Covington Investment Advisors, Inc. Blog
News, Tips, Commentary, etc.
We are frequently asked for our opinion on international investing. Recent articles suggest an overweight allocation to international stocks, more specifically in European stocks, because of their attractive valuation relative to US domiciled stocks. While we agree the valuations may favor Europe over US in the short run, our concern is the risk/reward trade off in doing so. To summarize some of those risks: Transparency: Companies abroad follow different financial reporting standards and abide by different regulatory bodies so comparing apples to apples may be difficult. Less transparency can mean more volatility because audited financial information may not be provided on a regular basis and the local markets may be less liquid. Layers of complexity: There are a couple of ways to invest internationally: direct investment, depository receipts, or through a fund structure. In any structure, diligence is required to account for different settlement instructions, clearing instructions, regulations of the market,...
As of 5/31/16, 97% of S&P 500 companies have reported their earnings for the first quarter of 2016. According to S&P Dow Jones Indices, of those that have reported we have operating earnings per share of $24.09 which is a decline of -6.7% from one year ago. The 12 month operating earnings per share is $98.73 for the index, a decline of -11.45% from one year ago and a decline of -1.71% from the previous quarter. This marks the fourth consecutive quarter of declining year-over-year earnings and the fifth consecutive quarter of year-over-year revenue declines. Source: S&P Dow Jones Indices The decline in earnings has largely been contributed to two things: the Dollar strength and the decline in Energy related activities. A stronger US dollar negatively impacts earnings for those companies that generate revenue outside the US. In fact, approximately 48% of revenues for S&P 500 companies are derived...
Charles Schwab Investment Outlook 2016 Columbus, Ohio: February 11th, 2016 Patrick Wallace and Cindy Jones had the opportunity to attend the annual Charles Schwab Investment Outlook held each year in Columbus, Ohio. This one day conference brings together experts in their respective fields to give their insights on the markets, economy, politics, and investment strategies. This year we were excited to see Chief Political Strategist for Horizon Investments, Greg Valliere and Chief Investment Strategist for Charles Schwab & Co., Inc., Liz Ann Sonders in addition to several new speakers. Below are some highlights from each session: The 2016 Presidential Race and Beyond Greg Valliere from Horizon Investments The chances of a recession are fairly slim due to a strong labor market and a strong consumer. We are starting to see signs of wages growing coupled with lower oil prices which is beneficial to the consumer. Regarding the Election: Greg does...
Covington had the pleasure of attending the Charles Schwab Impact Conference held in Boston, MA this year. This marks the 25th year of the conference with around 1,800 advisors from all over the country in attendance. Each year Schwab strives to provide best in class speakers from various backgrounds who offer their unique perspectives on their field of expertise. This year’s keynote speakers ranged from cellist Yo-Yo Ma to Alan Mulally, former CEO of Ford Motor Company. In addition to the in-depth educational sessions we attended, highlights of the general sessions were the following: Bernie Clark – Executive Vice President of Charles Schwab & Co., Inc. and head of Schwab Advisor Services: Over the past 10 years, the Registered Investment Adviser (RIA) industry has grown from $1.6 trillion to $4 trillion. There are over 14,000 RIA firms today. RIA’s employ over 32,000 people. There’s $23 trillion in untapped opportunities for Advisors....
The Need for an Independent Federal Reserve Bank (Or a Perfect Federal Reserve Bank Cannot Be Taylor Made) Patrick R. Wallace Daniel P. Messmer If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand. -Milton Friedman A Call to Regulate the FED There are two current and different calls for regulation of the Federal Reserve Bank. One is that more oversight is required from Congress. Senator Rand Paul is leading this charge. Unfortunately for Senator Paul, the Supreme Court has already ruled that the Federal Reserve among other entities is independent. So while having to answer with audits to show no wrong doing, fiscal responsibility, etc. the board of the FED will act as it sees fit to best handle the economy. Another movement is out there that the FED should be made to...
Welcome and Happy New Year! As part of an ongoing effort to provide best-in-class service, we are pleased to reveal our new website. Our new website, aside from being aesthetically pleasing, is more agile, interactive, and is more reflective of Covington and our core values. One of our main goals we wanted to achieve when designing the new site was to help our clients and potential clients get to know us better and get a feel for who we are as a company, the services we provide, and offer insights to our philosophy through our new Blog. In the coming months, our goal is to build out the Blog to provide insight and helpful information. Stay tuned…