• My latest hobby and its investing parallels.

    Dear Friends,

     

    With my half century mark on the horizon, I decided to try to get in better shape this year to fight the hands of time. I have always enjoyed running over the years and so I set my sights on training to run a marathon. My marathon race date is January 13 at Disney – I wanted to complete the race before tax season begins!

     

    As I train, it strikes me that there are a lot of parallels between running a marathon and investing. To cover the distance of a marathon requires a steady and consistent pace. Investing requires that same consistency. There are certainly plenty of miles where you feel great and other miles where you feel terrible and want to give up. Investing is no different – there are times (like the 800-point drop on Tuesday) where you become frustrated and ready to throw in the towel. Other times, like the first half of 2017, everything is going smoothly, and you feel great.

     

    Stopping and starting while running a distance only makes it harder to complete the race. With investing, getting in and out of the market is a sure way to undermine your investment performance. Running too fast or running too slow will also hurt your chances of completing a marathon. Similarly, if your investment allocation is too aggressive or too conservative, you will not achieve the investment results you desire.

     

    With running, you really never know how that next mile will feel. Is something going to start to hurt? Are you going to be able to maintain your pace? Same with investing – we can’t predict the future. We can run the race, we can make sure our allocation is what it needs to be, and we can maintain consistency in our approach. Those are the things we can control. Beyond that is everything we can’t control. Of course, this is where the media comes in to highlight all those things that are simply beyond our control – effectively making things seem much worse than they ever actually are.

     

    There have certainly been some tough miles in the market of late. The two main issues impacting the market are trade and interest rates. While I wish there was some magic and immediate resolution to these issues, it appears they will create much volatility in the weeks and months ahead. So, if you check your balances regularly, be sure to have a solid supply of antacid!

     

    A new trade deal with China or a Federal Reserve simply slowing down its increases in interest rates would have a significant positive affect on the market. Last week, with mere comments by the Federal Reserve Chairman and a dinner meeting between the U.S. and China, the markets gained 1,250 points. This is the unpredictable nature of the markets and headlines in the short-term.  These headlines will pass just as they always do – we just don’t know when. Once resolved, the markets will continue on the same upward trend they have been on for the past 80 years.

     

    In 2019, consumer and corporate spending and sentiment may very well carry the day over these trade and interest rate concerns. Regardless of how these issues play out, we believe our primary focus on large companies with a good balance between growth and value will produce the best possible results for your investment marathon.

     

    We hope you have a Merry Christmas and a blessed New Year!

  • Third Quarter Update!

    Dear Friends,

     

    As the kids go back to school, the world finds itself on a bit of a playground see-saw between economic growth and interest rates. Global economic growth is at the highest level since 2011. Across the world, manufacturing, consumer sentiment and business capital spending are largely on the upswing. Overall global growth is expected to hit 3.9%. This economic tailwind has produced stellar corporate earnings growth of over 20% for 2018.

     

    However, this heightened economic growth is pushing central banks around the world to tighten interest rates. Since the financial crisis of 2008, world banks have engaged in an ultra-low interest rate policy that has helped spur economic growth. The policy pivot to tightening interest rates (along with any trade skirmishes) could produce a headwind to the current favorable conditions.

     

    We believe that ultimately economic growth and corporate earnings will prevail in 2018 as central banks appear to be operating quite conservatively in their tightening efforts. However, any accelerated move in interest rates or a full-blown trade war could disrupt the current cycle. The market results so far in 2018 seem to reflect this ongoing back and forth with some months being good and others not. Despite this, the overall market performance is positive with returns of about 3-5% so far this year. We expect this pattern to continue for the rest of the year which will likely keep returns for the year in the more moderate range of 6-8%.

  • Halfway Through – Taking Stock!

    Dear Friends,

    As we start the second half of 2018, the U.S economy appears poised for continued growth. The tax cuts enacted at the end of 2017 and an increase in federal spending approved in February appear to be adding economic momentum. In fact, these policies are expected to add about $285 billion in fiscal stimulus to the U.S. economy this year.

