Letter from the Publisher

Where will the opportunities be in 2015?

Dear Investors,

Strategic Wealth Advisor

February was a great month for stocks. That strong bounce left the S&P 500 up 1.52% year-to-date. Even better, the SWA strategies are up 3.52% year-to-date, more than doubling the S&P 500 total return."

"So, where does that leave us? And, what’s ahead?"

On March 9, the current bull market will be six years old. And, we’ve never seen such a steep wall of worry. Back then, Nouriel Roubini called it a “dead cat bounce.” Many said the recession wouldn’t end until 2010, maybe 2011. Later, many supply-siders said the “Fiscal Cliff” would do us in. Then the always laughable Keynesians said “The Spending Sequester” would end the boom. And don’t forget Dubai, commercial real estate loans, Obamacare, or the implosion of the Eurozone. It’s been a long six years, but the stock market keeps rising and the economy keeps growing.

Why? The team behind Strategic Wealth Advisor, Trends, Business Briefings and AudioTech’s Business Book Summaries argues that the answer is pretty simple: “It is profits from entrepreneurial activity driving stocks higher.” QE and government spending have done little more than offset one another.

Based on 60 years of historical interest rates and profits data, we conclude that, with the 10-year Treasury yields anywhere below 4%, the current level of corporate profits means the equites are still undervalued when compared to historical norms. And, that’s why equities keep rising. The market has been, and still is, undervalued. This will be true until corporate profits fall sharply, interest rates soar, or stock prices rises to a point that exceeds the current value of discounted earnings.

This is why we remained bullish through all the fears of the past six years and why we don’t think the new panic du jour, caused by the rising dollar, is anything that should cause investors to climb into a bunker.

As the theory goes, a stronger US dollar (up almost 20% versus major world currencies since mid-2014) will hurt US equities by either reducing profits directly or hurting the US exports now and corporate profits down the road.

In theory, a stronger dollar translates into lower profits for US-based companies and listed multinational corporations. But that’s only true if the dollar keeps rising. Everyone knows the Fed is going to tighten policy (most likely beginning sometime between May and September), but we expect any tightening to go very slowly. As a result, we believe a strong dollar is already priced in, and perhaps more than priced in.

Those who currently fear a strong dollar tend to downplay other forces at work. The historical record shows little relationship between the strength of the dollar and corporate profits. For instance, corporate profits grew rapidly in the first half of the 1980s and for much of the 1990s, even as the dollar soared.

One reason is the so-called the “J-Curve.” This construct says that it takes a while for a stronger currency to change a country’s appetite away from goods produced domestically and toward foreign goods. So, in the meantime, it takes fewer dollars to buy the foreign goods we were going to buy anyhow. As a result, the trade deficit shrinks even as the dollar is stronger, boosting US GDP.

Another idea to keep in mind is that a stronger US dollar can reflect weaker foreign currencies due to actions taken by those countries, like looser monetary policy designed to prevent deflation. If so, those policies may generate more real economic growth abroad, which helps everyone.

But the ultimate reason a stronger US dollar should not be seen as a negative for US equities is that the stronger dollar is itself a vote of confidence in the future of the US economy. It signals that the collective wisdom of currency traders is giving America a big thumbs up.

The US bull market will come to an end someday. But that day is still a long way away and a stronger US dollar won’t be the culprit. Best wishes for maximum prosperity,

Fred A. Rogers Publisher

Strategic Wealth Advisor Performance

Breakdown of Recent SWA Performance Strategies vs. S&P 500

& Listing of Stock Held in Each Strategy

Listing of Portfolio Stocks

Premier Strategy

Listing of Portfolio Stocks

Core Growth Strategy

Listing of Portfolio Stocks

Shareholder Yield Strategy

Strategic Wealth Advisor Performance

Premier Strategy

The 25 Extreme Value Stocks

Holdings

Strategic Wealth Advisor Performance

Premier Strategy

The 25 Extreme Value Stocks

Allocation

Strategic Wealth Advisor Performance

Core Growth

Fundamental Potential

Holdings

Strategic Wealth Advisor Performance

Core Growth

Fundamental Potential

Allocation

Strategic Wealth Advisor Performance

Shareholder Yield

Stocks with the Best Total Shareholder Yield

Holdings

Strategic Wealth Advisor Performance

Shareholder Yield

Stocks with the Best Total Shareholder Yield

Allocation

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