July 2018

November 15, 2019

Recently I was invited to attend an "Elite Advisor Summit" that TO Ameritrade holds annually for a select number of Advisors who are an integral part of their own thriving advisory firm. It was a unique opportunity to meet and talk with some of the brightest Advisors in the investment advisory business and get a sense of some of the challenges facing them today and the successes they are having handling them. It was interesting to realize that many of the same issues that are facing our clients, are also facing clients all over the country.

As Advisors, our life long experience and learning never ends, so much of our job is to use this knowledge to educate our clients. So now more than ever, with the ongoing changes to the Investment, retirement planning, tax, and estate planning environment, we must remain focused on finding sound solutions for our clients in these challenging times.

Many Advisors echoed a similar theme of seeing an economy running on all cylinders. And to that point, the latest Kiplinger Letter states: "The current expansion is far from over. At nine years and counting, it now ranks as the second longest stretch without a recession, in modern times ... still short of the 10-year I expansion of the roaring 1990's, which it will surpass next year, barring some sort of sudden catastrophe."

The GDP (Growth Domestic Product) rate looks to run close to 3% for 2018, which is very respectable and shows an economy that is still growing. The unemployment rate currently stands at 3.8%, a level not seen since the year 2000. According to James Paulsen, of the Leuthold Group, "Since 1950, when the unemployment rate was 3.9% or less, the average annualized return delivered by the S&P 500 was only +5.65%. This is not "death warmed over", but it pales in comparison to the recent average annualized return of +13.21%, when the labor unemployment rate has been 3.9% or higher!"

Corporate earnings look to rise by 15% to 18% for the full year of 2018, with some estimates pointing toward 10% Corporate Earnings growth for 2019. Currently inflation, which seems to be at a moderate level (at the moment) isn't worrying the Federal Reserve, which is steadily raising the Fed Funds Rate over time. Yet, with all of this good news, we have a stock market that can't find its way, being constantly whip-lashed by the latest headlines. Good advice may be to continue to expect the same for the remainder of the year.

Attached you will find a chart titled Stocks, Bonds, Bills and Inflation 1998-2017. The first 10 years show very little in growth, with most of the returns coming in the latest 10 years. This chart lends a bit to the fact of looking at returns through a longer lens. By looking solely at the last 10 years you would believe the returns to be straight up. Yet, when pulled back over a longer period of time- 20 years to be exact, Large Cap stocks have under-performed their long run average by almost 2.8%.

Another chart, titled Short Term Rates, gives a nice description of just how much short-term interest rates have risen in the last 2 years. A 3 month T-bill briefly touched a zero percent yield in January of 2011, is now closing in on a 2% Yield. This is a level at which a 3 month T-bill now yields the same as equities. We believe that this should soon open more options for investors looking to earn more income from the bond side of their portfolio.

As a final note, the IRS has yet to provide TD Ameritrade and other Financial Institutions with clear reporting instructions for QCD's (Qualified Charitable Distributions). The 1099R at year end will have the "gross" distribution from the IRA, yet the "taxable" amount is the same number. It is imperative that if you donate directly from your IRA to your chosen charities, you keep track of these direct distributions and let your accountant know, so at tax time, those distributions will be deducted from your "taxable" income. Charities should still be sending you letters confirming the donatio!" through the IRA. Our hope is that the IRS will soon provide clear guidance that will allow these intuitions to report those QCD's on your tax form and the 1099R will reflect a "gross" distribution but then a lower //taxable" amount, reflecting those Qualified Charitable Distribution(s).

We are looking forward to again having our annuai"Ciient Appreciation Event", with one date in August and another in September. Our office will be mailing out details as it gets closer and hope that you will be able to attend, bringing any family and friends that you think would enjoy and benefit meeting our team.

Lastly, it's important that we remind you to make sure you review your investment plan with us at least annually and reach out to us if your situation has changed or you have concerns that need to be addressed, at any time.

If you have any questions at all, please do not hesitate to call.

Hope you enjoy the summer!

Bryan Bastoni, CFP