Monthly Newsletter – November 2019

We begin November’s newsletter by focusing on how the market usually performs when it is up this much through October. We also share the latest tax planning strategies from RRBB Accountants & Advisors. Finally, we share the most recent monthly commentary from Pacific Asset Management.

When the market is up this much through October, it usually finishes the year strong

US equity markets are now trading at all-time highs with the S&P 500 currently up over 23% YTD, the Dow Jones Industrial Average up over 18% YTD, and the NASDAQ higher by over 27% YTD.

If history is any gauge, these results are a bullish sign for stocks through year-end. The S&P 500 has performed this well (+20% or more through October) just seven times since the 1950s. When analyzing those seven years, the median return was 5.92% and all seven times led to gains for the rest of the year.

Source: CNBC

RRBB November Newsletter

RRBB Accountants & Advisors’ latest client newsletter provides money-saving year-end ideas, insights at how social security benefits have changed for 2020 and explains the power of cultivating gratitude. The full newsletter can be accessed by clicking the link below:

RRBB November Newsletter

Monthly Market Commentary

Brexit negotiations dominated the returns for Sterling investors in October as the Pound bounced on the hopes of a deal between the UK and Europe

Please click the link below to read the latest monthly commentary:

Pacific Asset Management – November Commentary

Monthly Newsletter – October 2019

Our October newsletter provides insights on relevant timely topics we hope you find value reading. We begin with the fourth-quarter market outlook from Lord Abbett’s investment leaders. We also share the latest Ark Invest blog discussing how disruptive innovation saves lives. Finally, we share the most recent monthly commentary from Pacific Asset Management.

Investments: What’s Ahead for the Fourth Quarter?

Lord Abbett investment leaders offer their insights on key fixed income and equity sectors for the remainder of 2019.  The participants identified a number of factors to watch in the months ahead, including U.S. economic growth, corporate leverage, U.S.-China trade tensions, and technological innovation.

Lord Abbett – What’s Ahead for the Fourth Quarter

These Innovations Have the Potential to Save Lives

ARK believes that innovation is changing the way the world works and ultimately making it a better place by saving lives, delivering productivity advancements, empowering users and developers, and reducing the environmental and social externalities of economic growth. Below are a few examples of how disruptive innovation saves lives:

Deep Learning Is Making Rapid Advances in Diagnostic Radiology

Drones Could Save the 20,000 Lives Lost to Out-of-Hospital Cardiac Arrest Each Year

CRISPR Technology Could Help Feed the Growing Population

Autonomous Vehicles Will Reduce the Chances of Dying in an Auto Accident by Over 80%

To read the full article, click on the link below

ARK Invest – How Disruptive Innovation Saves Lives

Monthly Market Commentary

“FANG” stocks (Facebook, Amazon, Netflix, and Google) the poster children of growth stocks fell over the month as investors shunned highly valued technology stocks.

Please click the link below to read the latest monthly commentary:

Pacific Asset Management – October Commentary

Monthly Newsletter – September 2019

We begin September’s newsletter by addressing the latest developments on Brexit and the implications. With many clients of ours having UK based assets, this is a major area of focus that we will be paying close attention to. Our September newsletter also covers the turbulent August market conditions with the S&P 500 losing 1.8%, Foreign Developed Stocks (MSCI EAFE) losing 2.6%, Emerging Market Stocks (MSCI EM) losing 4.9% whilst defensive asset classes such as US Investment Grade Bonds (+2.6%) and Gold (+7.7%) delivered positive returns. Finally, we share the most recent monthly commentary from Pacific Asset Management.

Brexit Developments & Implications

Brexit is certainly one of the greatest risks investors face currently. Since Brexit was announced on June 23rd, 2016, the pound (GBP/USD) has fallen from 1.49 to 1.22 today (-18+%). Newly elected prime minister Boris Johnson is prepared to walk away from the EU if the two sides (UK & EU) cannot reach an agreement by October 31st. However, the UK parliament just passed legislation that will force Mr. Johnson to delay Brexit if an agreement cannot be reached by October 19th. Mr. Johnson responded by calling for an early general election, which was blocked because officials opposed to Brexit want a “no-deal” scenario entirely off the table. Parliament is scheduled to vote again on this early election motion sometime next week.

