Market Commentary – December 31, 2018

Investing during the month of December was like traversing an icy mountain stream. It delivered a staggering shock to the senses that triggered the instinct to, “Get Out!”
When it comes to investing, that instinct is called loss aversion. For many people avoiding a loss is more important than realizing a gain. Simply put, not losing $100 is more important than gaining $100.  Erica Goode of The New York Times talked with psychologists Daniel Kahneman and Amos Tversky about a series of experiments they had conducted to measure loss aversion. The pair found relatively few people would bet money on a flip of a coin unless they stood to win at least twice as much as they might lose. The desire to avoid losses is the reason many people sell stocks when the value of the stock market is declining. Unfortunately, it may be a poor choice for a variety of reasons. For example,

  • Downturns are temporary. The Schwab Center for Financial Research evaluated the performance of the Standard & Poor’s 500 Index since 1966 and found, “the average bull ran for more than four years, delivering an average return of nearly 140 percent. The average bear market lasted a little longer than a year, delivering an average loss of 34.7 percent.”

While past performance is no guarantee of future results, understanding the history of gains and losses in bull and bear markets is critical because it can help investors avoid potentially costly mistakes.

  • Markets rebound. Consider December 26. It was the best day for stocks in nearly a decade. The Dow Jones Industrial Average rose 1,000 points, posting its biggest daily gain in history.

Investors who were not invested in stocks missed an opportunity to participate in a market rebound. Despite significant gains late in the month, there is a chance this will be the worst December performance since 1931, reported MarketWatch.

  • Your long-term life and financial goals haven’t changed. Sometimes, investors have to traverse an icy stream, or muck across a muddy patch, as they move toward their goals. Your portfolio should be built to help you pursue specific life and financial goals. It may be well diversified to help moderate losses when you encounter challenging market conditions. Consequently, if your long-term goals have not changed, selling during a downturn could make it more difficult to reach your goals.

However, if you’re experiencing a high level of discomfort as the stock market fluctuates, it may be important for you to re-evaluate your risk tolerance and make any changes necessary to your asset allocation.

One of the most important aspects of our work as financial advisors has little to do with asset management or investment selection. It has everything to do with helping our clients make better financial decisions. We try to provide information and advice – coaching, if you will – that may help our clients avoid mistakes that may make it more difficult to achieve their goals. We also encourage clients to embrace choices which are likely to help them work toward their goals.

If you find yourself debating whether to hold your investments or sell them, please give us a call before you do anything. We welcome the opportunity to talk with you about what’s happening and offer some context which may help set your mind at ease.

If changes are necessary, we can help you identify options and weigh the pros and cons of each. Our goal is to help you work toward your goals.

synaptic pruning and habit stacking…If you have some New Year’s resolutions you would really like to keep then you may want to try habit stacking. It’s an idea that harnesses brainpower to help you achieve your goals.

Brains are powerful tools. They help us form connections and, when those connections are no longer used, our brains conduct synaptic pruning to get rid of the connections, according to James Clear author of Atomic Habits.

As a result, our brains are full of strong connections that support certain skills. That’s the good news. The bad news is, by a certain age, we’ve trimmed a lot of neurons, which can make it challenging to form new habits. Clear wrote,

“When it comes to building new habits, you can use the connectedness of behavior to your advantage. One of the best ways to build a new habit is to identify a current habit you already do each day and then stack your new behavior on top. This is called habit stacking… For example:

  • After I pour my cup of coffee each morning, I will meditate for one minute.
  • After I take off my work shoes, I will immediately change into my workout clothes.
  • After I sit down to dinner, I will say one thing I’m grateful for that happened today…”

Once you’ve mastered habit stacking, you can begin to form chains of habits. Imagine where that could take you!

