We are pleased to announce that Shea Mears has joined our team as a lead Financial Advisor.
Shea brings a rich background and skillset to the Gilbert & Cook team, with experience in financial planning strategy and implementation, education, investments and tax planning. Utilizing his experience and talents as a former tax professional, Shea looks forward to creating financial planning and tax mitigation strategies for the clients of Gilbert & Cook.
“Gilbert & Cook is one of the most respected Wealth Management firms around. From inception the Gilbert & Cook team has focused on taking care of clients through sophisticated planning and investment techniques. With that philosophy, they have built a team of highly educated, highly experienced professionals that work together to ensure that the client experience is second to none.” Shea explained.
“When an opportunity arises to join a firm like this, you don’t even pause.”
This year, Gilbert & Cook, Inc. is celebrating 25 Years in business. Founder, Linda Cook states, “We are honored to have Shea join our team. We have known Shea for many years and are looking forward to adding his experience and talents to our financial planning team. This is a big year for our firm, celebrating 25 years, and I am so happy to welcome Shea to our Gilbert & Cook family and have him share this journey with us.”
Not only has Shea been a Financial Advisor, he has been dedicated to giving back to others as an educator – formerly an accounting professor at the Des Moines Area Community College and currently an adjunct professor at Simpson College.
Shea earned a bachelor’s degree in accounting from the University of Northern Iowa and a Masters in Business Administration with accounting emphasis from Drake University. Additionally, Shea is both a Certified Public Accountant (CPA) and Certified Financial Planner (CFP®)
Contact Cara Shindler at email@example.com for more information regarding the latest updates with Gilbert & Cook.
DSM Wealth joined us at our recent Mid-Year Economic Update event. Gilbert & Cook hosted a panel discussion on the state of the public and private marketplace - moderated by Brandon Grimm, and featuring panelists: Chris Cook, Eric Lohmeier, and Matt Schilling.
This article was featured in the Des Moines Business Record, published on July 6th 2018. Read the full online issue (here).
Gilbert & Cook Celebrates 25 Years!
The Gilbert and Cook core belief that people always come first finds its roots back to 1993.
After Linda Cook’s early career in investment planning convinced her long-term relationships are much more valuable than selling something, she started her own independent firm in Des Moines. Linda set out to truly understand her clients, listen to what they wanted to achieve and find the right solutions to meet their needs.
25 Years later, the mission remains the same.
“The core of what we do is caring for people and helping them make good decisions,” Linda said. “Just seeing what clients needed and how to help them wasn’t just about solving their problems with a product, it’s really solving it with a strategy. It’s helping them find the confidence to make good decisions on their finances.”
Linda was joined in 2000 by Marlis Gilbert. Marlis’ many years of experience, including a primary focus on financial planning, made her a great match and asset for the firm. Together, the two worked to build a team environment, cultivating a partnership mentality to grow the firm.
In 2009, Linda’s husband, Chris, who is a Certified Public Accountant (CPA) and a Chartered Financial Analyst (CFA), joined the firm as the Chief Investment Strategist.
Because of the well-rounded leadership at Gilbert and Cook, clients get specialized expertise in many different fields.
“We are an ensemble practice,” Linda said. “As a client is engaged with Gilbert and Cook, they don’t just get me or one of the advisers. They get the whole team, and we’re all there to be available and helpful while bringing in additional expertise when needed.”
As a private wealth management firm, Gilbert and Cook offers many different services in financial planning and investments. The firm specializes in life transitions, whether that be a major business transaction, a death in the family, divorce, retirement or many more major life events. Gilbert and Cook serves families, individuals and businesses.
In all of those services, clients are treated with personal care and receive tailored solutions to problems, rather than a one-size-fits-all approach. The team at Gilbert & Cook works to bring clarity to the various choices their clients face, and provide the confidence needed to make important wealth decisions. In short, if you are dealing with something complex - Gilbert and Cook professionals can break it down and make it simpler to understand.
“Our mantra is Live a Life of Abundance, and we have each one of our clients define what abundance means to them, allowing us to help in a personal and tailored way,” Linda said. “We keep what’s important to them at the top of our minds in each and every meeting.”The Gilbert & Cook philosophy is predicated on sincere concern for their clients and maintaining a genuine relationship. “We have special relationships with our clients,” Linda said. “It’s not just something we say, but it’s something that we live every single day. We’re there for them every step of the way.”
The Gilbert and Cook investment team has three Chartered Financial Analysts on staff. The CFA designation is regarded as one of the highest certifications in the finance industry. As an independent firm, Gilbert and Cook tailor’s the investment strategy and proprietary asset allocation models for each individual client situation.
Going forward, Gilbert and Cook is looking to grow its team with quality and experienced professionals. “We’re always on the lookout to bring on amazing new team members to join our family and provide value to our clients.” Linda said.
On July 10th, guests joined Gilbert & Cook for a discussion on the current state of the market, the 2018 economic outlook and expectations in both the public and private marketplace with recent changes and events.
The event was moderated by Gilbert & Cook Portfolio Manager, Brandon Grimm, and featured the following panelists:
Chris Cook, CPA, CFA
Chief Investment Strategist - Gilbert & Cook, Inc.
Eric Lohmeier, CFA
President - NCP, Inc.
Matt Schilling, CFA
Analyst, Real Estate Securities - Principal Real Estate Investors
Mid-Year 2018 : Economic Update
THE MONTH IN BRIEF
U.S. stocks have been trending higher, but have endured some rough water over the past few weeks. In May, investors were left to interpret mixed signals. The historic U.S.-North Korea summit was on, then off, then on again. An apparent truce emerged in the U.S.-China tariffs battle, but it did not last. Oil rallied, but then prices fell. Federal Reserve policy meeting minutes indicated central bank officials would accept above-target inflation for a while. Other economic signals were clear: new and existing home sales were down, consumer confidence was back up, and consumer spending was strong. In the end, the markets took all this in stride – the S&P 500 rose 2.16% for the month.
Now in June, U.S. stocks continue to fall as a threat of new tariffs on Chinese imports from the U.S. is ramping up global trade fears. Treasury yields are dropping and the U.S. dollar is rising.
Mortgage rates may have soared in April, but they stabilized in May. On May 31, Freddie Mac’s Primary Mortgage Market Survey found the mean interest rate for a conventional home loan at 4.56%, which was 0.02% lower than on April 26. (At the end of May 2017, the average interest rate on a 30-year ARM was 3.95%.)
Home buying fell off in April. According to National Association of Realtors research, there was a 2.5% retreat in the pace of existing home sales. Construction for single and multi-family units were solidly higher compared to the prior month and are up noticeably year over year. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, fell in May compared to April. Permits for single and multi-family unit structures both declined month over month but both remain higher year over year.
LOOKING BACK…LOOKING FORWARD
The economy is still in good shape, and is likely to withstand possible storms ahead. Volatility is unlikely to diminish Fed tightening expectations for the rest of 2018. The Fed hiked rates 0.25% on June 13th.
Trade concerns continue to rise. Tariffs are now being levied on imported steel and aluminum, and the trading partners affected by these taxes are responding or planning to respond with tariffs of their own on U.S. goods. Could stocks stall out because of this? An impeded flow of international trade would certainly impact the GDP of the world’s major economies and exert a drag on corporate earnings. The uneasiness about the brewing trade war gives some investors pause; the potential scope of it seems too large to price in. It is hard to imagine any kind of summer rally if the measures and countermeasures taken by various countries escalate. Not all investors appear to be worried, though – witness what happened in May even as the distinct possibility of trade wars emerged. The blue chips were hurt, but the tech sector and the small caps held up. Do these shares have further room to advance, and will investors retain their bullishness about them? June presents significant questions for investors worldwide, and we may see equities take a pause as threatened tariffs become reality.