    Meanwhile, corporate earnings are at new highs – up over 25% from a year ago for the average large blue-chip company. This represents the seventh straight quarter of profit growth and the strongest gains in many years. These same companies are now starting to spend money on factories, equipment and other capital goods. In the first quarter of this year, these capital expenditures totaled over $167 billion – the fastest pace in seven years.

    However, this continued growth does spark one area of potential economic concern. When increased spending occurs with very low unemployment, inflation starts to appear. In fact, one key inflation measure watched by the Federal Reserve hit the central bank’s target in May after running below it every month for six years. If inflation starts rising too fast, the Federal Reserve will be forced to raise rates at a much faster pace as well and this could lead to economic difficulties as borrowing money becomes more expensive.

    Headlines, of course, can also throw the markets and economies off. Chief among these is the current discussion about tariffs which could have a negative effect on the earnings of large multi-national companies. We suspect that this political discussion is just a very boisterous negotiating tactic given the current administration’s pattern of behavior but a protracted trade battle would certainly have negative economic consequences.

    These trade headline concerns have kept market returns somewhat muted so far this year. Your second quarter statements that you will get in the next week or two will show just slightly positive returns for the second quarter. For the year so far, overall returns are on the order of about 2-3%.

    Interestingly, these returns so far appear to be following the typical pattern of Presidential mid-term election years. In the months ahead, politics will certainly dominate the headlines. In the previous 14 mid-term election years (going back to 1962), the markets have experienced a sell-off early in the year and on average end the first three quarters essentially flat. However, as the election results become clearer, the markets rally in the fourth quarter – averaging an increase of 7.5% in the last quarter.

    Given the strength of current earnings and capital spending, we are optimistic that this pattern will repeat itself for 2018 and the year will end quite positive for investment results. Stay tuned! That is easier to do these days than ever before as we have dramatically expanded the platforms you can use to listen to our latest weekly broadcast. Our radio show “Dollars and Sense” provides an opportunity to hear our up-to-date thoughts and perspectives. The show is broadcast live on 102.5 FM/540 AM every Sunday at 9AM and then distributed out to various on-line platforms on Monday morning. Links to the most popular channels are below so be sure to subscribe to our channel on your favorite social media platform and you will be automatically notified of our new shows.

     

    iTunes  https://itunes.apple.com/us/podcast/dollars-sense-with-joel-garris-j-d-cfp/id1388059834?mt=2

    Google Play https://plus.google.com/+Nelsonfinancialplanning

    YouTube https://www.youtube.com/channel/UCMkUy7pgh5x0jzAYwdUx9og

    Facebook https://www.facebook.com/NelsonFinancialPlanning/

     

    If we have not yet visited with you in 2018, the summer time is a great opportunity so don’t hesitate to contact the office to schedule a conversation.

     

     

  • May Flowers and Volatility Showers Plus our 34th Anniversary

    Dear Friends,

    With a third of the year behind us, the calendar shifts to spring (well actually summer here in Florida). So far, 2018 has shown a NORMAL level of volatility.

    Is it really a NORMAL level of volatility? Well, consider this. In the first quarter of this year, the S&P500 experienced daily moves of more than 1% on 23 days. However, over the past 60 years, nine other years (or 15% of the time) experienced similar levels of daily volatility. If something happens 15% of the time, it certainly doesn’t make it abnormal . . .

    In those years where volatility was higher in the first quarter, the remaining three quarters also had higher volatility with their being an average total of 86 such 1% days for those years. However, the good news for those years was that the average total return was 9.6%! The current economic back drop appears poised to replicate a positive return as well, particularly with corporate earnings currently running at an 18% annual growth rate.

    For some additional perspective, please review the attached article from American Funds. “Investing through Adversity” contains some valuable perspective and statistics. Please pay particular attention to the third page which helps to put bull and bear markets into perspective.

    34 years ago today, Jack Nelson started this company. Certainly a lot of headlines and markets ups and downs have occurred over that time period! For reference though, the DOW was at 1186 on May 1, 1984. The fundamentals of investing like diversification and consistency remain as true today as they were in 1984. It has been a privilege to help so many achieve their hopes and dreams and we look forward to many more years to come.

