Market Update

We always encourage you to focus on the long term.

We plan and allocate your investments so that you will have adequate liquidity to meet your short-term financial needs.

We don’t know how the future will evolve, but we do our best to plan, knowing that the reality is unknown.

While stressing our long-term focus, sometimes analysis and thoughts about short-term market actions and news can be helpful to you.

In general, worldwide stock market indices have declined since September 30th. US and worldwide stock market indices increased in early November (see blog dated November 8, 2018), then declined most of November, with a strong recovery this week, since Thanksgiving.

The decline of worldwide stock market indices since September 30th can be attributed to investor psychology regarding the following:

  • Slowing global growth
  • Trade tariff impact
  • The huge decline of oil prices since early October
  • Concern about rising interest rates in the US (see the above cited blog post)
  • Valuation concerns about some sectors or individual stocks may have been overvalued

Most of our clients have significant fixed income allocations. For illustrative purposes, let’s say someone had a 50% stock and 50% fixed income allocation. Though the financial markets have declined for the year, a balanced portfolio would not be down double digits on a percentage basis for the year to date. While not what we expect long term returns to look like, it is not anywhere near the losses incurred in a major down market.

We remain confident in our major investment principles, which include:

  • Being globally invested for the long term
  • Using very low-cost asset class mutual funds and not individual stocks
  • Not trying to pick which stocks, sectors or regions will do best
  • Owning high quality fixed income and not junk bonds
  • Avoiding hedge funds and alternative investments, which lack transparency and can be very expensive
  • Over-weighting to value and small company asset classes

On Wednesday November 28, US Federal Reserve Chair Jerome Powell gave a key economic speech. He first discussed his outlook for the economy and interest rates. He then explained in-depth the Fed’s approach to monitoring and addressing financial stability. I found both aspects of his speech to be very insightful and they gave me confidence about the future.

While not everyone will be interested in the full speech, I highly recommend reading this speech, or at least the pages 1-2 about interest rates and pages 13-14 summarizing his thoughts about financial stability. The highlights of the first part of his speech are below. I will likely write about the latter part in a future blog post. The speech is very readable. It shows that the Fed is trying to effectively communicate, as well as look at the financial world and attempt to identify future problems before they become severe.

Powell explained that the Federal Reserve has two jobs, to promote maximum employment and price stability (keep inflation around 2%). He stated that “our economy is now close to both of these objectives.”

The real news which caused the stock market to increase significantly on Wednesday were his comments that the financial markets interpreted that interest rates will not need to be raised much further. He explained that while interest rates are still low historically, “they remain just below the broad range of estimates of the level that would be neutral for the economy-that is, neither (causing the) speeding up nor slowing growth.” (WWM inserted “causing the”)

Powell said he, along with his Federal Reserve colleagues, and many private sector economists, are forecasting “continued solid growth, low unemployment, and inflation near 2 percent. There is a great deal to like about this outlook. But we know that things often turn out to be quite different from even the most careful forecasts.” (Emphasis added)

Powell then went on to discuss the balancing act that the Federal Reserve has, that they are dealing with uncertainty and there is no pre-set path for future interest rate moves. Because no one can predict future events, which cumulatively will affect the Fed’s future interest rate decisions, Wall Street will play a guessing game and this leads to volatility in the financial markets. While all this occurs in the short-term, this is where we remain disciplined and focused on the long-term.

Our bottom line from this speech….

  • There will very likely be a short-term interest rate increase of .25% in December.
  • We stated in our November 8th blog post that there will likely be two or three .25% short term interest rate hikes in 2019. After this speech, it’s possible that there may less. The Fed will monitor and evaluate how the economy is performing and review its forecasts at each of their meetings.
  • Powell does “not see dangerous excesses in the stock market.” He made this comment in the latter part of his speech, when he was focusing on financial stability. He distinguished market volatility, which is normal and expected, from events that could threaten financial stability.

We hope this analysis is helpful to you.

If you have further questions, please contact us. That is what we are here for.

Giving Thanks

As we will celebrate Thanksgiving Day next week, we hope you appreciate the good fortune that so many of us have, simply by being born and able to live in the US.

