Time to check your financial and emotional resources

After 2018’s roller coaster ride through the financial markets, the New Year presents an excellent opportunity to take stock of your retirement plan and maybe reallocate a resource or two. Portfolio managers commonly reallocate accounts by shifting investments based on both technical and fundamental indicators and retirement timelines. They do this throughout the year in an effort to find a prudent balance of safety and growth. But, a fresh year also offers inspiration to analyze your emotional resources and distribute them appropriately as well. If you haven’t taken a risk tolerance test in a while, now would be a good time to do that. Any investor’s ability to withstand market volatility can be affected by many variables including age, income level, budget, retirement timeline, personality and family situation. A person confident in his or her ability to absorb risk might view a steep market decline as a buying opportunity and a necessary correction of a healthy market, while another person might look at the exact same numbers and want to flee the equity market entirely in favor of cash and/or treasuries. The financial conundrum we all face is that both reactions could be correct. The age old admonishment to sell down to your sleeping point means a different alarm clock for every investor. Nervous investors with a strict retirement timetable tend to choose the slickest clock with the loudest alarm, while those who have a looser timeline and a mellower attitude might even sleep in. The point is, you have to ask yourself what type of investor you are. If volatility keeps you up at night and you’re willing to forego growth opportunities to lessen the likelihood of losing money, you may want to stick to cash or bonds. (Of course, with that choice you face another kind of risk, inflation, in which you could end up losing value in your accounts because they aren’t earning enough to keep up… | Read More »

Several factors support an optimistic view of 2018

As stocks markets around the globe soared on accelerating corporate profits and strong economic growth, 2017 turned out to be a stellar year for investors.  It was the third best showing for the U.S. stock market since the 2008 financial crisis, with only 2009 and 2013 having higher average returns.  What was different about 2017, though, was that the prodigious stock market returns were, for the first time since 2008, attended by strong underlying economic fundamentals.  Fourth quarter earnings won’t be reported for a few weeks, but based on the first three quarters, together with Wall Street’s best estimates for this quarter, earnings growth for the 500 companies that comprise the S&P 500 are expected to be about 10 percent for the full year.  That would be the best earnings growth we’ve seen since 2011. During the slow, arduous crawl out of the global recession corporations managed to grow their earnings, primarily, by cutting costs and reorganizing their business models.  But in 2017 businesses finally saw a sustained pickup in demand, both at the consumer level and in business-to-business transactions.  As economic activity accelerated during the year we began to see in the financial press a new phrase that, by December, had become the defining theme of 2017.  That phrase is: synchronized global growth. Europe, Japan, China and emerging market economies such as Brazil, India and the Pacific Rim have all experienced some of the highest GDP rates in a decade, creating a virtuous cycle of growth that has provided an extra boost to the U.S. economy. Consider that somewhere between 30 to 38 percent of revenue generated by the largest corporations in America comes from these foreign countries. All indications are that this “synchronized global growth” should continue well into 2018.  Indeed, the latest Purchasing Managers Index for Europe showed “robust intakes of new business” that “tested capacity.”  As current capacity gets squeezed, businesses likely will have to invest… | Read More »