The market bounced yesterday  after the very negative Monday due to the sharp  drop in oil - squabble between Saudi Arabia and Russia - on top of the fear of increasing spread of Coronavirus 

Today we had another larger than normal down day; the high volatility measure how high the ups/downs will be on given market days  and right now suggest up or down days of 3-6% ; to keep this level of high swings suggest that having large up days can be just as likely as large down days and  it’s also less likely that this  volatility stays this high much longer.

Facilitating calm and perspective during times like this are when we are most busy and most valuable to our clients!  Please take advantage of us !

Please expect more volatility – mostly computer based /”machine trading” and not individuals or wealth mangers – until 2 or more of the following occurs, which should be sooner than later.

•  An agreement with the Saudis /Russia on price of oil/stability in energy sector
•  A  flat or decreasing trend in US cases of 2019-nCov
• Fiscal Government Policy /Economic Stimulus support to combat the disruption of our economy
• Sustainability in the leisure industries – Cruises and Airlines
• Sustainability in oil related/production companies
• Less negative economic data from China/Industries /Companies than the market is expecting , as reflected  in declined stock values.

Although  US banks , economy and consumer are strong to good , no one knows how widespread the virus will grow.   Clearly, the Global economy has slowed due to virus and corporate earnings will be  negatively  impacted.    The question is whether the rapid  outsized market decline will be confirmed by pending  economic and corporate earnings data and how quickly and wide the virus spreads in the US?

We don’t know what we don’t know, BUT THE GOOD NEWS : 

First :   Most portfolios are down substantially less than market indices ;   “ I know, who cares , I feel I lost a bunch of money!”  However, the importance in your values coming down less than the market is that we can take an offensive/buying tactic which enables greater gains when, not if, the market recovers.   We are taking action to reduce your exposure as appropriate , based on your Personal Investment Policy including your Personal Investment Model Allocation Selection as well as your custom financial plan.  Reducing risk means selling select sectors of stocks and  bonds and reallocating to cash, increasing fixed income or equites that may act inversely or cushion the decline in your account values.  We are just simply trying to reduce the turbulence like a pilot , until clean air is available to fly in again.   Make Sense?

Your Financial  Plan includes your annual consumption rate as a percentage of your total invested assets you have with Maxele .   In most of the cases, clients have 15-25 times + (meaning 15-25years+ ) in their funds of what they withdrawal per year.   Knowledge of this ratio allows you to know that a 10 -15% decline in your total portfolio  value only reduces your multiple typically by 1-3 years in most cases; in other words, you have 12-22 times what your draw or your funds will last 12-22 more years without no additional gains or loss , at this snap shot in time.  We do our best to review your ratio so you can keep calm at times like we are in now .  Every case is custom so if you have questions, please let us know.

Second, this cycle we are in will not last forever; China had bottoming in its stock market and increase in cases in about 45-50 days post trend of the virus spread.   This is very positive for us and the world! 

Third, there will be exceptional buying opportunities in stocks which can lead to higher values in portfolios than prior to the advent of this decline.

We remain Good Stewards of your money and this scary time will pass:  Do you recall SARS, SWINE FLU, EBOLA and what the market declines were?   Exactly!  That’s not to say this will be the same but the US has the best medical minds working on containment , prevention and eventually a vaccine .  

As always, if you have unusual concerns regarding the market volatility or would like to review your current Investment Allocation Election, please let us know . 

March 11,2020

Remember, market declines are normal - “Don’t throw the baby out with the bathwater” as we look forward to promising 3^rdquarter corporate earnings with a backdrop of a growing US economy. 

With all time market highs back on Sept. 20^th, most of the market focus had been on positive news: Mexico and Canada new trade agreement, strong economy and employment, low inflation and interest rates with the best corporate earnings in years. 

What happened?  A “perfect storm” can always come at any time when a series of events occur together, jolting the markets: Rapid increase in Italian bond yields, China slow down and trade war, increasing US Treasury bond yields and specific global chemicals companies/sectors, such as PPG, paint manufacturer’s recent pre-announcement of earnings miss due to higher costs, slowdown in China and increasing tariffs. This was compounded by warnings from other sectors/companies such as auto’s, computer chip makers and even luxury goods, such as Tiffany (TIF, Jewelry Products) generally due to China sales restrictions. The Federal Reserve’s recent message was vague to overly hawkish on expected interest rate increases which spooked the markets. 

Why so much selling If the US economy is strong and corporate profits up?  Fear of US economy hitting wall and recession worries became the focus. Stocks in sectors that have been up the most such as technology and big names - Amazon and Netflix - generally sell off the most in market corrections. Also selling leads to specific technical decline markers which can result in computer-based trading (think automatic) resulting in panic like over selling with increased volatility. The market is not conditioned to higher rates and volatility should be expected but this does not mean the market will go down further or not increase to new highs.  We need treasury interest rates to stop rising which will happen when the fear of an imminent recession resides.  

What to do? Always remain calm during these rapid declines – don’t panic. Fear trades such as buying gold or even flight to quality via buying US treasury bonds is not what is happening. Realize that most portfolios have had nice increases in values this year and over the last 12 months; most client portfolios are only down 1-2% through yesterday this month. Today’s selling looked more like a catharsis, which can mean a bottom, although the decline may continue. Keep perspective and see opportunity for future gains and bottom fishing.  Market dips and even 10-12% declines/corrections are normal and even healthy for values to go higher. Buying opportunities in attractive sectors will likely arise from this decline and more attractive prices should result from rebounds of sectors that may need to be reduced/sold at higher prices. China related issues are likely a major cause of this volatility and this could be corrected with any news regarding trade talks or rumors of any resolution. The focus questions are how much of this decline is due to fundamental issues and how strong will 3^rd quarter corporate earnings and outlook reporting be, starting this Friday? Finally, the Federal Reserve may be responsive to any fundamental related, economic slowdown and in turn, decide not to increase rates as aggressively in 2019. 

