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First Quarter 2019

What a difference a quarter can make!


These last six months are a perfect illustration of:

  • How unpredictable markets can be
  • How hard it is to time the markets
  • How quickly sentiment can changeThe S&P 500 in the fourth quarter of 2018 was negative 13.65%, with December being the worst single month since 1931. There were concerns about trade, interest rates, a general economic slowdown and continual dysfunction in Washington D.C. Those concerns are still with us; however, some information has become a bit clearer:
  • The Federal Reserve does not intend to raise interest rates, for the time being
  • Brexit appears to be a no-go for now
  • Mueller investigation is complete
  • China trade talks are continuing
  • The economy is slow, but still positive

Most balanced portfolios have recovered from the lows from December, as the market is sharply higher. The S&P 500 is up 13.65% through March. This might be, in part, because the last quarter negative reaction was overdone, or perhaps fundamentals are reflecting an economy that is still growing. It’s helpful to have clarity around interest rates, which can be interpreted as both negative, (because the economy is not growing as fast) or positive, (because it is still a stimulus to those who borrow and helps the economy grow). Managing portfolios for volatility requires discipline and a check-in to be sure their goals have not changed, and, that you are not making emotional decisions that could affect your long-term returns. Here are some historical facts related to how markets have behaved in the past during different presidential cycles: Historically, between 1950 and 2017, according to Ibbotson and Morningstar, markets have performed best when there has been a Democratic president and a Republican congress or a Republican president and a split congress. We are, of course, the later in present day.

Historically, during a midterm election year when there has been a market pullback of 5% or more, the average market rebound the following year has been 32%. Given our current position, it appears that we are following that historical trend quite closely. The markets were down approximately 20% in Q4 2018, and from the bottom point are up over 20% now.

Lastly, since 1948 there have been zero recessions, during the third year of a presidential cycle. On average, markets have been up significantly, with double digit returns during the third year of a presidential cycle from 1948-2014 according to Strategas Research Partners.

While we are pleased to have markets heading in a more positive direction, we remain concerned that general global growth is slowing, budget deficits are growing, and it is unlikely we will see increased cooperation for progress on the budget in Washington D.C.


2018 Overview – Tax Changes

  • Lower marginal tax rates for individuals and corporations
  • Changes to tax deductions and repeal of personal exemptions
  • Estate and gift taxes scaled back
  • No major changes to retirement and education incentives
  • ACA individual mandate to purchase insurance effectively repealed
  • New tax system for pass-through businesses
  • Individual income and estate tax provisions (including new pass-through income rules) sunset after 2025
  • The legislation is expected to cost nearly $1.5T over the next ten years

There are some easy tax planning ideas that you can incorporate in 2019 as it pertains to charitable deductions and ways to bunch deductions so that you can still itemize. However, most tax payers will not itemize going forward as the new standard deduction for couples are $24,000. Once you have had a chance to review your taxes this year, you will hopefully have a better understanding of how to take advantage of ways to enhance efficiencies going forward. Feel free to let us know how we can help.


We are currently sponsoring a new financial literacy game, Financial Wellness Center, that is educational and fun!   It is great for kids (7+), teens, and adults at all stages of life. The tool includes a pre- and post-test, a scenario-based game, and an easy to understand library with practical information about all types of loans, credit scores, and much more. Feel free to give it a try yourself – everyone that has tried it has learned something new. You can find Financial Wellness Center by clicking on the following link: I’d love to hear what you learned!


We were honored to be asked to speak at the Genesee District Dental Society to provide an update on midterm elections, the markets and the new tax laws.

Many SWMG staff will be attending our National Educational Conference with Raymond James Financial Services at the end of April. Here we get best practices, regulation updates, continuing education, as well as networking with our peers.

Finally, many of us enjoyed Spring Break – a much-needed time away from a winter that is still hanging on. Hopefully, spring is around the corner!

Thank you for your confidence and our continued association.

To good health.


*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 not a registered broker/dealer and is independent of RJFS.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. 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.

There can be no assurance that any investment will meet its performance objectives or that substantial losses will be avoided. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.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.

Stephens Wealth Management Group and Pearl Planning are not a registered broker/dealer and is independent of Raymond James Financial Services.

Financial Market Update* Year-to-date change as of March 31, 2019
S&P 500 Index 13.65%
Morningstar Commodities
Broad Basket Category 7.05%
MSCI EAFE US$ (International) 9.98%
Barclay US Aggregate Bond 2.94%

*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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