What a year 2017 was! After a lingering slump for worldwide economies and markets (2014 through late 2016), the past 12 months have been crazy, chaotic, and chart-topping in ways both good and bad.
Hurricanes Harvey and Irma brought destruction. The Equifax cyber-hack created its own tidal wave of financial security concerns. A reality TV celebrity became President of the United States of America. North Korea seemed ready to shoot missiles in every direction. The costs of college education and healthcare remained shockingly high. Rates of unemployment and borrowing stayed surprisingly low.
The U.S. stock market hit record new high after high (but still lagged the impressive performance of foreign stock markets). A recent report from Charles Schwab & Co., Inc., posted, “every one of the world’s 45 largest economies tracked by the OECD (Organization for Economic Cooperation and Development) has grown this year, and the OECD has forecast another year of growth for major global economies in 2018.”
Have you noticed the uptick in local M&A activity? Regal Cinemas, Ruby Tuesday, Pilot Flying J, etc., all are in the midst of deals. Though I don’t think we are watching the rise and fall of another house of cards like 2008, still, the financial tectonic plates are shifting in some manner.
I can’t shake a feeling of caution. When investors start pushing to buy more stock, as stock prices hit new highs, my Spidey-sense starts tingling. For example, in recent months, I’ve had a handful of clients ask me to sell conservative bond funds to purchase highflying growth stock funds; or asked me to cull their portfolio laggards in order to increase their overall exposure to stocks. Several patient, normally longterm investors have asked for charts featuring daily or weekly investment data.
When markets (and investors) start to get a bit frothy, I go to ground with simple, plain vanilla tenets of investing: Don’t invest in any stock or stock mutual fund that you don’t expect to own for at least five years; apply prudent diversification when constructing a long-term investment strategy; rebalance periodically with a buy low, sell hi gh discipline; never lose sight of downside risk when examining upside opportunity; always keep some cash liquidity on the sidelines.
Year-end is an appropriate time to take a big picture snapshot of your entire financial plan. Have you laid out a 2018 spending plan? Given that there will always be a next market downturn, are you ready? What preparatory steps should you take now? Have you increased your contributions to savings or retirement accounts? In the midst of tax reform, should you accelerate some deductions into this year or defer some income into next year at possibly lower tax rates?
As with every year, I am 100 percent certain that 2018 will present us with financial opportunities and challenges, celebrations and disappointments. The holidays are a perfect time to gather around the fireplace and update family members on your financial wants, needs, and wishes for the New Year.
Knoxville News Sentinel
12/24/2017 – Page 2B-3B