Warren Buffett has often cited what he calls “winning the ovarian lottery,” which he feels Americans win the day they are born in the US. In lengthier speeches on the same topic, he cites the many aspects of your life which are determined at birth: the political and economic system you are born into, your health, gender, skin color and your level of intelligence.While our country is certainly not perfect, we are thankful for its many virtues and the opportunities it has provided to so many of us.


We are truly thankful and positive, and hope you are as well.


We are thankful for our clients, who have placed their trust in our firm. We do not take your loyalty for granted.

We are very thankful for the referrals that our clients and friends have made to people they care about, so we can assist them and better their lives.

We are thankful for clients who have requested our advice on matters in addition to  investing and financial planning, such as helping them with life transitions, estate planning, real estate transactions and the sale of businesses.

We are thankful that our clients understand the importance of focusing on their long-term goals, and not on short-term market swings, as this will provide you with better long-term investment results.

We are thankful for our business partners and relationships, which help us to be successful and operate our business efficiently.

We wish all of you a very Happy Thanksgiving, and hope you are able to share it with those who are most important to you.

As you are reading this, I will hopefully be arriving in Athens, Greece, along with my two sons, to visit my daughter, who is studying abroad this semester. We will be staying in Athens, then going to Florence and Rome, Italy over the next week. 

Note: As next week is Thanksgiving, there will not be a weekly blog post email next Friday. The next email will be November 30th.

Rapid Changes……what they mean

From early October until October 29th, the S&P 500 declined approximately 10%.** Stock markets throughout the world incurred similar and even worse losses. While we recommend holding a globally diversified portfolio of stocks, we are using the S&P 500 for illustrative purposes here.

Since October 29th, stocks have rebounded significantly, recouping 1/2 to 2/3 of their losses, depending on the specific asset class.

These are some of the lessons from the past 6 weeks…..

  • Not reacting to news, commentary and dire stock market predictions is almost always the right course of action. Not reacting is actually a conscious decision.
  • Markets can and do change suddenly. You need to be able handle sudden movements and volatility.
    • While US large stocks were at near all-time highs in early October, and some thought they were “over-valued,” the swiftness of the decline was not clearly predictable.
    • In a similar manner, it was hard to predict the very quick and significant recovery that has occurred since the October 30th bottom.
    • Could you have accurately timed both the recent top and bottom of these moves?  We doubt it.
  • Our disciplined investment approach can be beneficial in the long term and short term. We adhered to our clients’ long term investment policies, and rebalanced accounts as appropriate.
    • For those who added funds during this downturn, we took this opportunity to buy low and rebalance to asset classes that have not been performing well.
  • This discipline of buying more of the poor performing asset classes makes sense, if you think of groups of stocks like items at a store which have gone on sale. They were now cheaper. Stocks after the decline represented greater values than they did when the prices were higher.
    • You buy things when they are on sale at a store, right? Stocks that have had quick declines, and especially if most things in the world have not changed that much, are like a sale at a store. Stocks that have dropped in price would now have greater future expected returns, so they are a better value at the lower price.
  • The most cited reason for the decline was the talk and action of the Federal Reserve to raise short term interest rates. While this may have been a cause, or contributing factor, it is hard for us to believe that institutions or retail investors did not anticipate the recent Fed moves or their projections for future interest rate increases. We think their actions have been well telegraphed and are quite reasonable, given the strong state of the US economy. The Fed funds target is currently 2-2.25%.
    • While we are not making interest rate predictions, we want you to realize that it is very likely the Federal Reserve will raise short term interest rates by .25% in December, and then at least two or three times in 2019, by .25% each time. Thus the Fed funds rate could be in the 2.75%-3.25% range by the end of 2019.
    • The two year US Treasury Note is almost 3% today. The Fed projections imply that the 2 year yield could likely rise to 4-4.25% by the end of 2019.
    • This means that for the fixed income investments of your portfolio, they will generate more income as your current investments mature and are reinvested at higher yields.
  • It is also hard to predict the movement of other assets, like the price of oil. In the past few weeks, the price of oil has declined by 20%, which is considered a bear market (drop of 20% or more). I don’t know of any financial institution that was predicting this type of decline. Most financial forecasters and bets in oil futures were predicting oil to go higher this fall, and certainly not far lower, based on Wall Street Journal articles over the past few days.
    • This decline in oil is good for the US economy for many reasons. It reduces inflationary effects, which may mitigate the cost of interest rate increases to borrowers. It enables consumers to spend more. It reduces material costs.
  • Many analysts cite the uncertainty preceding the midterm elections as contributing to the October decline. Clearly, removing uncertainty does help investor psychology. However, if uncertainty was part of the cause for the decline, why did stocks increase in the days before the November 6th election?
    • This re-emphasizes our long standing recommendation to avoid most political news when making investment decisions. While it may seem logical to want to factor politics into your investment strategy, it is not practical and often times will lead to poor decisions.
    • In our opinion, stocks are unpredictable in the short term. So don’t try to make predictions and take short term actions.
      • In the long-term, stocks follow corporate earnings and successful companies adapt and overcome political and other challenges.

