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Third Quarter 2018

The Market Recap

Depending how you measure, “the market” is up roughly 10% year-to- date. A closer look, however, shows that a rather narrow part of the overall market is performing well – that is U.S. stocks, specifically growth companies. As we’ve mentioned in previous newsletters, large tech companies have become expensive to buy relative to other types of companies. These tech companies include Amazon, Facebook, Google, Netflix and Apple. Smaller growth companies have been on a tear as well, while value companies that typically pay dividends have not risen as quickly. The Federal Reserve has raised interest rates three times in 2018 and is signaling more increases to come this year and next. This is because the economy is strong, unemployment is low, and inflation is currently not an issue. If the economy continues to expand through July of 2019, it will be the longest expansion in U.S. history totaling 120 months, beginning in 2008.

Bonds and international stocks (both developed and emerging markets) are down for the year due to rising interest rates, trade tensions and political risks. All of these continue in the headlines as we near mid-term elections. In the late 1990’s, the stock market stayed higher for longer than we thought was possible. The dot-com bubble collapse and recession set in leading to a 50% drop in stocks in 2000–2001. Highlighting that while valuations are higher than average with a backdrop of a stronger economy, we could experience some continuity of growth.

2018 Anniversary of the Global Financial Crisis

Broad diversification including holding cash, bonds, and other assets that do not correlate in lockstep with stocks during market volatility can be very helpful in mitigating the market’s downside and help you stay focused on longer-term goals. In every significant market correction that we have experienced since the mid-70s, including 1987, 2001-02, and the most recent global financial crisis 2008- 09, this has continued to be the case. Controlling the things you can such as, cost, distribution rates, taxes, tax efficiency and a balanced approach can be very effective to help manage those things you cannot control such as, geopolitical events, recessions, etc. However, when you delegate money to safer, more stable investments, remember what could happen:

  1. You could experience less downside during market declines
  2. And by definition – You will not look like the S&P 500 – which could be a good thing!

Clients were very happy that their overall portfolio was not down 50% in 2008-09, and that they recovered more quickly than the market did. The S&P 500 took about four and a half years to get even from 2007.


In an effort to keep you up-to-date on current topics we are hosting webinars. You can attend at the scheduled time (“live”) or listen at your leisure once the webinars are completed and posted on our website. Recordings can be found under the Webinar tab at

Earlier this year we held a webinar on Trade Wars and the impact of tariffs. This past week we completed a webinar on Medicare, and later this month we host a webinar focused on 2019 tax reforms and how they might affect you. On the topic of taxes, we have added some information to our website: comparison-prior-tax-law-tax-cuts.pdf

As I have been speaking to clients this year, I’ve become increasingly aware that there is a need for more information related to the impact of lower tax brackets, increased standard deductions, and limits on itemized deductions, such as property taxes. I encourage you to review your 2018 tax return with your tax preparer before year-end. This will enable you to determine if you want to accelerate charitable deductions, or if you are able to avoid alternative minimum tax and exercise stock options. Business owners may benefit from some of the tax cuts included in the new law.

Happenings at SWMG

Nick Sheeran is celebrating his ten-year anniversary at our firm. Congratulations, Nick! He and his wife also have baby number two due later this month. Jill Carr is writing a bi-monthly blog every other Tuesday morning on various financial topics. We encourage you and your family members to read up on everything from saving for a college education to paying down debt. (

Sherri Stephens and Tori Boswell attended the annual Raymond James Women’s Symposium in Tampa, Florida this past week. They networked with many of the senior women leaders and business owners at the firm, as well as attended presentations on relevant and emerging topics. Melissa Joy, CFP® of Pearl Planning recently joined our firm establishing a satellite office in Dexter, MI located close to Ann Arbor. She is a seasoned veteran of the profession, nationally recognized and we are delighted to have her as a part of our growing firm. Jason Guenther will be attending a conference this month focused on the latest in investment strategies. We also recently upgraded our phone system, and are in the very beginning stages of implementing a new reporting tool that we are excited to share with you in 2019. With that, we’ve added Inwoo Hwang to the firm as an Investment Analyst. He’s a Michigan State University graduate and is going to be key to some of our upcoming initiatives.

As we head into the fourth quarter of 2018, please let us know how we can be helpful in your year-end planning. We hope you haven’t been affected by fires, floods, or hurricanes this year. Feel free to call upon us to help in any way throughout the rest of the year.

Best Regards,



Financial Market Update* Year-to-date change as of September 30, 2018
S&P 500 Index 10.56%
Morningstar Commodities
Broad Basket Category 0.17%
MSCI EAFE US$ (International) 1.43%
Barclay US Aggregate Bond 1.60%

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.

*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.

Managed futures involve specific risks that may be greater than those associated with traditional investments and may be offered only to clients who meet specific suitability requirements, including minimum net worth tests. You should consider the special risks with alternative investments including limited liquidity, tax considerations, incentive fee structures, potentially speculative investment strategies, and different regulatory and reporting requirements. You should only invest in hedge funds, managed futures or other similar strategies if you do not require a liquid investment and can bear the risk of substantial losses. 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.

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