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First Quarter 2018

The Market Recap

2017 was a very calm year in that there were no significant moves to the downside for U.S. markets. January of 2018 continued the upward trend as tax cuts drove momentum. That abruptly ended in February as The Federal Reserve raised rates and signaled more to come as highlighted in our interim newsletter in February, titled “Volatility Is Back!”. The backdrop for earnings is still positive and The Fed is forecasting growth to continue. The correction was swift, and markets recovered. However, recently the news of tariffs and a privacy breach at Facebook have led to more market jitters. The S&P ended the quarter down 0.8% (total return) breaking the indices streak of nine consecutive, positive quarters. It was just the second down quarter in the past five years.

In terms of the “tit for tat” with China on tariffs, $50B of goods and services is 0.3% of our GDP, according to the United States Secretary of Commerce, Wilbur Ross. This isn’t very significant in dollar terms. More importantly, it appears to be a message to China that they no longer can enjoy an unfair playing field in terms of trade (they tax imports that we do not) and they cannot steal our intellectual secrets any longer. However, it could have larger implications if a more significant trade war escalated. The uncertainty is contributing to market volatility.

In addition, Facebook and Amazon - two of the biggest names in the S&P 500, are in the headlines. Their stocks have declined, as has the sector. They had been tracking at historically high levels, so a pause may be healthy. Or, some sort of regulation may be in their future reducing earnings. Not surprisingly, markets have pulled back once again.

We have had a long positive run in stocks for several quarters. The fundamentals of the economy are positive, but as interest rates rise and uncertainty remains, some shift of momentum of different types of assets will likely occur. With interest rates likely to increase, we will need to focus on bond portfolios, as they will likely not perform as well as they have in the past. We will adjust our investment strategy based on forward looking assumptions, not what was true in the recent past, while keeping an eye toward risk adjusted returns, as has always been our practice.

It has been hard for investors to know with negative headlines seemingly, everyday, which will have meaningful impact, and which are simply done for political messaging.

Tax Reform

2018 will be the first year under the new tax bill. We have posted some of the new rules and compared them to last year (with the changes highlighted) on our website under the tab Knowledge Center – Articles of Interest – Examining the Tax Cuts. The standard deduction has increased and some deductions will be capped or eliminated. You may want to refer to the table to have an idea of how changes may affect you.

Don’t forget April 22nd is Earth Day. As a reminder we will be happy to accept any shredding you have - just bring it in to us. Our commercial shredder comes once a month and we will securely pass it along to be shredded in a timely manner.

Protect Your Data

Identity theft is on the rise. If you suspect that you have been hacked or compromised, below are some quick reference numbers for you to be aware of and keep handy.

  • Identity Theft for Tax Related Purposes: If you are the victim of identity theft, or at risk because your information has been breached, go to these sites:
    www.irs.gov/uac/Taxpayer-Guide-to-Identity-Theft or www.identitytheft.gov

  • To Report Internet Fraud: www.ic3.gov

  • Key Numbers:
    - FBI: (202) 324-3000 or your local field office
    - FTC: 1-877-IDTHEFT
    - IRS: 1-800-829-0433
    - Postal Inspection Service: 1-877-876-2455
    - Social Security Administration: 1-800-269-0271

  • Credit Reporting Bureaus
    - Equifax: (800) 525-6285; (800) 685-1111 to freeze your credit report;
    P.O. Box 740241, Atlanta, GA 30374
    - Experian: (888) 397-3742; (888) 397-3742 to freeze your credit report;
    P.O. Box 9530, Allen, TX 75013
    - Trans Union: (800) 680-7289; (888) 909-8872 to freeze your credit report;
    P.O. Box 2000, Chester, PA 19016
    - Innovis: (800) 540-2505; (800) 540-2505 to freeze your credit report;
    P.O. Box 1640, Pittsburgh, PA 15230

Account Fee Credit for Going Paperless

Beginning in May, clients with accounts subject to an annual fee who elect online document delivery will be eligible to receive a $15 account fee credit – applicable against the annual account maintenance fee, Capital Access fee or IRA fee. Clients may elect paperless delivery of all account documents in Client Access. Click on Account Fee Credit for eligibility requirements and information.

We hope that if you are living in the Midwest or Northeast that spring is somewhere in our future!

Best Regards

Sherri

 

Past performance may not be indicative of future results. Expressions of opinions are as of this date and are subject to change without notice. Any opinions are those of Sherri Stephens and not necessarily those of RJFS or Raymond James. Stephens Wealth Management Group is independent of RJFS.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected.

Diversification and asset allocation do not ensure a profit or guarantee against a loss. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. You should discuss any tax or legal matters with the appropriate professional.

Investments mentioned may not be suitable for all investors. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.

Financial Market Update* Year-to-date change as of March 31, 2018
S&P 500 Index -0.76%
Morningstar Commodities
Broad Basket Category 0.17%
MSCI EAFE US$ (International) -1.53%
Barclay US Aggregate Bond -1.46%

*Indexes are for illustrative purposes only. One cannot invest directly in any index. Assumes dividends are reinvested.
Source: Morningstar

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Morningstar Commodities Broad Basket Category is a composite of returns of all funds in this category. The MSCI EAFE is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States & Canada. The EAFE consists of the country indices of 21 developed nations. The Barclays US Aggregate Index is an unmanaged market value weighted performance benchmark for investment- grade fixed rate debt issues, including government, corporate, asset backed, mortgage backed securities with a maturity of at least 1 year.

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