That being said, patience and endurance are important in the face of occasional ominous headlines as we look forward to long-term goals.
What makes a long-term genuine relationship last - professional or personal - is trust. For 25 Years, individuals and families have trusted Gilbert & Cook – accomplishing financial goals, enhancing life experiences, and living a life of abundance.
It has been a privilege to be in service to you and your families for the last 25 years. We like to think that our successes over the last two decades can be attributed to an unwavering commitment to providing sophisticated strategies, creating a unique experience, and maintaining genuine relationships with our clients and their families.
As we celebrate, we say “Thank You” to all of our clients, professional partners and team members, both past and present. We truly thank you for all of your support, collaboration and we look forward to our continued relationship... and to all of the exciting things to come!
We are happy to welcome three new team members to the Gilbert & Cook family!
Heather Knight, Vice President of Strategic Planning
As Vice President Strategic Planning, Heather works with the Gilbert & Cook team to develop creative business solutions. Heather earned her bachelor’s degree from University of Northern Iowa and brings a 20 year history of success within the business community, including experience in Fortune 50 and Big 4 firms. In addition to Financial Services, she has background in IT, Professional Services, Business Strategy and Business Development. Heather serves as a mentor in the Kids Hope USA program and is a regular volunteer and supporter for the Alzheimer’s Association.
Emily Dawson, Administrative Assistant
As the firm's Administrative Assistant, Emily is the first point of contact for clients, business partners and guests. Emily is originally from Southwest Iowa. She graduated with a Bachelor’s degree from Simpson College, majoring in Management and minoring in Marketing.
She is active in her church, enjoys traveling with friends and family, and loves babysitting.
Brian Klein, Relationship Manager
As a Relationship Manager, Brian walks alongside the Lead Advisor, meeting the clients needs throughout their relationship. Brian graduated from the University of Wisconsin-Whitewater with a Bachelor’s degree in Finance in 2014. He moved to Des Moines from Milwaukee, Wisconsin in March 2018. He is excited to use his talents to facilitate the clients of Gilbert & Cook to live their life of abundance. Brian enjoys being active in life with his many hobbies including: tennis, basketball, backpacking, and traveling to new places.
2017 turned out to be a very attractive year in financial markets around the world. Stocks were the story, but even bonds (Barclays US Aggregate index) were up +3.54%. US large companies (as represented by the S&P 500 index) rose +21.83%, US small companies (Russell 2000 index) posted +14.65%, and international stocks (MSCI EAFE index) won the year at +25.03%. The first year in 5, by the way, where Europe Australia and the Far East developed markets (EAFE) performed better than the S&P 500, and only the 2nd year in the past 8. The S&P 500 had a positive total return (price + dividends) each and every month during 2017. Remarkable.
So where from here? What does 2018 hold for investors? We’re side-stepping the direct question a bit as we paint a broader perspective. Whether we credit Nostradamus, Mark Twain, or Yankee catcher/philosopher Yogi Berra, it is true; “It is difficult to make predictions, particularly about the future”. Certainly, that humorous quip does not keep mortal men from offering our honest and educated guesses about future events. (Think politicians, economists and meteorologists). But let’s have some candid reflection about our collective ability to do so.
Who would have predicted nine years ago that we would stand on top of mounting records in US equity markets? That interest rates would still be near historic lows? Or that Amazon’s market capitalization would easily eclipse that of Wal-Mart, Target, Kroger, Best Buy, Kohls, Macy’s, Dicks Sporting Goods, Under Armour, Dollar General, TJ Maxx, (plus others) combined? A family can’t live in a virtual single-family home, but they certainly can shop for goods that way. FYI…Target on its own made more profit over the past year than Amazon.
That nine-year reference is an important one. 2008 saw the S&P 500 drop by -37%. The world was in the vice grip of financial system paralysis, and predictions of economic prosperity, lets be honest, were as scarce as home equity. We all remember it. How it felt. Not to read about it from a 1929 history book, but to run our lives through it. To make a forecast on January 1st, 2009, that the S&P 500 would increase on average more than 15% per year for the next nine would have come with a side of pixie dust. Incidentally, the market would have been down nearly -25% to start that bold prognostication before ultimately coming true.
Backtrack even further to 1968. The brightest minds from multiple disciplines were assembled in New York for the Foreign Policy Association’s fiftieth anniversary. Within the throws of the Vietnam War and the cloud of Martin Luther King’s assassination, their charter was to look fifty years into the future, documented in a book called “Toward the Year 2018”. Clear misses such as nuclear replacing natural gas and “the suppression of lightning” can be coupled with eerie accuracies like “large-scale climate modification will be effected inadvertently” from carbon dioxide. Or, “a global communication system (of weather and communication satellites) would permit the use of giant computer complexes” with the revolutionary potential of a data bank that “could be queried at any time”. Spooky. So is “putting broad-band communications, picture telephones, and instant computerized retrieval in the hands of (humans)…is much too optimistic” to assume that these same technologies would entail the ability to use them wisely.
The biggest misses, however, were outlined recently by Paul Collins of The New Yorker in the current, real-life 2018. “Not a single writer predicts the end of the Soviet Union – who in their right mind would have. There’s also nary a woman contributor, nor a chapter on civil rights in sight.” The 1968 book did ask the question: “Will our children in 2018 still be wrestling with racial problems, economic depressions, other Vietnams?” and then forgets to answer.
Today we sit in the comfort of hindsight. Basking in the profits and prophesy. But what did we really learn? We learned that a forecast, if overtly relied upon, can miss the eventual truth considerably. A solid process, on the other hand, captures the “when”, not the “if”. Process waits for the future patiently and
does not attempt precise calculation.
The Gilbert & Cook investment process shapes to each circumstance. Future client events are planned for now and a diverse mix of tools are set in place to anticipate multiple forecasts. Near-term, mid-term, and long-term categories are matched to the risks and rewards fashioned together by our team and the client. We spend our predictive power and experience on those issues that can be controlled.
We do still have thoughts around the obstinate big picture as the US economy has every chance to continue growing the next few years, thereby setting the record for the longest uninterrupted (by a recession) expansion in our nation’s history. While stretched in terms of time, the dollars produced in this recovery trail past accounts so our view is toward sustainable growth. New US corporate tax laws are favorable to company profitability and free cash flow providing a 2018 tailwind for stocks. International equities may continue to outperform the US due to being earlier in their economic recovery cycle and more favorable in valuation and currency effect. And our expectations for bond returns are muted, but continue to provide inevitable volatility control for stocks.
That’s the beauty, excitement, and reward of it; that no one can truly know in absolutes what lies around the corner. Rely on process, not prediction.
The Gilbert & Cook team is expanding and we are looking for an Administrative Assistant to join our family. If you are interested in submitting your resume or would like additional information, contact us at: firstname.lastname@example.org
Administrative Assistant - Position Details:
Provides complex and highly confidential administrative and support staff services to the Gilbert & Cook team. Must exercise judgment and discretion in the handling of telephone calls, scheduling appointments and relieving the executives of administrative detail. In this fast paced, professional environment, the administrative assistant will independently handle a wide variety of situations and conflicts that are non-routine.
Administrative duties include:
- Conduct business as the first point of contact in the front office: greeting guests and offering drinks.
- Maintain the office appointment schedule by planning and scheduling meetings, conferences, teleconferences and travel.
- Welcome guests and clients by greeting them, in person or on the telephone; answering or directing inquiries.
