Investors shrugged off Greece’s technical default, slower earnings growth, and geopolitical pressures in February, sending the S&P 500 TR index up 4.32%. Technology, financials, and oil & gas were the best performers this month, while utilities, real estate, and gold lost ground as investors’ improved sentiment led them to buy the best prospects for earnings growth. Treasuries dropped during the month, while corporate bonds gained, which was more evidence that investors were more comfortable taking risks. Aggressive strategies have outperformed conservative strategies so far this year. Net returns for our income, growth and opportunity composites were 3.08%, 3.67%, and 5.51%.

Our equity allocations remain at neutral levels for all of our strategies, except for opportunity accounts, which are underweight. During February, we increased allocations to several core portfolio companies in the oil & gas, cyclical, and technology industries, and we also added small cap positions in growth and opportunity accounts. Income yields remain strong across all of our strategies.

A positive shift in investor sentiment away from last year’s gloom has lifted stocks this year. Valuations are not excessive, but the market’s steady upward march has made it more difficult to find good buying opportunities. We hesitate to buy too much of the present rally because last year started with a similar burst of optimism in the face of major risks in Europe, the Middle East, and our own fiscal policy – risks which have not yet receded, in our view. We do plan to replace some defensive core holdings with more growth-oriented investments, and will continue to add small caps as we find them, but we will not get overweight into stocks until we see favorable changes in the prevailing risks.

If you have questions, please do not hesitate to call or email us.

Sincerely,

Daniel A. McAdams
Chief Investment Officer