West Oak Capital, LLC
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August 2015

We welcome your call or email if you have any thoughts you would like to discuss.

Byron, Lisa, Jerry and Darin
Stock prices have tumbled in recent days, with the major averages down more than ten percent from their recent highs.  By definition, this put the stock market in “correction” territory, something that is normal after a relatively long period of rising values.  Markets have been choppy all year, although it has been about four years since the last time we experienced a retreat of this magnitude.  Reason tells us that weak moments are nothing new for the capital markets, while our emotions remind us that every time feels terrible! 
In our opinion, the uncertainty seems to be focused on three primary areas:
  • Corporate Profits – A rising value for the U.S. dollar and a collapse in oil prices have put a pinch on corporate profits.  A stronger dollar makes U.S. goods and services more expensive to overseas customers, and foreign-earned profits translate into fewer dollars on consolidated financial statements.  Reported growth in revenues has been underwhelming in several market sectors this year.
  • Interest rates – The Federal Reserve has indicated their intention to begin raising short-term interest rates at either the September or December meeting.  Recent events have called into question whether the Fed will now delay those plans or follow through with a rate action as a “sign of confidence” in our economy.  It is more of a symbolic gesture, anyway, as a quarter-point bump up from zero would be a small move toward a target rate that most analysts forecast should be in the two to three percent arena down the road.
  • Bumps heard ‘round the world – Troubles in Greece and, now, China have rattled markets.  The Chinese stock market has endured a speculative surge and collapse.  Slowing economic activity in China affects commodity prices, as well as the emerging market nations that have been supplying materials to the country. Turmoil in foreign countries can make for dramatic news, although the impact on our economy is often fairly small.  Even though China is the world’s second largest economy, it represents only two percent of S&P 500 earnings.
The U.S. economy is still improving.  Progress has been slow, but positive, and companies are adding to payrolls.  Take a look at your portfolio and recognize that your holdings represent businesses with strong financial standing and a workforce that is dedicated to doing the things necessary to improve the value of the company.  Rapid and dramatic price fluctuations are often the result of short-term computerized trading, as well as forced selling to meet margin calls and mutual fund redemptions.  Over longer periods of time, fundamentals determine asset values. 
Please call us at any time if you would like to discuss the capital markets or any issues of concern to you.

Past performance is not indicative of future results. The information contained in this report is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the items mentioned. The information, while not guaranteed as accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice.
West Oak Capital, LLC
2801 Townsgate Road, Suite 112
Westlake Village, California 91361
Ph. 805.230.8282, Fax 805.230.8283
Copyright © 2015 West Oak Capital, LLC, All rights reserved.

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