- Maintain office electronic files.
- Assist with planning all-staff events, including obtaining accommodations and negotiate contracts with vendors if necessary.
- Compose correspondence, prepare reports and conducts special projects as directed.
- Responsible for maintaining the appearance and condition of our office including: set-up of meeting spaces, office supply inventory, and kitchen.
- Assisting firm President with administrative duties.
- Excellent verbal and written communication skills to respond to sensitive and/or technical customer/employee situations with a high degree of diplomacy and confidentiality.
- The ability to multi-task, attention to detail and strong organizational and independent problem-solving skills are required.
- Exceptional computer skills, including adaptability to utilize various software packages such as our client management system, scanning, Microsoft Office Suite, etc.
- Team player, able to work well with individuals at all levels of the firm as well as with high net-worth clients.
- Professional office experience preferred.
- 4-year degree preferred.
Too quickly, the time has passed us by. After 14 years with Gilbert & Cook, Mary Ann Baker will retire at the end of the year. She has been an important part of our family and truly embodies what it means to have a genuine relationship - a core value of the Gilbert & Cook team.
A letter from Mary Ann Baker:
Fourteen and a half years ago, I moved to Des Moines and was known by what mortgage people call the "trailing spouse", as I relocate a lot because of my husband's advancing career. As usual, I had applied for positions online during the moving process. While unpacking, I received a call from Gilbert & Cook to come in for an interview.
Upon arriving at the office, my first impression was that this place was nothing like any other office I had worked in - and in all of my travels, I have worked in several. The office had a warm, cozy, home-like atmosphere. It was something that I had never seen in an office environment before and I welcomed it. I had found an office in which their clients and staff came first. Caring for people is my passion, so I accepted the offer in a heartbeat.
I have come to love the team at Gilbert & Cook and "my" clients as if they were my family. Yes, I call each and every one of them "my clients", as I have come to love them all as if we were related. I love to hear about their families, adventures and care about their trials and troubles.
This letter is bitter sweet. I am off on a new adventure called "retirement" and I have very mixed feelings. I am excited for my husband, Marty and I to enjoy what we have worked so hard to accomplish, but I am also going to miss the daily connections to my office family and "my clients" lives. Fourteen years is a long time, in which I have made some lifelong friends.
I will keep you all in my thoughts and prayers and hope you know that I will always be thankful for this experience. Thank you to all for being a part of my life. I will cherish the memories.
Mary Ann Baker
It may seem as though the headlines are coming at us constantly - breach after breach. The most recent, brought to you by Equifax, exposed the information of nearly half the population of the United States. It’s likely that you, or someone that you know, will have their personal information in the hackers’ hands.
The good news is, knowledge is power and there are ways to protect yourself going forward.
CHECK YOUR SPENDING ACCOUNTS FOR SUSPICIOUS ACTIVITY
Keep an eye on your transactions by monitoring your bank and credit card statements. Better yet, if you are a client of Gilbert & Cook, you can utilize your Abundant Living website to monitor all of your transactions and set up alerts for suspicious spending behaviors, all in one convenient location.
ENROLL IN A CREDIT MONITORING SERVICE OR FRAUD ALERT PROGRAM
Credit monitoring services will track your personal information to determine if it’s been used in a way that is suspicious or out of the ordinary, and alert you to the behavior. Credit monitoring does not stop a thief from opening a new account in your name. Instead, they alert you of a potential fraud after the fact.
If you have been a victim of fraudulent activity, a Fraud Alert can be placed on your account and will require a business to verify your identity before issuing any new credit. There are different types of Fraud Alerts, lasting from 90 Days to 7 Years. Note: If you set up a Fraud Alert through any of the major credit reporting agencies (TransUnion, Experian, and Equifax) it will prompt them to coordinate with each other make sure your records are protected across all companies. A fraud alert can be placed on your account and will provide more protection to you than credit monitoring, but does not provide you with the full security of a Security Freeze.
FREEZE YOUR CREDIT
Unlike Credit Monitoring, or Fraud Alerts, freezing your credit (also known as a Security Freeze) stops identity theft from happening rather than alerting you to fraud after it has occurred. A Security Freeze gives you complete control of your credit file and is the best way to protect your credit and identity.
A Security Freeze will lock your credit file at each bureau with a special PIN that is private to you. Freezing your credit with a PIN will require creditors to verify your identity before they can get a copy of your credit report and can stop someone from opening a new credit account in your name.
Security Freezes do not lock down your open accounts or affect your credit score, and they can be removed and re-frozen if needed. There is a cost to freezing your credit (up to $10 per credit reporting company) and another cost to have it removed. You can freeze your credit immediately at the big three credit bureaus - Experian, Equifax, and TransUnion.
How to do it:
To set up a security freeze, you will need to contact each of the three credit bureaus individually. This process can be done online or over the phone with a series of personal questions to confirm your identity. (Note: Given the severity of the recent security breach, there may be a delay with the influx of requests at the credit bureaus.)
Equifax: 866-349-5191 / www.freeze.equifax.com
Experian: 888- 397-3742 / www.experian.com/freeze
TransUnion: 888-909-8872 / www.transunion.com/credit-freeze/place-credit-freeze
If a situation occurs and you need a new line of credit, you can lift your freeze by simply contacting the bureau used by the lender and provide your PIN.
As always, please contact your Gilbert & Cook team if you have any questions or concerns regarding your financial situation.
