The stock market has had a stellar first half of the year. But that’s only true if you were in the right part of the market. The overall US stock market gained 17% so far this year. International stocks were up a solid, but much lower 12%. US small-cap stocks were up only 6%. And deep value stocks rose a paltry 1%. It was the proverbial tale of two markets. The best of times for some, but not so much for others.
Is it possible to have too much money? The answer is yes if the subject is estate taxes. Currently few of us have to worry about Federal estate taxes since the exemption is so high, but that is set to revert back to its former limit at the end of 2025. This means a reduction of approximately 50% from today’s generous level.
Reinsurance funds, those that invest in relatively obscure catastrophe bonds and quota shares, have provided uninspiring returns over much of the past decade. From 2014 to 2022, the Swiss Re Cat Bond Index, which measures the returns of the catastrophe bond market, returned an annualized 3.7%, far below its long-term average of 6.8%. However, the cat bond market got off to a hot start in 2023. It returned 10.5% in the first half of the year, which is the index’s strongest start to the year in over 20 years.
Stock market returns for the second quarter bear a striking resemblance to what occurred in the first quarter: US, international, and emerging market stocks were all positive, large-cap stocks outperformed their small-cap counterparts, developed international markets outpaced emerging markets, and most factor funds lagged behind the overall stock market. Technology, communications, and consumer discretionary sectors continued to lead the way by returning over 10% for the quarter and over 30% for the year-to-date period.
The price of gold has been moving upward, hitting a new one-year high this month. So, is now the time to ask – Should I invest in gold or look for a better long-term investment?
For the past several years, it has been impossible to get any sort of return on cash balances. The Fed Funds rate was literally zero for a while, and banks, money market funds, and CDs all paid close to zero percent interest on cash balances. You could leave money in your bank account because there wasn’t much opportunity cost.
However, that has changed over the past year as the Fed has aggressively raised short-term interest rates.
If the overall stock market falls from here, which we consider fairly likely, value and international stocks will probably also decline. However, their low valuations should help insulate them from severe declines, and we expect that they will outperform growth-oriented stocks. So, today may not be the day they ring the bell to signal the market bottom, but for certain market sectors, this will likely be an attractive buying opportunity when we look back from a decade in the future.
Gold has started to rise lately, and with inflation still running hot, we know conversations will shift to gold before
We are in a highly regulated business, which causes a few headaches, but also offers our clients important protections. There are certain disclosures that we are required to make regularly regarding our policies and procedures, including
Stock and bond markets enjoyed some relief to close out 2022 after dismal returns for most of the year. The S&P 500 gained 7.6% for the fourth quarter while the Bloomberg U.S. Aggregate Bond Index rose 1.9%. Despite the rebound, 2022 was one of the worst years for both bonds and the traditional 60% stock/40% bond portfolio in recent history.
Weak market periods and low investment returns.
2022 was a year of dramatic selloffs in both the stock and bond markets. Bonds, hit by extraordinary losses at a level not seen since 1842, failed to offset the stock market’s painful 18.1% decline.
While investors focus on recession, interest rates, and inflation, there may be a more concerning issue for the long-term investor. What if we are heading into an extended period of weak market returns?
In our latest InvestEd video, Mark Armbruster, CFA, and Chris Cebula, CPA, discuss the current economic environment and academic research to explore the possibility of persistent low returns and provide some ideas on portfolio resiliency in weak market periods.
The S&P 500 had its worst year since 2008 and bonds just wrapped up their worst year ever. However, inflation seems to have rolled over and employment remains robust. Has the market bottomed? Is the Fed going to pivot shortly? Are better days ahead for investors? Perhaps. But for truly long-term investors, it probably doesn’t matter.
Last year may not have been so great for the stock market, but it was a solid year for our firm. We were gratified to see our performance remain fairly strong, at least relative to the overall stock and bond markets. This was thanks largely to our data-driven approach that led us to value stocks, conservative bonds, and alternative investments, all of which performed admirably.
