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  • 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%.

    Calculating Personal Finances 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 .

  • 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.

    Stock Market Improvement 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.

  • 35 Days & Counting and A Recap of 3rd Quarter

    The best part of the start of the fourth quarter this year is that means there are only 35 days left of listening to Donald and Hilliary insult each other. That’s the good news! Of course, the bad news is that we’ll have to listen to one of them for the next four years!

    The usual question we get in a Presidential election year is who’s better for the market? Last week’s post “Donkeys, Elephants, Bulls & Bears Oh My!” provides an in-depth analysis to that question. I wrote this article last week and posted it on Facebook and Twitter so be sure to follow us on those social media sites as well. Bottom line: the historical combination that produces the best market results is a divided government. Regardless of who wins the White House, I suspect that we will continue to have gridlock in Washington!

    The third quarter helped the markets get back on track for the year. Your quarterly statements that you will receive in the next week or so will show an overall gain of 4-6% for the quarter – all in the wake of Brexit. For the year so far the gains are about 7% which would put the year on track to be in line with long term historical market averages of 8-10%.

    Investment Strategies I still think there is a decent chance of being on the upper end of that range by the time the year ends because of continued low interest rates and gas prices which are encouraging consumer spending. Whenever I drive around the Winter Park area, I can clearly see this in the wait times at restaurants and the abundance of commercial construction projects.

    Against these obvious signs of improved consumption, there seems to be a continued and heightened sense of impending market decline. This negativity is often a contrarian indicator as bull markets typically turn south in euphoric moods not pessimistic ones. In fact, history confirms just that. According to Barron’s, when market prognosticators predict little or no gain, the S&P 500 has traded higher 12 months later 95% of the time, with an average gain of 11%. On the other hand, when strategists are at their most bullish, there is about a 50% chance of a market fall. In other words, be optimistic when the world is pessimistic.

    Our next client meeting is coming up on Saturday, October 29. This is our breakfast event and starts at 9:00AM at the Country Club of Orlando, 1601 Country Club Drive, Orlando, FL. David Hanna of the American Funds will be providing an overview of the year and a look ahead to 2017. David is always a dynamic speaker so be sure to attend this meeting. Please RSVP on our website or call the office at 407-629-6477. Feel free to invite your friends as well. Like the earlier meeting this fall, we will have some goodies available with our new name and logo so be sure to come.

    If we have not seen you lately, please be sure to visit with us before the year ends. In the meantime, don’t forget to listen to the radio show “Dollars and Sense” every Sunday at 9AM on Newsradio 1025 WFLA. The radio show is a great way to hear my latest thoughts and reactions to the day’s headlines. If you miss the radio show you can always catch it at your convenience on any one of the social medial channels we use – Linkedin, Facebook, Twitter, Goggle & Soundcloud. Just click on any of the icons after my name below and you’ll be connected to be added as a follower.

    Look forward to seeing you on the 29 th for breakfast.