21,000 on the DOW – what does it really mean? Clearly, it means positive
things for the value of your accounts. Our investment allocations that
typically include high levels of exposure to stocks are now fully participating
in this rally. Our email at the first of the year expressed concern that
the post-election rally in November and December was quite concentrated
in a handful of companies in certain sectors where a Trump victory meant
less regulation and more profitability. So far, in 2017, the rally has
become much broader principally because the economic data continues to
improve. Just last week, manufacturing activity in both China and the
U.S. showed nice improvement. Meanwhile, sentiment among consumers and
small business owners continues to hit levels not seen in many years.
However, just as our counsel is to maintain perspective and not get too
caught up in the constantly negative news cycle, we encourage the same
behavior now. A 1,000 point increase on the DOW doesn’t mean as
much as it used too. The simple math underscores that. When the DOW was
at 10,000, a 1,000 point jump meant a 10% increase. Now, with the DOW
at 20,000, a 1,000 point increase means a 5% improvement. This 1,000 point
jump in just 24 days is not even record setting in market history –
merely tying a record set in 2009.
Clearly, there are reasons for cautious optimism ahead on the strength
of consumer confidence and improvement in manufacturing activity. But
in terms of percentage swings, this is nothing more than normal market
behavior where on average swings of 5-10% occur about three times per
year. We remain somewhat concerned about the continued inconsistencies
of the Trump administration. In this global economy where corporate America
makes nearly half of its profits (45% to be exact) from outside the U.S.A.,
a breakdown in international relations and trade could quickly undermine
All of this certainly sets the stage for our next client meeting on March
28. Our speaker will be Bill Cass from Putnam Investments. Bill returns
to discuss the latest economic and market conditions and to provide a
look ahead to the rest of 2017. Please join us on March 28 at 5:30 at
the Country Club of Orlando, 1601 Country Club Drive, Orlando, FL. Please
RSVP for you and your guests to this email or the office at 407-629-6477.
Please stay tuned to our weekly radio show “Dollars and Sense”
for our thoughts on the latest news. The speed of the news cycle these
days is ever increasing and our live weekly show provides an opportunity
to hear our take on the current headlines. The show airs at 9AM on Sunday
at 102.5 FM or 540 AM and is available the following day on our website
www.NelsonFinancialPlanning.com or our social media outlets on Facebook,
Twitter or Linked In.
Around the office these days tax season is underway. While we expect many
changes for 2017, 2016 returns are generally running quite similar to
the prior year for most people. The only exception to this is that mutual
fund capital gain distributions appear to be lower from the previous year
so that is helping to reduce the tax burden for some.
On a personal note, my oldest son Nelson recently achieved the rank of
Eagle Scout. So very proud of him and his accomplishments. Hard to believe
he turns 16 later this month and then I will be constantly looking for
my car keys!
Look forward to seeing you at the meeting on March 28!