As most of you know, we tend toward the technical side of the investment business and aren’t so great at prospecting for new clients and selling. That results in slower growth and likely reduced revenue for our firm, but we’re quite happy focusing more on delivering a solid service than being an advisor to the masses. Even with moderate growth last year, we still finished up with around $700 million in client assets entrusted to us. We started out fourteen years ago as a very small firm and are now solidly mid-sized. I doubt we’ll ever be a behemoth, even in our local market, but we expect to continue to grow in measured fashion over the years.
Stock and bond markets enjoyed some relief to close out 2022 after dismal returns for most of the year. The S&P 500 gained 7.6% for the fourth quarter while the Bloomberg U.S. Aggregate Bond Index rose 1.9%. Despite the rebound, 2022 was one of the worst years for both bonds and the traditional 60% stock/40% bond portfolio in recent history.
Nancy Pelosi famously said we needed to pass Obamacare legislation so we could find out what is in the bill. Well, the SECURE Act 2.0 has now been passed, but there are still a lot of details that need to be fleshed out, likely by the Treasury Department in the coming years. Here’s what we know so far:
The SECURE Act 2.0 was approved by Congress and signed by President Biden in late December 2022 and is now officially law as of January 1, 2023. It is an extension of the SECURE Act of 2019 which was intended to help strengthen the retirement system and ensure participants’ financial readiness for retirement…
When will we see a return to a bull market in 2023? It might not be tomorrow but there may be signs of hope. There are reasons to be optimistic, including stock market valuations. The CAPE ratio currently stands at 28 for the overall U.S. stock market. It is still well ahead of the longer-term average of 17, but down considerably from its high of 38 late last year.
What if we are heading into an extended period of weak market returns? In our latest InvestEd video, Mark Armbruster, CFA, and Chris Cebula, CPA, discuss the current economic environment and academic research to explore the possibility of persistent low returns and provide some ideas on portfolio resiliency in weak market periods.
Over the past almost 15 years, diversification was a fool’s errand. Simply buying the largest, techiest, US-based stocks would have yielded the largest rewards. Why bother with small-cap stocks, international diversification, or Warren Buffett’s precious value stocks (what does that old coot know anyway)? FAANG stocks were all that were necessary to earn market-beating returns.
The field of economics is often referred to as the dismal science. Today’s environment certainly helps us understand that moniker. Inflation is running amok, interest rates are moving aggressively higher, stock and bond markets are both down considerably, and we may already be in a recession. It is not hard to paint a picture of more downside ahead. All eyes have been on the Fed lately to cure these problems.
Today, market sentiment is about as bad as it gets. The black line in the chart below shows how individuals and institutional investors feel about the prospects for the stock market. It is almost as low as it was in 2008. That is not terribly surprising given how both stocks and bonds have performed so far this year. However, sentiment tends to be a contrary indicator.
The stock market fell for a third consecutive quarter, adding to its losses for the year. After a slight rebound to start the quarter, gains reversed sharply in September as the S&P 500 fell by more than 9%, making it the worst month for the index since the Covid downturn of March 2020.
The first half of 2022 has been challenging for both stock and bond investors as persistently high inflation, anticipation of further Fed interest rate hikes, and negative GDP growth weighed on returns. The S&P 500 experienced its worst first half of the year since 1970, while bonds have experienced a loss of more than 10%.
Alternative investments, as we define them, include funds that focus on more esoteric strategies such as investments in catastrophe bonds, small private loans, currencies, commodities, private real estate, and may involve reasonable shorting or leverage. These are all things that sound risky.
We get asked a lot about long-term care insurance. It makes sense that this comes up so often. After all, the prospect of paying for nursing home care for many years and the damage that can do to your finances is scary.
The first quarter of 2022 was a challenging start to the New Year for investors. After falling into correction territory, the S&P 500 cut some of its losses late in the quarter to end the period down 4.6%. This marked the first time the index experienced a negative quarter since Q1 of 2020.
Just like the weather in Rochester, financial regulations are ever changing. Two recently proposed changes could upend your plan for drawing money from inherited IRAs and how you save in your 401(k) if they are approved later this year.
None of us thought we would live long enough to see our group of alternative investments reverse their multi-year slump, but it is finally happening. Our alternative investment portfolio has outperformed stocks and bonds so far this year and over the past twelve months.