Weekly Focus – Think About It
“Excellence is an art won by training and habituation: we do not act rightly because we have virtue or excellence, but we rather have these because we have acted rightly…”
–Will Durant, American philosopher

 Best regards,
John F. Reutemann, Jr., CLU, CFP®

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

 

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

* This newsletter and commentary expressed should not be construed as investment advice.
* There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95percent of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Sources:
[1] https://www.nytimes.com/2002/11/05/health/a-conversation-with-daniel-kahneman-on-profit-loss-and-the-mysteries-of-the-mind.html?pagewanted=all&src=pm&module=inline
[2] https://www.schwab.com/active-trader/insights/content/7-tips-weathering-bear-market
[3] https://www.cnbc.com/2018/12/26/us-futures-following-christmas-eve-plunge.html
[4] https://www.marketwatch.com/story/stock-market-ends-wild-week-in-negative-territory-as-dow-sp-500-set-for-worst-december-since-1931-2018-12-28
[5] https://jamesclear.com/habit-stacking
[6] http://blogs.umb.edu/quoteunquote/2012/05/08/its-a-much-more-effective-quotation-to-attribute-it-to-aristotle-rather-than-to-will-durant/

How Do You Celebrate the New Year?

From early Babylonians to present-day Americans, people have been celebrating the beginning of every New Year for almost four thousand years!1 Here are a few ways people celebrate the holiday in the United States:2

  • 61 percent of American adults say a prayer on New Year’s Eve
  • 44 percent plan to kiss someone at midnight
  • 22 percent fall asleep before the New Year arrives
  • 45 percent make resolutions to lose weight, spend less, save more, etc.
  • 73 percent keep their resolutions for less than two days

One million people gather in Times Square and 2,000 pounds of confetti fall on their heads. One billion people around the world watch festivities on television. Ushering in the New Year is a momentous event.2

In the United States, we usher in the New Year with champagne, Auld Lang Syne, and a midnight kiss to ensure that our affections will last throughout the year. Not everybody celebrates the way we do, though.

  • In England, the first person to cross your threshold in the New Year is your First Footer, or Lucky Bird, and will determine what kind of luck you’ll have throughout the year.
  • In India, Hindus celebrate the New Year four times each year to welcome each of the four seasons. During Diwali, children light mustard oil lamps to attract the Goddess of Fortune to their homes.
  • In France, the celebration lasts for a month. Friends exchange cards and enjoy Papillottes – chocolates or candies with wrappers that pop like firecrackers when they are opened.
  • In Denmark, people save china dishes to break on friends’ thresholds during the New Year. A pile of broken dishes outside your home on New Year’s Day is a good sign, showing that you have many friends.

If you have any momentous events in your life, please let us know. We want you to be secure financially as momentous changes can alter financial plans.

We wish you a Happy New Year!

Market Commentary – December 17, 2018

Ouch!
It never feels good when the stock market heads south, and that’s what happened last week. The Standard & Poor’s 500 Index (S&P 500), Dow Jones Industrial Average, and Nasdaq Composite all moved into correction territory, which means the indices have fallen 10 percent or more from their previous peaks.

If you look at corporate earnings, the decline in U.S. stock values may seem a bit of a head scratcher. During the third quarter of 2018, almost four-fifths (78 percent) of companies in the S&P 500 were more profitable than analysts expected, according to FactSet Insight. Earnings grew by 25.9 percent – the fastest growth rate since 2010.

When you remember the stock market is a leading indicator, the mystery is resolved. Share prices reflect what investors expect will happen in the future, and third quarter earnings are in the past.

So, what moved the market last week? Investors’ concerns included slowing global economic growth. Dave Shellock of Financial Times reported:
“World equities closed out the week on a soft note as disappointing economic reports out of China and the eurozone heightened concern over the outlook for global growth…the big focus was on China, where activity and spending data confirmed that the country’s economy had a dismal November.”

Monetary policy and geopolitical issues, including the possibility of a U.S. government shutdown and ongoing Brexit follies, contributed to investor pessimism. The American Association of Individual Investors Sentiment Survey showed a 17-point decline in bullish sentiment and an 18.4-point increase in bearish sentiment.

