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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 Fall 2018 Newsletter

In Your Best Interest: Our Fall 2018 Newsletter

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


Market Highlights Q3 2018

One lens we use to assess our economic and financial wellbeing is market prices for US stocks and foreign shares of corporations. From that perspective, Q3 was quite favorable for investors. US stocks and global stock indexes rose on strong economic indicators and corporate earnings. As you can see below, each of the US indexes posted solid gains, and global stocks overcame declines seen in the first half of the year. Prices for 10-year Treasuries dropped by the end of the quarter, pushing yields higher by 20 bps.

If your portfolio lagged compared to these impressive gains, don’t be alarmed—and don’t worry. A balanced portfolio is designed to avert risk by including US bonds which saw negative returns in the quarter due to the inverse relationship to rising interest rates. A balanced portfolio further includes global stocks whose returns were lower than the US market. Balancing risk and reward is the goal, and your portfolio should always reflect that reality. 

That said, current economic indicators point to continued growth. Jobs are up 196,000/month for the past year, and hourly earnings are up 2.9%. Interest rates are the highest they’ve been since April 2008 which signals a strong economy, and GDP growth is at 4.2%. Home sales are stable, consumer spending remains strong, and consumer confidence is at an 18-year high.

One of the few distractors from growth has been turmoil in international trade. The trade battle between the US and China has dampened Chinese stocks, though higher numbers at the end of Q3 hint at decreasing concern about the real impact of the trade war. Brexit—and its potential impact on commerce in the UK and Europe—remains uncertain. On the plus side, a revamped NAFTA (USMCA) agreement should ease tensions between the US and our trading partners in Mexico and Canada; Japanese stocks are approaching highs not seen since the early 1990s; and Germany, France, and the UK all saw gains in their respective stock benchmarks.

Will growth approach 4.0% in the last quarter of the year? Are security prices “too high”? Is a recession inevitable? We know that today the US economy is strong and security prices are exuberant. As always, the prudent investor stays invested, stays the course, and sticks to the basics with a balanced, risk-appropriate approach to growing and protecting your wealth through all market cycles.

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In Your Best Interest: Our Summer 2018 Newsletter

In Your Best Interest: Our Summer 2018 Newsletter

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


Market Highlights Q2 2018

The second quarter of the year can be called a lot of things, but boring certainly isn’t one of them.

Long before the trade war between the United States and China began in earnest in early July, Trump’s threats of tariffs on Chinese imports began to rattle the world, and threats of retaliation from the Chinese added fuel to the fire. As the battle of words escalated, investors braced for a storm. But while there was certainly some significant volatility, favorable corporate earnings reports helped calm some of the global economic angst, and investors were able to maintain a steady ship and see higher-than-anticipated gains in Q2. Most of the major indexes ended the quarter ahead of their Q1 closing values. The tech-heavy Nasdaq gained over 6.0%, and the small caps of the Russell 2000 grew by almost 7.5%. The S&P 500 also closed the quarter ahead of its first-quarter closing values, and the Dow finished the quarter up by less than 1.0%. Prices for 10-year Treasuries rose by the end of the quarter, pulling yields down by 13 basis points. 

Interestingly, even as Trump’s trade war moved from threat to reality in the first week of July, the market has continued to maintain an upward trajectory, at least for the moment. Trade skirmishes between the United States, China, Canada, Mexico, and the European Union are likely to remain a reality for some time, but those tensions have so far been offset by a strong US jobs market, steady corporate earnings, and increased household spending. Global tensions may be here to stay, but consumers and investors appear to be confident in the economy—and confidence is always a plus when it comes to investor returns.

As we move into the second half of 2018, expect the tensions to continue. Business has accepted the trend towards open markets and reduced trade barriers. The US economy has been strengthened along with our global trading partners. Businesses will eventually adapt to whatever conditions prevail, but current events are disruptive and time and money will be spent to reposition production and sourcing of materials. Outcomes of trade wars are unpredictable, but if the extent of reactions in the past weeks is any indication, the impact will be complicated. Nations are big ships and don’t turn on a dime, but slowly, slowly, we will experience changes in geopolitics. Yet whatever occurs around the globe, our team is monitoring your plan and your investments closely. And if you have any questions or concerns along the way, we’re always here to help keep you on course. 

Click here to read the full newsletter.

 

 

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In Your Best Interest: Our Winter 2018 Newsletter

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


MARKET HIGHLIGHTS: Q4 2017

If we looked only at the numbers, 2017 was golden. The stock market hit an incredible 71 new highs this year (no, that is not a typo!) and closed the year up 21% on average. The S&P index gained 19%, the Dow Jones index of 30 stocks gained 25%, and the tech-heavy NASDAQ gained 28%. For investors, it was a year to celebrate. 

 

There was lots of other good news as well. Congress tried—and failed—to repeal the ACA, ensuring continued healthcare access for millions of Americans. If anything, the publicity around the repeal helped increase enrollment, with December enrollment breaking records and beating all expectations. The labor market added 2 million new jobs, the Federal Reserve raised interest rates three times during the year (a sign of a strong economy), GDP increased to an annual growth rate of 3.2%, and demand for new housing remained strong.

On the less favorable side, the US trade deficit increased (something that will only get worse under the new tax plan) and inflation rates remained below the Federal Reserve’s target rate of 2%. Today, there seems to be one question on everyone’s lips: How long will this market last? 

By now, most of us have invested our funds in the market. And as the numbers continue to climb, it’s easy to fall into the trap of trying to “play the market.” Instead, I urge you to stick to your long-term flight plan and accept that the market cycle will work through any volatility. Strong corporate profits, low interest rates, and positive investor sentiment provide good tailwinds, although rich valuations could provide a headwind. In this environment, your best option is to invest strategically and focus on your personal balance sheet, paying close attention to your cash and debts. Be sure you have cash reserves to insulate you from being a forced seller in a down market, and reduce your debt and other fixed obligations. Doing so will put you in position to face the future with confidence—no matter which way the winds blow in the year ahead. 

 

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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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Disclosure

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 >