We wrote an article for the CFA Institute back in 2013 on what has happened to the stock market during periods when America was at war. While we’re not technically at war today, we thought it would be interesting to revisit the data. The numbers from our original study are presented in the table below, but the punchline is that the stock market has generated returns above historical averages and with less risk during periods of war.
Investors are asking how to invest during inflation? There are economic experts who currently have strong opinions about inflation like Larry Summers and Nouriel Roubini, but even they can’t predict the future. So how can you protect your future investment returns in a high inflationary environment? In this ACM InvestED episode, we’re going to discuss inflation, which is currently at 40-year high. We’ll also talk about its potential impact on your investment portfolio, and how to react as an investor or perhaps why you shouldn’t overreact.
The fourth quarter of 2021 was a microcosm of 2021 as a whole. Many of the trends that we saw throughout the year continued into year end. The emergence of a new COVID variant contributed to reimposed restrictions, supply chains disruptions, and rising inflation. And, the stock market responded similarly to prior COVID scares: a knee-jerk reaction down followed immediately by a rally that culminated in new record highs. Other trends also continued as international stocks continued to trail their US counterparts despite more attractive valuation metrics, and bonds delivered another quarter of lackluster results.
It is well known that the stock and bond markets have generally gone up over time. Why else would anyone invest? Sure, there have been a few “speed bumps,” such as the Great Depression and the decade of 2000 when things didn’t work out so well (see nominal return graph), but generally investors have made money by being invested. But what happens when you factor in inflation?
A not so new New Year! Most of us planner types spent 2021 worrying about one thing or another. For some of us, a lot of frenetic energy was spent on the projected, proposed, and much debated financial changes that the President, and much of Congress, hoped would reboot a lot of well-established financial plans.
Another year has come and gone. In our business the New Year means lots of reporting. Certainly, clients like to know how the year went for their portfolios, and doing those meetings is the fun part of our jobs. However, the other type of reporting that we could do without is filing documents each year with the SEC and other regulators. Still, it forces us to look at our business and take stock of our progress.
In today’s market the riskiest investments seem to keep going up. Stocks sporting huge valuations like Tesla (TLSA) and Rivian (RIVN), cryptocurrencies like Bitcoin (BTC), and SPACs garner a lot of attention, and they have made a lot of money. However, historically this type of investing has ultimately resulted in steep losses. Stock market valuations and fundamentals still matter, even though they may seem quaint at times.
In our latest VidCast, Mark Armbruster, CFA discusses current market valuation, possible expectations for future returns, and why valuation is still very relevant.
I’m not really a sports guy, but a famous Wayne Gretzky quote keeps rising to the top of my mind: “I skate to where the puck is going to be, not where it has been.” Hackneyed? Yes. Insightful? Also yes. And, a particularly apt warning for stock and bond investors for today’s shifting economic environment.
Stock market returns were effectively flat for the third quarter. July and August experienced fairly strong returns, but losses in September weighed on full quarter results. Mid-cap and small-cap stocks were slightly negative this quarter, but strong performance in the first half of the year has still provided attractive year-to-date returns.
Despite a weak September, the stock market has generally fared well of late. Returns have been strong year-to-date, and over pretty much any trailing period. There have certainly been bumps in the road, such as the COVID correction in March of 2020, but the last major disruption was thirteen years ago in 2008. While rising stocks are generally good, there can be too much of a good thing. We may be getting to that point, and the same may be true for the bond market.
Social Security is a topic that is sure to arouse emotions. The “entitlement” nature of it bothers some folks. Some just don’t like the thought of not working and surrendering their retirement security to the government. Others don’t believe it will be around since the Social Security Trust Fund is basically broke. Also, deciding when to take Social Security involves some uncomfortable topics, such as life expectancy. However, Social Security is really a good thing that should be part of a deliberate retirement income strategy. Spoiler alert: it will be there for you when you need it.
Our latest InvestEd Vidcast discusses the current economic environment and thoughts about inflation, economist Nouriel Roubini and stagflation, and Larry Summer’s secular stagnation. While somewhat mutually exclusive, all three are possible in the coming years. None appear to be too rosy for investors and the stock market. We discuss each scenario and how to invest through what could be a challenging economic cycle.
Investments returns were solid across all asset classes in the second quarter, as economic growth continued to rebound from last year’s pandemic. U.S. stocks, international stocks, alternative investments, and bonds all generated positive returns.