The bottom line is that in the short term, stocks are volatile. That is why we develop your asset allocation to be appropriate for your goals and needs, as well as your ability to handle the short term risks and volatility of the financial markets.

We want you to be secure, so you have adequate funds to endure market downturns and be able to sleep well at night, regardless of how the stock market is performing.


**The Standard & Poor’s Composite 500 Index consists of 500 of the largest companies based in the U.S. The companies in the Index change frequently over time, as companies grow, fail, merge and get acquired.

How to be more secure and help your favorite charity

We want to donate to your favorite charity.

We want you to be more secure, financially.

And, we want you to be more secure on the Internet and how you use your passwords.

So just as the beginning and end of daylight savings time has become known as the time to change the batteries in your smoke alarms, we want you to start a new tradition. Daylight savings time ends this weekend, so set your clocks back an hour before you go to bed Saturday night. And change your smoke alarm batteries!

We strongly recommend that you use a password manager program, which should work in a coordinated manner on all of your devices, such as your cell phone, iPad or other computers.

I have used 1Password for many years and I highly recommend it. My son encouraged to begin using 1Password years ago and I cannot imagine living without it. It saves me time. I don’t have to re-type my passwords when I log into various websites. The program auto fills them for me. I have lots of very different, complex passwords and I don’t have to remember any of them. I don’t have my passwords written on a piece of paper in my desk or “hidden” in a notebook.

You should use 1Password or another program, such as LastPass and Dashlane. While the best programs are not free, the cost is relatively nominal (most are between $20-40). We think it makes sense for these applications to charge a fee, and even to have an annual charge, as they are keeping your data secure and they should be constantly improving their services, as well as keeping up with technology changes. For further information on various password manager programs, please see this article:  The best password managers of 2018. 

You should know that everyone in our firm now uses 1Password within our business, to store various passwords we need to maintain. That’s how important computer and password security is to us.

If you are not yet regularly using such a password manager program, we want you to start. If you are a client of WWM, and start using a password manager program by November 15th, we will donate $25 to your favorite charity.

That’s all you need to do is start using a password program and email Michelle Graham of our firm, Let Michelle know that you have started to use a password management program and tell us the name and address of your charity. We will then make a $25 donation in your honor.

We will all benefit. You will be more secure, you will make your life easier and we will be helping a number of charities, we hope!

And if you are already using such a password program, we want to encourage you to start a new tradition. Twice a year, when daylight savings time begins and ends, we encourage you to change 10-15 of the passwords you use the most or are financially important. And if you have any frequently repeating passwords, those should be changed. You should not repeat passwords.

If you are a client of WWM, and you change 10-15 of your passwords by November 15th, we will donate $25 to your favorite charity (if you already are using a password manager program).

After you make your 10-15 password changes, email Michelle Graham, Let Michelle know that you have done this, and the name and address of your selected charity. We will then make a $25 donation in your honor.

We care about you.

We care about the charities that are important to you.

And we care about your security on the Internet.

The next step is up to you.

We hope to hear from many of you in the next few weeks.

Will you act?