Is This as Good as it Gets? – May Commentary

The first quarter offered lots of “candy” (government spending) and no “spinach” (tax increases).  But that idea started changing in April with government policy shifts: the unveiling of big infrastructure spending (spread over 8 to 10 years), plus new large-dollar child spending programs; both to be funded with higher taxes – corporate and individual.  Taxes are oriented as an aggressive path to pay for massive spending.  At present, the combination of extraordinary fiscal spending and monetary stimulus is pulling forward demand, output, revenue, profitability and investment (perhaps stealing it from 2022 and maybe beyond; called a growth hole).  After such a strong start to the year, and remarkable 12 month recovery, the biggest hurdle the market faces is high expectations and crowded positioning.  At present, there appears to be a peak in positive data and eager market participation (number of stocks rising at the same time), usually found in the first third of a new bull market run.  With so much good news already priced into stocks, any bad news or “miss” could spark near-term volatility.  So let’s ask… Is this as good as it gets?

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“Green Light = GO!” – Nvest Nsights Q1 Newsletter

March marked the one-year anniversary of last year’s stock market low, as COVID fears continued to intensify and lockdowns were beginning.  Since that time, a flood of government support prevented the economy from enduring a depression and fueling a remarkable market rebound.

The first quarter of 2021 provided investors additional growth.  Another round of government stimulus and an accelerating pace of vaccination is driving optimism unleashing pent-up demand, reinforcing the investment theme “Green Light = Go!“.  Yet returns tend to be less exuberant and more volatile as new bull markets enter their second year.  This is not a “bearish” forecast; but rather an acknowledgement that market dynamics can be more frustrating in “Year Two Following the Low” even as economic fundamentals become more robust.

Indeed we are already experiencing a more choppy start to 2021.  Much of the volatility relates to concerns about inflation – a topic of frequent client questions as the huge sums of government spending are recognized.  The “Roaring 20s” was a decade of surging economic growth following recovery from wartime devastation and pent-up demand.  100 years later, there are some interesting parallels and other key ingredients causing many to wonder if higher inflation is on the way and how it may impact their portfolios.

Our personal finance article this quarter, “ARPA What?”, reviews how the most recent economic stimulus package is way more than direct payments to individuals/families; some strategic planning opportunities exist for many even if they do not qualify for a stimulus check.

A printer-friendly version of our quarterly newsletter can be obtained here: Q4 Nvest Nsights

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ARPA What?

On March 11, Congress passed a third round of COVID-related stimulus via the American Rescue Plan Act (ARPA) with a price tag of $1.9 trillion.  This latest package – months in the making – is best known for direct payments of $1,400 to qualifying persons and each of their dependents.  A more abrupt income phase-out (adjusted gross income of $75,000 or $150,000 married filing jointly) made fewer people eligible this round.  Those who are near that threshold may consider making a deductible IRA contribution for example.  But stimulus payment eligibility aside, there are other provisions in the bill that may provide you with some strategic planning opportunities – even for those who do not qualify for direct payments.

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Green Eggs and Ham – March Commentary

Do green eggs really exist?  Dr. Seuss’ classic children’s book, “Green Eggs and Ham” was first published in 1960.  This beginner book was created to be fun and easy to read, perfect for practicing readers ages 3 to 7, and lucky parents too.  Readers enjoy the terrific tongue-twisters and unmistakable characters, Seussville, and signature rhymes.  Even former President Obama noted during the 60th anniversary year of the author’s books, “Pretty much all the stuff you need to know (to live your life) is in Dr. Seuss.”  Do green eggs really exist?  A friend who raises chickens indicated eggs are laid in a wide range of different colors and sizes – white, brown, cream-colored, even pastel blue, pink, and yes even green.   We know eggs come in small, medium and large sizes, even extra-large.  Did you ever eat a colored egg?  If you did, you may find it appropriate to quote a favorite storyline…“I do not like green eggs and ham.  I do not like them, Sam-I-am.”  [March 2 is Theodor Seuss Geisel’s (1904-1991) birthday, and schools call it Read Across America Day.]

February was an overall positive month for investors of the stock market, but financial markets are getting worked up.  Interest rates are rising (meaning bond prices decline) faster and more than most expected.  TheContinue reading

Caffeine Frenzy – February Commentary

Too much of anything can be bad.  Sometimes, it only takes a spoonful, or even less.  In July 2014, the Food & Drug Administration warned about powdered pure caffeine.  Usually added to drinks before workouts for an energy boost or to aid weight loss, or as a dietary supplement. It was also used as a study aid among college students.  In May of 2014, a high school senior in LaGrange, Ohio died, days before graduation, after consuming one teaspoon of powdered caffeine – the equivalent of drinking 25 cups of coffee or 70 cans of Red Bull.  His autopsy found more than 70 micrograms of caffeine per milliliter of blood in his system, more than 20 times that of an average coffee drinker.  The difference between a safe and lethal amount of caffeine is very small.Continue reading

“Tragedy or Miracle?” – Nvest Nsights Q4 Newsletter

We are thankful for your continued support and for receiving our guidance and advice on investing and “LIVING LIFE” financial planning during the last year – a year which could either be characterized as a “tragedy” or a “miracle”.

