Broker Check

2nd Quarter - 2017

The first half of 2017 was very good for stock markets worldwide! Year to date through June 30, 2017 the S&P rose 8.24%, the NASDAQ was up 14.07%, the EAFE up 14.23% and the MSCI Emerging Markets up 28.23%.  On the fixed income side, the Barclays Capital Aggregate rose 2.27% for the same period.

The Economy

I have some good news! For the first time in the past ten years, advanced economies worldwide are growing in sync.  This has only occurred three times in the past fifty years! The IMF (International Monetary Fund) estimates that the global economy will grow 3.5% in 2017 and 3.6% in 2018. 

The aftereffects of the financial crisis are finally fading.  Commodities have come off their lows and prices have stabilized.  Inflation has remained low. International countries are benefiting from a fiscal move from austerity to ease. 

Here in the U.S., GDP continues to grow in the 2%+ range.  Unemployment now stands at about 4.5%, its’ lowest level since 2007.  Today there are more job openings than applicants to fill them.  The unemployed that had given up looking and the “underemployed” are coming back into the job market.  Wages are rising at about a 2.5% annual rate and, interestingly, there is reason to suspect that may be a low estimate because the baby boomers are retiring and younger workers with less seniority are taking those jobs at a lower wage bringing down the average.  Manufacturing and exports have picked up this year (in part due to an 8% YTD decline in the dollar making US products more affordable outside the U.S.).  Granted, this recovery has been long by historical measures but the economists that I follow are not expecting a recession this year or next.  

The Stock Market

Stocks, particularly U.S. large cap and technology, are expensive.  Historically stocks “correct” every 14 months (a correction is defined as a drop of 10% to 20% in price.) If history repeats itself we’re due.  Although nobody likes their portfolio to go down, occasional corrections are healthy for the market and help us in avoiding a stock market “bubble” (as we all know, bubbles always burst.)

What to Do?

I don’t recommend trying to time the market because it’s almost impossible to know when to sell and when to buy back in.  If you need cash to build up cash reserves or to fund an upcoming extraordinary expense I suggest raising cash now.  If you’re already invested I suggest investing for the long term.  If you’re adding cash to your portfolio, I suggest “averaging” into your equity positions over the next six to twelve months, this is called “dollar cost averaging.”

A few observations and thoughts:

  • International stocks, both developed and emerging markets, are fundamentally cheaper than U.S. stocks today. 
    • Did you know that there are 7 billion people in the world and 5 billion of them live in China, India and Southeast Asia?  A good percentage of those people are new to, or soon to be entering, the middle class.  I can’t help but think that is compelling reason to have some investment in the region.
  • Bonds and cash have not produced the returns that stocks have this year but are an integral part of a well-balanced portfolio by reducing volatility and risk. 
  • Active management versus the indexes will probably always be debated. This year to date, active has the edge.  I, as you know, am a fan of active management in most stock market conditions.
  • Annual reviews are important.  If you haven’t been in for a review this year or your financial situation has changed please come in for a review.  If you have questions or concerns call or email. We’re here to help you stay on track.

What’s New at the Office?

We have a new employee!  Alan Dorin is our new Client Services Associate.  He is a 2015 graduate of Sonoma State with a BS in statistics.  He has strong mathematical and analytical background and he’s a pleasure to work with too!  He was raised in San Rafael and his extended family lives in the North Bay.  He’s an avid sports fan, loves to watch movies and he’s a video gamer.  He loves spending time with his family and he will soon be a dad to his first baby, Jack! 

As many of you already know, Nancy is now in Florida and is already at work getting everything in place to open her sailing school with partner in business and in life, Paul Ferrara.  She will continue to work with us remotely and we feel lucky to still have her on the team.  Of course, we miss here in the office but we’re so happy she’s pursuing her passion.

Our next client event is scheduled for Thursday evening, December 7th.  We’ll be sending the details soon!  Save the date!

We sure enjoyed this year’s WOW event!  We hope that all of you who were able to join us enjoyed it as much as we did.  We will, of course, try to outdo ourselves again next year!

In closing, I want to want to wish you and yours’ health, happiness and prosperity.  I thank you so much for your continued confidence, business and friendship. 

Best wishes,


References:  Wall Street Journal;; Oppenheimer Funds: Emerging Markets Insights: Creative Innovation; LPL Research

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  All investing involves risk including loss of principal.  No strategy assures success or protects against loss.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.  Bonds are subject to market and interest rate risk if sold prior to maturity.  Bond values will decline as interest rates rise and bonds are subject to availability and change in price.  International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.  These risks are often heightened for investments in emerging markets.  The fast price swings in commodities and currencies will result in significant volatility in an investor’s holdings.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.  Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities.  An investor should consider their ability to continue purchasing through fluctuating price levels.  Such a plan does not assure a profit and does not protect against loss in declining markets.  Active management is when investment managers attempt to outperform the market by predicting market activity, and can add value to portfolios by anticipating market cycles and continuously changing asset allocation over time.  The International Monetary Fund (IMF) is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.