Please visit BBC’s website below for the latest Brexit coverage:

Brexit – BBC News

Market Perspective

Schwab experts share their latest market insights and perspectives.

Key points:

  • Equity markets have stabilized and remain within their broad range established over the past six months, but risks remain.
  • Manufacturing sentiment and activity continue to be weak, but that malaise has not yet bled into the larger consumer segment of the economy.
  • Not all trade news is gloomy, and certain international regions, like Japan, may provide some much-needed diversification in the current environment. 

Click on the link below to read the full report:

Schwab Market Perspective: Storm Clouds Building

Monthly Market Commentary

Our partners at Pacific Asset Management share their latest Market Commentary. Please click the link below to read the latest monthly commentary:

Pacific Asset Management – September Commentary

Monthly Newsletter – August 2019

July was a calm month for investors with most asset classes delivering faint returns. The S&P 500 reached a new all-time high and closed up 1.4% for the month. As we turn the calendar to August, our newsletter covers the highlights from ARK’s Big Ideas Summit, gauging the impact of the Fed’s rate cut, and the latest monthly commentary from Pacific Asset Management

Big Idea’s Summit 2019

We attended the Big Idea’s Summit 2019, an event hosted by ARK Investment Management on July 24th at the New York Stock Exchange. The event sought to educate, inspire and empower investors to better understand today’s market, where to find long-term growth, and the impact transformative technologies will have on their portfolios. Below are some topics covered at the event:

Deep Learning
  • Deep learning is software that’s not ‘written’ but ‘trained’. Humans gather data and create a learning framework. The system learns the right behaviors automatically. Deep learning improves with more data and often exceeds human performance.
  • Examples: Social Media, Apple Watch, Tesla Autopilot, Google Translate, Smart Farming.
  • Amazon Go uses cameras and sensors which feed into deep learning software to recognize shoppers, to understand when they pick up items or put them back, and to allow them to leave the store without checking out at a cash register.
Digital Wallets
  • By the end of 2018, Venmo became the 4th largest manager of customer accounts, trailing only Bank of America, Chase, and Wells Fargo.
  • Digital wallets can acquire customers much cheaper, becoming effective channels for banks to engage and retain customers.
  • Based on lower customer acquisition costs and more cross-selling opportunities, investors could value digital wallets at a significant premium to traditional banks.
Genome Editing
  • CRISPR is a powerful DNA editing tool that should be able to delete, replace or repair genes easily, inexpensively, and precisely.
  • ARK believes CRISPR is the most promising way to cure diseases — from sickle cell anemia to cystic fibrosis to pediatric blindness to cancer. CRISPR genome-editing should shift the health care system from treating symptoms to curing disease.
  • CRISPR enables cheap and rapid “write” capabilities to correct defects and cure diseases.
  • Genetic defects in the human code cause many diseases including cancer, heart disease, diabetes, cystic fibrosis, and Alzheimer’s.
  • CRISPR Should Address All Monogenic Diseases, potentially generating $75 Billion in Global Revenue Per Year.
  • Only 5% of 10,000 monogenic diseases, conditions caused by an error in a single gene, respond to any treatment today.
3D Printing
  • 3D printing is a form of additive manufacturing that builds objects layer-by-layer instead of removing material from a larger block or using a mold.
  • As a result, 3D printing collapses the time between design and production, shifts power to designers, and creates products with both radically new architectures and less waste, at a fraction of the cost of traditional manufacturing.
  • Boeing estimates that 3D printing could save $2-3 million per plane.

Gauging the Impact of the Fed’s Rate Cut

Lord Abbett experts explore the potential investment implications of the U.S. Federal Reserve’s policy move on July 31. 

Gauging the Impact of the Fed’s Rate Cut – Lord Abbett

Monthly Market Commentary

Our partners at Pacific Asset Management share their latest Market Commentary. Please click the link below to read the latest monthly commentary:

Pacific Asset Management – August Commentary

Monthly Newsletter – July 2019

Our July newsletter provides insights on relevant and timely topics we hope you find value reading. We begin by sharing ideas on what is now officially the longest U.S. economic expansion in history. We also share the latest tax planning strategies from RRBB Accountants & Advisors. Finally, we share the most recent monthly commentary from Pacific Asset Management.

