What a roller coaster of a year 2016 was, regardless of whether we are discussing the economy or politics!
Very weak economic growth in the first half of the year appeared to yield to improved numbers as the second half wore on. The threat of recession that was flashed in late 2015 through early 2016 seems to have receded. The election of Donald Trump as President, in addition to being a shock to the mainstream media, seems to have jump-started business optimism as the prospects of less onerous regulations and lower taxation are anticipated. While the economic expansion that began in mid-2009 will likely continue into 2017, be advised that some issues are not resolved. We still have $20 trillion in debt. Rising interest rates may signal a better economy, but also likely signal higher inflation. Federal Reserve hikes in the Fed Funds interest rate may also spell trouble for the economy if they choke off growth.
2016 began with the worst first 28 days in S&P500 history, then a rebound, then Brexit, and then finally a post-election rally that took the market to new highs. Bond yields, however, spiked in the final quarter causing losses in many interest-rate sensitive investments. Many people want to know my outlook for the markets for 2017. I am tempted to answer as J.P. Morgan (the man, not the company) did when asked the same question: “It will fluctuate.” No one knows what the markets will do. Here is what we do know: 1) US stocks by most measures are expensive and even obscenely so, 2) Foreign stocks by most measures are cheap to fairly valued, 3) The market will eventually go through a significant decline, 4) Most investors feel inclined to buy more stocks when they are doing well, and sell more when they are doing poorly, thereby hurting themselves, 5) A well-designed diversification strategy reinforced by a disciplined, rules-based risk management system will probably make its value felt after many have given up on it to chase whatever is hot at the time.
As mentioned in a previous newsletter, I’m proud to announce that Matt Ridenhour earned his Certified Financial Planner(TM) designation this past year. Matt is also now on the board of the Better Business Bureau of Coastal Carolina. In addition, Emily Ridenhour passed her exams and is now Series 7 and 66 registered with LPL Financial. Lee Carter continued to do great work on the board of the All 4 Autism organization, while Regi Armstrong joined the board of the Florence Little Theatre.
In the new year, we will introduce several new items to clients. One will be an emailed newsletter called Other Points of View. It will be a consolidation of LPL Research and other firms’ viewpoints, so you are not overwhelmed by emails. You will get this email and be able to click on what interests you. Another is enhanced performance reporting. We are part of a pilot program at LPL Financial, testing a new reporting tool so that our reviews for you will be more meaningful.
Keep in mind that everything we do, we do it for you (to paraphrase Bryan Adams’ 1991 song). Our entire purpose, our sole focus, is to help you reach your financial goals. Sometimes it will mean we push back against some of your desires (such as drawing out too much money or investing too much in stocks, for example), but we never do so out of stubbornness; only out of our deep commitment to your wellbeing. By the way, in 2017 I will celebrate 20 years being in the financial advisory business and helping clients pursue their goals. Fifteen of those twenty years have been proudly served as the founder of Armstrong Wealth Management Group.
Thank you for your continued trust.