There has been quite a bit of activity lately for one of our alternative funds, and we thought it would make sense to provide an update.
The Stone Ridge Alternative Lending Risk Premium Fund (LENDX) buys small consumer, business, and student loans. It does this through on-line lending platforms like Lending Club, Square, Sofi, and others. These loans are made to high quality borrowers with average FICO scores above 700. The interest rates on these loans are relatively high, as they are generally too small to be of interest to traditional lenders, such as banks.
Traditional retirement savings largely takes place within company-sponsored retirement plans, such as a 401(k) plan. The premise is simple: put money away directly from your paycheck and save money on taxes. However, for those with unique tax circumstances, Roth 401(k) plans are also available. The idea is the same as with a traditional 401(k), except that you don’t get a tax deduction when you make the contribution, and the money grows tax free thereafter and may be withdrawn tax free during retirement.
What do SPACs , NFTs, cryptocurrency , shortsqueeze, meme stocks, and WD-40 have in common? What could Bitcoin (BTC), Dogecoin (DOGE), or even Shiba Inu (SHIB) and household brand WD-40 possibly have in common? Join Mark Armbruster, CFA and Christopher Cebula, CPA in the latest ACM InvestEd VidCast to find out.
There are worrisome signs about inflation these days, but it is impossible to know for sure if it is coming. It is also very hard to hedge and can be costly if you are wrong. What about inflation protection by holding real assets such as commodities, gold, inflation-protected bonds or even real estate? Should we accept that inflation will be part of the investment experience, even if it causes some short-term disruptions? Join Mark Armbruster, CFA and Chris Cebula as they discuss the GDP, US debt, housing and consumer prices, and investing in times of inflation in the latest from the ACM InvestEd VidCast Series.
The first quarter of 2021 was a solid one for stock investors, but not so great if you own bonds. However, for both stocks and bonds it was a period of transition, reversing trends that have been in place for many years.
There is a lot of talk of impending inflation lately. Massive amounts of government stimulus during the pandemic have resulted in the largest rise in money supply on record, and the current administration promises far more in the future. Similar measures have been taken overseas, resulting in unprecedented global liquidity. Lots of money in the system, along with the reopening economy, will create a lot of demand for goods and services.
Some elements of the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act have been extended into 2021. On the positive side, individuals who do not itemize deductions on their tax returns can still claim the $300 universal charitable deduction that was part of the original CARES act. Even better, the 2021 extension has doubled the amount to $600 for couples who file their tax returns jointly.
We are in a highly regulated business, which causes a few headaches, but also offers our clients important protections. There are certain disclosures that we are required to make regularly regarding our policies and procedures, including
Factor investing is an investment approach that is deeply rooted in academic research. Using factors in investment portfolios can help dampen volatility, improve diversification and investment results. Join Armbruster Capital’s Mark Armbruster, CFA and special guest, Alex Botte CFA, CAIA from Two Sigma, as they discuss the attributes of factor investing in the latest from the ACM InvestEd VidCast Series. Learn what a factor is, how it relates to portfolio risk, and how it can improve portfolio construction. Warning – we got a little carried away and went over our typical ten minutes or less threshold.
The Dow will rise to 40,000 in the next 12 months. That’s not so much a forecast as it is a warning. Sure, a rising stock market may sound exciting, but too much of a good thing can pose eventual problems. And, if history is any guide, a quick jump to 40,000 is very possible, but so is a subsequent correction that could take the Dow to 18,000.
Many are happy to see 2020 come to an end, but it was actually a pretty good year for investors. Just like every other aspect of life, the capital markets were a bit weird, but headline gains for both stocks and bonds were impressive.
Stocks are trading at all-time highs and stocks of unprofitable companies seem to earn the largest gains. Technology, momentum, and growth are the order of the day. Is bargain hunting in such an environment a fool’s errand?
To convert, or not to convert, that is the question. While Hamlet dithered over trivial questions about life and death, the consideration of how to optimize the tax efficiency of your IRA is far more interesting and important, but it can also be just as tricky.