When stock markets leave you feeling like Santa dropped coal in your stocking, it may be helpful to remember the words of Warren Buffett, “Be fearful when others are greedy and greedy when others are fearful.”

When the holidays are just too much. Around the holidays, it’s easy to become stressed and overwhelmed. Psychology Today offered some suggestions that may help you stay merry and bright, no matter what the season brings.

  1. Don’t lose sight of what makes you happy. It’s easy to become obsessed with everything being perfect. If you find yourself snapping because the shopper next to you got the last one, the holiday light display is sagging, or the table isn’t set just right, take a deep breath. True happiness often is found in everyday routines and healthy relationships.
  2. Give thanks for what you have. This seems like a natural corollary to point number one. Instead of focusing on what’s not quite right, redirect your thinking. Sure, your great aunt’s stories are inappropriate, and the mashed potato incident wasn’t great, but there are some good moments, too. If you can, find time to write down the things for which you are grateful to have in your life. Then, review it as needed.
  3. Do nice things for other people. Not everyone has a warm coat, much less a warm home and a patience-trying holiday meal. Giving to others can help give meaning to the season. You could donate to a favorite charity, help out at a food pantry or a shelter, or visit elderly neighbors. One of the very best aspects of giving is that it can make us happier.
  4. Embrace experiences. If you want to have a memorable holiday, don’t buy lots of gifts. Give experiences. Happiness research suggests, “…happiness is derived from experiences, not things…when they are shared, experiences allow us to get closer to others in a way impossible with inanimate objects that we can buy,” reported Paul Ratner on BigThink.com.

 

Weekly Focus – Think About It
“…in Racine, Wisconsin: The Santa at [the mall] knows sign language. He signs with kids who are hearing impaired, so that he can ask them – and they can tell him – what they want for Christmas. Because the warm fuzzy feelings of the holidays don’t just come from getting the right present – they come from feeling like part of a loving, inclusive community.”
–MentalFloss.com

Best regards,
John F. Reutemann, Jr., CLU, CFP®

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

 

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* Consult your financial professional before making any investment decision.

* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Sources:
https://finance.yahoo.com/news/u-stock-market-officially-correction-001801781.html
https://www.investopedia.com/terms/c/correction.asp
https://insight.factset.com/earnings-insight-q318-by-the-numbers-infographic
https://www.investopedia.com/articles/economics/08/leading-economic-indicators.asp
https://www.ft.com/content/cb5ddff4-ff45-11e8-ac00-57a2a826423e
https://www.ft.com/content/1d218d08-ffb5-11e8-aebf-99e208d3e521
https://www.aaii.com/sentimentsurvey
https://www.goodreads.com/quotes/29255-be-fearful-when-others-are-greedy-and-greedy-when-others
https://www.psychologytoday.com/us/blog/the-mindful-self-express/201412/how-find-peace-and-happiness-holiday-season
https://bigthink.com/paul-ratner/want-happiness-buy-experiences-not-more-stuff
http://mentalfloss.com/article/90086/20-heartwarming-stories-will-brighten-your-holiday-season

2019 Tax & Financial Planning Guide

Keep up to date on what’s new for 2019. Check out our handy-dandy tax and financial guide! There were many tax changes made in the Tax Cuts and Jobs Act of 2017.  The House Committees and IRS have been navigating these changes for most of 2018.  Everyone will be impacted and everyone has questions about how these changes affect them.
Click here>>

Credit Freeze – You Should Think About It!

It’s been over a year since Equifax, one of the three largest credit reporting agencies in the U.S., revealed they’d been hacked. Because the hackers were able to access everything from Social Security numbers to payment histories to driver’s license numbers, the cyberattack put over 145 million Americans at risk of identity theft.1
What did you do to protect your data?

