2019 3rd Quarter Summary & 4th Quarter Preview

The 3rd quarter of 2019 saw continued market volatility primarily focused on

  1. The ongoing trade saga between the U.S. and China (if you like roller coasters try following that closely!)

  2. Recession indicators shifting back and forth from negative to positive with lots of press about a “looming recession”

  3. A Federal Reserve that is divided about whether rate increases or rate decreases are the proper move right now, combined with presidential tweet input on the subject at a level not seen before.

  4. Impeachment talks, Saudi oil attacks, Brexit and a more realistic Eurozone recession, Hong Kong protests, and more…

And yet, through all of that the investment markets (stock, bonds, and real estate) have all had a pretty strong year. You probably wouldn’t realize it if you were just looking at the headlines. These topics will all continue to be the main things that we will be keeping an eye on for portfolios in this 4th quarter as well.

While we always have weekly updated content linked here on our website, I know the majority of you at most prefer these quarterly update summaries. A few of those resources are below:

1) J.P. Morgan’s Guide To the Markets - One of my favorite resources for charts & commentary related to what is happening in the markets and the economy, Dr. David Kelly and their team do an excellent job of trying to pull together a wide range of data. Click here for an 11 minute video of him giving a great current summary & reviewing what he believes to be the most relevant slides currently. To follow along and read the commentary, click here.

2) Vanguard Market Perspectives - click here for an easy to read summary of Vanguard’s perspectives on the major areas of focus for the markets. Also of note is their 10 year forward looking return projections for various asset classes based on current market environment that show well-below long-term averages with global stocks leading the way that line up with other research I have seen as well. My take on this is that an active commitment to making smart personal financial choices combined with global diversification is more important than ever.

3) Lazard Quarterly Summary & Outlook - click here for their US focused review and Outlook. Contact me for their Europe, Japan or Emerging Markets versions.

The bottom line is to expect continuing volatility from the many headlines in our world today. Selective and diversified exposure to stocks in the appropriate amounts based on your risk tolerance still seem to be the most attractive place to allocate capital for long-term investing. We have recently enhanced our risk assessment tools that we use for portfolios. If you feel you may need to update your information in that area to review your portfolio, please let me know. All the best!

A World Where These Live Side By Side On Your Phone


It was October 3rd and the markets had just had a challenging start to the month, dropping 4.5% in just over a couple of days when I looked at my phone to see a markets update. I had to laugh when I saw the image above that I had to screenshot. I realized instantly that this summarizes the investment & economic world we live in today. When “The Street” tells you to sell your investments, take your money and hide before everyone else realizes we are in a bear market while Yahoo Finance’s big bull tells you to ignore what’s happening because the Dow is going to 30,000 it’s hard to know who to believe. If you clicked on those articles I know they would each make compelling cases for why they believe what they believe.


These have been popping up frequently as well from Barron’s - “The Dow is Up (Down) Because…”. While trade tweets and manufacturing/jobs/interest rate etc reports certainly impact markets, that ignores the fact that there are a significant number of less easily explainable factors that go into what is happening in the markets, including on a company by company basis.

We want everything to fit into a nice, easy explanation for why something is happening. We also figure that someone has to have an actual handle on what is going to be happening next. People looking for the guru or newsletter that has “The info that the government (IRS, big banks, your financial advisor, etc) doesn’t want you to know”. We love the confident person on TV who seems so sure of his outspoken prediction that he couldn’t possibly be wrong. Those are the people the media loves to bring back on over and over again even if not always being held accountable for their often high strikeout ratio.

I know, because for much of my career I’ve been focused on some of that as well. Feeling the obligation to do the best I can for my clients I want to be able to present as much clarity & confidence as I can about what’s happening. This has sometimes led to not getting valuable insights I come across out until I can “make sense” of exactly what’s happening and what the direction is.

The fact is that we live in a complex world with a lot of moving pieces. In my 20+ years now of being in our industry, I have yet to find someone who’s got it all figured out. What I have found over the years are a lot of good resources that have been consistently balanced about the strengths & weaknesses, the opportunities and the threats to the markets and the economy. I have shared links to articles and blogs of people I trust not to always be “right”, but to be balanced in their assessments of the markets & economy. While I will continue to do that on our site, my goal going forward is to more consistently share the “interesting” articles I come across regularly that relate to things that you actually have control over in influencing your financial life, such as:

  • Building portfolios that use sound investment principles appropriate for your own risk & realistic return expectations.

