Four reasons we’re still cautious about the market

After posting negative returns in the months of December, January, and February, we have experienced a significant counter-trend rally in the stock market since mid-February.  The bulls are reading this as a sign that the seven-year long bull market has regained its footing.  We are not as confident in that assessment and see this as a mini run-up in the broader context of an overall bearish market.  This fall we wrote a post about why, at the 2,100 level on the S&P 500, we were cautious.  Since then, we had a deep correction in the stock market followed by a sharp rally that takes us to today’s level of approximately 2,050.  While the market is a bit lower than the 2,100 level where we initially blogged about key market risks, we reiterate our cautious view and hesitancy in chasing the short term upside volatility in the stock market.  This brief list of fundamentally-based facts illustrates the reasons for our continued cautious stance towards the stock market: Stocks are expensive – the S&P 500 is currently trading at a lofty 16.7x price to earnings multiple. This compares to the 10-year average multiple of 14.0x. Sales growth and earnings growth are negative (we are in a revenue and earnings recession). Corporate America just finished reporting calendar year’s 2015 fourth quarter results.  Companies provided guidance for Q1 2016 and the outlook is not very enticing. The S&P 500 is forecast to post year-over-year sales growth of negative .8% in the first quarter of 2016. The S&P 500 is forecast to post year-over-year earnings per share growth of negative 8.3% in the first quarter of 2016. Profit margins have peaked and are starting to decline. Total debt to total capitalization (financial leverage) is starting to increase. It is clear that the fundamental data is contradicting the short term rally we have seen in the stock market.  It is hard to be bullish when sales… | Read More »

When your fiduciary is your friend

As I have mentioned before, one of the greatest blessings of a long career in this field is that my clients become my friends. With this and all great blessings comes a deeper responsibility: I want to do right by my friends. Last week I had a meeting with a friend who has been a client for nearly 40 years. We have seen each other through many of life’s sweetest and most challenging moments – the college graduations and marriages of our children, the deaths of our spouses. Through those times I supported my friend the same way you support your friends – I sent and received cards of congratulations and condolence, I attended and hosted both heart lifting parties and heart breaking funerals. But, as her financial advisor, I also remained keenly aware of our fiduciary relationship. Together, we set goals and designed a plan to achieve them. We allocated her resources in a way that we hoped would both protect her and allow her to achieve her investment and legacy planning goals. When her husband unexpectedly lost his job at a paper mill, we met immediately and they left my office assured that they would be okay financially. Given their age and risk tolerance, we positioned their retirement account with an eye towards growth and a baseline of protection in an annuity. We tweaked that allocation through the years as their risk tolerance changed, and took a close look at it years later when her husband died unexpectedly. So last week, we reminisced about all we had been through and how well we had worked together. That small annuity we purchased in 1990 will provide her with an income stream through 2020. Because of the tweaks we made when her husband passed away, she has other sources of protected income that she can turn on in 2020. Meanwhile, her investment portfolios continue to grow. It’s especially sweet when… | Read More »

Top nine reasons to fund an HSA

For the past three years, I have gotten a notice from my healthcare provider that the policy I carry will no longer be available to me in the New Year.  Each year I find myself with a more expensive policy that provides me with less coverage.  But now, thanks to a savvy tip, I’ve figured out how to make my finances and healthcare work with each other.  How, you ask?  Three simple, sweet letters:  H S A. I am in a high-deductible health plan (HDHP).  My HDHP policy requires me to pay a deductible of $2,800.  As it turns out, as long as I have a minimum deductible of $1250 as a single person or a $2,500 minimum deductible for a family policy (which will be $1300 and $2600, respectively, for 2016), then I qualify for an HSA (Health Savings Account). An HSA allows a person or a family with a HDHP (high deductible health plan) to put aside tax free money that can be used to pay deductibles and other qualified healthcare expenses and won’t poof away into nothing if it isn’t used!  What a concept!  That just seems too good to be true! I have compiled a list of some important things to know regarding HSAs.  These are the top nine reasons my HSA is my new best friend: My HSA is tax deductible off of my gross income, which is awesome, and could even lower my tax bracket. My HSA resembles my Roth IRA since my principle grows tax free BUT, in addition, I get the fantastic benefit of receiving a current tax deduction. (NOTE: HSAs have contribution limits. For 2015, an individual may contribute up to $3,350; for a family, that amount is $6,650. People over 55 may add another $1,000 per year as a catch-up contribution). I can even have my HSA account managed by investment professionals to maximize its growth potential. If I don’t… | Read More »

Celebrating International Women’s Day with chocolate and goals #OneDayIWill

With a CEO who has proven by her innovation and drive that girls can grow up and thrive in any industry, even those still dominated by men, we here at Winch Financial recognize the power of women every day. Still, we’re happy to set aside some time today to join the world in celebrating International Women’s Day by nibbling a little chocolate, toasting optimism and acknowledging both the struggles and triumphs of our global sisterhood. With 14 female employees at Winch Financial, ranging from just starting out to retirement, we came up with a wide variety of responses to today’s Google hashtag, #OneDayIwill. One day I will: Miss all of the things that drive me crazy: wiping dirty faces, picking up toys, reminding my kids to get their chores and homework done, what to cook for dinner…there are endless things, but I know when my kids are grown I will miss doing all of them! Find where all those lost socks and missing Tupperware container tops went! Giggle about all the little things in life that made me feel crazy, sad or mad and see the good things that came from it.  I am a better and stronger person because them. Find a really good balance between work and play!  Work can be rewarding on many levels, but you also have to balance that with plenty of fun activities.  There is a great big world out there, and I am hoping see a whole lot of it. “Retire” but not completely.  I enjoy my profession and will continue as long as I can. Travel the country and visit each of the 50 states. Rule the world. Become an internationally celebrated author…and a grandma. Finally see that all the puzzle pieces really do fit together. Learn to dance. Do mission work. Visit the Northeast coast driving from Maine to NYC. Inspire people toward greater health by teaching them the joy of… | Read More »

If you think you might need a Roth, you probably do

Roth IRAs are a little like breath mints – if you think you might need one, you probably do. And, like mints, they offer refreshing relief from common irritants, like taxes, which can leave a sour taste in your mouth and a big hole in your retirement portfolio. Here’s how the Roth IRA works and why nearly everyone who qualifies, especially younger investors, should open one now. The money you invest in a Roth IRA grows tax free. Consider the implications of this short statement. The money you put in a Roth IRA is yours alone. The government has no claim on it and, after the account has been opened for five years, you can withdraw those contributions at any time with no taxes and no penalties. None, which means… You won’t have to worry about pesky RMDs. Maybe you’re too young now to even wonder about Required Minimum Distributions, but you’ll worry about them plenty once you turn 70 ½ and have to make these yearly withdrawals and pay the requisite taxes on them from your traditional IRA. Do your older self a favor and start putting money in a Roth today. Then, you can sit back and watch it grow. The Roth allows you more freedom than an employer sponsored retirement plan like a 401(k), 403(b), SEP or Simple retirement account. You can contribute up to $5,500 annually to a Roth IRA if you earn less than the threshold set by the IRS. Unlike a 401(k), in which you’re limited to investments selected by your employer, a Roth allows you to choose from a wide range of investment options including stocks, bonds, certificates of deposit, mutual funds, exchange-traded funds and more. You can open a Roth no matter how young you are, as long as you have compensation income to contribute to it. You just can’t contribute more than you earn. Also, even though you can withdraw from… | Read More »