Well, here we are at the beginning of another new year! Yay!
If you haven’t scheduled your 2017 personal financial planning appointment yet, let me suggest that you do so now. Just click this “Schedule 2017 PFP Appointment” link and follow the prompts to choose a convenient date and time. “Winging it” is easy, but usually does not lead to desired outcomes. In fact, winging it can be easy now, but difficult later.
Asset management reports for our clients have been posted. Fourth quarter growth was modest, averaging +0.29%. For the year our clients averaged +7.07%, versus inflation of approx 2.12%. (December inflation numbers are not yet available.)
Shown below are the asset class returns experienced by investors during the 4th quarter.
Asset Class Returns, 4th Quarter 2016
|US Inflation Adjusted Bonds (SCHP)||-2.60|
|US Traditional Quality Bonds (SCHR)||-3.54|
|Non-US Inflation Adjusted Bonds (WIP)||-7.49|
|Non-US Bonds (IBND)||-7.59|
|US Large Cap Stocks (SCHX)||3.86|
|US Real Estate (SCHH)||-2.60|
|Healthcare Stocks (VHT)||-4.21|
|Non-US Real Estate (RWX)||-7.88|
|Non-US Emerging Bonds (PCY)||-6.56|
|US Biotechnology Stocks (IBB)||-8.29|
|US Inflation (CPI-U, Est.)||0.05|
So, what about 2017? My best guess is that inflation will increase, but not by too much, interest rates will increase, but not by too much, and the dollar will continue to strengthen versus most other currencies, but not by too much. This might seem like a recipe for continued good news for US stocks, and it may well be. But you can never know…
I read earlier today that a lot of new money is going into emerging market stocks now. Likely some investors see value in this category since those assets have been fighting the headwind of a strengthening dollar, and the current “make America great again” political rallying cry, which has stoked the US Consumer Sentiment Index. Having studied capital markets for several decades now, I have little confidence that now can be just like any prior time, and therefore little confidence that the expectation of similar results will prove valuable. There are just too many variables. Bottom line: I am of the opinion that broad, efficient diversification continues to be the best strategy for my clients. In my experience, over time we do well using this strategy, and with less volatility than if we were invested in fewer asset categories. And less volatility is good.
I shall wrap this blog post up by again emphasizing the importance of annual financial planning reviews with an objective, experienced adviser. If you haven’t yet done so you should schedule your 2017 PFP appointment now. Click here.