  • Making smart (& sometimes difficult) decisions related to owning your household cash flow

  • Taking advantage of savings & investing opportunities to grow your wealth long-term

  • Setting appropriate & meaningful goals & having accountability to moving towards them

  • Tax & planning strategies that can help you accomplish those goals effectively.

If we focus on and do enough of these things right over a long period of time you will win financially regardless of whether “The Street” or “Yahoo” was “right” over the next couple of months. I’m grateful for the opportunity to be a guide and partner in your financial journey.

A Tale of Two Very Different Months

A kinder, gentler Fed

December was a bad month for stocks. There’s no way to sugarcoat it. Long-term investors recognize the need for disciplined approach, but that doesn’t mean extreme levels of volatility won’t create some degree of concern. I get it.

We touched a bottom on Christmas Eve, and shares extended gains into January. In fact, the Wall Street Journal ran an article stating the S&P 500’s advance last month was the best start to the year since 1987.

Market Returns 2-11-19.jpg

Much of the data suggests the economy continues to expand, but one important reason the bull market is waking up from its late-year slumber is the Federal Reserve.

In December, the Fed was talking about “gradual” rate hikes–possibly two this year. I placed gradual in quotes because that’s how the Fed phrased its guidance.

In late January, just six short weeks later, the Fed said it can be “patient” as it ponders the direction of rates. Yes, that’s right–the direction. When Fed Chief Jerome Powell was asked at his late-January press conference whether the next move in rates might be up or down, he didn’t tip his hand. Instead, he said it all depends on the economic data.

At this point, the Fed’s on hold–no more rate hikes, at least through the shorter term and maybe longer.  Discussions about an “inverted yield curve” for bond markets came up a lot in the 4th quarter and there was a lot of talk about possible recession in 2019 or 2020.  Historically when that spread between longer term (e.g. 10 years) and shorter term (e.g. 2 years) gets less, banks have less of an incentive to borrow at short term rates to lend out at longer term rates and “lending standards” tend to get more restrictive, making money less available to consumers and businesses to get money to do the activities that lead to economic growth, which can obviously lead to recession.  That is a simplified overview, but hopefully one that helps with understanding what that means when you hear about it.  The chart below shows the history of those 2 components and how they’ve interacted with previous recessions.  As the orange line (the difference between 10 yr and 2 yr) approaches zero, banks have historically tightened their lending standards and that has preceded recessions.

Yield Curve 2-11-19.png

It’s not that economic growth has stalled or even slowed considerably. The latest 300,000+ payroll number provided by the U.S. BLS would suggest the economy is not weakening.

But various surveys of consumer and business confidence have eased (University of Michigan survey, Conference Board, Wall Street Journal), and economic growth has slowed a bit around the globe.

Throw in a cautionary signal in the market decline from investors late last year (fears the Fed was poised to tip the economy into a recession if it continued to tighten the monetary screws), and the Fed shifted its stance.  How did tweets from the President impact some of this softening?  Hard to say, but he has been open about criticizing the Fed regarding rate increases as he certainly wants the economy & markets to keep clicking.  It is an unprecedented time of involvement in these matters from the White House.

The Fed stance now seems to be the main catalyst for the challenges experienced by the markets in the 4th quarter.  Other primary issues, including trade talks with China and government shutdown related to border security funding at least seem to have some promise of progress in the weeks and months ahead.  While we will certainly be keeping an eye on all of these issues and economic data, current indicators have both our strategic and tactical portfolios invested.

If you have any questions or would like to discuss any matters, please feel free to email back or give me a call.  As always, I’m honored and humbled that you have given me the opportunity to serve as your financial advisor.


Thanks to Horsesmouth for portions of the info above

October/November 2018 Market and Economic Update

October/November 2018 Market and Economic Update

As a summary update of what’s been happening in the markets, as well as how we are looking at things going forward, I wanted to share this from a Weekly piece put out last week by CLS Investments, a well-known 3rd-party money manager.

 “As of this writing, with a few days left in the month, October has lived up to its scary reputation as one of the worst months of the year for the stock market. There is a bevy of reasons commonly cited for the stock market weakness with each holding some truth, but the leading reasons are

March 2018 Market Update

March 2018 Market Update

As we noted last month, the end of January and early February’s slide saw the S&P 500 Index lose just over 10% in value–an official correction–in just nine trading days. That’s right–nine trading days from an all-time high to a 10% decline which, according to LPL Research, was the quickest on record.