    Our client appreciation events are coming up in the next two weeks. The May 15 event still has space available so if you have not yet sent in your RSVP please contact the office today as we need to set a guaranteed number by tomorrow.  We are currently in the process of securing dates for our 3rd & 4th quarter client meetings so stay tuned for those exact meeting dates.

    With tax season behind us, there are plenty of opportunities to schedule a conversation so give us a call to schedule something particularly if we have not visited yet in 2018.

  • March 20 Meeting Reminder and 2018 So Far

    Dear Friends,

     

    Mid-March already! Here’s how I know time flies – I make my second parental trip to the DMV with one of my sons next week. Now I will have two male teenage drivers in my house – I appreciate your prayers!!!

     

    The markets in 2018 have had the consistency of a teenager. January fantastic; February terrible; and March to be determined. Much of this behavior is simply a part of being an investor – markets are inherently volatile and the only way to achieve investment results over time is to be consistent. Today marks the anniversary of the market low from the housing bubble. On March 9, 2009, the Dow closed at 6,547 – a far cry from where it sits today. Now, take a moment and think of all the headlines that were major distractions along the way – terrorism, hurricanes, government shutdowns, and a European debt crisis to name just a few.

     

    The economic backdrop continues to remain quite strong. The earnings season that just ended produced an average corporate earnings increase of 15% from a year ago. Across the globe, 144 of the 148 individual country economies are projected to grow this year. There are always reasons to be concerned – chief among them today are tariffs, trade wars and a Federal Reserve that raises interest rates too quickly – but in balance we remain optimistic about the road ahead.

     

    Our next client dinner meeting is approaching on Tuesday, March 20. Bill Cass of Putnam Investments will be providing a 2018 Outlook.  The event starts at 5:30 at the Country Club of Orlando, 1601 Country Club Drive, Orlando, FL. Please be aware that the Country Club is now enforcing its dress code – not permitted are short shorts, tank tops, sweatshirts, baseball caps, cutoffs and collarless T-shirts. Sorry, these aren’t my rules . . .

     

    It is tax time at the office so we are preparing 2017 returns and projecting taxes for 2018. The general trend for 2017 is higher taxes due to better market results. Fortunately in 2018 tax rates do go down but most that itemize their deductions will find themselves taking the new (and higher) standard deduction amount in the future. Please contact us if you need any assistance in preparing your tax return this year.

     

    Look forward to seeing you on March 20.

  • Recent Volatility – Some Perspective

    Dear Friends,

     

    Well, as we mentioned in our January 12 letter and our December 27 and November 22 emails, we thought volatility would return to the markets in 2018 and it certainly has!

     

    Over the past 80 years, short term volatility – the kind that produces short lived declines of 5-10% (much like what is currently happening) – occurs about three times each year. These types of declines are often emotionally driven (particularly this week) but are typically followed by equally quick recoveries. 2017 in fact was abnormal because there wasn’t much volatility. Just one week ago the markets were in their longest stretch without at least a 3% decline.

     

    Nothing has changed in the economic landscape over the past week to suggest there is something bigger at work. In fact, corporate profits are growing at 13% from a year ago; consumer spending is up on the strength of average payroll increases of 3%; and yet to come are the positive impacts of the tax cuts for 2018.

     

    Bottom line, sit tight and don’t get too caught up in the headlines – history suggests this is just a normal part of the behavior of the markets.

     

    Our client meeting earlier this week featured a 2018 Outlook. The outlook for the road ahead continues to look good with the global economy recovering and interest rates remaining low on a historical basis. The discussion revolved around a handout which can be found at https://www.capitalgroup.com/ca/pdf/en/public/2018_Outlook.pdf. Feel free to review this document and either send us an email or call the office at 407-629-6477 with any questions.

     

    If you missed this last meeting, be sure to mark your calendar for our next one on Tuesday, March 20. This is a dinner meeting at the Country Club of Orlando and our featured speaker is Bill Cass of Putnam Investments.

     

    Tax time is upon us and we already are scheduling final reviews of completed tax returns. If we have previously prepared your taxes, please forward us as soon as possible the information noted in the personalized Tax Organizer we mailed you a couple of weeks ago. If you would like to take advantage of our tax preparation service, please contact us.