Whatever your perspective, 2020 offered BIG surprise (global pandemic, lockdown; or the financial market response to it all?).  In this quarterly newsletter we provide brief articles below which aim to provide context about the year we all just experienced and the reaction of the financial markets; what we are focusing on in the year ahead with the dawn of both a new President and congressional political composition; and ponder what unexpected developments might occur.

Our personal finance article this quarter, “Light Bulbs Reveal a Better Idea“, discusses how helpful a big-picture view of your financial position is when the market inevitably encounters unexpected surprises.  We observe clients who partner with us in our “LIVING LIFE” financial planning effort so often experience a “light-bulb”, epiphany moment.

A printer-friendly version of our quarterly newsletter can be obtained here: Q4 Nvest Nsights

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Light Bulbs Reveal a “Better Idea”

In 1967 Ford unveiled a “see the light” marketing campaign for its new Mustang.  That campaign utilized a light bulb which was turned on to illuminate the room with the new Mustang model.  This symbolized how seeing something in a new light can result in an epiphany moment – the message: “Ford has a better idea”, a different approach.

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Energizer Bunny Breaks Loose – December Commentary

The Energizer Bunny is the marketing icon and mascot of Energizer brand batteries in North America.  It is a pink mechanical toy rabbit wearing sunglasses and blue and black striped flip-flops that beats a bass drum bearing the Energizer logo.  The Energizer Bunny advertising tagline is brilliant, “Keeps going and going…”  When used as a synonym to describe a person or other object, it means a person who seems to have limitless energy and endurance.  Is it appropriate to characterize the stock market rally since March 23 as being like the Energizer Bunny?  It appears everything is breaking out.  Market strategists indicate this is the broadest rally, both domestic and geographically, since 2013.  93% of the stocks making up the S&P500 are above their 200-day moving average (trend line of the last 200 days).  That’s a top decile reading historically.  The high reading suggests the market is overbought (high enthusiasm; more on this below), but in fact bodes well for 12-month forward returns being positive.  The current market rally “keeps going and going…”

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“Life in Perspective: Identifying Your Investment Focus” – November Commentary

Many are asking, “what’s next?” given election stress is ending.  Let’s start with a true story.

Kati Metro, 74, was hiking near Phoenix, Arizona when she fell, injuring her face, wrist, and hip.  Rescue workers arrived by helicopter, and strapped her to a stretcher.  Unfortunately, fierce winds caused one of the lines – intended to stabilize the stretcher and prevent spinning during its lift into the helicopter – to fail.  As the horizontal stretcher was pulled upward, it started spinning faster and faster, like the runaway hands of a clock – over 170 rotations during the two minute ascent.  Katie survived the ordeal, although she was dizzy for days.  As horrifying as the experience was, it’s a bit of an analogy about how a lot of people feel right now.  Seeing clearly with “20/20” vision is challenging this year.  Too many big and noisy developments continue to alter most everything about daily life; we are fatigued by this yearlong dizzying experience.  Identifying your focus is important, particularly in the world of investing.

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“Forward Expectations & UNCH” – Nvest Nsights Q3 Newsletter

Investment growth was furiously positive in the six months following the March lows, besting even the same interval of time following the “Great Financial Crisis” of 2008.  In “Forward Expectations“, we review that while history shows the forward return pace typically slows, performance remains positive – particularly when looking +6, +12, or +24 months forward.  While September reminded investors that challenges in reopening the economy persist amid covid-19, it is also good to recall that the 4th quarter is often the strongest performance season for stocks.  That pattern includes election years.  Should historical data not be convincing enough, we explain in “UNCH” how fundamentally significant are the “all-in” efforts of governments around the globe to support their economies.  One chart monitoring change in Money Supply “may be all one needs to know” over the next few years.  We should assume that uncertainty on many fronts will persist; and uncertainty results in volatility.  But “Fear of Volatility” reminds investors not to confuse volatility with risk of loss (they are very different); those who do are more prone to make permanently impactful errors when investing.

Also, if interested: The Higher Wages of Growth, provides a review economic stats recently published by the US Census Bureau.

A printer-friendly version of our quarterly newsletter can be obtained here: Q3 Nvest Nsights

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