Broker Check

2018 - 1st Quarter

JAN’S QUARTERLY LETTER – 1st Quarter 2018



Things are happening - and changing - so quickly that it’s difficult to finish my quarterly letter before revising it!  At any rate, here goes!

The Stats…

Stock markets worldwide were volatile in the first quarter of 2018.  Most equity indexes ended the quarter slightly down.  YTD through March 31, 2018 the S&P was down <1.22%>, the NASDAQ was up +2.32%, the EAFE was down <1.58%> and the MSCI Emerging Markets was up 1.33%.  On the fixed income side, the Barclays Aggregate Bond index was down <1.9%>for the same period.  Thus far in the second quarter stocks remains volatile and most equity indexes have moved up slightly while bonds are off a bit while rates rise.

The Stock Market….

I expect the recent stock market volatility to continue for the rest of the year. We’re overdue for a “normal” stock market correction of 10% to 20%.  Although no fun for investors, periodic corrections in the stock market are healthy and help prevent a “bubble” that will eventually burst.

I continue to recommend you maintain adequate cash reserves and hold your investment portfolio long term.  Historically, the probability of capital appreciation in a well-diversified equity portfolio increases substantially over time (five years or longer) and the risk of capital loss decreases.

The Economy….

Our economy and many economies worldwide (developed and emerging) remain in recovery.  There are headwinds and there’s uncertainty but so far, so good. 

The U.S. is now officially in the second longest recovery in recorded history.  The normal signs of an overheated economy have not yet surfaced, and most economists do not expect a recession this year or next. 


Unemployment is now 3.9%, the first time it’s fallen below 4% in 17 years and only the third time in the past 70 years!  Historically, low unemployment has led to rapidly rising wages, rising prices and a spike in inflation.  So far this has not happened; in the past 12 months wages have increased a modest 2.6%.  Many economists attribute this to the large number of “underemployed” people who are not counted as unemployed and available for better and full-time jobs.  Others disagree and maintain that low unemployment will lead to excess inflation, and this time is no exception to the rule. 

The Federal Reserve has indicated that they will continue their pattern of raising rates slowly over time.  Inflation is nearing the Fed’s annual target rate of 2%.  If/when they see inflation picking up speed they are likely to raise rates more aggressively.  (It is very important that the Fed raise rates to a point where they will have the ability to provide monetary stimulus to our economy in our next recession.)

Corporate tax cuts are providing a windfall for U.S. corporations. If they deploy their excess cash flow to innovate and grow their businesses, that will be good for wage earners and the economy long-term.  If they use the cash flow to buy back shares, that will be good for corporate executives and shareholders.  I’m worried that corporate America will focus on the latter versus the former.  Time will tell.

Individual wage earners are benefitting from tax cuts too.  Their paychecks are fatter.  It has only been a few months but, to date they are not spending the extra cash, they are saving it.  The success of the new tax bill depends upon the growth of our economy.  Consumers make up 70% of our GDP.

This March President Trump announced U.S. tariffs on steel and aluminum imported from China as well as a myriad of other Chinese products and services. China has been quick to reciprocate and plans to impose steep import tariffs on 128 U.S. products.  President Trump said he will decide in early June if he will impose steel and aluminum tariffs on Canada, Mexico and the European Union.   Historically, tariffs have led to international trade wars (i.e. the Smoot-Hawley Act of 1930), increasing costs to produce goods and provide services, rising consumer prices and ultimately halting economic growth.   I am not surprised that some predict the threat of tariffs will simply “evaporate” in the coming months. President Trump has little Congressional support on the issue.  In fact, the GOP has traditionally been opposed to tariffs and a strong supporter of free trade.

Geopolitical events are always a threat to economic stability worldwide.  Top of mind issues right now include the U.S. reinstating sanctions and pulling out of the Iran Nuclear Deal and upcoming talks with North Korea. 

What to Do…….

As always, focus on your needs, goals and timeline. I strongly believe the success of your financial plan is dependent upon a long-term perspective, patience and realistic expectations.  Your investment portfolio is just one piece of your financial plan.  Estate planning, risk management, retirement planning, cash flow management and other more individualized goals and concerns are equally important.

If you need to replenish your cash reserves or anticipate an extraordinary expense in the next 12 to 24 months, I suggest you raise the cash you need now.  Due to last year’s stock market appreciation your portfolio may need to be rebalanced.  If you haven’t been in for a review recently or are unsure whether you need to address either of these issues give us a call.



What’s Happening in the Office…

We will soon have a couple of notaries in the office! Both Alan Dorin and Tom McCaffrey are taking the course early this summer.  We’ll let you know when the service will be available.

Last, but not least, our WOW event is scheduled for Thursday evening, July 26.  We’ve got a surprising and fun theme planned for you this year.  You will soon get an invitation with all the details.  We hope you can make it and please bring a friend!

In closing, all of us in the office want to thank you for being such wonderful clients.  We value your confidence, business and friendship.  We wish you and your loved ones a happy, healthy and prosperous summer.


Best wishes,


















References:  Wall Street Journal;; The Economist; LPL Research; The New York Times.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  Indexes are unmanaged and cannot be invested into directly.


Financial planning offered through JL Schneider & Associates, a Registered Investment Advisor and a separate entity from LPL Financial.

Jan Schneider, CFP ®, is a Registered Principal and Investment Advisor Representative with, and securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.

900 MENDOCINO AVENUE, SANTA ROSA, CA  95401 (707) 522-8000  FAX (707) 522-8008