Granite Group Advisors -


2011-06-07 :: Granite Group Advisors - Market Update 6.7.11
Granite Group's latest update on market valuation.

To our Valued Clients:

June is turning into a very difficult and volatile market. The most recent leading economic news has not been good. Employment is picking up at a slower rate than previously estimated, oil prices are starting to eat away at disposable income, and housing prices have dropped back to 2009 levels. GDP is slowing as most financial houses have cut their estimates. The concerns over war in the Middle East, the European debt crisis and the US deficit continue to impact investor behavior. Some factors are due to seasonal adjustments and the Tsunami, which we believe are temporary.

As we have stated in past commentaries, we do not expect markets to trade at the historical 15 P/E ratios as we believe the economy will keep forward P/E ratios at a discount (approx. 12-14 times earnings) The good news as of this writing, we are at 13 times 2011 and 12 times 2012 earnings. This means the markets are efficiently discounting the slower growth prospects and are fairly valued.

Our forecast has been for modest returns for years to come in the equity markets. The present correction should be considered a healthy pull back that has been expected. Growth outperformed Value for several years and it is now Value’s turn. We might have been early, but our call of domestic and international dividend value plays are coming home to roost! Interest rates have fallen to the bottom end of our range. All of this is a little bit of “watching the paint dry,” but we believe the allocations made will outperform general market indices with much less volatility.

We will take advantage of market valuations and put money to work as it fits within each client’s risk parameters.

Lyle & Rich

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