We are looking forward to 2016 in spite of the inauspicious start of the year. There are three major reasons for our optimism: the FED actions, our investment model adjustments, and hedge fund activities, all of which culminated in December 2015.

The FED interest rate increase and their promise to return to normality will boost corporate confidence and investment. Holding interest rates down and spending trillions while the economy grew for seven years discouraged corporations. The FED’s move signals a return to sustainable policy, encouraging businesses to open their wallets.

The second confidence builder is the newest version of our investment model. We’ve added additional Safety and Quality filters and raised the Growth and Value scores required for portfolio inclusion. These enhancements, grounded in historical research, are expected to improve performance.

Finally, hedge funds with large short positions have driven some stock prices down—sometimes fundamentally, sometimes opportunistically. As those short positions unwind, it may lead to a sharp recovery in targeted areas. We believe this could support market upside in 2016.

Sincerely,

Katz Family Financial