THE QUARTER IN BRIEF
After a remarkable first quarter, the stock market cooled off slightly in Q2 – but investors still saw substantial gains. Strong earnings helped take Wall Street’s collective mind off a decidedly mixed bag of economic signals. Consumers remained confident as the quarter unfolded; although hiring, inflation, and consumer spending weakened. Home sales declined, then rebounded. Overseas, factory activity in China and the eurozone showed improvement, and foreign equity benchmarks continued climbing. Many commodities took sizable Q2 losses. When the quarter ended, the bulls were still firmly in charge. (1)
DOMESTIC ECONOMIC HEALTH
As one quarter ends, the Bureau of Economic Analysis commonly makes its third and last assessment of the prior quarter’s economic growth (though, even this “final” estimate may be adjusted in later years). In the last week of June, the BEA announced a “final” Q1 growth number of 1.4%, which was nothing to celebrate. Would Q2 growth come in above 2%? (2)
Second-quarter consumer spending data from the Department of Commerce raised some concerns about reaching that percentage of growth. While April and May brought solid growth for personal incomes (0.3% in the former month and 0.4% in the latter), the gain in personal spending fell from 0.4%, in the fourth month of the year, to 0.1%, in the fifth. Retail sales, too, tailed off: after rising a robust 0.4% in April, they fell 0.3% for May. (2)
Households did feel good about the state of the economy and their financial prospects. At final readings of 97.0 in April, 97.1 in May, and 95.1 in June, the University of Michigan’s consumer sentiment index stayed well north of its 86.1 historical average. The Conference Board’s index ended the quarter at a very high mark of 118.9. (2,3)
Hiring figures from the Department of Labor were somewhat weak. Monthly employment reports showed that U.S. firms added 174,000 net new jobs in April and 138,000 net new jobs in May. (In March, the number had been just 50,000.) Was the job market simply at capacity? Only time would tell. Reductions in the labor force participation rate helped send both the headline jobless rate and the U-6 rate, factoring in the underemployed, to notable lows. By June, the headline (U-3) rate had dipped to 4.3%, a level unseen in 16 years; the U-6 rate had fallen to a 10-year low of 8.4%. (4)
On the manufacturing front, the news appeared better. The Institute for Supply Management’s factory purchasing manager index rose to 57.8 in June, a 34-month peak. This was after readings of 54.8 in April and 54.9 in May. ISM’s service sector PMI was also well above the expansion line of 50 in April and May, displaying respective readings of 57.5 and 56.9 in those months. (5,6)
Still, federal government reports showed manufacturing and industry production falling off in Q2. Industrial output jumped 1.1% in April; then, flattened in May. Manufacturing output went from a 1.1% gain to a 0.4% retreat. Hard goods orders were down 0.9% in April; then, down 1.1% a month later. (2)
Annualized inflation declined during the quarter. The May Consumer Price Index showed only a 12-month gain of 1.9% and just 1.7% for core prices. A month earlier, yearly inflation had been at 2.2% with the core CPI rising 1.9%. Did wholesale inflation also lessen? The headline number did, ticking down 0.1% in May to 2.4%. The core Producer Price Index was up 2.1% year-over-year through May, a 0.2% increase from April. (2)
The Federal Reserve lifted the federal funds rate by another quarter point in June to a target range of 1.00-1.25%. It also disclosed it would begin reducing its massive bond portfolio “this year,” which could put pressure on long-term interest rates. The central bank intends to let $6 billion of Treasuries and $4 billion per month in agency debt and mortgage-linked securities mature per month to start. In late June, all 34 of the country’s largest banks passed the Fed’s annual stress tests – a milestone unseen since their adoption seven years ago. (7,8)
GLOBAL ECONOMIC HEALTH
Emmanuel Macron’s decisive victory in France’s national election cheered investors concerned about the potential for another crack in the European Union, and it started a rally in the euro, which continued in June after European Central Bank President Mario Draghi commented that “the threat of deflation is gone and reflationary forces are at play.” Investors took those words as a strong hint that the ECB would presently end its quantitative easing. As the quarter concluded, Chancellor Angela Merkel’s reelection seemed probable in Germany; a fourth Merkel term would be another boost to EU economic confidence and stability. (1,9)
Manufacturing economies accelerated around the world in the quarter. The Markit eurozone factory PMI reached 57.0 in May, and then, 57.4 in June (a 4-year peak). Manufacturing PMIs in Vietnam, India, South Korea, Taiwan, and Japan were all above 50 (the level signifying sector expansion) as Q2 wrapped up. China’s official factory PMI was at 51.2 in May; then, 51.7 in June. Its official service sector PMI came in at 54.5 in May and 54.9 in June. (10,11)
One factoid conveys how well global equity benchmarks did in 2017’s first half: 26 of the world’s 30 major indices posted 6-month gains. The last time that happened was in 2009 – and it has only occurred in four other similar intervals within the past two decades. (12)
Germany’s DAX finished the first half up an impressive 7.4% YTD, and France’s CAC 40 was up 5.3% on the year when Q2 ended. The United Kingdom’s FTSE 100 was 2.4% higher YTD on June 30. India’s Sensex topped the 31,000 level in June, reaching an all-time peak and outdistancing nearly all of its nearby Asia-Pacific benchmarks with an astounding 16.1% first-half advance. The Nikkei Asia300 index did even better, ending the first half of 2017 up more than 21% YTD. (13,14)
Looking at some regional indexes, the pan-Europe Stoxx 600 index fell 0.5% in Q2, but still had risen 5.0% YTD through June. The MSCI World Index advanced 3.4% in the quarter, to go up 9.4% for the year; MSCI’s Emerging Markets benchmark rose 5.5% in Q2, taking its YTD gain to an impressive 17.22%. (13,15)
Oil traded under $50 for most of the second quarter, touching a low of $42.05 before rising to finish Q2 at $46.33 on the NYMEX. Gold ended June at $1,241.40; silver, at $16.57. (1,16)
Losers outnumbered winners in the commodity sector in Q2, and some commodities took steep falls. Iron ore slid 21.37% in the quarter; sugar, 17.60%; gasoline, 11.16%; coffee, 10.95%. Other notable losses came for silver, oil, and cocoa, which were all down between 9-10% for the quarter; heating oil and natural gas gave back roughly 5%. Among the big Q2 winners: oats, up 29.32%; CBOT wheat, up 19.81%; feeder cattle, up 10.43%. Palladium picked up 4.78%; soybean oil; 3.62%; corn; 1.72%; copper, 1.66%. (1)
The animal protein and grain sectors were the best-performing portions of the commodities market in the quarter, respectively gaining 15.13% and 13.34%. The energy sector fell 7.61%; the precious metals sector, 2.09%; the base metals sector, 1.75%. (1)
Home buying slumped in April and then rebounded during May. In the fourth month of the year, the National Association of Realtors calculated a 2.5% decline in resales – but a 1.1% May gain left them 2.7% improved over the past 12 months. That May gain happened with inventory down 8.4% year-over-year and a median existing home price 5.8% higher ($252,800) than a year before. The Census Bureau said that new home sales dropped 7.9% in April, but they rose 2.9% a month later. (2,17)
Cheap mortgages were certainly a plus. In Freddie Mac’s March 30 Primary Mortgage Market Survey, mortgage types bore the following average interest rates: 30-year fixed, 4.14%; 15-year fixed, 3.39%; 5/1-year adjustable, 3.18%. Freddie’s June 29 survey showed the following averages: 30-year fixed, 3.88%; 15-year fixed, 3.17%; 5/1-year adjustable, 3.17%. (18)
Three other closely-watched housing market indicators weakened in Q2. The Census Bureau’s monthly snapshot of housing starts and building permits showed starts down 2.8% in April and 5.5% in May as well as permits slipping 2.5% for April and 4.9% for May. The year-over-year advance on the 20-city composite S&P/Case-Shiller home price index was 5.9% in the March edition and 5.7% in the April edition (this is a famously lagging indicator). Finally, NAR’s pending home sales index took two small steps back, retreating 1.7% in April and 0.8% in May. (2)
LOOKING BACK…LOOKING FORWARD
A sustained rally with only brief, minor setbacks left the notable U.S. equity and volatility indices at the following levels at the end of Q2: S&P 500, 2,423.41; Dow Jones Industrial Average, 21,349.63; Russell 2000, 1,415.36; Nasdaq Composite, 6,140.42; CBOE VIX, 11.18. The quarterly gains for the big three are noted below; the Russell advanced 2.39% in three months, while the VIX fell 3.12%. The PHLX Oil Service Sector index brought up the rear among U.S. equity indices, staggering to a 22.54% 3-month loss. (19)
