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.
Stocks posted their worst returns since 2008 last year. Most of the damage occurred in the fourth quarter when stocks dropped 13.5%. This was the 12th worst quarterly performance since the Great Depression.
The stock market declined by 4.4% in 2018. It was the first year stocks posted a loss since 2008. The S&P 500 rose 20% in 2017, 12% in 2016, and more than 13% annualized over the last decade. Yet, a one-year decline of 4% has caused all sorts of consternation. I admit that the peak-to-trough loss was much larger (17.5% so far), and the fourth quarter was one of the worst on record (down 13.5% in just three months).
They say all the world loves a clown. That may be true, but one thing I know that is even truer is that all the world currently hates alternative investments.
Interestingly, cash was the best performing asset class in 2018, earning 1.8%. That’s a pretty meager return, but it was better than losing money in stocks or breaking even in bonds.
Prince, or the artist formerly known as Prince, or whatever his name ultimately was, made headlines throughout his life for his talent and eccentricities. However, the headlines after his death in 2016 revolved around the fact that he died with an estimated $200 million estate and no documents in place to guide its disposition.
The diversification of an investment portfolio has been described as the one “free lunch” in the investment world. That is because holding a portfo¬lio of assets with unique risk and return characteristics can result in higher long-term returns and a lower risk profile.
October has come and gone, which is likely a relief for investors. October gets a bad rap when it comes to the stock market, and perhaps deservedly so: It was October of 1929 when the slide into the Great Depression began in earnest with a 20 percent dip in the stock market. It was also October, in 1987, when Black Monday resulted in the stock market falling over 20 percent in a single day. October of 2008 saw stocks decline 17 percent.
The third quarter of 2018 was a mixed bag for investors. Stocks, at least domestic stocks, performed admirably. The S&P 500 rose 7.7% in the quarter and is now up 10.6% year-to-date. Small-cap stocks have performed even better so far this year, rising 14.5%.
The mid-term elections are right around the corner. That means that the phone is ringing with questions about how the elections could impact the stock market. Generally, we prefer to keep politics and investing separate, but we grudgingly accept that they can influence one another in the short run.
October 1st was our ten-year anniversary. It is true that Armbruster Capital was incorporated a little over nine years ago. However, Mark started working at our predecessor firm, and building what would become Armbruster Capital, a decade ago.
Where is the US economy headed?
Recent news coverage about an inverted yield curve, potential trade wars, and troubles in emerging markets have created some unease.
Mark Armbruster, CFA. Where is the US economy headed? Recent news coverage about an inverted yield curve, potential trade wars,
The stock market achieved an all-time high in late January, but then saw a subsequent drop of more than 10 percent. Since then, it has vacillated wildly, reacting to strong economic news, yet also showing signs of concern. The Fed has been raising short-term interest rates, and volatility has returned in earnest. This has set up a “Tale of Two Markets” scenario, which is making investors question if they should get out of stocks altogether.
While it may come as a surprise, the second quarter of 2018 was actually quite strong for stock investors. The S&P 500 rose 3.4%, mid-cap stocks gained 4.3%, and small-cap stocks returned almost 9.0%. Even REITs rebounded in the quarter for a gain of 7.8%.
Certainly, we’re in a divided age currently where the glass could look half full or half empty depending on which side of the political aisle you sit. Unfortunately, that has been true for some time now. The same dynamic is also at play in the stock market.
The SEC recently approved two new rules: (1) the adoption of new FINRA Rule 2165 (Financial Exploitation of Specified Adults) to permit members to place temporary holds on disbursements of funds or securities from the accounts of customers where there is a reasonable belief of financial exploitation of these customers; and
Small-cap value stocks have been uniquely poor performers recently. They posted strong returns in 2016, but otherwise, each of the past seven years small-cap value stocks have either significantly lagged or just barely beaten large-cap growth stocks.
Mark Armbruster, CFA. I read another article recently that warned of an impending market downturn and cited Nobel laureate Robert J.
Volatility has returned. While stock market returns were truly remarkable in 2017, the good times only continued into late January of this year. Since then, the market declined more than 8% from its peak into the end of the quarter. However, the downturn isn’t the real story.
We started using the Stone Ridge Alternative Lending fund (LENDX) roughly a year and a half ago. It has returned around 6% annualized since we started investing, which is in-line with our long-term expectations for alternative investments.
Small-cap value stocks have been uniquely poor performers recently. They posted strong returns in 2016, but otherwise, each of the past seven years small-cap value stocks have either significantly lagged or just barely beat large-cap growth stocks.