Is the growth to value stock market rotation just around the corner? Among the hot IPOs and the soaring technology stocks, there are still some underappreciated segments of the stock market that can be bought at reasonable prices, and there’s no flashing blue light to point out these stocks, but there’s an opportunity that could protect capital and also generate significant returns in the decade to come and avoid another “Lost Decade” of portfolio performance. Learn about the “Blue Light Specials” in value stocks.
Quantitative factor analysis of ARKK ETF. In our latest ACM InvestEd VidCast we discuss the ARK Innovation Fund (ticker: ARKK) and it’s incredible price trajectory and increase in assets under management (AUM) during 2020. By examining factor exposures using the Fama French 5 factor model, Mark Armbruster, CFA and guest John Lyon, CFA try to break down Cathie Wood’s ARKK secret sauce, determine the drivers of the fund’s current rock star status, and what the future might hold.
2020 Election vs the Stock Market – The question on everyone’s mind: How will the 2020 presidential election outcome impact investors and the stock market. Join us as Mark Armbruster, CFA & Chris Cebula, CPA discuss the subject – Regardless of who wins the election, should investors be concerned?
The stock market’s movements so far this year can best be described as weird. That may not be an apt technical definition, but there’s no better way to put it.
The stock market dropped 35% in 31 days, and then recovered all of its losses just five months later. The S&P 500 is now close to its all-time high, which was reached in early September, post-Covid.
As we enter the final quarter of 2020 many of us start to think of year-end charitable giving. Despite a difficult year for the economy and wild stock market swings, preliminary data from Fidelity and Giving USA suggest that Americans have stepped up their philanthropy, increasing donations by almost 16% so far in 2020. Perhaps that should not be surprising, as it turns out America is the most generous nation when it comes to charitable giving. Per Philanthropy Roundtable, annual private philanthropy in the U.S. represents almost 1.44% of GDP This is twice as high as the 0.77% recorded in Canada, nearly three times as high as the U.K.’s 0.54%, and in stark contrast to China’s 0.03%.
Vice President Joe Biden says the coming election is a “battle for the soul of the nation.” President Donald Trump has declared this the “most important election in U.S. history.” Perhaps. Or perhaps the nation’s deep partisan divide is just the way the world goes ‘round. Maybe, as John Prine suggests, we’re extrapolating out the worst-case scenarios because that is human nature.
The COVID-19 pandemic resulted in a government-forced shutdown of much of the economy, and subsequently, very large government stimulus packages from nations worldwide. This has amounted to trillions of dollars being pumped into the economy, including $6 trillion in the U.S. alone. Worse, this comes on the heels of massive government spending to help bail out the economy after the 2008 financial crisis, much of which is still sloshing around the global economy.
Many economists fear all this excess liquidity will result in rapid inflation in the years to come. Popular wisdom suggests that gold is a reliable hedge against inflation, and the price of gold has indeed risen recently. We’ve recently fielded a number of questions about gold investments. In our latest ACM VidCast, Mark Armbruster, CFA & Christopher Cebula, CPA, take a look at the merits of gold investments.
Here’s today’s dirty little secret that no one wants to talk about: your investment portfolio is likely underperforming the market this year. Worse, you are probably lagging behind school-aged day traders on the new Robinhood trading app.
ACM InvestEd – When Proven Strategies Aren’t Working – A Lesson from Warren Buffett – September 2020
Here’s today’s dirty little secret that no one wants to talk about: Like Warren Buffett, your investment portfolio is likely underperforming the market this year. Worse, you are probably lagging behind school-aged day traders on Robinhood. Why is that?
What do Sir Isaac Newton and the Kodak (KODK) traders on the Robinhood platform have in common? Join us as we explore the power of investor emotions and the fear of missing out (FOMO) over the commonsense of investment fundamentals.
Apple reported their quarterly earnings last week, and as part of the announcement, they declared a 4-for-1 stock split to be effective August 31st of this year. What does this mean for investors?
In today’s ultra-low interest rate environment, it’s tempting for investors to take additional risk to generate the income they need from their portfolios. While that may seem like a rational response to today’s economic realities, there are too many pitfalls with this approach, and focusing on…
The second quarter was marked by a global pandemic, a largely paralyzed global economy, racial tensions that boiled over into violence, heightened political discord, record jobless claims with 40 million people unemployed, continuing business failures, geopolitical tensions with Hong Kong largely being subsumed by China, locusts in India and Pakistan that could result in famine, and even murder hornets in the pacific northwest. So, of course, the stock market rose, posting its best quarterly performance in over 20 years.