     

    The start of the year is always a good time for a review so if you have not been in to see us lately feel free to contact the office to schedule a conversation.

     

  • Another Year Passes…

    Dear Friends,

     

    Time Flies! In a year of hyperbole, that may be the biggest understatement!

     

    2017 produced three major surprises. First and foremost, of course was the performance of the overall stock market. My “Fearless Forecast” – a tongue in cheek exercise our founder Jack Nelson started decades ago on the Sunday radio program “Dollars & Sense” that I continue to host – was not nearly this optimistic with my DOW prediction for 2017 at a mere 23,000! Needless to say, our consistent investment approach that utilizes predominantly large blue-chip companies generated us all very good investment results this year.

     

    Second, there was very little volatility in achieving this performance. In fact, 2017 is on track to be the first year ever in which the S&P 500 will have a perfect record of no negative months.

     

    Third, there was a significant Christmas gift to all in the form of large tax cuts. Regardless of what you may have heard in the media, this tax cut unequivocally puts more money in your pocket. To be determined, of course, is its effect on the deficit and future generations. I am glad we all don’t run our personal finances the way the federal government operates!

     

    I have no doubt that 2018 will have its share of surprises as well. There are always headlines – new and old – that will be dissected thoroughly and whenever possible stoked to create maximum fear. I suspect 2018 will have more short-term headline driven market volatility than 2017 – it can’t help but not given the perfect record of 2017! The obvious volatile example is North Korea which continues to smolder. The less than obvious example is the task in front of the Federal Reserve as they try to increase interest rates while monitoring the proper growth level for an economy that shifted into a higher gear in 2017. Their task, along with many other central banks, of continuing to unwind the post-2008 financial response is a daunting one at best.

     

    However, we believe that the economic trends that started to accelerate in the second half of 2017 will carry over to 2018. 2018 would be hard-pressed to match the performance of 2017, but the year should be a decent one for investors as consumers start to spend more, corporate profits continue to increase, and the immediate effects of the tax cut spur further economic activity.

     

    Be sure to listen to my radio show “Dollars and Sense” this coming Sunday at 9AM on 540 AM/102.5 FM for my official “Fearless Forecast” for 2018. If you miss the show on Sunday, it will be posted to Facebook, Twitter, Linked In and our website www.NelsonFinancialPlanning.com.

     

    The start of a new year begins anew our series of regular client meetings at the Country Club of Orlando located at 1601 Country Club Drive in Orlando. Our February 6, 2018 dinner meeting at 5:30PM features a return of Joe Valencia from American Funds. This should be an informative way to start the year off as Joe will be providing a 2018 Outlook. Bill Cass of Putnam Investments returns for our March 20, 2018 dinner meeting at 5:30PM. This will be a timely discussion as well featuring both a current tax and economic analysis.

     

    Please be sure to RSVP to these events either by email or contacting the office at 407-629-6477 to reserve your space. Feel free to invite your friends to these meetings as well!

     

    The start of a new year also means that tax season is around the corner. The recent tax cut only affects 2018 returns and beyond so your upcoming returns should follow the same pattern of the prior year return. In our usual mid-January letter, we will include a special Top 10 Tax Changes for 2018 to help you begin to prepare for these sweeping tax changes.

     

    Enjoy the New Year’s Holiday and I look forward to seeing you in 2018!

  • A Quick Recap Before the Holidays

    There are many things we are thankful for this year – paramount among them is the nice returns to date in 2017!

    The year has been surprising not only in the magnitude of the market increase but in the absence of volatility so far. The amount of the increase is partially making up for the absence of significant market improvement in 2015 and 2016. Of course, the greater contributing factor to this increase is the global economic upswing occurring across nearly all of the world’s major economies. This upswing has led to improved corporate profits particularly in large multi-national companies that are predominant in the funds you own. In fact, these types of companies have experienced two consecutive quarters of double digit profit growth.

