Broker Check

A June Letter to Clients: Ignore the Distractions

| June 07, 2017

Well it is hard to believe that we are at the halfway point of the year, that the summer solstice is fast approaching and that before we know it Labor Day will be here.  Wow!  By the time you read this, Catherine and I will be at the Rotary International Conference in Atlanta, where we will be hanging out with 33,000 fellow Rotarians!  From there we move on to St. Augustine to visit son and his family, then on to Key West to hang out with daughter and Noah and to celebrate my 40th High School Reunion!  Our last stop of this long vacation is Tampa where we hope to visit the Chihuly Glass Museum and the Salvadore Dali Museum.  After that home again!  While we will be traveling, if something comes up, don’t hesitate to email or call me. While it may take a little longer for me to respond, I will do so. 

One other thing before we get to the meat of this month’s update.  I have recently launched a new website full of educational information.  As part of that website, I have new method of sending out my newsletters and monthly updates.  Sooooo, you are going to receive this monthly update twice!  Once per my current means of emailing through my mailchimp service provider and once through my new provider.  Please let me know what you think of the differences between the two versions!  I really need your feedback.   Now, on to the meat of the update……

For this month’s Client Newsletter, we will focus on how to block out the noise and see what is really going on. The steady diet of headlines pouring out of the current administration has been unsettling for most Americans, regardless of where they sit on the political spectrum.  We know equity markets loathe heightened uncertainty. What is happening in Washington is generating an enormous amount of political uncertainty. Yes, the word “impeachment” has even been bandied about in conventional circles. It was responsible for a one-day sell-off last month that cost the Dow 373 points (St. Louis Federal Reserve).

Blame the knee-jerk reaction on allegations being made concerning the White House and members of the staff.  There hadn’t been much downside action in the major indexes recently, so talk of impeachment jarred the short-term crowd. But, political as well as international uncertainty has yet to generate economic uncertainty. Hence, and this is important, we have seen little downside in stocks. It really is about the economy.

Given the comparisons to Watergate, let’s take a high-level look at what was happening economically in the early 1970s and compare it to today.

Table 1: Then vs. Now




Inflation rose to double-digit levels, peaking at over 12%


Inflation remains low

Interest rates were spiking higher; prime loan rate hit 12%


Interest rates remain low

OPEC oil embargo roils economy, oil prices rise four-fold


A glut of oil exists today and prices are well below levels of recent years

The unemployment rate jumped as the economy fell into a steep recession


Employment is rising, the unemployment rate is at a cyclical low, and the economy is expanding

Source: St. Louis Federal Reserve, U.S. State Dept.

As Table 1 illustrates, the fundamentals are radically different today.


Beyond the brief synopsis I provided above, I’ll stay out of the political weeds and let you form your own opinions.  Stepping briefly into the political arena feels like I’ve stepped into a minefield! But I felt it was important to provide some context in relation to the markets.  My job is to be your financial advisor and financial confidant. That is where I focus my energy. I’d be happy to entertain any questions you may have about your portfolio, your financial plan, and how I believe various events of the day may impact your investments.  But let’s stick to your financial roadmap.

Table 2: Key Index Returns




3-year* %

Dow Jones Industrial Average




NASDAQ Composite




S&P 500 Index




Russell 2000 Index




MSCI World ex-USA**




MSCI Emerging Markets**




Bloomberg Barclays US Aggregate Bond TR




Source: Wall Street Journal,, CNBC, Morningstar

MTD returns: April 28, 2017—May 31, 2017

YTD returns: December 30, 2016—May 31, 2017


**in US dollars


Too sanguine?

A couple of months ago, I touched on the failure by the House to pass a so-called “repeal and replace” for Obamacare. It had little impact on shares. Like it or not, the House finally passed a health care bill last month, and it did little to boost shares.  The crown jewel for investors, however, has always been a cut in the corporate tax rate. Well, what seemed like a certainty immediately following the election has become murky. In fact, a late May article in the Wall Street Journal entitled “GOP’s Proposed Tax Changes Are No Match for Status Quo--Republican lawmakers’ boldest ideas for changes are on political life support…,” summed up the dilemma the party is facing.

We were told by the pundits that political gridlock and any unraveling of the President’s tax cut and infrastructure agenda would pound stocks. It’s not yet unraveled but bold economic changes from Washington are at risk.  Yet, stocks are near all-time highs.  Why? I think what we are beginning to see is the passing of the baton. An investor-friendly agenda in the post-election climate that fueled market gains has been replaced by stronger economic fundamentals.

S&P 500 profits in Q1 came in at the fastest pace since Q3 2011, according to Thomson Reuters. And forecasts for the year have been relatively upbeat.  Simply put, the fundamentals “trump” the negative headlines, whether those headlines originate in the U.S. or overseas.  The longer-term focus of the markets has always been the economic fundamentals. I believe that focus has not changed.  Unless the economy is significantly impacted, unexpected and alarming events may create short-term volatility, but they rarely create long-lasting impact.

Shedding light on a confusing maze of options–financial literacy

I recently came across a definition of financial literacy in Wikipedia that I believe sums up the term well. I’ll paraphrase: “It refers to the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources.”  How do you manage money? How does one come up with financial goals and a plan to reach those financial goals? How do we make effective decisions with our financial resources?

These are easy questions that don’t command easy answers. You see, the financial arena is much more complex than it was 50 years ago. There is a downside to the proliferation of choices we have today. It adds a layer of complexity and creates confusion. Many don’t know where to begin. Many fall into paralysis by analysis.  One of my goals in my practice is to educate the investor. I know we cover various topics in our meetings, but I’ve learned that some folks feel uncomfortable about asking questions they perceive as too simple. Don’t we all?

Let me say this–there isn’t a bad question. I want you to be comfortable with what we recommend. I understand that you reach out to me for assistance with your finances, and I take that responsibility very seriously.  While the financial plans we advocate encompass basic principles, we do not take a cookie-cutter approach. Instead, we tailor our advice to your unique situation.  One of the things that drove me to launch the new website is the wealth of financial information I now have available to share with you and the rest of my clients. 

Bottom line

Every situation is unique, but there are fundamental financial principles that guide our recommendations.  Finally, let me repeat, there are no bad questions. What we don’t know can hurt us. And financial ignorance can be extremely costly.  Let’s talk if you have questions. That’s what I’m here for.   Assisting you in pursuit of your financial goals and shedding light on financial complexities provides our team with an enormous amount of satisfaction. Financial literacy is just one of the avenues that will help place you on the road to reaching your goals and dreams. Take a moment and check out the new website and let me know your thoughts.  Have a great Summer!  Kind Regards, Rudy