The Year in Review: A recap of 2016 and an optimistic outlook for 2017

The Year in Review: A recap of 2016 and an optimistic outlook for 2017

EARLY SIDE

2016 began as 2015 ended with oil prices and stock prices falling. Oil (WTI Crude Oil) began 2016 at $37.13 a barrel and bottomed on February 11th at $26.21, a decline of 29% in just six weeks. The S&P 500 began the year at 2044 and fell to 1829 by February 11th (yes, the same day oil bottomed), a decline of 11 %. Fortunately, both the oil market and the stock market stabilized quickly and both had reached their beginning of the year levels by the second week of March.

BREXIT

The referendum in Great Britain in June 2016 whether or not Great Britain would remain in the European Union or vote to exit was viewed as either a solidifier of the EU or the first step to its demise. All polls showed a major advantage to the stay vote, but as we would find out more than once in 2016, pollsters did not have the pulse of the voters. The citizens in Great Britain voted against the establishment, against the recommendation of their Prime Minister, and against staying in the European Union. The stock market sold off 6% in two days, but then recovered fully within three days, to finish up just over 4% year-to-date through June 30.

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Annual 2016 Market Overview

Annual 2016 Market Overview

Annual 2016 Market Overview

December 31, 2016

During 2016, the US stock market posted its best performance since 2013 after shaking off a horrific start of the year that concluded with the DJIA dropping to a two-year low of 15,660 on February 11th. The index of 30 Blue chip stocks would ultimately end the year plus 26% from that low watermark and closed the year with an annual gain of 13.42%.

Reversing course from the previous year the energy sector was the biggest gainer of the S&P 500 advancing 27.36 % during 2016 after experiencing 2 years of declines. Financial stocks
(+ 22.80%) also performed very well particularly in the latter part of the year benefiting from the prospect of less regulation coupled with a more aggressive plot of higher interest rates going forward after the Federal Reserve finally raised rates in December, for only the second time in the last 9 years.

The Russell 2000 was up 19.48% in 2016, far outpacing gains for the Dow and S&P 500, trading on the thesis that its components are more focused on the US economy, which at the moment, looks more promising than companies operating abroad.

Equity Markets 4th Quarter

The small cap Russell 2000 was the best performing equity asset class in the 4th Qtr. with a return of 8.43%. The DJIA was a close

second at 7.94%. The NASDAQ lagged with a return of just over 1.34% as the S&P Value Index clearly outperformed the S&P Growth Index by a notable 9.17% during 2016.

International Developed had a 2016 calendar year loss of (-1.88%) as well as (-1.04%) quarterly loss respectively. Facing the headwind of a stronger US $ Emerging markets continued to struggle losing (-4.56%) in the 4th quarter, but did advance 8.58% for
the year due to an early year rally.

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Tax Loss Harvesting: Don’t Miss Out on the Opportunity

Tax Loss Harvesting: Don’t Miss Out on the Opportunity

NOBODY LIKES TO SELL AN INVESTMENT AT A LOSS. However, using a strategy of realizing losses to reduce taxable gains, referred to as tax loss harvesting, can help you enhance the after-tax returns of your portfolios. Tax loss harvesting can not only save an investor taxes in the current year, but if done properly, can provide tax savings for years to come. Many investors avoid tax loss harvesting because they want to avoid selling something at a loss and possibly missing a rebound. We advise our clients to maintain their equity exposure even while tax loss harvesting. You can do this by simultaneously selling your asset that has an unrealized loss and purchasing a similarly correlated asset to the one just sold.

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Third Quarter 2016 Market Review

Third Quarter 2016 Market Review

 

Capital Markets marked time and fluctuated largely sideways after posting sharp gains in the first month (July) of the 3rd Quarter.

