We wish our readers a happy holiday season. We will publish an abbreviated edition of this newsletter next week, and resume our normal schedule after the New Year.
This Year In Review And The Year Ahead
2015 was a year of divergences. Developed markets outperformed developing markets, services outperformed manufacturing, and commodity-related companies and economies underperforming everything else. Broader indices often served to conceal these divergences, with some software-related names, for example, far outpacing the performance of the S&P 500. 2016 may prove to be a good time to exploit those divergences; we plan to hold significant cash balances while we study investment opportunities in reasonably valued companies which can grow against a tepid macroeconomic backdrop. Initially, we will concentrate on U.S. companies as long as the trend of U.S. Dollar strength continues. However, the Dollar’s substantial appreciation over the past four years against the currencies of the U.S.’ trading partners argues against the potential for further major appreciation in 2016. We continue to view Dollar strength as the efully to key, and will watch carefully to see how it unfolds during 2016; a top in the Dollar may present opportunities to buy quality U.S. exporters and the currencies of manufacturing and service-led economies outside the U.S. With the U.S. market fairly valued to slightly overvalued, we will also view a substantial correction in the U.S. market as an opportunity to buy companies we like at more reasonable prices.
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