With the three marquee U.S. equity indices up between 15-27% in 12 months, investors are naturally skeptical about how long stocks can maintain such powerful momentum. Bulls still rule the Street, though – and bullish analysts see more upside to this market during the rest of 2017. It is true that past performance is no guarantee of future success, but the major Wall Street indices have tended to have a good second half in the past 20 years, regardless of their first-half performance. The Dow and Nasdaq have posted second-half advances during 14 of the past 20 years, and the S&P 500 has followed suit in 13 of the past 20 years. Looking closer at the years featuring these advances, the average second-half rise was 4.31% for the Nasdaq, 3.23% for the Dow, and 2.68% for the S&P. Since 1988, the S&P has never retreated during the second half of a year when it has gained 6% or more in a first half. So, in recent stock market history, when the bulls have been ruling the Street in the first half of a year, they have tended to keep running the rest of the year. Bears might say that the bulls who embrace these statistics are suffering from recency bias, and perhaps, that argument has merit. Then again, bearish analysts have predicted an end to this bull market year after year, and still, it persists. (23)
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. The FTSE 100 Index is a share index of the 100 most highly capitalized companies listed on the London Stock Exchange. BSE Sensex or Bombay Stock Exchange Sensitivity Index is a value-weighted index composed of 30 stocks that started January 1, 1986. The Nikkei Asia300 Index is based on the "Asia300" group of must-watch companies selected by Nikkei. The composite index is supplemented by an index focusing specifically on companies in the ASEAN region, as well as individual indexes for 11 countries and regions. The MSCI World Index is a free-float weighted equity index that includes developed world markets, and does not include emerging markets. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. The CBOE Volatility Index® is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. The PHLX Oil Service Sector Index (OSX) is a modified market weighted index composed of companies involved in the oil services sector. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
1 - seekingalpha.com/article/4085358-commodities-second-quarter-overview-outlook [7/3/17]
2 - investing.com/economic-calendar/ [6/30/17]
3 - tradingeconomics.com/united-states/consumer-confidence [7/4/17]
4 - nytimes.com/2017/06/02/business/economy/jobs-report.html [6/2/17]
5 - cnbc.com/2017/07/03/june-ism-manufacturing-index.html [7/3/17]
6 - instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm [6/5/17]
7 - forbes.com/sites/laurengensler/2017/06/14/fed-raises-rates-june/ [6/14/17]
8 - money.cnn.com/2017/06/28/news/economy/fed-stress-test-wall-street-results/index.html [6/28/17]
9 - investors.com/news/draghi-drama-undercuts-key-stock-market-support/ [6/29/17]
10 - nytimes.com/reuters/2017/07/03/business/03reuters-global-economy.html [7/3/17]
11 - cnbc.com/2017/06/29/china-manufacturing-accelerates-in-june-with-official-pmi-at-51-point-7-beating-expectations-for-51-point-0.html [6/29/17]
12 - ig.com/au/view-ig/2017/07/04/stock-markets-in-2017--a-good-first-half-38915 [7/4/17]
13 - foxbusiness.com/features/2017/06/30/europe-markets-european-stocks-close-in-red-germanys-dax-hobbled-by-bayer.html [6/30/17]
14 - asia.nikkei.com/Business/AC/Bets-on-Modi-s-reforms-help-India-stocks-beat-peers-in-first-half [6/30/17]
15 - msci.com/end-of-day-data-search [6/30/17]
16 - money.cnn.com/data/commodities/ [6/30/17]
17 - inman.com/2017/06/21/consumer-resilience-boosts-may-existing-home-sales/ [6/26/17]
18 - freddiemac.com/pmms/archive.html [7/4/17]
19 - barchart.com/stocks/indices#/viewName=performance [6/30/17]
20 - barchart.com/stocks/indices#/viewName=performance [3/31/17]
21 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F30%2F16&x=0&y=0 [6/30/17]
21 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F30%2F16&x=0&y=0 [6/30/17]
21 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F30%2F16&x=0&y=0 [6/30/17]
21 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=6%2F29%2F07&x=0&y=0 [6/30/17]
21 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=6%2F29%2F07&x=0&y=0 [6/30/17]
21 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=6%2F29%2F07&x=0&y=0 [6/30/17]
22 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [7/3/17]
23 - cnbc.com/2017/06/30/chances-for-second-half-stock-market-gains-are-good.html [6/30/17]
FED HIKES, LEAVES 2017 FORECAST UNCHANGED
As expected, the Federal Reserve raised the target range for the federal funds rate by a quarter-point last week to 0.75-1.00%. “The simple message is, the economy is doing well,” Fed chair Janet Yellen explained to the media following the move. The central bank’s dot-plot table still projects two more rate increases during the balance of 2017, with three rate hikes envisioned for both 2018 and 2019. (1)
INFLATION PRESSURE EASES
February’s Consumer Price Index displayed only a 0.1% gain, compared to 0.6% in January. Core consumer prices moved 0.2% higher. The small February increase still left the headline CPI up 2.7% in the past 12 months. The Producer Price Index rose 0.3% for February, putting its yearly advance at 2.2%. (2)
SMALL GAINS IN SENTIMENT, RETAIL SALES
The initial March University of Michigan consumer sentiment index came in at 97.6 Friday, 1.3 points above its final February mark. Thanks mainly to “improved personal finances” among households, the index’s current economic conditions component hit a 17-year high. A Census Bureau report showed retail purchases up 0.1% in February, 0.2% with car and gasoline buying factored out. (2,3)
CALM WEEK SEES SMALL STOCK MARKET ADVANCE
Wall Street saw the March 15 Federal Reserve policy decision as an affirmation of the economy’s health; equities investors were not at all riled. Ending the week at 5,901.00, the Nasdaq Composite gained 0.67% in five days. The S&P 500 rose 0.24% in the same period to settle at 2,378.25 Friday, while the Dow Jones Industrial Average added just 0.06% across five trading sessions on the way to a Friday close of 20,914.62. Losing 3.26% in five days, the CBOE Volatility Index ended the week at 11.28. (4)
THIS WEEK: Monday, nothing major is scheduled. Earnings announcements from FedEx, General Mills, Lands’ End, Nike, and Steelcase appear Tuesday. Wednesday, Wall Street reviews February existing home sales and earnings reports from Cintas, Five Below, Perry Ellis, and Winnebago. Thursday morning, Federal Reserve chair Janet Yellen delivers a keynote address at a Fed conference in Washington, D.C.; in addition, investors will eye the latest initial claims report, February’s new home sales report, and earnings news from Accenture, GameStop, KB Home, Micron Technology, Shoe Carnival, and Sportsman’s Warehouse. Friday offers a report on February hard goods orders and Q4 results from Finish Line.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
1 - marketwatch.com/story/fed-raises-interest-rates-by-a-quarter-point-sees-two-move-moves-this-year-2017-03-15 [3/15/17]
2 - investing.com/economic-calendar/ [3/17/17]
3 - sca.isr.umich.edu/ [3/17/17]
4 - markets.wsj.com/us [3/17/17]
5 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F17%2F16&x=0&y=0 [3/17/17]
5 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F17%2F16&x=0&y=0 [3/17/17]
5 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F17%2F16&x=0&y=0 [3/17/17]
5 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F16%2F12&x=0&y=0 [3/17/17]
5 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F16%2F12&x=0&y=0 [3/17/17]
5 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F16%2F12&x=0&y=0 [3/17/17]
5 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F16%2F07&x=0&y=0 [3/17/17]
5 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F16%2F07&x=0&y=0 [3/17/17]
5 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F16%2F07&x=0&y=0 [3/17/17]
6 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [3/17/17]
7 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [3/17/17]
Open the full Key Financial Data report for 2017. This report includes important information regarding the 2017 Tax Rate Schedule, standard deductions and exemptions, tax rates on capital gains and qualified dividends, exemption amounts for Alternative Minimum Tax, gift and estate tax exclusions and credits, education credits and deductions and tax deadlines.
The article below was published as a Market Bulletin on November 9th, 2016 by Dr. David Kelly, Chief Global Strategist with J.P. Morgan Asset Management. Click here to view a PDF of the original publication.
U.S. elections: A populist victory
After a long and brutal U.S. Presidential election campaign, Donald Trump has emerged victorious, with Hillary Clinton conceding in the early hours of the morning, and Trump congratulating her on a hard-fought campaign. Importantly, the swing to the Republicans also saw the party retain control of the U.S. Senate. In a much easier-to-predict result, the Republicans retained a comfortable majority in the House of Representatives.