    Meanwhile, this market increase has been extraordinarily smooth. However, some level of short-term volatility (the type that produces declines of 5-10%) is normal and to be expected simply by being an owner of large blue chip companies. This short-term volatility is normally headline driven and occurs over a span of weeks. Longer term volatility (the type that produces declines of 20-25%) is directly connected to a downturn in economic activity which is clearly not where the current economic trends are pointing. These trends from employment and manufacturing data to business and consumer confidence remain quite positive. The global economy is certainly improving but still not in top gear. Consequently, we remain optimistic about market returns in 2018 but with a healthy perspective on the realities of short-term headline driven volatility.

    The ending of a year means that tax season and our 2018 client events will be upon us shortly. Time will tell what tax changes will occur for 2018 and beyond. The dueling House and Senate tax proposals don’t provide a clear direction at this point. For the current year, there are no major tax changes so we would expect tax returns to be similar to prior years. The only exception would be that capital gain distributions are expected to be slightly larger than past years which would increase the tax implications on non-retirement accounts.

    Please mark your calendar for Tuesday, February 6, which will be our first client meeting of 2018. This will be a dinner event at the Country Club of Orlando and Joe Valencia from the American Funds will provide a 2018 Outlook. Look for more details on this event in our letter mailing in early January.

    The end of the year is always a good time for a review so if you have not been in to see us lately, please call the office to set up a conversation.

  • 3rd Quarter Commentary

    Dear Friends,

    We trust you all survived Hurricane Irma last week. The office was out of power for a day before resuming normal operations. It is so sad to see the pictures and hear the stories about the devastation in the Keys and the Caribbean. The forces of nature are powerful indeed!

    Meanwhile, the markets continue to shrug off any negative news and move higher. Your third quarter statements which you will get in a couple of weeks are on pace to show another 2-3% increase for the most recent three month period. For the year so far, domestic equity funds are up over 12% while international funds are up over 20%.

    There are some real economic fundamentals that are helping to drive this upward trend and provide the basis for our continued optimism. First, the major economies of the world are expanding in unison for the first time since the 2008 financial crisis. Second, inflation remains subdued keeping both the Federal Reserve and the European Central Bank on the sidelines to leave interest rates unchanged. Third, the U.S. economy is not over leveraged as there has been minimal credit growth over the past 10 years; and the U.S. financial system is better capitalized than it has been in years. Fourth, the stock market is not being driven upward by investor euphoria as $737 billion has been pulled out of equity strategies since the 2008 financial crisis.

    Our client meeting next week will focus on the overall economic picture and discuss the importance of the active investment management that happens in each fund you own with us. Our typical client portfolio consisting of 8-10 funds which hold about 1,200-1,500 different publicly traded companies. During the course of the year approximately 300-400 of those companies will be sold and other companies bought. This very active investment approach generates superior long-term results.

    Brad Rutan of MFS Investments will be our guest speaker at the event on Wednesday, September 27. As usual, the event starts at 5:30 at the Country Club of Orlando (1601 Country Club Drive, Orlando, FL) and features dinner and drinks. If you have not yet reserved your space at this meeting or would like to bring a friend, please call the office at 407-629-6477 or reply to this email.

    On another note, many of you have asked us how to respond to the widely reported data breach by Equifax, one of the three credit monitoring agencies. We discussed this topic this past Sunday on the radio show (“Dollars & Sense” Sundays 9-10 AM on 102.5 FM/540 AM) and you can listen to the show on Facebook via this link https://www.facebook.com/NelsonFinancialPlanning/posts/1944460429170427 . You can also refer to the information put out by the Federal Trade Commission at https://www.consumer.ftc.gov/blog/2017/09/equifax-data-breach-what-do .

    I followed the steps outlined by the FTC to find out that I may have been affected by the data breach at Equifax so I subscribed to the free credit monitoring service. Another option is to place a credit freeze or fraud alert on your credit. The fraud alert is not quite as cumbersome as the freeze when seeking credit in the future so I prefer the fraud alert unless there has been a specific incidence of identity theft. Protecting your information is of the utmost priority here at the office and we recently upgraded our firewall to the best available option on the market. We certainly live in a different and vastly electronic era these days!

    If you have not been in to see us lately, please call the office to arrange a review. Thank you as always for your continued confidence and the referral of your friends to us! Look forward to seeing you on the 27 th .

  • AdvisoryHQ Review of Nelson Financial Planning