For the past 18 months, two hot button issues for investors have been the Fed and trade negotiations between the U.S. and China. These two issues were the catalysts for two market corrections in 2018, the latter of which nearly approached bear market territory. However, for the first five months of this year fears of a Fed misstep were alleviated and reported positive progress towards a trade deal between the U.S. and China spurred markets to new all-time highs.
On Friday, Uber went public in the what is the biggest initial public offering (IPO) so far this year. Earlier this month, Beyond Meat went public with less hype and saw its price skyrocket 163% in its first trading day, making it the best-performing first-day IPO in nearly two-decades. Beyond Meat is a producer of plant-based meat substitutes founded in 2009. The company’s Beyond Burger is sold at Whole Foods and restaurants chains around the country.
At HIGHLAND, one of the cornerstones of our investment approach is that securities offering higher expected returns share particular attributes, which we refer to as the dimensions of higher expected returns (or dimensions for short). These dimensions are based on economic theory, backed by Nobel Prize winning academic research, and supported by decades of real-world historical data. Dimensional Fund Advisors is an investment management firm with a long history of applying academic research to practical investing and is one of our preferred investment managers. Dimensional Fund Advisors defines a dimension as a return difference between two assets or portfolios “that is sensible, empirically robust in the data, and cost-effective to capture in well-diversified portfolios.”
When Tiger Woods won the 2019 Masters earlier this month, it capped off one of the greatest comebacks in golf history, if not one of the best comebacks in the history of all sports. Woods’s last Masters tournament victory came in 2005 and his last major tournament win was back in 2008. In this 11-year span between major wins, Woods faced a very public divorce, was arrested for driving under the influence, and battled a number of injuries. With his latest Masters win, Woods has 15 major tournament wins and is now three behind Jack Nicklaus for most of all time.
When the calendar turned from March 31st to April 1st, the U.S. economic expansion turned 117 months old. Should the expansion continue through July, it would become the longest economic expansion in U.S. history. Given that the U.S. economic expansion is starting to show signs of its age, many have been questioning how much longer until the next recession.
It’s been an eventful few months. After posting its worst quarterly return since the fourth quarter of 2008, the S&P 500 rebounded strongly in the first quarter of 2019 to post its best quarterly return since the third quarter of 2009. The S&P 500 has now recovered much of its fourth quarter losses as oversold signals have faded and investor optimism has been buoyed by a favorable shift in monetary policy by the U.S. Federal Reserve.
The changes made to the tax code by the Tax Cuts and Jobs Act (TCJA) of 2017 are now being felt full fledge, and despite early fears, some filers have been pleasantly surprised by their tax returns for 2018. Historically, one of the more loathsome tax rules over the years was the Alternative Minimum Tax (AMT) which disproportionately impacted earners in the Northeast and West Coast where wages and cost of living are higher. In 2018, the rules around AMT have changed increasing the amount of income you must earn to be impacted by the tax.
The Federal Reserve held their March meeting this past week and indicated no more interest rate hikes will be coming in 2019 as a result of concerns over slower growth and the potential for a bump in the unemployment rate. This is a significant shift from three months ago when the Federal Reserve announced two interest rate hikes would be appropriate for 2019.
Nobody likes paying taxes. Even though taxes are necessary to keep our schools open, communities safe, roads clean, and governments running, it’s not a fulfilling experience to see a percentage of your hard-earned income or investment gains vanish into thin air. With that being said, there’s no way of escaping taxes (without risking legal repercussions, of course), but that doesn’t mean there aren’t things we can do throughout the year to reduce the amount of taxes you ultimately end up paying.
Author Nancy Hatch Woodward once wrote, “Snow brings a special quality with it – the power to stop life as you know it dead in its tracks.” Anyone who lives in the Northeast knows this all too well.
On Thursday, November 15, 2018, the New Jersey/New York area was hit with one of the more notable November snowstorms in history. Parts of Northern New Jersey and New York City received upward of six inches of snow, with some areas getting hit with as much as ten inches.
The story of the millionaire next door has been told at nauseum. Since authors Thomas J. Stanley and William D. Danko first released their book “The Millionaire Next Door: The Surprising Secrets of America’s Wealthy” in 1996, the book’s themes have been used as an attempt to promote good savings habits.
In closing 2018, the S&P 500 posted its worst December since 1931, during the Great Depression, and its worst quarter since 2008, during the Great Recession. The good news is we didn’t have to wait long for the bounce back. To start 2019, the S&P 500 posted its best January since 1987. As of Friday’s market close, the S&P 500 is 5.0% below its high on September 21, 2018, but is 19.0% above its low on December 26, 2018.
A retirement calculator is a great tool for most investors. It lets you input a number of variables such as current age, planned retirement age, annual salary, annual savings, current retirement savings balance, and expected annual return and the calculator computes your estimated accumulated retirement account balance at retirement. Some calculators will even translate that lump-sum balance into an annual withdrawal amount. This is a straight-forward way to see if you are on track to meet your retirement goals and compare what you have with what you will need. If you don’t like your results, you can play with the inputs to determine what changes you should make.
Over the past few weeks most of our posts have focused on putting the recent stock market volatility in perspective and subduing concerns about the strength of the U.S. economy.
One of the important points we have stressed is the importance of remaining disciplined to your investment strategy because capital markets have rewarded long-term investors. One of the graphics we often show to illustrate this point is the chart included below. This chart shows the growth of $1 from January 1, 1926 through December 31, 2018 had you invested in US small cap stocks, US large cap stocks, long term corporate bonds, long term government bonds, and cash.
The National Football League (NFL) season reached its conclusion yesterday when the New England Patriots defeated the Los Angeles Rams 13-3 at Mercedes-Benz Stadium in Atlanta, Georgia to win the Super Bowl. While New England Patriots Fans are busy celebrating their sixth Super Bowl win in the past eighteen years and Los Angeles Rams fans are licking their wounds, some investors are looking to the final score to get a sense of how the stock market is likely to perform for the rest of the year.
How often in the past month have you received a credit card offer with a large sign-up bonus and lofty on-going rewards? Sign-up bonuses can be a flat dollar amount, say $500, or a promise to match any cash back rewards you may earn within the first 3 months. On-going rewards can be cash, points, or travel perks. No matter your need there is sure to be a credit card issuer out there trying to entice you to sign up for their card. Some people accept the sign-up bonus and on-going rewards and don’t think twice about it. Others, though, see these offers and wonder, “What’s the catch?”
Over the past few months, market participants have focused on the yield curve and its history of predicting an economic recession. As the chart below shows, the yield curve has inverted prior to every recession dating back to 1962. With predictive power like this, it’s no wonder investors have been vigilantly monitoring its movement in an attempt to gauge when a recession may occur.
At HIGHLAND, we continue to support the efforts by our staff to develop personally and professionally. We have a commitment to providing excellent service and guidance to clients. Each member of our team has an intellectual curiosity and belief that what they do really matters to our clients’ lives. With this in mind, we have some exciting news to share about the HIGHLAND team.