Trump’s victory was achieved by tapping into, and to some extent, stoking general voter discontent. While most of the campaign on both sides was negative, Trump’s populist messages of lower taxes, gun rights and a conservative religious agenda, allied with opposition to trade agreements and illegal immigration, were ultimately successful in knitting together a winning coalition.
Markets had been anticipating a Clinton win, which would have represented a continuation of the status quo. Trump’s victory, by contrast, has elevated global uncertainty, partly because of the danger of a trade war and partly because it is not clear which parts of a very ambitious agenda of tax cuts, increased defense and infrastructure spending and health care reform can, or will, be implemented. Global financial markets have reacted in predictable “risk-off” fashion, with global stock markets and oil prices falling, and gold and U.S. Treasuries rising. The Mexican peso has fallen, as has the U.S. dollar.
For investors, however, the question is not how markets have reacted, but what is the long-term outlook in the wake of the U.S. elections? A few key points need to be made:
First, the U.S. economy that President Trump will inherit is in pretty good shape. Real economic growth has picked up in recent months while the unemployment rate, at 4.9%, is close to any economist’s definition of full employment. S&P 500 earnings have rebounded smartly from the oil and dollar induced slump of 2015 and inflation is still moderate. Moreover, the global economy is also showing signs of life with the global manufacturing purchasing managers’ index hitting a two-year high in October. All of this, absent political uncertainty, would be positive for stocks and negative for bonds.
Second, the uncertainty and volatility following the U.S. election will, for now, reduce the probability of a Federal Reserve (Fed) rate hike in December, although the Fed will want to leave its options open until it can assess the market and economic fallout from the election result.
Third, while last night’s results represented a Republican sweep, actual policy change may be far less dramatic than was proposed by Trump during the campaign. First, it should be noted that there is a wide gulf between Trump’s agenda and that of many “establishment” Republicans and the latter may well balk at unfunded tax cuts or spending increases. In addition, both the new President and Congress will likely act more slowly on dismantling the Affordable Care Act or trade agreements, until some better alternatives can be found.
Finally, it should be noted that, as has been the case elsewhere in the world this year, voters have chosen change over caution and politicians tend to respond to what voters want rather than what they need. While the Trump agenda is unlikely to be implemented in full, members of Congress may be willing to go along with some proposals to increase spending, lower taxes, reduce illegal immigration and increase tariffs. If they do so, they may well further stoke inflation in an economy that is already heating up. Longer term, increasing government debt to fund these initiatives has obvious dangers.
The knee-jerk reaction of investors to last night’s election was to sell U.S. and global stocks and buy Treasury bonds. However, in the medium term, a warming economy, further stoked by expansionary fiscal policy, could favor the former over the latter.
In the long-run, investors would do well to make sure that they are well diversified outside of U.S. stocks and bonds and that they have sufficient exposure to alternatives and international securities. In light of the Brexit vote and the U.S. elections, 2016 has proven decisively that populism is a good political strategy— whether it proves to be good for long-term economic fortunes is another question entirely.
DISCLOSURE: The Market Insights program provides comprehensive data and commentary on global markets without reference to products. It is designed to help investors understand the financial markets and support their investment decision making (or process). The program explores the implications of economic data and changing market conditions for the referenced period and should not be taken as advice or recommendation.
The views contained herein are not to be taken as an advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance.
J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by the following entities: in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other EU jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Hong Kong by JF Asset Management Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited; in India by JPMorgan Asset Management India Private Limited; in Singapore by JPMorgan Asset Management (Singapore) Limited, or JPMorgan Asset Management Real Assets (Singapore) Pte Ltd; in Taiwan by JPMorgan Asset Management (Taiwan) Limited; in Japan by JPMorgan Asset Management (Japan) Limited which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Korea by JPMorgan Asset Management (Korea) Company Limited; in Australia to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Cth) by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919); in Brazil by Banco J.P. Morgan S.A.; in Canada for institutional clients’ use only by JPMorgan Asset Management (Canada) Inc., and in the United States by JPMorgan Distribution Services Inc. and J.P. Morgan Institutional Investments, Inc., both members of FINRA/SIPC.; and J.P. Morgan Investment Management Inc.
In APAC, distribution is for Hong Kong, Taiwan, Japan and Singapore. For all other countries in APAC, to intended recipients only.
Copyright 2016 JPMorgan Chase & Co. All rights reserved.
The right investment advisor does what's right for you.
What is an RIA?
A Registered Investment Advisor (RIA) is a professional advisory firm that offers personalized financial advice to its clients, many of whom are affluent. Many independent RIAs work with complex portfolios and address unique needs that require a highly customized level of investment management strategy and consultation. RIA firms are registered with the Securities and Exchange Commission or state securities regulators, are subject to the Investment Advisers Act of 1940, and have a fiduciary duty to act in the best interest of their clients.
FIVE KEY BENEFITS OF INDEPENDENT REGISTERED INVESTMENT ADVISORS
1) Get advice based on what's best for you.
Whether it's your retirement planning, tax situation, estate planning or assets at multiple places, it's fundamentally important that your advisor truly understand you, your goals and your situation. Many independent registered investment advisors (RIAs) are in a position to do that and pride themselves on strong personal interaction with their clients and dedication to their needs. They believe that their independence is key to offering investment advice based on what's best for their clients.
2) Understand exactly what you're paying for.
Independent RIAs typically charge a fee based on a percentage of total assets managed. This fee structure may have advantages. It's simple and easy to understand, helping to avoid surprises. It also gives your advisor an incentive to grow your assets - when you succeed, your advisor succeeds.
3) Get advice for your complex needs.
Many independent RIAs provide services that address a variety of complex investment needs that often arise when you accumulate significant wealth, such as assisting you with the sale of a business, complicated tax situations, trusts and inter-generational issues. Some advisors are specialists in certain investment strategies. Others can assist you with comprehensive services, such as estate planning or borrowing. Given the rich diversity of specialization throughout the industry, no matter how complex your individual needs, you will likely find an independent RIA who can provide advice that's right for you.
4) Enjoy a different kind of relationship.
The goal of an RIA is to help find solutions that are closely aligned with client needs and objectives, and many independent RIAs enjoy a deep, personal relationship with their clients. This often takes regular, ongoing interactions. And because many independent RIAs are entrepreneurial business owners, the buck stops with them, so to speak, and they frequently have a strong sense of personal accountability to their clients.
5) Know where your money is held.
RIAs typically use institutional custodians - generally large brokerage firms or banks - to hold and safeguard their client's stocks, mutual funds and other assets. These custodians also provide important infrastructure services such as executing trades and preparing monthly brokerage statements for clients. This helps an RIA focus on understanding your needs and providing the best advice possible.
State-registered RIAs may not file a Form ADV, and advisors who are exempt reporting firms only complete parts of Form ADV. This content is made available by Charles Schwab & Co., Inc. for educational purposes.
©2011 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.
The Bipartisan Budget Act of 2015 impacts two important claiming strategies: "Restricted Application" and "File & Suspend."
Restricted Application Strategy
The first change will limit use of this strategy. If you haven't reached age 62 by the close of 2015, it will no longer be possible to file a restricted application to receive spousal benefits (based on someone else's earnings record) while delaying your own retirement benefit (based on your own earnings record). Instead, an application for any Social Security benefit will be deemed to be an application for all benefits you might be entitled to, and you will receive the highest benefit you are eligible for.
However, if you are already 62 or older on December 31, 2015, these changes do not apply to you. In other words, if your date of birth is before January 2, 1954, you will still be able to file a restricted application when you reach full retirement age to receive spousal benefits (to receive benefits based on your spouse's earnings) while deferring your own retirement benefit (based on your own earnings record).