Longest U.S. Economic Expansion in History

The U.S. is officially in its longest economic expansion, surpassing the record of 120 months that occurred from March 1991 to March 2001. However, the overhang from the housing & financial crisis has made this expansion much weaker than past expansions. The cumulative total of quarterly GDP growth figures equals 25%, far lower than previous booms. Expert opinions vary on whether this expansion is going to last. Some believe the Federal Reserve will save the day through cutting interest rates, while some think additional stimulus cannot combat the looming downturn or that the Fed won’t be aggressive enough to stave it off.

Source: CNBC – This is now the longest US economic expansion in history

RRBB July Newsletter

Tax day might seem far away, but waiting until year-end to make your tax moves may prove costly to you. Maximizing your tax savings starts with an effective mid-year strategy! Detailed here are some ideas to kick-start your summer tax planning. This issue also includes some unique and free summer travel destinations, an infographic with key IRS audit information, and five steps to help your business set the right salaries for your employees. The full newsletter is in the link below:

RRBB July Newsletter

Monthly Market Commentary

Our partners at Pacific Asset Management share their latest Market Commentary. Please click the link below to read the latest monthly commentary:

Pacific Asset Management – July Commentary

Monthly Newsletter – June 2019

May was a challenging month for investors as trade-related fears weighed on the global economic outlook. The S&P 500 dropped 6.4% whilst investment grade bonds (Bloomberg US Agg. Bond +1.8%) benefited over the period. As we turn the calendar to June, our newsletter covers the Three Developments to Watch in the Second Half from Lord Abbett, a potential US/UK trade deal, and the latest monthly commentary from Pacific Asset Management.

Three Developments to Watch in the Second Half

Below is a summary of the midyear round-table where Lord Abbett’s experts tackle inflation, the housing market, and consumer debt levels—and their potential market impact in the second half of 2019. Click the link below to view the entire round-table conversation:

https://www.lordabbett.com/en/perspectives/economicinsights/midyear-outlook-three-developments-to-watch-in-second-half-video.html

  1. Inflation Expectations
    • There are now signs of wage growth acceleration which is an element of the U.S. economic expansion that was lagging.
    • And whereas this wage growth acceleration could pose an inflationary threat, it’s not doing so, because simultaneously productivity’s picking up at the same time, and so production costs aren’t going up, even though wages are.
    • However, if the central bank engages in inflation targeting in the second half (viewed as unlikely), that would be a significant volatility driver.
  2. U.S. Housing Sector
    • Single-family housing has only recovered about 60% of the average level of housing starts from the 1990’s-2000’s. This is weak in part because there’s been a shift in consumer preferences towards multi-family units and towards renting rather than owning.
    • However, single-family housing has started to pick up recently and that’s another thing that is unusual for a late-cycle environment.
    • Typically, housing is weakening in the latter phases of a business expansion. And if it’s starting to strengthen now, it’s another factor that could sustain growth.
  3. Debt Levels
    • The consumer is deleveraging. Mortgage debt is significantly down. And if you look at debt-to-income [ratios] of households, that’s declined to very low levels.
    • The public sector is where debt is increasing. Right now, clearly though, investors are not worried about it. If they were, we would be seeing much higher financing costs and we’re just not.

Trump Promises Huge U.K. Trade Deal, Including Health Service

In his current visit to the UK, President Donald Trump promised the U.S. and U.K. could as much as triple their trade after Brexit, but stirred controversy by hinting that Britain’s government-run health system could be opened to American companies.

For more information on this topic, please read the following Bloomberg article:

https://www.bloomberg.com/news/articles/2019-06-04/trump-says-trade-could-triple-with-u-k-in-deal-following-brexit

Monthly Market Commentary

Our partners at Pacific Asset Management share their latest Market Commentary. Please click the link below to read the latest monthly commentary:

Pacific Asset Management – June Commentary

Monthly Newsletter – May 2019

We begin May’s newsletter by addressing the failed China-US trade negotiations.  We believe continued failure to reach an agreement is a great risk to investors for the remainder of 2019.  However, we still remain hopeful an agreement can be reached because we ultimately believe both parties understand a comprehensive trade deal is in the best interest of the global economy and financial markets.

We also introduce the concept behind disruptive innovation investing and why we believe long term, growth oriented investors should strongly consider taking advantage of this opportunity.

