Mid-Year Review:
If you have not yet scheduled your “half-time” 2018 review, now is the time. We want to provide you with your personalized portfolio review, risk analysis, and also look at how the 2018 income tax changes may affect you personally. Be sure to bring your 2017 income tax return with you to your meeting so we can look at last year’s taxes and estimate what this year may look like prior to year-end. Call today-405-844-9826- to schedule your personal review! We can schedule an in-person meeting or an online review via Go-To-Meeting. Just let us know which is more convenient for you.
How Life has Changed for Young Americans Age 25-34 Since 1977:
The Markets:
The major U.S. stock indices gained some ground in July, with the Dow Jones Industrial Average up 4.7% and the Standard & Poor’s 500 Index rose 3.6%. For the first seven months of 2018, the Dow is now up 2.86% while the S&P 500 is now 5.35% higher than at the start of the year. Since the market high back on January 26th of this year, the Dow is still down 4.5%. (Yahoo Finance)
The yield for the 10-year U.S. Treasury moved higher in July, ending the month at 2.96% compared with 2.85% at the end of June. (Yahoo Finance). Remember: Bond prices move inverse of interest rates. Interest rates up/Bond prices down. Mortgage rates now sit at 4.43% for a 30-year fixed, and 3.84% for a 15-year fixed mortgage. (Bankrate.com)
We made some adjustments to client portfolios across all risk levels in July in a continuing effort to further diversify holdings and reduce volatility. We added Real Estate Investment Trusts (REITS) to portfolios for all risks to expand client account allocations into more non-traditional equity/stock holdings that don’t necessarily move in sync with stocks in general. We have placed a portfolio of ten different REIT issues within accounts to provide further diversification. We also were able to capture some gains in certain stock holdings and re-invest those proceeds into new positions in July.
The fear of higher tariffs and a trade war have produced headwinds and kept markets in-check so far this year. The markets have been more volatile, but so far, they have been able to recover from the downside and remain fairly flat in general. We would expect a better second half for the markets overall assuming the tariff issues can be resolved in a somewhat agreeable manner. In the U.S., the economy is growing, jobs have increased, and a U.S. recession, at least in 2018, does not appear to be a major threat to the economy or markets. This is always subject to change, and we will continue to monitor the situation and keep you advised. We all know, at some point, the economy will experience another recession and a “bear” market. No one knows exactly when that will occur.
It still may be some time away, but another recession is inevitable and it’s never too early to look ahead. We are now just ten months shy of the 120-month longest-ever expansion in modern history so it’s a good time to review the importance of:
- Adequate emergency savings fund-a minimum of 3-6 months emergency fund is generally recommended, depending on your specific income, expenses, and situation.
- Reducing portfolio volatility-We are attempting to do this now with our current mix of asset categories and how they interact with each other.
- Remembering that asset classes take turns-Stocks, bonds, commodities, REITS, etc. all have times with they do well and “outperform” and times that they “underperform”. Even categories within these categories have times of outperform vs. underperform.
- Systematic re-balancing-We generally rebalance portfolios every month and sometimes in-between if warranted.
- Reasonable expectations-It’s always important to define investment return expectations based on overall portfolio risk and have an understanding of both potential upside, downside risk, and average net returns.
- Lifelong portfolio diversification-We keep all our portfolios diversified for all risk levels among different general asset categories, as well as individual positions within a category.
We hope you have had a great summer so far, and it’s hard to believe August is already here! We appreciate the privilege to be of service to each of you and look forward to working together in the years to come.
God Bless,
Your TEAM at F.I.G. Financial Advisory Services, Inc.
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1 The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be
invested into directly. Past performance does not guarantee future results.
3 The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into
directly. Past performance does not guarantee future results.
Uncertainty and Volatility