Fixed Income
3qtr1

The 10-year US Treasury yield crept up to 1.6% after falling to 1.36% earlier in the quarter. The longer end of the curve remained less steep with the 30 Year note yielding just 2.32%. It began the quarter yielding 2.29%, so it hardly budged. Municipal bond prices moderately declined during the quarter but traded down less than -0.31%. Inflation Protected Treasuries advanced 1.42% and is now up 6.58% year to date. The US Aggregate bond advanced by .46% and ended the quarter with a 5.80% year to date gain. Comments from the Federal Open Markets Committee suggest a rate hike is in play by the end of year.  Read more

Getting Your Fiscal House in Order

Getting Your Fiscal House in Order

 

fiscal-houseBecause it is always a timely topic, we thought we would discuss household fiscal responsibility and try to provide readers with some tips for getting their fiscal house in order. As financial planners and CPA’s, we interact with people from all across the financial spectrum. Our experience has taught us that whether a household is in good financial condition or not has less to do with household income and more to do with household spending (Sound familiar, can you say federal government?). We see families who make more than $500,000 annually who can’t borrow a nickel because they are so maxed out with debt. We also see families who make $60,000 annually who have a house, two cars and no debt other than a mortgage. What it comes down to is simple math. You can’t spend more than you make indefinitely. You can do so in the short-term by borrowing to fund the difference, but at some point that option runs out. So, why do so many families find themselves in a financial mess? We believe there are three main reasons:

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Retirement Planning 2016 – Part 2

Retirement Planning 2016 – Part 2

Retirement Planning is by far one of the most important areas of financial planning and one that we allocate a good portion of our time and resources to address. We break retirement planning up into two distinct phases:

  1. Accumulation Phase
  2. Distribution Phase

The accumulation phase is simply the phase in which you are still working and gathering assets to fund the second phase, which is the distribution phase. Clients in the distribution phase are typically either retired or semi-retired and are supplementing their pre-retirement income with distributions from their portfolios. In the last newsletter we addressed the accumulation phase. This article is part two of our two-part series on retirement planning and will address the distribution phase.
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Second Quarter 2016 Market Review

Second Quarter 2016 Market Review

 Market Overview – Markets move past Brexit!

World Capital Markets quickly reversed after a knee-jerk sharp two day sell off from Friday, June 24th to Monday, June 27th in the aftermath of the UK vote to exit the European Union. However, the DJIA average recouped the two-day 871-point route ending the quarter plus 790 points in the final four trading days. Including July 1st, the US markets had their best week of the year. However, the story of the 2nd quarter and that of 2016 thus far is the action in the bond markets. The 10-year US Treasury note briefly fell below its lowest level ever at 1.385% on the first day of trading in the third quarter. The market is now firmly of the belief that Brexit collateral damage uncertainty will exert pressure on world central banks to pump even more stimulus to world economies. Brexit has put a downward trajectory on the British Pound sterling, and sparked additional demand for US Treasuries and the US dollar. Gold has caught a bid. Recent events suggest that The Federal Reserve may remain in a holding pattern as well.
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Retirement Planning 2016 – Part 1

Retirement Planning 2016 – Part 1

Retirement PlanningElegantly dressed couple of pensioners

Retirement Planning is by far one of the most important areas of financial planning and one that we allocate a good portion of our time and resources to address. We break retirement planning up into two distinct phases:

  1. Accumulation Phase
  2. Distribution Phase

The accumulation phase is simply the phase in which you are still working and gathering assets to fund the distribution phase. Clients in the distribution phase are usually either retired or semi-retired, and are supplementing their pre-retirement income with distributions from their portfolios. This article is Part 1 of a two-part series on retirement planning and will address the Accumulation Phase of retirement planning.
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Taxation of Investment Income

InvestmentNot all investment income is taxed the same. Thanks to the IRS, the tax code regarding your investments is constantly changing, and keeping up with these changes is important to optimize the tax efficiency of your portfolio. Remember, it’s not what you make but what you keep that counts.

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First Quarter 2016 Market Review

First Quarter 2016 Market Review

Market Overview
If an investor were to look at just the starting and ending index values for equities, it would show a quiet quarter with equities posting a very modest gain for the 1st quarter. The S&P 500 finished up 0.77% on a price only return basis. Looking deeper, however, reveals that investors were taken on a very wild ride, driven by fears of both a global and domestic recession, which saw equity markets sell off substantially and enter correction territory.
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