Steve Erken, CFP®

Principal

Date: October 10, 2018

As we are approach the first day of fall, Sept. 22^nd, looking back, it was a quiet summer in the markets, despite emerging market currency declines (Turkey, Brazil, South Africa) vs. the stronger dollar, tariff wars (China) and increasing interest rates (Federal Reserve). With August and September often being the two most dormant months of the year, US stocks appear to be resilient due to exceptional corporate profits but also strong sales, a very solid economy and a spending consumer. Volatility has been low apart from late January and again in late March as the domestic/S&P 500 Index tested the Feb. 8^th low, down ~ 10% before climbing back. Unfortunately, most of the gains have been due to a handful of stocks – Amazon, Netflix and Microsoft together make up ~ 70%+ of S&P 500 returns and 78%+ of NASDAQ 100 return, through mid-August. If you add Apple and Alphabet (Google), these six stocks make up ~98% + of market returns! The DOW 30 was slightly up through mid-August with Boeing, Microsoft, Nike and Verizon carrying this price-weighted index.  The heavy weighted stock performance reflects the very narrow market returns due to trade, currency and interest rates concerns. However, the likely resolution to the trade wars would remove the largest market headwind suggesting higher and more broad market values by year end. 

As of this writing, Aug. 15^th, the S&P 500, DOW 30 and tech heavy NASDAQ are up ~ 5%, ~1 ½% and ~ 11% respectively, before dividends, with weighted returns being due to a select number of stocks, as described above. The aggregate bond index (AGG) is down almost 3% before dividends while the international sector is down ~ 8% (EFA before dividends). Despite possible dips of 3-5% (very common) or even the annual 10% correction (this past Feb), any down turn may be short lived due to the stronger earnings, economy and consumer; buying/reallocation opportunities will arise. Unfortunately, the narrow market gains and down bond market, makes it more difficult to achieve higher returns in more custom conservative and moderate portfolios as there is less risk due to increased diversification, including consumer staples/defensive securities and bonds, both of which are currently out of favor.

Steve Erken, CFP®

Principal

Dated: 8/15/2018

As you may be aware, the increase in the Standard Deduction has increased which may result in you not using the itemized deduction filing (schedule A). The new standard deduction amounts are $24,000 Married/Filing Jointly (prior amount was $12,700) and $12,000 filing Single (prior amount was $6,350). Also, age 65 + Married/Filing Jointly receive an additional $1300 and Single receive an additional $1600. Moreover, the State Tax Deduction on the Itemized Schedule A is now capped at 10,000 which could also lead to taking the Standard Deduction. In fact, taking the standard deduction and offsetting your Required Minimum Distribution with charitable distributions, could result in paying less taxes than in prior years!

You/Your tax preparer will need to determine if you will be taking the Standard Deduction which suggests that you consider making charitable contributions from your IRA (must be 70 ½ to qualify for Qualified Charitable Distributions, QCD).

If appropriate, we can facilitate obtaining check books for just IRA’s, so contribution to charities can be made directly from your IRA.

Of course, we are here to help! Please let us know if you would like assistance to review this topic (As always, we will refer you to your tax preparer as appropriate).

Steve Erken, CFP®

Principal

May 10, 2018 

I know the market volatility/decline may cause some of you to be nauseous! Frankly, with the recent market decline, the Jan-March quarter will be the first negative quarter of the last ~ 10!  In fact, the broad S&P 500 Index was positive for ~ all 12-month last year. The negative months of Feb/March this year are unpleasant to see as we are not accustomed to having our account statement balances decline, are we?  We need to get familiar with these declines as volatility is likely here to stay; this is normal and may be a good sign as the US economy continues without the help of government stimulus (“printing money” adding to our debt) which artificially reduced market volatility.

Keeping perspective suggests you consider that the broad US market (S&P 500 Index) is only down ~1% year to date through March (before dividends) despite the volatility. Additionally, over the last 12 months, the market is up ~ 12% with most clients capturing ~50% to 120% + of this gain, (depending on your custom Investment Policy, investment timing, etc.) which equates to ~ 6 -15 +% investment returns, net of all fees, over the last year, including the recent declines of the last 2 months.   Of course, these returns are far superior to mostly cash and or fixed income/bonds which have trended negative. 

The rapid market swings and declines in Feb. and March, enhanced by computer trading, have more to do with several event risk factors, and less with any fundamental economic reason; corporate profits remain strong, interest rates low and the US dollar stable.

If you recall, the market decline in February was sparked by an overreaction to a rapid spike in interest rates and further exacerbated by technical parameters (think market trend investing) and mechanical selling/computer trading, a root cause being the failure of market insurance hedge instruments (confusing, I know). The market almost fully recovered but the tariff scare, likely a negotiation tactic, driven by the political media, rocked markets with additional pilling on due to the Facebook (FB) breach. This led the market to re-test the February lows. The market rebounded (likely magnified by computer trading again) but was followed by a sharp technology-based decline related to key products used in self-driving cars (recall the Uber/Tesla accidents?). During this period, there has been no real change in the important fundamental data that truly drives stocks and markets. Interest rates are now lower than they were, “tariffs” will be negotiated, Facebook will start “behaving”, and the development of the self-driving car is not going away! 

These event risks, in the absence of new positive data with a backdrop of increasing rates, gave sellers a reason to take some profits. However, the good news is that the stock market generally looks forward and not back; we should too as we anticipate increasing corporate profits over the next couple of months and into the balance of the year. 

Steve Erken, CFP®

Principal

March 30, 2018