Happy New Year! Sure, a little late on the wishing, but we wanted to get past all the false starts that we too often see in January with resolutions and goals. You know the story, we all know the story. It's a new year, I resolve to ____, and come February all is back as it was. The thing is goals don't need January to happen; they don't need the New Year.
We want to take the whole year approach to goal setting and reexamining. That's why we'd like to start off today by asking how's your goal health? Now is as good a time as any to examine what you're trying to do, what does that path look like, how might your life have changed over the last year in ways that change your goals. Do your goals need a reset? Let's look specifically to retirement goals, are you where you want to be with your savings, has anything changed in your life that changes the retirement horizon? A quick way to determine where you are on the road is to figure how close you are to having twenty-five times your annual income in retirement saving, because that's the estimate on how much it takes to keep your standard of living going after you retire. If your goals have changed or you just want a deeper dive into that road map, give us a call and we can re-examine where you are and if any additional steps need to be taken. That is what we are here for after all.
The brand new year also brought in a brand new President. Let us just get this out of the way now; we're not going to be discussing our thoughts on the new President. Many of you most assuredly have strong feelings one way or the other, but that's not what you come to us for and really that's not our expertise. We will however talk about the role of the four year presidential cycle in regards to how we make our investment decisions.
While there is certainly no predicting the future, we often can and do look at the past for guidance. What we typically see from the last year of the cycle, the fourth year of the presidency, until the summer of the first year of a newly elected president are typically some of the roughest times for the market while years two and three are typically stronger times for the market. Using the past as a guideline will have us looking for more buys early on and looking to years two and three as "harvest times" to take profits on the buys. And this cycle turns out completely different, no worries, past data is just a guide not a hard and fast rule, if the signals we look at don't look promising we move on.
One very promising note from Q4 2016, earnings were the best they have been since 2014. Earnings, with the exception of Q4 2016, have not for the most part been strong. The strength of Q4 combined with what looks to be a two year consolidation period for the market implies that we could be seeing the start of a bull market, and if earnings continue to be strong we should see the continuation of a bull market.
Even with a potential bull market investors are still concerned because of 2000 and 2008. There are certainly always risks, especially with our current geopolitical climate right now and high uncertainty with politicians worldwide, but there are some potential gains. We're looking at a possibility of multiple deregulatory events and lowered taxes which push a bull market into a long term bull market.
The market is fluid and the market is going to run through periods of high volatility, it always will. Whatever happens, be aware that on average annually the market tends to periodically drop by 15%. Don't worry about these drops, we don't. A combination of strong earnings and market drops are not moments of worry but moments of opportunity, buying opportunity, which we are always looking for.
That's enough about the markets. Happy new year, now go outside and enjoy the day, listen to some music, read a book, just live the life you need to. If you need some suggestions as to music and reading, we are thoroughly enjoying Leonard Cohen's last album "You Want It Darker" and currently reading “Thinking, Fast and Slow” by Daniel Kahneman. We're always on the lookout for suggestions on new books to peruse and music to soothe, so please pass any along.
If in looking at the last year you discover that maybe your goals have changed, let's set up a meeting to discuss what that means for your investment options moving forward. If you just want to meet to discuss where you are, give us a call as well.
Market Commentary Disclosures:
The information contained herein is obtained from sources believed to be reliable but its accuracy and completeness is not guaranteed. Due to market volatility, any opinions expressed herein are subject to change without notice. Investors should be aware that there are risks inherent in all investments, such as fluctuation in investment principal.
The S&P is a market-cap weighted index composed of common stocks of 500 leading companies in leading industries of the U.S. economy.
The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.
Indexes are unmanaged, do not incur management fees, costs and expenses cannot be invested directly. Past performance is no guarantee of future results. Returns do not include sales charges or fees an investor would pay to purchase the securities they represent. Such costs would lower performance. Index returns include reinvestment of all dividends.