We could see the road construction crew as we neared the sign just before the hill. We knew the speed limit in a road construction zone; our concern was not that we were going too fast but that our slower pace would hold up traffic and construction. I thought to myself . . . Should we speed up? Hmm, if we speed up could we continue the pace, or would we burn out?” Several miles and more hills were to come before we would reach home. As we pass the construction crew flagger, we apologized for our slowness. His reply, “You two are doing just fine!” as my dog Tu and I continued our run for the day. (Perhaps Tu felt a tiny bit embarrassed; as you can see he was camera shy that day.)
Saving for retirement and having enough for when we retire is a concern for many. We read how the market is going up (or down), how a neighbour has received a great return or got out due to a burned-out market. We wonder if we should add more risk to our allocation to ‘speed’ the investments along or move to cash when an article says there may be a crash. How quickly we sometimes forget that the market can also reverse itself. A portfolio invested in S&P 500 in 2008 returned a -37%. In contrast, in 2008 the U.S. Aggregate Bond (AGG) returned 5.24%. For those who were younger and did not need to withdraw from their portfolio, there was time to recover from the loss and continue when the S&P returns over the next few years were 26.46% in 2009 and repeated a high of 32.39% in 2013. I often think a portfolio is similar to sports; that one needs to invest at a comfortable pace (within one’s risk tolerance). Here at White Raven Financial, we verify your risk tolerance by reviewing your risk quiz and matching that with your ability to handle risk and allow you to continue to invest without burning out.
For those of you that missed it amongst the potential trade war news, the Fed raised interest rates in June increasing the fed funds target range by a quarter point from 1.75% to 2.00%. Giulio Martini, Partner, Director of Strategic Asset Allocation for Lord Abbett wrote in his June economic insights on the comparison in stocks in relation to the U.S. Treasury 10 year note – and how they feel about stock prices until the 10-year yield rises to roughly 3.75%. Martini also discussed an inverted yield curve, a flatten yield curve and what those possibilities might mean for the economy and the market. Charles Schwab’s Investment Strategist Liz Ann Sonders in her 2018 Mid-year U.S. Equity Outlook also wrote about the flattening yield curve but felt that is was nominal at this stage in the economic cycle. Sonders also wrote that the economy is tardy in its up-cycle within a constricted labor market and even tighter monetary policy. She summarized by reminding investors to focus on discipline, to rebalance and stay diversified.
And while most are worried about trade wars, the recent changes that occurred during the July 2nd election in Mexico show the forces of populism are still at play around the world, reported by Blackrock Investment Institute. The election results could herald profound changes for Mexico’s policy and politics and we may see more of this coming in Latin American countries with the upcoming Brazilian election. We continue to have a geopolitical shifting landscape across the pond when looking at global trade. Neil Dwane, Global Strategist for Allianz Global Investors, in his Half-Time Report compared the world’s economic players with talents from the 2018 World Cup. He surmised that central banks’ global approach on various differing tracks to monetary-policy normalization will result in continuing divergence and fragmentation. He continued by reiterating that global trade is the biggest game around and that economic growth may be driven more by each countries’ ability to enact positive reforms and competitive policies.
The month of June appeared to show that the indices were performing a back-and-forth step-dance routine. The blue-chip barometer (the DowTR)* took a one-half step backwards, subtracting .49% for June. The S&P 500 (SPYTR)* took a large one-half step forward, adding .62% for the month. The tech-rich Nasdaq Composite (COMPTR)* decided on a full step and again completed the month in first place with a .98% gain. On Tuesday, June 26, 2018, the Dow Jones Indices released the latest S&P CoreLogic Case-Shiller report showing that the national core home price index momentum continues. The 20-city composite April Home Price Index reported a 6.6% year-over-year gain; down from the 6.7% posted the previous month. Before seasonal adjustments, month-over-month data had the month of April posting a .08% gain over the prior month of March for the 20-city composite index.
Regards and Thank you,
The Team at White Raven Financial
*The Dow Jones Industrial Average covers 30 blue chip U.S. companies selected by the editors of the Wall Street Journal. The Dow represents about 25% of the NYSE market capitalization and less than 2% of NYSE issues.
*The Standard and Poor’s 500 is an unmanaged, capitalization weighted benchmark that tracks broad-based changes in the U.S. stock market. This index of 500 common stocks is comprised of 400 industrial, 20 transportation, 40 utility, and 40 financial companies representing major U.S. industry sectors. The index is calculated on a total return basis with dividends reinvested and is not available for direct investment.
*The NASDAQ is a market-value weighted index that measures all NASDAQ domestic and foreign common stocks.
*Indexes are unmanaged and do not reflect service fees, commissions, or taxes. You cannot invest directly in an index. Past performance is not necessarily indicative of future results. Returns for the DOW, S&P500 and the NASDAQ is the total return (price only) provided by Morning star Inc. as of 2018June30. Diversification and asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment loss.
Advisory services are offered through White Raven Financial, a Registered Investment Advisor in the state of Washington.
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The information contained in this material have been derived from sources believed to be reliable, but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed.
Whenever you invest, you are at risk of loss of principal as the market does fluctuate. Past performance is not indicative of future results. Purchases are subject to suitability. This requires a review of an investor’s objective, risk tolerance, and time horizons. Investing always involves risk and possible loss of capital.
