• 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.

    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.

  • 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%.

    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 .

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  • Market Update

    Dear Friends,

    As President Trump marks his 100 th day in office tomorrow, we thought it would be a good time to take stock of where the markets, economy and headlines are.

    2017 is clearly off to a great start for the markets. So far, U.S. markets are up over 6% and non-U.S. markets are up over 8%. We believe that much of this movement is simply a catch up to the economic improvement in the second half of 2016. This better economic data had generally been underappreciated and underpriced by equity markets. The election, in and of itself, simply provided the resolution of some uncertainty that gave the markets an opportunity to focus on the better economic conditions at hand.

    Currently, we believe the markets are pricing in the expectation of additional economic growth. This expectation is predicated on a combination of diminished regulatory burdens on the private sector; lower personal and corporate tax rates; and fiscal stimulus in the form of infrastructure spending. Unfortunately, these pro-growth policies have been delayed by political wrangling. We are optimistic that these policies will take effect in the near term, but any further delays in implementation could splash some cold water on the markets.

    Despite this political uncertainty, the greater trend towards optimism cannot be ignored. Consumer and business confidence numbers are both at levels not seen for well over a decade. Of course, optimism can be fickle particularly if headline events like North Korea take a disastrous turn. Absent that type of event (which is always a risk in today’s world), we continue to expect that this optimism will lead to tangible effects like greater spending by households and greater hiring by corporations.

    Stock Market Strength Here at the office, another tax season has come and gone. If we have not yet visited with you personally in 2017, now is a perfect time to come in to the office for a general conversation. In other news, Nelson Financial Planning was recently ranked by AdvisoryHQ News as a top-rated financial advisory firm in Orlando, FL. We have attached their review to this email for your reference and to share with your friends.

    We are getting ready for our upcoming client appreciation event at Enzo’s on your choice of May 11 or May 16. We thank you for your timely response and selection of food and dates. We are very excited that the response to this event has been so strong. Both dates are currently on a wait list due to venue size restrictions so please let us know if your plans change.

    As always, for our latest thoughts, tune in to our weekly radio show “Dollars and Sense” at 9AM on Sunday at 540 AM/102.5 FM. The show is also available the following day on our website www.NelsonFinancialPlanning. com or on Facebook or Twitter under Nelson Financial Planning and Linked In under Joel Garris.

    Look forward to seeing you on either May 11 or May 16!

  • 21,000!?!? and March 28 Meeting

    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.

    Dow Jones 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 these results.

    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!

  • 2016 Recap & 2017 Outlook

    Dear Friends,

    From Brexit to Trump, 2016 produced unexpected results that made it a particularly difficult year to navigate. While our returns were positive for the year with overall results up about 7-8%, market performance particularly the Dow made headlines moving to the 20,000 level. Unfortunately, this performance was driven by a handful of companies which undermined our diversified approach in the short term.

    These concentrated results occurred in a handful of financial, healthcare and energy companies who saw their fortunes reverse dramatically on election night in anticipation of a looser regulatory environment under Trump. The broader markets in 2016 saw minimal earnings and revenue growth (0.1% and 2.2 % respectively) for businesses. Diversification – just like being consistent on your holdings – is a strategy that works well over time to reduce overall portfolio risk. While providing consistent returns, it is not 100% perfect all the time.

    2017 Stock Market Outlook It has been a while since we have seen this type of phenomena – 17 years in fact. In 1999, a handful of tech companies drove the market to new highs only to fall back to earth in 2000 and 2001. While I don’t believe we are in a 1999 scenario these days, there are certainly some parallels. Regardless, don’t be alarmed by your quarterly statement that you will get next week that will show minimal growth for the quarter. In addition, the international and bond portion of your allocations also worked to undermine the domestic performance. The silver lining there is that your investment allocations are lighter on those asset classes these days. Overall, the year was decent in terms of results and that’s our overall investment goal.

    Looking ahead to 2017, the consumer appears to be less pessimistic than in prior years based on the past few months of consumer confidence data. This is crucially important for broad economic and market growth as consumer spending accounts for 70% of our economy. In fact, corporate earnings are expected to grow by 12% for 2017 with top line revenue growth of 6%. Meanwhile the average consumer has less debt, more cash and has finally started to experience real wage growth (nearly 4% in 2016) for the first time in years. For these reasons, we are particularly positive for the overall market in 2017.

    2016 was a busy year at the office. Our main efforts involved a successful rebrand to Nelson Financial Planning along with continued efforts to ensure the cyber security of your information. We also became active on social media so be sure to follow us on Facebook, Twitter or Linked In. These outlets also provide an opportunity for broader dissemination of our weekly radio show “Dollars and Sense.” Hearing it live at 9 AM on Sunday at 102.5FM or 540AM can often conflict with church schedules but now it is always available the next day on our website at www.NelsonFinancialPlanning. com .

    Tax season and our client meetings for 2017 will start very soon. In fact, our first one is coming right up on January 19. This meeting will follow our usual dinner format starting at 5:30 at the Country Club of Orlando, 1601 Country Club Drive, Orlando, FL. Our speaker will be Joe Valencia from the American Funds. Joe’s 2017 Outlook presentation should make for an informative meeting. Please RSVP for you and your guests to this email or to the office at 407-629-6477.