Stock and bond market investors watch with trepidation as the Federal Reserve Board determines how much to raise interest rates this year. The Fed has already taken short-term interest rates from roughly zero percent to a target of 1.50 percent to 1.75 percent, and promises further hikes throughout 2018.
Mark Armbruster, CFA. The stock market’s valuation recently surpassed its 1929 peak, and the S&P 500 now trades near the
Perhaps no financial product is more controversial than annuities. At best, an annuity is an insurance offering that provides a guaranteed stream of income that you cannot outlive. At worst, it is a high-cost way to earn subpar investment returns.
With both stock and bond market valuations at lofty levels, many investors are starting to wonder if they will be able to continue to earn the types of returns they have enjoyed over the past nine years. Continued gains in the stock market would push valuations to potentially dangerous levels, and bond yields aren’t that far north of zero currently.
With the exception of Donald Trump and Bitcoin, stock market valuations seem to be making the most headlines these days.
Index investing was much in the news in 2017. An article in the Wall Street Journal in late November noted that U.S. index funds have seen cash inflows of around $1.7 trillion since 2009, compared with outflows of nearly $1 trillion for actively-managed mutual funds. Another article noted that investors had collectively invested $436.5 billion this year into index funds globally through December 20, according to EPFR Global.
While 2017 was a great year for stocks, it was mediocre for alternative investments. The benchmark index we often look at, the HFRI Fund-Weighted Composite Index, earned 8.5% last year. While that isn’t too bad, our alternative investments did not produce returns in that range.
With the new technology we implemented last year, we have been able to offer clients a portal to log into their accounts to run various detailed reports on their portfolios. We believe this has been a great success.
1.$18,500 maximum salary deferral to a 401(k) or 403(b) plan (up $500 from 2017).
We are in a highly regulated business, which causes a few headaches, but is largely a good thing that offers our clients important protections. There are certain disclosures we are required to make regularly regarding our policies and procedures. A few of them are
As of this writing, cybercurrency Bitcoin has appreciated in value in excess of 1,500 percent so far this year. That makes it one of the best performing investments ever, even when considering tulip bulbs in 1636, stock in the South Sea Company in 1720, and internet stocks in the late 1990s. Most of the academic studies written on financial markets start with a few basic premises: investors are rational, they want to maximize returns, and they want to minimize risk. Is it possible that the move in Bitcoin is a rational response to new data that has emerged over the course of the past year? Probably not. Bitcoin remains largely the same from a structural standpoint today as it did a year ago.
Today, socially responsible investing, or SRI, accounts for around 25 percent of all managed assets in the U.S. The percentage is even higher in Europe and is rising fast in parts of Asia. SRI investing can take many forms, but the most popular is negative screening. That means excluding companies that participate in undesirable activities, such as the manufacture of tobacco products, weapons or fossil fuels. However…
Most of us have seen the recent headlines about the stock market hitting new highs. By some measures, stocks now trade at valuation levels only seen twice before: in 1929 and in 1999. If you recall, the aftermath of those periods was not terribly profitable for investors.
The third quarter of 2017 was one of continued political strife at home, missile launches and increasing tension in Asia, several devastating natural disasters, and efforts by the Federal Reserve to slow the economy. In the face of that, the stock market rose to record highs.
By now, everyone is aware of the massive data breach at Equifax. Something like 143 million Americans had their personal information exposed in the hack. That effectively means that every American adult was impacted. You can check to see if you are on the list here: www.equifaxsecurity2017.com. I’ll bet you are.
Our alternative investment portfolio was looking pretty good through August of this year. All of the funds except one were in the black, and returns were on track for around a 6% gain. Then September hit.
What if someone told you that there was more upside in the market from today’s levels? What if they said it could rise 4,445% from here?
As hard as it may be to believe, yearend is just around the corner, and that means it is time to think about tax planning. This year, it seems that year-end tax planning is facing a perfect storm of unknowns.
We may have announced it before, but we recently updated our website. There are a host of resources there, including electronic versions of all our newsletters, articles, and even a few videos. We try to send most of this to you directly, but there are a few items that you likely missed.
What happened? On 9/7/2017 Equifax announced a massive personal data breach potentially impacting approximately 143 million United States consumers. The
Mark Armbruster, CFA. The stock market hates uncertainty, and there is plenty of uncertainty with respect to the tensions over
The rally in investment assets continued in the second quarter of 2017. All major asset classes earned positive returns for the quarter, and most have posted very strong returns year-to-date.
