The Armstrong Report: Quarterly Update Fall 2014


It is hard to believe, but Christmas will be upon us before you know it. As the year begins to wind down, here are a few thoughts I would like to share.

THE ECONOMY

The economy is...who the heck knows. The first quarter GDP dropped 2%, the second quarter rebounded 4.2% (so the first half grew at 1%), and the third quarter seemed to be growing closer to 3%. This economy doesn't appear to be coming out of the doldrums. Why? In my opinion, the administration's policies have been anti-growth, burdening the economy with higher taxes and growth-choking regulation. In addition, the Affordable Care Act appears to be anything but affordable. Obamacare continues to scare employers and employees alike. Finally, our corporate tax rate continues to be the highest in the world. According to a new international tax competitiveness index, the US ranks 32nd in the world. We are in a global economy and capital will flow where it is treated best.

THE MARKETS

On the surface the equity markets seem to be tranquil with decent gains this year and modest volatility. But under the surface, all is not well. 47% of NASDAQ stocks and over 25% of small cap stocks have lost 20% from their peak. Yet, US stocks appear to be overvalued by most reliable measures. In addition, developed foreign stocks are foundering again, and commodities have reversed course to the downside. Also, most countries have interest rates at or near historical lows. The current combination of high US stock valuations, low interest rates, high public debt, low stock volatility, high number of people buying stocks on margin, and the few number of professionals and investors expecting negative returns is worrisome to say the least. Please review your asset allocation to ensure you are within your comfort level and resist the urge to follow the crowd.

THE FIRM

For the first time we brought all our associates to the LPL Financial national conference. This was a great opportunity for everyone to see the big picture, gain continuing education to help clients, and to have a little fun. In addition, we were blessed with some positive press as several publications (e.g. Wall Street Journal, US News & World Report, Pittsburgh Post-Gazette) decided to quote us on a variety of topics.

Finally, thank you for your continued trust. We know you can choose anyone to partner with you for your financial success; we truly appreciate that you have chosen our firm.

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