We also share the latest monthly commentary from Pacific Asset Management.

Trade War Renewed

Despite the delay and tariff increase, it is still possible that talks continue and a trade agreement may still be ready for signing at the G20 summit in Japan on June 28.  For more information on US-China tariffs and the other key geopolitical risks, please read the following market commentary from Charles Schwab:

Geopolitics: Examining The Top Five Risks

Disruptive Innovation Investing

Disruptive innovation strategies invest in companies focused on developing technologies to displace older technologies and/or creating new markets.

The best example of a disruptive, innovative company is Amazon (AMZN).   Founded in 1994 as an online book store, Amazon has evolved into the largest e-commerce marketplace and cloud computing platform in the world as measured by revenue and market capitalization.  From Whole Foods to Prime, Amazon has disrupted and innovated commerce and technology in so many profound ways.   This explains why Amazon’s stock price has risen approximately 120,000% (!) since it began publicly trading in 1997.  To put this into context, below is a chart showing how much a $100, $1,000, and $10,000 investment in 1997 would be worth today (Source: Investopedia.com):

Initial Investment Today’s Value (Estimated)
$100 $120K
$1,000 $1.2 Million
$10,000 $12 Million

Modern advancements in technology are allowing companies in various sectors to create the disruption and innovation that leads to substantial long term investment growth.  Specific areas believed to be poised for disruption and innovation are as follows:

Robotics

Autonomous Vehicles

Machine Learning

3D Printing

Energy Storage

E-Commerce

Blockchain Technology

Bioinformatics

Molecular Diagnostics

Source: ark-funds.com

The challenge, of course, is selecting the right area’s/companies that will fulfill the desired disruption and innovation.  As a result, there are unique risks involved with this investment approach, such as:

Regulatory hurdles

Rapid pace of change

Political or legal pressure

Competitive landscape

Exposure across sectors and market cap

Uncertainty and unknowns

Source: ark-funds.com
Monthly Market Commentary

Our partners at Pacific Asset Management share their latest Market Commentary.  Please click the link below to read the latest monthly commentary:

Pacific Asset Management – May Commentary

Monthly Newsletter – April 2019

Our April newsletter provides insights on relevant and timely topics we hope you find value reading. We share the latest Brexit updates from The Associated Press as the UK rushes toward the departure date without a plan in place. April’s newsletter also provides the latest insights on America’s “retirement crisis” and the legislative efforts to combat the issue. We also share the “Four Reasons to Consider Municipal Bonds” by Lord Abbett along with the latest market commentary from Pacific Asset Management.

Latest on Brexit

LONDON (AP) — The British government and senior opposition figures met Thursday to seek a new plan on how the country leaves the European Union, as Prime Minister Theresa May tried to limit divisions within her Conservative Party inflamed by her shift toward compromise…

AP NEWS – BREXIT

America’s Retirement Crisis

It’s financial literacy month, do you know where your retirement is?

According to CNBC, there is a retirement crisis in America where most will be unable to afford a ‘solid life’. Consider the following:

The three “legs” of the retirement “stool” (private savings, pensions, and Social Security) are all in dire shape.

At Vanguard, the median 401(k) account value for an investor age 65 and older is a measly $58,035.

After looking at the data, the Saint Louis Fed concluded: “It could be worrisome that, for many American households, the total balances of their retirement accounts may not be sufficient to ensure a solid life in retirement.”

In response to this growing problem, the most comprehensive changes to private retirement plans in more than a decade are gaining momentum in Congress. Please read the following CNBC articles to learn more:

CNBC – There’s a retirement crisis in America where most will be unable to afford a ‘solid life’

CNBC – House committee passes bill to upgrade 401(k) plans amid ‘retirement income crisis’

Four Reasons to Consider Municipal Bonds

For those taking a fresh look at these tax-exempt securities, here is what Lord Abbett considers to be the most attractive features of the current muni market:

Lord Abbett – Four Reasons to Consider Municipal Bonds

Monthly Market Commentary

Our partners at Pacific Asset Management share their latest Market Commentary.  Please click the link below to read the latest monthly commentary:

Pacific Asset Management – April Commentary

Monthly Newsletter – March 2019

retirement

Our March newsletter provides insights on relevant and timely topics we hope you find value reading. With tax season around the corner, we share the latest insights from RRBB Accountants & Advisors. We also share BlackRock’s latest retirement insights along with the latest market commentary from Pacific Asset Management.