We’ve been getting a lot of questions about our alternative investments recently, so we thought we would introduce a new, at least quasi-regular, column in our newsletter focusing on this asset class. We’ll talk this time about why we use alternative investments, but in the future, we’ll do a deeper review of some of the funds.
We recently added a new team member. Craig Julien joined us in early June to help us with our systems, operations, and IT. Craig has a couple decades of experience in the IT industry, most recently with the accounting firm EFPR Group. Accordingly, Craig knows firsthand about data security and the importance of confidentiality in the financial industry. He’s already done a great job of tweaking our systems so they are more efficient and user friendly, and we’re looking forward to some enhancements that will make electronic account access easier for our clients as well.
Several years ago, I worked with an investment adviser who did not like to show investment performance to his clients. In fact, he never even calculated returns for his managed accounts. He really had no idea or interest in how he was performing, and certainly did not want his clients questioning him about their returns.
Back in 1970, Edwin Starr released a recording of the song “War.” The notable lyrics, “war/what is it good for/ absolutely nothing,” have been quoted often in the 40 years since. However, contrary to Starr’s lines, it turns out there may be one thing that war is indeed good for: the stock market.
Last year was a year of surprises. Sure the Chicago Cubs won the World Series for the first time in 108 years, Brad Pitt and Angelina Jolie announced that they are dissolving their marriage, but I’m talking about more interesting topics, like those that impacted the capital markets.
Standard & Poor’s recently released its biannual study of mutual fund performance. S&P looks at the performance of actively-managed mutual funds versus appropriate stock market indices to see if the funds, as a group, added value for their investors.
The first quarter of 2017 was a solid one for stock investors. Large-cap stocks rose over 6.0% in the quarter, as measured by the returns of the S&P 500 index. Historically, election years and the first year of a Presidential term are the strongest for stocks, and 2017 is shaping up to follow the historic pattern.
It is conference season, which means we’ve been on the road lately meeting with fund companies and hearing about their latest research. One point that virtually everyone is making these days is that traditional asset classes (stocks and bonds) are richly valued, and likely won’t generate the same level of returns in the future that we have experienced historically.
Portfolio Review The financial markets were a mixed bag in 2016. Despite early volatility, stocks ended the year on a
I come to praise active management, not to bury it. Active management has been much maligned recently, including in this column, because of the increasing dominance of index investing over active stock picking.
Indeed, according to estimates from Morningstar, actively managed U.S. stock funds have seen outflows of over $185 billion so far this year. By comparison, U.S. stock market index funds have attracted almost $125 billion in new assets. What’s driving this disparity?
The index fund recently celebrated its 40th birthday. The Vanguard 500 Index Fund, the very first indexed mutual fund, began on Aug. 31, 1976. That might not seem like such a big deal, but consider that during a typical 10-year period, roughly half of all stock mutual funds close their doors. Merely surviving for 40 years is quite a feat, but the fact that the Vanguard 500 Index Fund is now among the largest mutual funds in the world makes it all the more impressive.
In fact, of the 25 largest mutual funds, all but 10 are index funds. Of the 10 non-index funds on the list, only six are actively managed.
Portfolio Review Investment returns in the third quarter were strong and rewarded risk taking. Looking at the U.S. stock market,
By Murray Coleman September 7, 2016 Mark Armbruster speaks with Murray Coleman on how with low-interest rates and high correlations of other
The year 1993 was a pivotal one in the entertainment world. The TV show “Friends” began filming that year and soon became a runaway success. The show launched Jennifer Aniston into mega-celebrity status. Because of her newfound fame, she came into contact with other A-list celebrities, and ultimately she married Brad Pitt.
Portfolio Review The stock market performed quite well in the second quarter, earning 2.5%. This is surprising, because had the
REIT Valuations at All Time Highs Real estate investment trusts (REITs) are stocks that invest in real estate and mortgages.
Here’s a depressing thought: The expected net-of-fee, real return from a balanced portfolio of stocks and bonds is around 1.7 percent annually over the coming decade. Of course, that assumes you don’t pay taxes. If you do, the expected return is less. A recent study by consulting and research firm McKinsey Global Institute raised exactly this issue (though their numbers were a bit different), suggesting investors need to get used to lower returns. Others have made the same case.
What do a rutabaga and a turnip have in common with your investments? Quite a lot, as it turns out.
For the past hundred years or so, as agricultural science progressed and found new ways to grow food more efficiently via the use of chemicals, a small organic food movement has persisted. Proponents of the movement argued that chemically or genetically adulterated food was unhealthy and potentially dangerous.
