Joe with Sophie, Riley & Magglio at Lake Michigan 

Joe with Sophie, Riley & Magglio at Lake Michigan 

By Joe Smalley, Accredited Investment Fiduciary®

America is amazing.  We crave our independence.  We have a strong work ethic.  And we love our sports.  This summer, on the eve of the Fourth of July, I thought I’d take some time to give you my thoughts on where we stand, what is going on in the markets, and give you some thoughts and ideas as we move into the dog days of summer. 

Independence

Globally, the US economy stands out.  It is not the fastest growing economy; there are emerging markets (EM) countries like South Sudan and Paraguay that are growing faster.[1]  It is not the biggest economy, the European Union’s GDP has recently eclipsed that of the US.[2]  But many economic indicators in the US continue to improve.[3]  That, coupled with the Federal Reserve’s pledge to keep interest rates low, seems to be helping the stock market reach record levels, with the Dow Jones Industrial Average cresting 17,000 today.[4]  It is hard to believe that a short five years ago, the DJIA fell to 6,547.[5]    

World Events

Brazil is hosting the World Cup soccer tournament this month.  Team USA made a fantastic showing.  Hardly anyone thought that they would emerge from the “Group of Death” and move on to the quarterfinals, but they did.  Unfortunately, there are some other not-so-great things going on in the world right now.  Russia is rattling chains in Ukraine.  China is attempting to extend their presence in the South China Sea.  ISIS is emerging in the Middle East to surpass Al Qaeda as the number one threat in the region. These are all things to continue to watch over the summer.

Summer Sale?

We all love sales.  It is great to be able to buy that pair of shoes on clearance, find a car well below sticker price, or get a good deal on a BBQ – especially this time of year.  It is the same thing with stocks.  Because of the extended bull market – the Dow Jones has gone up for 39 consecutive months without a 10% correction – along with some of the geopolitical threats from around the world, there could be a sale coming in the stock market.[6] It is for exactly that reason that we have been keeping some cash on the sidelines: there soon could be a buying opportunity. 

What to Do

As always, the best thing to keep in mind is that markets move in cycles.  Your short-term money is for the short term.  Your medium-term money should not only be invested in equities.  Your long-term money is where you want to have the majority of your stocks.  For that reason, if there is a pull back in stocks, and it is invested for the long term, by definition you will have time on your side to allow the market cycle to come back.  Smart investors use downturns to add to their long-term stock portfolio.  Take a look at your allocation.  Find out where you might want to add to your portfolio.  And be ready.  When the markets pull back, if appropriate for your situation, consider adding to the portfolio where it needs additional exposure to help balance it out. 

Rebalancing

Speaking of balancing, now might be a good time to review your asset allocation.  We have had a good run in the stock market over the past few years.  It might be time to take some profits off the table and rebalance the portfolio back to your level of risk tolerance. 

Housekeeping

Our sidewalk and handicap parking spots have been poured, which means that we can finally have our Open House.  Be on the lookout for an invitation soon; we can’t wait to show off our new office – the oldest house in Lansing.  We also are eager to have you meet Sarah and Emma.  Sarah is our new Client Concierge and Emma will be heading up our marketing and communications. 

Scheduling a Meeting

Summer is busy with vacations and baseball and spending time with family.  But if you would like to get together to go over your financial situation this summer, give us a call – we’re happy to talk about the markets, the Tigers, but more importantly, your goals.  And we have some pretty fancy new software to help us along those lines. 

Have a safe & happy summer!

Joe

 

 

Securities & advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a Registered Investment Adviser.  Asset allocation programs do not assure a profit or protect against loss in declining markets.  No program can guarantee that any objective or goal will be achieved.  All indices are unmanaged and investors cannot actually invest directly into an index.  Unlike investments, indices do not incur management fees, charges, or expenses.  Past performance does not guarantee future results.

[1]{C} https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html

[2] http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

[3] http://www.bloomberg.com/news/2014-06-19/leading-economic-indicators-index-in-u-s-rises-for-fourth-month.html

[4] http://online.wsj.com/articles/china-data-lifts-u-s-stock-futures-1404218053

[5] http://en.wikipedia.org/wiki/Closing_milestones_of_the_Dow_Jones_Industrial_Average

[6]{C} http://blogs.marketwatch.com/thetell/2014/06/09/is-a-stock-market-correction-overdue/