Making and saving money is hard. Perhaps that is why human beings are wired to look for bargains. We’re constantly looking for sales, coupons, rebates, and discounts. It feels better to know you didn’t overpay for something.
When the CARES Act was signed into law on March 27th it suspended Required Minimum Distributions (RMDs) from Individual Retirement Accounts (IRAs) for 2020. It also allowed account holders to redeposit any prior distributions up to 60 days from the date of withdrawal. This was good news for many, as it potentially meant a lower tax bill for 2020 since there could be less reportable income.
Investment performance needs to be put into context to be truly meaningful. For example, assume you earned a 10% return over some period. Is that good? It seems so at first, but what if all your neighbors got returns of 11%? Or, what if the overall stock market was up 15%? The same return can look different under different assumptions.
Our newest team member is Kim O’Brien. Kim will be helping with reception, account maintenance, cashiering requests, and other service-related duties.
’ve seen a lot of craziness. Just five stocks now account for over 20% of the entire market value of the S&P 500. There’s irrational trading in stocks of bankrupt companies. There’s a lot of highly speculative trading going on by uninformed investors. Interestingly, these are all hallmarks of the 1990s as well when…
The golden age of fixed income is over. That means we have to rethink portfolio management and risk control. The days when investors could rely on traditional bonds as safe, income-producing securities that hedge equity risk and deliver returns that keep pace with inflation are …
The golden age of fixed income is over. The days when investors could rely on traditional bonds as safe, income-producing securities that hedge equity risk and deliver returns that keep pace with inflation are finished. While it may not have felt like it, long-term investors had it pretty easy over the last 90-plus years.
Behind the scenes at ACM – We firmly believe that management and custody should always be separated as a safeguard for clients. Many of you may recall Bernie Madoff, who ran one of the biggest Ponzi schemes in investment history…
We’re here today to discuss value investing and what could turn out to be a once in a lifetime opportunity for investors. Value investing is simply trying to buy stocks that are cheap relative to their intrinsic value. Tesla is clearly a growth stock with accelerating sales and growing market share…
The core promise underlying active management is that smart, hard-working investment managers with cutting-edge technology can outperform the overall stock market by actively buying and selling stocks or other investments. Although it seems intuitive that this approach would produce positive results, the evidence indicates…
We’ve been thinking lately about inflation. It hasn’t been a big factor in the economy in many years, but the topic seems relevant lately with all the government stimulus programs that have recently been announced…
We just finished up the most volatile quarter ever for the stock market. The Dow Jones Industrial Average is currently down 24% from its high, but it is also 20% above its recent low, which I think…
The song “Mr. Bojangles” is a staple on radio stations that feature songs from the 1970s, even though it was written in 1968. Most of us have heard the popular version, by the Nitty Gritty Dirt Band, which hit No. 9 on the Billboard charts. However, the original version by upstate New York native Jerry Jeff Walker is still relatively obscure.
Our discussion of the capital markets for the first quarter could be quite brief: it was bad. However, there are some interesting sound bites worth noting:
Factor-based investing, or what has become known as “Smart Beta” is a strategy that has been prevalent in academic and larger institutional realms for many years. However, it is just recently trickling down to the investment advisor and retail investor world.
Relief for some is on the way. As during most times of economic stress, our elected officials are racing to roll out multiple programs to help reduce the financial impact to businesses and individuals. Here are a few provisions that have been put into action that may be of help.
Last year was a good one for our firm. We wrote previously about adding Steve Sheflin to our investment team. We’ll likely add another capable body or two in the coming year, and are already interviewing to support our growth.
We are in a highly regulated business, which causes a few headaches, but regulations are largely good; they offer our clients important protections. There are certain disclosures that we are required to make regularly regarding our policies and procedures.
The S&P 500 rose 32% for 2019. Looking at data back to 1926, that was the 18th best year for the stock market, placing it in the top 20% of annual gains. However, that understates the actual achievement, as many of the better years occurred during or in the wake of the Great Depression when stocks fell and rose wildly.