We Shall Overcomb “If voting made any difference they wouldn’t let us do it.” - Mark Twain You may not
The Year in Review Investment returns in 2015 were not as bad as in 2008. That is the only positive
Don’t throw in the towel; you can navigate volatility On Aug. 24, the Dow Jones Industrial Average fell more than 1,000 points within the day. This sort of volatility is what makes investors nervous—and question their commitment to their long-term investment strategies. Selling out of the market during downturns, however, is one of the most damaging actions an investor can take.
Portfolio Review As evidenced by the chart below, the third quarter was nothing short of awful for investors. Practically every
Imagine: You are ill and go to your doctor for help. Unbeknownst to you, your doctor is on the payroll of a pharmaceutical firm, and he gets a cut of all the sales he makes of a particular drug. You describe your symptoms, and the doctor prescribes medication.
Portfolio Review Despite some volatility, the stock market was performing reasonably well in the second quarter. That is right up
Many organizations view retirement plans as a necessary evil. These plans may help attract and retain talent, but they can also be expensive, time-consuming, and difficult to monitor and administer. As a result, corporate retirement plans are often ignored by those who oversee them.
Income-producing investments, bonds producing a lot of interest income and stocks paying large dividends have been on a tear over the last few years.
With yields on bonds falling to all-time lows, investors seeking income from their portfolios have been turning to master limited partnerships, real estate investment trusts, junk bonds and stocks with large dividend yields.
A Forecast for Volatility Those who regularly make forecasts of the economy, stock market and interest rates are typically wrong.
Portfolio Review The good news is that the stock market had a strong year in 2014. The S&P 500
Year end is right around the corner—a time when a young man’s fancy lightly turns to thoughts of, well, tax planning.
For most of us, the thought of tax planning is enough to either make us glaze over in a daze of boredom and confusion or send us screaming for the exits as we wait for the annual fleecing by the tax man.
Question: What do you call an economist with a forecast? Answer: Wrong. We are constantly inundated with forecasts from “the experts.” This is true not only from economists but also from political pundits, Fed watchers, stock market strategists and other prognosticators.
What to do if the Stock Market Corrects Lately, volatility seems to have returned to the stock market. It is
Are Stocks Overvalued and Ready to Correct? We have fielded a lot of questions lately about the level of the
The world is full of investment pornography. This is a term coined by a mutual fund marketing executive I know to describe misleading claims in the investment industry. One such claim is that smart, hard-working investment managers with cutting-edge technology can outperform the market by actively trading stocks or other investments. Although it seems intuitive that this approach would produce positive results, the evidence indicates differently.
Given the length of the current stock market rally and the level stock market valuations have reached, there is a large and growing consensus that the next downturn is right around the corner.
Many believe that rather than just a modest decline, the next downturn will be another sharp, painful correction, similar to what we experienced in 2008.
Is the stock market overvalued and ready to crash?
I have fielded a lot of questions lately on just that topic. Typically, investors get uneasy when the stock market declines in value. However, with visions of 2008 still in our heads, many investors are increasingly nervous as stocks continue to make new highs.
Individual investors make bad decisions. That is the conclusion of a recent study, showing that 401(k) plan investors are increasingly tilting their accounts toward stocks although stock market valuations have risen significantly.
With winter finally winding down and the holidays squarely behind us, I’d like to say something very Grinchy: It is actually better to receive than to give. This may sound like blasphemy, particularly in Rochester, a city renowned for its philanthropy. But I’m not talking about charitable giving. I’m talking about your investment portfolio.
Capital Markets Review The first quarter of 2014 was generally solid for most segments of the capital markets. Domestic
I ’ve said it before: No one likes bonds. They’re boring, they don’t have much opportunity to appreciate in value, they can be rather complicated and their income is generally subject to unfavorable tax rates.
The third quarter of 2013 started out on a positive note, with strong gains in the stock market during July.
Mark Armbruster, CFA. I believe, but cannot prove, that true alpha does not exist for individual investors. There are too
It may be blasphemy, but I’m going to say it anyway: I don’t like dividends.
It is difficult to open an investment magazine or newspaper these days without seeing an article on the merits of generating investment income. The main argument usually is that since the largest part of our population is at or nearing retirement, investors will need to begin drawing income from their investments to meet their living expenses.
Despite overhyped fears that the Fiscal Cliff and subsequent budget sequester would derail economic growth, send us headlong into another recession,
Mark Armbruster, CFA. The investment management industry is based on the premise that smart, hard-working managers with cutting-edge technology can