If you’re like most Americans, the answer is probably, “not much.” According to a survey by AARP, only 14% of adults chose to freeze their credit after the hack – even though freezing your credit is one of the best ways to prevent identity theft.2

One possible reason for this is that credit freezes have traditionally cost money. But now you can freeze your credit for free!
Thanks to the “Economic Growth, Regulatory Relief, and Consumer Protection Act,” a new law enacted in May, credit reporting bureaus like Equifax, TransUnion, and Experian must offer free credit freezes.3

SEC. 301. PROTECTING CONSUMERS’ CREDIT.
“(A) IN GENERAL.— Upon receiving a direct request from a consumer that a consumer reporting agency place a security freeze, and upon receiving proper identification from the consumer, the consumer reporting agency shall, free of charge, place the security freeze not later than…1 business day after receiving a request by telephone or electronic means…[or] 3 business days after a request that is by mail.”3
– Economic Growth, Regulatory Relief, and Consumer Protection Act

What is a credit freeze?
To calculate your credit, agencies like Equifax store important data like loan and payment history, birth dates, Social Security numbers, and more. Whenever you apply for a loan or approval on a credit card, banks and other lenders will request that information from a credit reporting agency.
When you apply for a credit freeze, the agency will essentially lock, or freeze, your file so that it can’t be accessed. That way, even if a lender requests your information, the agency will not release it until you “thaw” the freeze first. It’s an excellent way to keep your personal information from falling into the wrong hands. That’s because it “makes it harder for criminals to use stolen information to open fraudulent accounts, or borrow money, in your name.”4

In many cases, you can safely keep your credit frozen year-round unless you need to apply for a loan. Unfortunately, many people don’t take advantage of this. Some probably didn’t want to pay the money, while others find the process to arduous. And some, likely, don’t think identity theft will ever happen to them. That’s despite the fact that, in 2014 alone, 17.6 million Americans experienced identity theft!5

In our opinion, freezing your credit is definitely an option to consider.
A few things to know:
• To get the most protection, you should freeze your credit at all three of the major credit reporting agencies. Visit these websites to learn how:
TransUnion: transunion.com/credit-freeze
Experian: experian.com/freeze/center.html
Equifax: equifax.com/personal/credit-report-services
• The new law also enables parents to freeze their children’s credit for free if they are under age 16. While a child’s identity is usually not as vulnerable as an adult’s, it still should be protected, and it’s a terrific way to teach children about the dangers of identity theft!
• While a credit freeze is a valuable weapon in the fight against identity theft, it won’t protect you from everything. That’s why you should check your credit report regularly. (You can still request a credit report even if your credit is frozen.)
• Freezing your credit will not affect your credit score.
To learn more, visit the Federal Trade Commission’s website at https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs.

Identity theft is one of the biggest threats to reaching your financial goals. Take steps to protect your identity as soon as possible. Please let me know if you have any questions – and be sure to visit the links listed above to learn more!

1 Stacy Cowley, “2.5 Million More People Potentially Exposed in Equifax Breach”, The New York Times, October 2, 2017. https://www.nytimes.com/2017/10/02/business/equifax-breach.html?module=inline
2 “Up for Grabs: Taking Charge of Your Digital Identity,” AARP National Survey, August 2018. https://www.aarp.org/content/dam/aarp/research/surveys_statistics/econ/2018/taking-charge-of-your-digital-identitynational.doi.10.26419-2Fres.00228.000.pdf
3 “Text of the Economic Growth, Regulatory Relief, and Consumer Protection Act,” https://www.congress.gov/bill/115thcongress/senate-bill/2155/text
4 Ann Carrns, “Freezing Credit Will Now Be Free,” The New York Times, September 14, 2018. https://www.nytimes.com/2018/09/14/your-money/credit-freeze-free.html
5 “17.6 million U.S. residents experienced identity theft in 2014,” Bureau of Justice Statistics, https://www.bjs.gov/content/pub/press/vit14pr.cfm

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