What You Should Know

What’s important? Risk in the stock market increased during August, as the S&P 500 total return closed -1.6%
amid ongoing trade disputes and changes to interest rate policy. Interestingly, value stocks underperformed growth
stocks during the month, even though value stocks historically perform better during market declines. Large
companies continued to outperform small companies by a margin greater than 30%, a trend ongoing since 2017.
American indices also continued to outperform developed international as well as emerging markets. The 10-year
Treasury Yield has now declined more in the past year than any other year of the past three decades, signaling that
the global rate environment has taken investors into new territory. Spreads between high-quality bonds and low-quality
bonds have widened to a margin to suggest that volatility in the near-term would not be a surprise event. As the global
economy softens, the U.S. economy remains healthy, largely due to a strong consumer base which is responsible for
two-thirds of U.S. GDP.

Why is this important? Although history can serve as a useful guide, it is important to note the current global
environment, which includes 18 major countries with negative-yielding debt, has not been seen before on a scale this
large. The impact of this abnormal interest rate environment on the global bond market is significant with limited
historical comparisons. Therefore, in our view, a rules-based investing approach has never been more important than
now as details and data continue to emerge from the economy, the market and individual holdings.

What do we think? We find market-risk data and certain pockets of the global economy concerning. However, we
also find optimism in the strong U.S. consumer, productive workforce, and an accommodative Federal Reserve which
could keep the current expansion growing. Although stock and bond investors face unique challenges as we head
into the final month of the third quarter, we will continue to monitor our key sources of data to keep you informed every
step of the way.

Tempus Strategy Series Overview

Tempus offers 12 actively managed investment strategies ranging from Aggressive to Conservative. Market and
Economic risk factors are monitored on a regular basis and allocation changes and/or holding changes are made
based on the decisions of the Tempus Advisory Group Investment Committee. Additional details on each strategy can
be found on our Resources page.


Strategy trading activity commentary: Economic data from a global perspective has continued its soft patch, with areas such as worldwide sentiment and production providing underwhelming results when compared to expectations. However, all is not the same overseas as in the U.S. where consumer conditions of the U.S. worker remain healthy. Consumer spending is responsible for 2/3 of the total U.S. GDP, and while global economic conditions soften, U.S. economic readings remain healthy with unemployment continuing to hover in historically low territory. Although the stock market’s sharp swings in August did elevate our short-term market risk calculations, it has yet to cross the threshold to justify de-risk trading.

Strategy Changes:

      • None: The key calculation metrics for this series of strategies did not indicate any changes to equity exposure is warranted at this time.


Strategy trading activity commentaryDespite significant headline risk resulting from the news of trade negotiations, interest rates, and EU restructuring, volatility retraced by month end.  Although longer-term market volatility data calculations remain elevated, none crossed the threshold to warrant trading activity.  Given the current low-rate environment globally, balance sheet risk has risen and will continue to hold our focus and attention. The U.S. economy remains at healthy levels in terms of unemployment, sentiment, and sales. We anticipate remaining in a neutral stance (not over or underweighting equity exposure) and will adjust accordingly as our data calculations warrant.

Strategy Changes:

      • None: The key calculation metrics for this series of strategies did not indicate any changes to equity exposure is warranted at this time.


Strategy trading activity commentary: From a historical comparison, the current bond environment has become abnormal.  Interest rates from governments around the world have been lowered, with many resulting in negative yields.  Unusual behavior is not normal, and we believe that as the global bond environment begins to stabilize, bond yields will return to their normal or historical averages (also called mean reversion).  As such, we anticipate keeping our fixed income outlook to favor short-duration (shorter-term) bonds in the near future.

Strategy Changes:

      • Researched Fixed Income had no changes.
      • Researched Strategic Income had no changes.


Strategy trading activity commentary: None, the strategy rebalances and calculates the target interest rate (2% plus the 10 Year US Treasury) on a quarterly basis.  As such, there are no changes at this time.

Strategy Changes:

      • Researched Balanced Income had no changes.

Tempus Recommended Holdings Overview

The Tempus Advisory Group Investment Committee performs a quarterly due diligence review of all current holdings to ensure each remains suitable for continued inclusion in our strategies.  Our selection process begins with a low-cost/high-quality bias, which is further enhanced through our research partner’s “WAR” (Wins Above Replacement) methodology, resulting in a composite rating and a decision to either:  Hold, Place on Watch, or Replace.

Changes as of Q2 2019:

      • Replace: IUSB, SCHO, BKLN, PFF
        • PFF replacement does not apply to the Researched Balanced Income strategy
      • Watch: RDIV

Financial Advice is offered through Mid Atlantic Financial Management, Inc. (MAFM) a Registered Investment Advisor. Tempus Advisory Group is not a registered entity or a subsidiary or control affiliate of MAFM.  The information contained in this e-mail and in any attached files is confidential and intended for internal use of the individual named in the email. This information should not be duplicated or distributed unless an express written consent is obtained from Tempus Advisory Group in advance.  If you are not the intended recipient, please notify me immediately and delete any attachments.  The views expressed here reflect the views of the Tempus Advisory Group Investment Committee as of 8-31-2019. These views may change as market or other conditions change. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Past performance does not guarantee future results and no forecast should be considered a guarantee either

Ready to talk?

Contact Us Today!

Let’s Talk