Let’s review the landscape. Moderate economic growth at home and abroad has been fueling corporate profits; analysts have been sharply revising 2018 profit estimates higher (Thomson Reuters); inflation has been low, and interest rates, while creeping upward, remain near historically low levels.

Is the Party Over for the Markets?

Well, this long-felt sense of unease people have had about things being “too good” showed up quickly last week and Monday as the stock markets had a sell-off (with a pretty solid comeback today).  After the unprecedented run-up we have had to new highs seemingly every week with historically low volatility in 2017 there has been a feeling among many I've talked to of “not if, but when” there would be a pullback.  Market pullbacks are historically a normal part of a healthy functioning market, but everything has pretty much lined up this past year to give us positive months in the S&P 500 ever since the election (and 22 of the last 23 months - Ycharts). 

Corporate tax reform combined with strong earnings outlooks carried 2017 into January of this year with a 5.73% return to start the year for the S&P 500.  The market action from the last few days (as of this writing) erased the 2018 gains and brought us back early January levels (still way up over this past year).  It is important when you hear the scary-sounding headlines that we keep things in context.  The drop on Monday, while the largest point drop in history, was only the 100th largest from a % standpoint in the history of the Dow and the 127th largest in the history of the S&P due to the massive increases in value the markets have experienced in the last 9 years.  Where things go from here is the obvious question.

A few of the triggers for the drop:

Are You Getting the Best Return on Life You Possibly Can?

Are You Getting the Best Return on Life You Possibly Can?

When it comes to investing, the current standard of return on investment (ROI) can be self-limiting, adding pressure that is counterproductive. So much of ROI is not within our control. We can diversify investments––always a good strategy––but we cannot control how the markets perform or how global events affect the markets. Just as meteorologists can predict the weather but still be wrong, we can try to predict and plan for market upheavals, but we cannot control them.

It’s important to balance return on investments with return on life (ROL). ROL is defined as, ‘How well you are doing in living the life you want, with the money you have.”

Here are some key ROL indicators:

Yes, You Might Actually Enjoy a “Working” Retirement

An important part of your retirement plan is a discussion of the benefits of working, regardless of age. Retirement is no longer an event––it is a segue into an altered definition of life as you know it.

One definition of “work” is that it consists of actions that bring value to others and meaning to you. While you may feel that you’ve had enough work, it’s probably the underlying issues (i.e., meetings, corporate politics, commuting) that have left you drained and exhausted.   

Think about this: many people who go back to work after retirement are motivated by more than money––they are also motivated by the psychological and existential payoffs.

September Update

Happy September!  I hope that you had a great Labor Day and end to your summer.  Another year with summer seeming to fly by and now football is here again.  My kids both started up new schools as Leilani is now officially a kindergartener & Joshua is in middle school!  Crazy.

We have some exciting things coming up in the fall that I want to let you know about & also want to give an update on markets, the economy & things I'm keeping an eye on, but I will send those in separate emails since I have a lot to share in this email, primarily focused on retirement.

6 Ways to a Happier Retirement 

Picture this—it’s Friday afternoon, your work is done, and you have the weekend ahead of you. But what makes this weekend different than any other weekend is that two-week vacation following it. You wish your colleagues well, they express similar thoughts, and you head toward freedom.

Of course, you’re excited! Travel, new experiences, time away from the mundane, and time to recharge.

In the back of your mind, you know it’s temporary and you’ll be back at your desk before you know it. Maybe that’s part of the reason why the time away is special. It’s short-lived.

Now, let’s take this another step.

Three Ways to Avoid the Downside of Retirement

When it comes to retirement, it’s easy to dream about the perks: sleeping in, traveling, reading a good book, playing golf––name your fantasy. Even if your retirement is fully funded, the reality can be far less fulfilling if you don’t plan ahead.

Repeated studies have shown that people who do not have a rewarding retirement can suffer both physically and psychologically during retirement. Lack of mental stimulation is a primary reason. People are often forced into retirement before they are ready. Others think they are ready, and yet are not prepared for the day-to-day realities of a new lifestyle. 

It May Be Time to Reconsider What Retirement Means to You

Whether you’ve been told you should retire at 62, 65, or some other age, only you can decide what is right for you. In fact, you may want to reconsider retiring at all––at least in the traditional sense.

Many of us don’t like the circumstances we find ourselves in––and look at retirement as the nirvana we’ve been missing. The truth probably lies somewhere between completely dropping out (i.e., piddling around in retirement) and never retiring (i.e., dying with their boots on).