The second change will limit (but not eliminate) advantages of using this strategy. In the future, if you voluntarily suspend receiving a Social Security benefit, this will also mean that while your benefit is in suspense:
- No one else can draw benefits based on your earnings record
- You cannot simultaneously draw benefits based on someone else's
If you are already eligible to file-and-suspend (or will be eligible before May 2, 2016), there is a limited time during which you can still choose to suspend your own benefit (in order to be eligible for a larger benefit later) without affecting a spouse's, ex-spouse's, or child's eligibility. Also, if you elect to suspend benefits on or before April 30, 2016, this should preserve your ability to request a retroactive lump sum if you change your mind prior to attaining age 70. After April 30, 2016, these planning opportunities will disappear. (...)
If you have any concerns regarding social security claiming strategies or questions about your financial situation, please contact Marlis Gilbert, our Chief Planning Strategist, by calling 515-270-6444.
From your Gilbert & Cook Investment Team
The downward slide of U.S. and global equity markets came swiftly in the first 12 trading sessions of 2016 (1). The worst start to a year ever. During a streak of tumultuous days like this, it is important to separate fear from facts. Sentiment from fundamentals. Emotion from discipline.
If supported by an extreme change in market fundamentals, the extent and trajectory of the January slide would say there is a high probability of a near term U.S. recession. The Investment Team at Gilbert & Cook does not share this view. The U.S. economy has created an average of 217,000 jobs per month for the past 4 years (2). Unemployment currently sits at 5%. (3) The Housing Affordability Index is near a 40 year low (that’s a good thing) as measured by the average mortgage payment as a percentage of household income. The consumer is strong.
Preliminary reading from the Bureau of Economic Analysis has the U.S. posting full year 2015 gross domestic product growth of 1.8%. A slowing pace, but not a retreat. The International Monetary Fund’s most recent global economic forecast for 2016 is +3.4% growth. A far cry from any recessionary fears. Slow and steady growth is healthy. Capital is deployed prudently in such an environment.
Headlines out of China would have you worry that a slowdown in their economy will pull the U.S. into recession. Again, not the case in our view. All U.S. exports account for 9.3% of our GDP and China is less than 2% (4, 5). If China exports went to zero our GDP in 2015 would have grown by 1.76% instead of 1.8%. And our strong U.S. dollar makes imports from China relatively less expensive.
The Federal Reserve, albeit with fleeting conviction, started raising rates in December and paused in January. We believe the Fed has telegraphed a gradual rate increase plan because they see a sustainable economic expansion in the U.S. When Alan Greenspan raised rates 17 times from the summer of 2004 to the summer of 2006, Fed funds started at 1% and finished at 5.25% (6). The S&P 500 index was up +12% over that same timeframe (7). Chairman Janet Yellen of the current Fed would like to see a longer term target of 3 to 3.5%. Still fairly accommodative from a historical perspective. And by many estimates, it will take several years to approach that target.
Low oil prices have been a double edged sword for some time. On one hand, the energy sector (representing 10% of the S&P 500 index) has seen profits crater. But on the other hand, the oil recession is a boon to consumers and businesses utilizing cheaper energy. A very tough argument if you live in Houston, but earnings in the other 90% of the S&P 500 have continued to expand nicely. Unlike the housing industry in 2008, energy businesses going through profit contraction help other areas of the economy. Oil consumption has actually continued to expand, but a glut of supply is depressing oil prices.
Fear based selling is heightened by those investors with too much of their portfolios devoted to risk based assets. A disciplined and well allocated portfolio matching investments with goals and time horizon allows for staying power during periods of “normal” price volatility. As many of you have heard us explain in person, the S&P 500 index has had an average pullback of more than 14% each year for the past 36. Nothing in the near term has been outside of those normal swings. We view conditions as positive for equity investors over the long term, but there will be short term testing of those convictions. Our goal as a firm is to help create confidence in the things we and our clients can control. Please don’t hesitate to call any member of our team for answers specific to your situation.
1 - S&P Dow Jones Indices
2 - Bureau of Labor Statistics
3 - Federal Reserve Bank of St. Louis (FRED) https://research.stlouisfed.org/fred2/series/UNRATE?utm_expid=19978471-2.Y0NpAPxIQfK_8K7-O4DTQg.0&utm_referrer=https%3A%2F%2Fresearch.stlouisfed.org%2Ffred2%2Fsearch%3Fst%3Dunemployment
4 - International Monetary Fund
5 - Federal Reserve Bank of St. Louis (FRED)
6 - Federal Reserve Bank of New York
7 - S&P Dow Jones Indices
THE QUARTER IN BRIEF
The third quarter of 2015 is now history – and what a trying quarter it was. In looking back at Q3, we see not only a rough stretch for stocks and commodities but also a period in which the financial narrative for the year changed. At the start of July, investors focused on whether or not the Federal Reserve would raise interest rates in September. By the end of the quarter, the evident economic slowdown in China had become the year’s defining story. Key U.S. indicators waned as the quarter progressed, though the housing sector maintained its impressive sales pace. The stock market pulled back – the S&P 500 lost 6.94% in the quarter, which left it negative year-to-date. (1)
DOMESTIC ECONOMIC HEALTH
As the quarter unfolded, the deceleration in overseas manufacturing began to affect America. For evidence, one needed only to look to hiring totals, hard goods orders, and the ISM purchasing manager index tracking the factory sector.
