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Lauren’s blog covers topics that impact your finances, your family, and your future. Is there a topic you’d like Lauren to tackle? We’d love your suggestions and feedback.

In Your Best Interest: Our Summer 2017 Newsletter

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.


MARKET HIGHLIGHTS: Q2 2017

 

“Global Stocks Post Strongest First Half in Years, Worry Investors.” That Wall Street Journal headline from the last day of Q2 caused more than a few investors (perhaps you included) to ponder “what’s next?” 

As we closed out the first half of the year, most indices were continuing to rise at a pace we haven’t seen since 2009. Despite certain political and global events that would have dampened investor exuberance in “the old days,” investors have been nothing but enthusiastic, and the economic data has certainly supported that fervor. Tumbling oil prices have driven down energy prices and inflation. The housing market seems to be gaining steam. And while growth in the GDP, inflation, and consumer spending has slowed, they are still showing modest increases. All of that, plus expected tax cuts, strong corporate balance sheets, and central bank support, seems to have outweighed any negative news and buoyed both the US and Global indices. The result: the Dow, NASDAQ, and S&P 500 are up 8.03%, 14.07%, and 8.24% respectively; and the Global Dow is up 9.54%. That strong economy spurred The Federal Reserve Bank to raise the Federal Funds rate another 1/4 point. 

So what can investors do to assuage their worries about the future? Jason Zweig’s interview with Peter L. Bernstein offers some answers. In the interview (which took place years before the Great Recession) Zweig asks: How can investors avoid being shocked, or at least reduce the risk of overreacting to a surprise? Bernstein responded with this wisdom: 

“Understanding that we do not know the future is such a simple statement, but it’s so important,” he said. “Survival is the only road to riches… I view diversification not only as a survival strategy but as an aggressive strategy because the next windfall might come from a surprising place. I want to make sure I’m exposed to it. Somebody once said that if you’re comfortable with everything you own, you’re not diversified.” 

Berstein then posed this question to investors: “Can you manage yourself in a bubble, and can you manage yourself on the other side?” 

I’m happy to say that our approach is consistent with Bernstein’s Yoda-like guidance. We continue to actively diversify our client portfolios, reallocating fixed income with international and global bonds, inflation-protected securities, and real estate. “Survival is the only road to riches.” And while no one knows what the future holds, we promise not to overreact—no matter what surprises come our way. ~

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In Your Best Interest: Our Spring 2017 Newsletter

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.


MARKET HIGHLIGHTS: Q1 2017

We’re living in interesting times. 
 

In the aftermath of the Brexit vote, last week the UK gave formal notice to the European Union that it would formally exit the EU in two years. The UK’s unprecedented decision will have unexpected consequences. On the home front, the Trump presidency continues to deliver unwelcome surprises. A key example: Trump’s baffling cabinet picks, which include Steve Mnuchin, a 17-year Goldman Sachs executive, as Secretary of the Treasury. So much for “draining the swamp.” Trump (fortunately) failed to deliver on another campaign promise: to repeal and replace the Affordable Care Act, which some attribute to the administration’s lack of political skill and experience. It seems business interests, not the wellbeing of our citizens, are the thrust of this administration’s agenda. On the flip side, the Democratic resistance learned some lessons from the Tea Party movement and rallied its base to participate actively in the budget and legislative processes. This new activism means the budget, as well as any pending tax reforms, will need bipartisan support to proceed. 

Beyond the political headlines, market indices continued to reach new levels. Buoyed by rising corporate profits and expectations of corporate tax cuts, the S&P climbed 5.5% for the quarter, and both the Dow and Nasdaq reached—and held—historic highs. The Dow hit the magic 20,000 mark in January, and consumer inflation topped the Fed’s 2% target rate for the first time in five years, which drove March’s interest rate increase of . percent (25 basis points). While rate hikes sometimes cause an unfavorable reaction in the market, this increase seems to have been priced in, and investors nodded their collective approval and moved on. 

All of these factors, combined with unfailing investor confidence, added up to deliver a solid quarter, with each of the indexes listed below posting impressive gains over their fourth-quarter closing values. 

One notable star in the market constellation was Apple (AAPL), which reported record Q1 revenue and earnings. It is counterintuitive, but Apple is now classified as a value stock rather than a growth stock. Based on its market cap, Apple has another claim to fame: the stock is the largest component in both the Dow and the S&P 500—an interesting indicator of the power of innovation and globalization, and the importance of technology moving forward. 

As we begin Q2, the fundamentals are certainly in place for continued economic growth. Employment, hourly earnings, disposable income, and consumer spending are all on the rise, and consumer prices are up 2.7% for the year—the highest rate of growth in almost five years, and solidly above the Fed’s 2.0% target for inflation. Even the core rate, which excludes energy, is holding steady at 2.2% since February 2016. As 2017 progresses, we look forward to continuing to leverage the power of investing to support your personal financial goals.

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Index

09 November 2016

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All written content on this site is for information purposes only. Opinions expressed herein are solely those of Lauren S. Klein, President, Klein Financial Advisors, Inc. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. Read More >