic stocks are not “cheap” based on today’s valuations. Further, higher interest rates can lead to lower profits for corporations and lower economic activity. This fear adds pressure to what investors think to value stocks at. In addition to fears of higher interest rates, trade is an important topic. If the U.S. places tariffs on goods and services, it will cost the U.S. consumer more money to consume these products and use these services. If foreign countries place tariffs on U.S. goods and services it can reduce how much U.S. companies sell abroad. For many U.S. based companies, sales outside the U.S. account for the significant portion of their annual revenue. These concerns are just the beginnings of the “Wall of Worry”.

This “Wall of Worry” is not a reason to bury ourselves (or our money) under the mattress. Quite the contrary, it means for those that ACT, have a plan, and embrace the market swings may find opportunity as a result of this “Wall of Worry.”

Lido Response: A.C.T. & Alternative Investing

Lido and our team of advisors embrace two core philosophies. The first step is to start with the “right plan”. Our plan embraces a philosophy we call A.C.T., which is an acronym for Alternative Core Tactical. It’s premise states that if an investor can lower the volatility (up and down movements) of their portfolio, seek to embrace more consistent income and use active management to build core and tactical positions, then market movements are welcome as they create potential opportunity. ACT is our belief in active investing.

Alternative investing often involves private investments that don’t move up and down with the market. There is no major market providing liquidity on these investments. With the added advantage of illiquidity, the investments don’t fluctuate daily. For example, if an investment fund loans on a piece of real estate or an investment in apartment buildings, the price doesn’t move up and down on a daily basis as the liquid market does.

Tenet One: Lose Less When Markets are Down

There are many reasons why an investor seeks to lose less during a downturn. One simple reason is losing less means you need to earn less in order to realize incremental growth and or return on the investment.

Tenet Two: Cash Flow is King

Many investments pay consistent cash-flow. This is true for both liquid and illiquid investments. Cash flow is king in many ways; the income can be reinvested into current opportunities, used for living, and act as a stabilizer in a portfolio.

Tenet Three: Find the Opportunity in Adversity

Core investments are those holdings that you believe over the next several years are necessary investments based on the industry, sector, or the fundamentals of a particular investment. The market will correct based on any number of factors including trade wars and higher interest rates. It doesn’t necessarily change our long-term view and macro trends in areas such as affordable housing, medical and private lending needs. Use market volatility to modify, solidify or reinforce core positions based on on market conditions. Do not rely on automatic re-balancing.  Tactical investing specifically seeks to take advantage of short-term market moves usually created by market overreactions. Market overreactions are gifts that happen more than you might suspect. Here are two poignant examples; (1) Hillary Clinton and President Obama talked about radical changes to health care. The news caused for this index to have an immediate knee-jerk downward price move. A year later, the health care index enjoyed healthy upward price momentum. (2) The market was set to crash on the evening of the surprise election of Donald Trump for President of the United States. Six months later the market’s appreciation was significant.

Today, tariffs and threat of trade wars are causing downward pressure on specific stocks and industries. This is a potential opportunity for investors. One can stress-test various scenarios and find that the sell-off is often overdone and can create tactical opportunities as well as prudent points to add to core positions.

Next Steps: What can Lido do for you?

If you are unsure as to your financial plan and investment strategy, talk to your Lido Advisor and clarify any ambiguity.

Today Lido continues to analyze, review and seek to source companies offering dynamic and timely alternative investments. Many of these investments are centered in real estate equity and debt. As interest rates rise, the economy continues to grow. Investing in these asset classes are important in complimenting a well-diversified portfolio.

We are anticipating stock market volatility to continue but do not see a recession in the next six months.

We also believe that interest rates will rise in a measured, predictable tone. Consumers are fully employed, with a lower tax bite and higher discretionary income. Government spending continues at current if not higher levels. With continued low inflation, low interest rates and global growth, the market can continue to grow and the economy can continue to expand. Our focus on building out the core and tactical portions of a portfolio remain intact. The news and the headlines may cause for continued market volatility but based on our assumptions, these fears are our welcome opportunities for the long-term investor.

Looking forward to what may come in Q2-2018.  


Past performance is not an indication of future performance.  The information provided in this newsletter is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any types of securities.  There is a risk of loss from investments in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor’s financial situation or risk tolerance. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses.

The information contained herein reflects Lido’s views as of the date of this newsletter. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessary come to pass. Lido has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. Lido is not responsible for the consequences of any decisions or actions taken as a result of information provided in this newsletter and does not warrant or guarantee the accuracy or completeness of this information.

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