May 2, 2016
Dear Friends,
Our clients hold both stocks and bonds in their portfolios. The growth section of their equity portfolio is designed
to provide for future returns, while the bonds and high dividend stock section are designed to provide a safe and
steady stream of income.
Since the first of the year, however, these return expectations have not been met. The income strategy generated
both more current income and greater price appreciation than the growth equity strategy. We do not expect this
return pattern to continue indefinitely. Rather, even as income securities continue to be in demand in the near
future, we expect growth equities to begin generating higher returns over time.
During the past few years, the pace of economic growth both in America and Europe has been modest. Last week
the Wall Street Journal published an article under the headline “U.S. Growth Starts Year in Familiar Rut”. It went on
to state that a sharp pullback in business investment and weak global demand dragged down the already lackluster
economy. A second article on the same page reported that total corporate profits, weighed down by the energy
slump and slowing global growth, was set to decline for the third straight quarter.
Our government has well recognized ways to stimulate the economy when it confronts a slowdown. Monetary
policy, for example, calls for increasing the money supply and lowering interest rates, and up to this point, the
United States as well as other countries around the world have favored this policy. As a consequence, short term
interest rates were driven down to near zero in the US, while in some countries actually have negative rates.
While the low interest rate government policy was designed to stimulate future economic growth, it had the
immediate effect of encouraging people seeking a steady and safe stream income to buy high interest rate bonds
and dividend paying stocks. As a result, prices of both dividend paying stocks and bonds appreciated. In addition,
further prices for these securities came from foreign buyers who moved their money into U.S. markets to escape
the political instability and negative interest rates that characterized their homelands.
Circumstances can change and in time growth portfolios will once again generate higher returns than income
portfolios. At the present time the stock prices of many companies that were severely impacted by the economic
slowdown are starting to increase, and this development may mark the beginning of a serious turnaround.
Please call and schedule an appointment with us so that we can review your holdings together. We would like to
make adjustments that enable us to preserve and enhance your wealth and meet your ongoing needs.
Sincerely,
Eugene Lerner
Managing Director, Partner
JR Gondeck
Managing Director, Partner
500 Lake Cook Road | Suite 210 | Deerfield, IL 60015 TEL 847.282.4225 FAX 312.962.3899 hightoweradvisors.com
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The Lerner Group is a group of investment professionals registered with HighTower Securities, LLC, member FINRA, MSRB and SIPC, and with HighTower Advisors,
LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower
Advisors, LLC.
This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment
opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment
opportunities referenced herein may not be suitable for all investors.
All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained
in this research is provided as general market commentary, it does not constitute investment advice. The Lerner Group and HighTower shall not in any way be
liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for
statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date
referenced. Such data and information are subject to change without notice.
This document was created for informational purposes only; the opinions expressed are solely those of The Lerner Group and do not represent those of
HighTower Advisors, LLC, or any of its affiliates.