Even with its anecdotal basis, ISM’s manufacturing index is a hugely important indicator – and it was troubling to see it decline from a July reading of 52.7 to a September mark of 50.2, near the contraction level. (ISM’s non-manufacturing PMI went from 60.3 to 56.9 in the same span.) By August, headline durable goods orders were down 24.1% year-over year. (2,3,4)
In September, the economy added a disappointing 142,000 new jobs – and the Labor Department revised July and August hiring downward to respective totals of 223,000 and 136,000. Annualized wage growth – which should be between 3-4% – remained low at 2.2%. The good news? In the ninth month of the year, headline unemployment was down to 5.1% while the U-6 “underemployment” rate dipped to 10.0%. (5)
Inflation – at least as measured by the Consumer Price Index – remained a minor economic factor. By August, the CPI was up just 0.2% in the past 12 months, with the core CPI up just 1.8%. The headline CPI retreated 0.1% in August, its first pullback since January. As for the Producer Price Index, it was flat in August after a 0.2% rise in July; by August, annualized wholesale inflation was at -0.8%, negative for the seventh month in a row due to reduced energy costs. (6,7)
Consumer confidence and personal spending held up reasonably well as economic warning signals came in from abroad. The Conference Board’s consumer confidence index reached a September mark of 103.0, rising from 101.5 in August. While the University of Michigan’s household sentiment index declined during each month of the third quarter, its final September reading of 87.2 represented a year-over-year advance of 2.6 points. Consumer spending was up 0.4% in both July and August; consumer incomes rose 0.5% in July and 0.3% in August. Retail purchases were up 0.7% in July and another 0.2% for August. (8,9)
As the quarter went on, the chances of the Federal Reserve raising interest rates seemed less likely. Indeed, the Fed made no move in September – but a dot-plot forecast it published projected the federal funds rate at 0.40% by the end of 2015. The poor September jobs report could alter that projection, as could the ongoing “global economic and financial developments” that the central bank referenced as cause to leave rates alone. (10)
GLOBAL ECONOMIC HEALTH
Greece may have seized the headlines in Q2, but in Q3 the big story was China. Its stock market exhibited extreme volatility and its economic indicators unsettled investors here and abroad. By July, the warnings were evident: Chinese exports had shrunk 8.3% in a year, imports had fallen for nine consecutive months and the retail sales pace had reached a 15-year low. (11,12)
During Q3, the Shanghai Composite dropped more than 25%. China surprised investors by devaluing the yuan in August; it responded to the correction by putting severe controls on its stock market. China’s official manufacturing PMI showed sector contraction for a second straight month in September, ticking up to 49.8 from 49.7. The Markit/Caixin private-sector factory PMI for China hit a 5½-year low of 47.2 in September. Since as much as half the worldwide demand for coal, copper, and iron stems from China, this was troubling news indeed. (13,14)
Economists questioned if China’s official GDP and manufacturing PMI readings were being vastly overstated. Oxford Economics estimates China’s 2015 GDP will be between 3-4%, and leading Swedish economist Mauro Gozzo projects 3% growth – far removed from the 7% expansion forecast by Chinese government officials. (15)
The Markit (official) manufacturing PMI for the eurozone was a comparatively healthy 52.0 in September, down from 52.3 in August. Deflation had returned: the eurozone CPI retreated 0.1% year-over-year through September. The region’s unemployment rate remained at 11.0% last month. (14,16)
Last quarter, the Thomson Reuters/Jefferies CRB Index suffered a loss of 14.71%. The other notable commodity sector benchmark, the S&P GSCI index, retreated 19.3% (its poorest third quarter in 45 years). (18,19)
Looking at the S&P GSCI quarterly scorecard, only lean hogs posted a three-month advance, gaining 13.4%; the other 23 commodities all retreated. There were some major Q3 descents among ag and energy futures: crude oil lost 26.9%, unleaded gasoline 21.0%, heating oil 20.9%, and wheat 21.2%. Crude oil ended the quarter at $45.09 a barrel on the NYMEX. (19,20)
Precious and base metals also declined notably in Q3. Gold lost 4.8%, settling at a COMEX price of $1,115.20 an ounce on the quarter’s final day. Silver fell 6.8% in Q3, platinum 15.8%, palladium 3.2%, zinc 15.9%, copper 10.2%, and aluminum 7.9%. (19,21)
Did the U.S. Dollar Index manage a third-quarter advance? Yes, it did. It settled at 96.35 on September 30, up 0.90% in three months. (22)
By August, new and existing homes were being bought up at a pace nicely exceeding year-ago levels. According to the National Association of Realtors, resales were up 6.2% annually in August, even after August turned out to be the second-weakest month for existing home sales in the past four-and-a-half years; 32% of buyers were first-timers. A Census Bureau report showed new home buying surging 21.6% in the 12 months ending in August. (23)
NAR’s pending home sales index softened by 1.4% in August, but even with that retreat, it remained 6.1% higher than a year ago at a healthy 109.4. The overall S&P/Case-Shiller home price index for July showed a 5.0% advance across the past 12 months, ticking north from 4.9% in June. (8,23)
Housing starts and building permits also showed significant annual gains according to the Census Bureau. Groundbreaking had increased 16.6% in the 12 months ending in August (14.9% for single-family projects). The number of permits issued in August surpassed the August 2014 number by 12.5% (8.7% for single-family construction). (24)Did home loans become more expensive in Q3? For the most part, no. A quick check of the June 25 and September 24 Freddie Mac Primary Mortgage Market Surveys show average interest rates increasing only on the 1-year ARM, from 2.50% to 2.53%. The 30-year fixed grew cheaper, with the average interest rate sinking from 4.02% to 3.86%. The story was similar for the 15-year FRM and the 5/1-year ARM; average interst rates on the former declined from 3.21% to 3.08% while average interest rates on the latter dipped from 2.98% to 2.91% (25)
LOOKING BACK ... LOOKING FORWARD
Were there any bright spots on Wall Street during a dismal quarter? Yes. Beneath the big three, a few indices did post some nice three-month advances. The Dow Jones Internet index gained 7.07% in Q3, and the Dow Jones Utilities Average rose 4.82%. The Nasdaq Insurance index ticked up 0.73% for Q3. This paled in comparison to the 34.39% Q3 rise of the CBOE VIX. Third quarter performances for the marquee indices left much to be desired. Their quarter-end settlements were as follows: DJIA, 16,284.70; S&P 500, 1,920.03; NASDAQ, 4,620.16. The small caps were not spared – the Russell 2000 lost 12.22% for the quarter, settling at 1,100.69 on September 30. (1)
Entering the fourth quarter, stock market investors have a central question: can the year be salvaged? Can the S&P 500 possibly finish 2015 with an annualized gain? A Q4 rate hike by the Federal Reserve now looks much less likely, but even if the Fed avoids making a move, will that ease any anxiety about China’s economy or the health of its stock market? Oil prices could remain low, with a major supply glut persisting at a time of reduced demand. Few investors are excited about this oncoming earnings season. Still, the fall could surprise to the upside. As recently as 2013, the S&P 500 gained 10% in Q4. In 2011, it advanced 11% in the last three months of the year. The bulls may be milling around right now, but there is a chance they could run again before 2015 is over – though it will take some notable earnings surprises and encouraging headlines to truly set them loose. (28)
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2 - instituteforsupplymanagement.org/ISMReport/MfgROB.cfm [10/1/15]
3 - instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm [10/5/15]
4 - ycharts.com/indicators/durable_goods_orders [10/5/15]
5 - forbes.com/sites/samanthasharf/2015/10/02/jobs-report-u-s-added-142000-jobs-in-september-unemployment-rate-steady-at-5-1/ [10/2/15]
6 - marketwatch.com/story/inflation-falls-for-first-time-since-january-cpi-data-show-2015-09-16 [9/16/15]
7 - bls.gov/news.release/ppi.nr0.htm [9/11/15]
8 - marketwatch.com/economy-politics/calendars/economic [10/2/15]
9 - cnbc.com/2015/09/25/us-consumer-sentiment-final-reading-in-sept-rises-to-872-vs-867-estimate.html [9/25/15]
10 - marketwatch.com/story/federal-reserve-keeps-interest-rates-unchanged-but-forecasts-hike-this-year-2015-09-17 [9/17/15]
11 - foxbusiness.com/markets/2015/08/12/us-stock-futures-slump-as-china-devalues-yuan-again/ [8/12/15]
12 - marketwatch.com/story/chinas-economy-enters-second-half-of-2015-on-weak-note-2015-08-09 [8/9/15]
13 - news.morningstar.com/articlenet/article.aspx?id=716336 [9/29/15]
14 - channelnewsasia.com/news/business/international/global-economy-loses-stea/2163526.html [10/1/15]
15 - forbes.com/sites/jnylander/2015/09/23/swedens-top-economist-puts-chinas-gdp-growth-at-3-others-are-less-optimistic/ [9/23/15]
16 - bbc.com/news/business-34401035 [9/30/15]
17 - msci.com/end-of-day-data-search [9/30/15]
18 - investing.com/indices/thomson-reuters---jefferies-crb-historical-data [10/5/15]
19 - indexologyblog.com/2015/09/30/commodities-post-3rd-worst-q3-since-1970/ [9/30/15]
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22 - online.wsj.com/mdc/public/npage/2_3050.html?mod=mdc_curr_dtabnk&symb=DXY [10/5/15]
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24 - mortgagenewsdaily.com/09172015_permits_and_starts.asp [9/17/15]
25 - freddiemac.com/pmms/archive.html [10/5/15]
26 - bigcharts.marketwatch.com/historical/default.asp?
27 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [10/4/15]
28 - money.cnn.com/2015/09/29/investing/stocks-third-quarter-fourth-quarter-rally/ [9/29/15]