RRBB March Newsletter

Tax season is in full swing. Early reports from the IRS indicate that, on average, refund amounts are down compared to last year. If this is you, the first article lays out some reasons for the change. This issue also includes a warning to business owners to file their taxes on time, tips to keep your monthly bills in check, and some exciting board games to try. The full newsletter is in the link below:

RRBB March Newsletter

BlackRock Insights – Retirement Concerns

Retirement planning has evolved from a world where pensions and Social Security paid for retirement to a world today where people are living longer and need to depend on their own savings.

Consider the following:

One-third of Americans have less than $5,000 set aside for retirement

Most people born today will live to be 103

90% of the world’s data has been created in the last two years

More than 40% of millennial’s don’t have access to an employer- sponsored retirement plan

Source: BlackRock

Click the link below to read the full article from BlackRock:

BlackRock Insights – Retirement Concerns

Monthly Market Commentary

Our partners at Pacific Asset Management share their latest Market Commentary.  Please click the link below to read the latest monthly commentary:

Pacific Asset Management – March Commentary


Investment Opportunities in Today’s Market Climate – February Newsletter

After posting its worst yearly performance since the financial crisis in 2018 (-6.2%), the S&P 500 just posted its best January since 1987 (+8.01%).  This illustrates how volatile markets are now.  Our February newsletter focuses on three investment opportunities to consider in today’s market climate.  In addition, we provide the latest monthly commentary from Pacific Asset Management. 

Investment Opportunities in Today’s Market Climate

Multifamily Real Estate investing

Multifamily rental housing is a common form of housing in the United States that presents a unique investment opportunity with low correlation to the economy and stock market.  Multifamily real estate investments generally focus on income producing properties with low/defensive risk profiles.

Demand for multifamily rental units remains high.  Research from the Urban Institute predicts that from 2010 to 2030, we will see five new renters for every three new homeowners.

There are significant barriers to homeownership that favor renter and multifamily demand:

  • Millennials are drowning in student loan debt.  According to the Federal Student Aid Office report from Q1 2018, there are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt.
  • As interest rates rise, it becomes more expensive to borrow money to buy a home.
  • Increased costs associated with home ownership (land, labor, overall construction costs).

Investing passively through a fund focusing on multifamily investment properties offers the ability to co-invest with professionals and diversification in asset types, geography, and business plans.  

Covered Calls

A covered call option strategy can help to control and reduce risk on a stock or exchange traded fund (ETF) you already own.  A covered call strategy is best suited for those with concentrated stock positions and for income-oriented investors. In particular, we have identified employee’s of publicly traded companies with accumulated stock compensation can benefit from a covered call strategy.

In a Covered Call transaction, you are simply giving someone else the right to buy your investment in exchange for cash paid today.  This cash provides immediate income and the potential for downside protection for the investment you own.

For a detailed explanation on Covered Calls, please read Charles Schwab’s article – Reducing Your Exposure with Covered Calls

Short Duration Income

The rising interest rate environment has created investment opportunities within the short duration income space.  The US Federal Reserves objective to normalize monetary policy (largely by raising interest rates) has caused short-term interest rates to rise dramatically, leading to a flattening yield curve (see below chart).

Source: Bloomberg

When comparing today’s US treasury yields (annual), the 2-year US treasury yields 2.52% versus 2.70% for the 10-year US treasury.  This means you are only receiving an additional 0.18% per year for the 8 year difference.  This environment creates an opportunity for investors to reduce risk by lowering their portfolios duration/maturity.

Currently, you can find a number of banks offering 2% or more on savings accounts. It is worthwhile to shop around for the best savings rates available. You can get started by visiting Nerdwallet.com’s Best Saving Accounts of February 2019

For more information on short duration investments, please visit Lord Abbett’s article on Gauging the Opportunity in Short Duration Credit.

Please contact us to explore these investment opportunities based on your personal goals and objectives.

Pacific February Monthly Commentary

Our partners at Pacific Asset Management share their latest Market Commentary.  Please click the link below to read the latest monthly commentary:

PACIFIC ASSET MANAGEMENT – FEBRUARY COMMENTARY