ARTICLES IN 2018

DATE:       January 1, 2018

TO:            POINT VIEW CLIENTS

FROM:      David G. Dietze, JD, CFA, CFPTM Founder and President

I.         Performance Update

     ·   Equity investors enjoyed an outstanding 2017, as synchronized growth throughout the planet led nearly all markets to                   solid gains.   The US was no longer the “only game in town;” our markets actually lagged most overseas bourses.

·  Volatility was exceptionally low.  There were no down months in 2017, and on no day was the market down for the year.         The fear gauge, a/k/a the VIX, spent most of its time in record low territory, below 10.

 

MARKET DATA

Fourth
Quarter
2017

2017

S&P 500 (dividends reinvested)

6.64%

21.83%

NASDAQ (dividends reinvested)

6.54%

29.64%

60/40 S&P 500 / TX-EXEMPT SECURITIES BLEND

4.26%

15.05%

DOW JONES INDUSTRIALS (dividends reinvested)

10.91%

27.92%

INTERNATIONAL STOCKS (MSCI EAFE IX ID)

4.17%

24.94%

TAXABLE BONDS (Barclay’s 1-3 Yr Gov’t/Credit)

-0.22%

0.84%

TAX-EXEMPT SECURITIES (Barclay’s Muni Index)

0.74%

5.45%

·  Corporate earnings were outstanding, up nearly 10% year over year.  A strong domestic economy plus rebounding        overseas activity boosted both top and bottom line results.  However, share returns exceeded earnings growth as valuations  grew more stretched, fueled by continuing low interest rates, tax reform, and a business-friendly regulatory approach.

·   One fly in this near perfect performance was the decline in the value of the Dollar. It dropped 7.5% versus a basket of currencies, and 12.2% relative to the Euro.  Don’t be surprised if your Continental friends are less ebullient about our S&P 500 return; the Euro’s rise reduced the S&P’s return to a German investor to single digits.  Not surprisingly, given the Dollar’s weakness, was strength in oil and gold.  The yellow metal rose 14% in 2017, while Brent crude surged 18%.

·   The bond market was volatile in 2017. Yields rose early in the year with the US 10 year Treasury yield touching 2.6%. Then, with rising geopolitical issues in Syria and North Korea, market focus changed from interest rate risk to capital preservation. Bonds rallied and the 10 year Treasury’s yield fell to 2.1%. Later in the year, yields rose on the Fed announcing they would reduce the assets on its balance sheet and raise rates for the third time.   Bottom line, despite three Fed rate hikes in 2017 bond investors still earned their coupons and more, with the Barclays Aggregate index rising 3.54%.

PREVAILING YIELDS AS OF:

FIXED INCOME ASSET

12/31/16

3/31/17

06/30/17

09/30/17

12/31/17

US Government 10 Yr. Note

2.45%

2.40%

2.30%

2.33%

2.40%

5-Year Certificate of Deposit

0.82%

0.89%

1.38%

0.99%

1.00%

Money Market

0.23%

0.11%

0.62%

0.71%

0.95%

II.         Looking Forward

Despite the longest rally since the late 90’s, we think stocks continue to be the best place to grow wealth long term. Yet, high quality fixed income continues to make sense as an offset to potential renewed volatility. Key risks will be inflation, China, and Federal Reserve policy.  A lack of inflation has allowed interest rates to remain low, but a tightening employment picture and surging investments may pressure prices.  China is determined to fight speculation and easy credit; as the world’s second largest economy, its efforts to dampen its economy may have spill over effects.  Finally, Jay Powell, as the new Federal Reserve Chair come February, will inevitably be tested by the markets; let’s hope he remains steady at the tiller, as the markets do not take kindly to abrupt or rookie moves.

 III.       Enclosures

The enclosed shows the recent performance of all your Fidelity accounts (if under management for more than 3 months and fully invested by Point View), and your investment advisory invoice. Fidelity’s 1099 will include all realized gains and losses, along with potentially deductible investment advisory fees, foreign taxes, and ADR fees, and all information about sales.  1099s are issued in late February.  Please contact Claire Toth if you or your accountant has any questions.

Article Index

Making Sense of the Market Volatility by David Dietze & John Petrides, 2.12.18.

Doing Well While Doing Good by Claire E. Toth, 2.5.18.

Tax Reform: A Bullish Development  by David Dietze, 1.17.18.

Ten Stock Ideas for 2018 by John Petrides, 1.9.18.

Bullish on 2018? Consider Three Key Issues by David Dietze, 1.5.18.

A Bit About Bitcoin by Claire E. Toth, 1.5.18.

Look Out for the Robo-Advisor by Donna St.Amant, 1.5.18.  

Financially Savvy Charitable Giving: Donor- Advised Funds by Elaine Phipps, 1.5.18.

Is FAANG Long in the Tooth? by John Petrides, 1.5.18.

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