On December 20th, the President signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The law is intended to increase retirement savings by expanding investment options and changing some of the qualified account rules. The SECURE Act may help some savers, but it comes with some negative consequences for estate planning and inheritors. Let’s look at how some of the changes affect you.
Last year was a good one for our firm. We wrote previously about adding Steve Sheflin to our investment team. We’ll likely add another capable body or two in the coming year, and are already interviewing to support our growth.
The third quarter was mediocre in terms of investment returns. Large-cap stocks in the U.S. were up 1.7%, but most other stocks lost money. Bonds actually outpaced stocks in the third quarter, with a gain of 2.3%. Real estate was the bigger winner, earning 7.3% as investors sought out more stable segments of the stock market. See full investment returns for the quarter and year-to-date in the nearby chart.
As the days grow short and foliage begins to change, our thoughts naturally are drawn to year-end financial planning. Maxing out contributions to 401(k) or IRA accounts (2019 limit is $19,000, plus $6,000 catch-up), making sure your beneficiaries are up to date on your accounts, and satisfying your Required Minimum Distributions (RMDs) if you are over age 70.5, are popular items to consider. However, a few lesser known topics are also worthy of consideration:
We are excited to announce that Steve Sheflin is our new Chief Investment Officer. We’re also proud that Colby Feane was recently named as a 2019 Forty Under 40 honoree by the Rochester Business Journal.
The share of 401(k) assets invested in index funds has risen from 17 percent in 2006 to 33 percent in 2016, a recent report from financial data firm Brightscope and the Investment Company Institute shows. While that is impressive growth, the share of retirement assets in index funds should be much larger, probably close to 100 percent.
The second quarter was another strong period for stocks, and surprisingly strong for bonds. Large-cap stocks, as represented by the S&P 500, led the way with a gain of 4.3%. Mid-cap, small-cap, and international stocks all generated respectable returns, but lagged the S&P 500.
A year and a half ago, we wrote articles on how the economy could continue to grow for three more years and the stock market could increase 30% from March 2018. We based our stock market forecast on valuations, despite the fact that many thought stocks were already overvalued.
A year and a half ago, we wrote articles on how the economy could continue to grow for three more years and the stock market could increase 30% from March 2018. We based our stock market forecast on valuations, despite the fact that many thought stocks were already overvalued.
Most investors have a mix of stocks and bonds in their portfolios. Stocks are there for long-term growth, whereas bonds are generally purchased for stability and income generation. This has worked out pretty well historically, as stock returns averaged over 10 percent annually since the 1920s, and bonds have yielded over 5 percent, according to Ibbotson data. A balanced portfolio of 60 percent in stocks and 40 percent in bonds has become the de facto standard for many investment portfolios, as the returns have been substantial enough to meet most investors’ returns, while keeping risk in check.
In a recent interview with CNBC, famed investor Warren Buffett marveled at the current economic environment. He not¬ed that unemployment is at multi-decade lows and the federal budget deficit is at an all-time high, yet inflation and interest rates are historically low. No economics textbook, in Buffett’s estimation, could have predicted such an environment.
The current economic expansion is now 117 months old. Looking at data that goes back to 1854, this is just shy of the record 120-month expansion that occurred from 1991 to 2001. It seems likely we’ll soon exceed the prior record, but how long can the economy continue to grow, and how long can the stock market continue its associated bull run?
Lately, the stock market has been a lot like the weather in Rochester, NY. If you don’t like it, you only have to wait three months for things to radically change. The fourth quarter of last year was one of the worst since the Great Depression. But we didn’t have to wait long for redemption. It arrived early this year, with a 13.6% gain in the first quarter (see market segment returns in the nearby graph).
Perhaps the fiercest advocate for the individual investor and shareholder rights ever to walk the planet died during the first quarter: John C. Bogle, who preferred to be called Jack by his legion of friends, founder of the Vanguard Group. Jack was best known for launching the first index mutual fund in 1976. This new approach to investing would ultimately revolutionalize the entire industry
We are in a highly regulated business, which causes a few headaches, but regulations are largely good; they offer our clients important protections. There are certain disclosures that we are required to make regularly regarding our policies and procedures.