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Second Quarter 2016


Market returns through June are listed to the right. The US market has recovered from an earlier pullback in January and February and the recent volatility from Brexit (see our earlier newsletter). It is just too early to tell what the impact will be from an economic standpoint. It is also an election year, and as we all know, it has been unpredictable as well. Sadly the news of yet another shooting or terrorist attack has created anxiety, fear, frustration and disbelief. It will take extraordinary leaders to guide our shell-shocked nation to a calmer, more secure place. It’s not clear if voters believe we currently have the people in place or running for office that can accomplish it. The US markets have been resilient and those who try to anticipate a short term direction have been challenged. Looking “under the hood” of the S&P 500, dividend focused and defensive stocks have performed best, but in July that leadership has started to shift as other growth names have started to catch up. Small to midsize defensive companies have done particularly well. Bonds have continued to perform as interest rates have fallen lower. The demand for any kind of income continues to drive prices. All indications are that rates around the globe will stay suppressed. MSCI EAFE (international markets) while improving, are negative through June mostly as those currencies have weakened against the dollar.

Staying focused on long term goals is not synonymous to buy and hold. With interest rates and current global markets changing we will want to be opportunistic but cautious. When adding money or taking distributions we have an opportunity to adjust as well. The time will come that international investing may be a place to add to, including emerging markets. Also, while interest rates stay impossibly low, we will continue to consider lower volatility investments that may add some stability over stocks, but may do better than 1% over the next three to five years. These are categorized as “alternatives”.


  • The yield on the ten year treasury close on Friday, 7-8-16, at 1.36% was the lowest closing yield ever for 10 year paper.
  • The number one performing individual stock during the first half of 2016 gained 117.5% and the same stock lost 4.8% in 2015 (ranked 273 out of 500).
  • Conversely the number one performing stock within the S&P in 2015 gained 134.4% and the same stock has lost 20% in first half of 2016 (ranking 460 of 500).

Most of our focus is reviewing what matters most to our clients. How to create the cash flow needed to fund retirement, college, trips, special purchases or philanthropy and anticipate your current and future needs. As we add expertise and technology, we want to stay ahead of what will be required to navigate our fast moving world.

Social Security/Medicare

Most of you know that we have been focused on the issue of Social Security and Medicare future short falls. I believe more of the cost of our care will be absorbed by us. Because Medicare premiums are paid from Social Security benefits, they will be reduced as well.

Two statistics that I have recently come across:

  • Social Security Trustees announced that the trust fund backing the payment of Social Security benefits (OASI retirement benefits) would be zero in 2035. A zero trust fund does not mean the payment of Social Security benefits would also go to zero, but rather would drop to 77% of their originally promised levels through the year 2090. When the trustees released their report in 2007 (i.e., 9 years ago), the Social Security Trust Fund was projected to be depleted in 2042 (source: Social Security Trustees 2016 Report).

  • Per a 2016 report, the trust fund supporting Medicare Part A (hospital insurance) is projected to be depleted by 2028. The long-term (75-year) present value shortfall in the trust fund could be corrected by an immediate 0.73 percentage point increase in combined Medicare payroll taxes (from its current 2.9% to 3.63%) or an immediate 16% reduction in Medicare expenditures (source: Medicare Trustees 2016 Report).

Whether or not these get addressed by our elected officials, we have to be sure our clients are planning for the ability to maintain their lifestyle and, their goals in spite of these changes.

Summer never lasts long enough! I hope you’re enjoying yours. Regards.


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.

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.

Dividends are not guaranteed and must be authorized by the company’s board of directors. 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. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters.

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