Q2 2018 Quarterly Update
We had surprisingly positive reviews the first time we tried this format, so we are bringing it back! We know some of our readers prefer the more traditional analysis of the current economic / market environment, so let’s start there. US stocks are slightly higher for the most part, with the gains almost entirely due to the large cap growth space. In fact, according to CNBC (through July 9th), just three stocks are responsible for 71 percent of all gains in the S&P 500. If you are heavily invested in this space, congratulations! Of course, you are likely operating in reverse – at least if you are a believer in “buying low and selling high”….
Meanwhile - in the world of bonds - short term interest rates have ticked higher with the Fed following through on their promises to hike. Longer term yields have remained stubbornly low however, and the 10-year remains below our key level of 3%. Unfortunately, the environment remains a frustrating and confusing one. On one hand, we should protect against the threat of interest rates rising from historically low levels as the economy continues to strengthen. At the same time, this threat of rising rates never seems to materialize – at least on the longer end. If you feel that we are overstating just how confusing the environment remains, maybe we should ask Bill Gross. Arguably the most well-known bond investor in the world – has been doing so for some 40 years - and now runs the “Janus Unconstrained Bond Fund”. We’ve been told we can’t quote performance numbers in these writings, so let’s just say that 2018 has not exactly been one of his career highlights to date.
So we could spend another 7 pages talking about stock valuations using Shiller / Buffett metrics, but it would be awfully redundant. Or we could talk about “trade wars” and what these threatened tariffs will mean for the short and long-term to the global economy. But we would rather not waste your time analyzing something that no one on the planet can predict whether or not will actually develop into something “real”. Our guess is that it won’t, but it is a topic that we monitor closely and may very well lead to some lengthy discussions if things progress much further……
So instead, we will keep this brief – we hope entertaining – and let you get back to enjoying your summer!
What We Know
“Any tax reform passed in the House and Senate will likely favor large corporations, while the ‘middle class’ should continue to bear the bulk of the burden. It will of course be disguised otherwise.”
“Until the yield on 10-year Treasury Notes breaks through 3%, the long-term, downward trend is firmly in place. If unconvinced, look at a 30 year chart of said yields.”
“The current investment environment is an especially difficult one for retirees (and those on the verge). Historically low interest rates have left many with a choice of accepting lower returns for the sake of needed safety – or taking uncomfortable levels of risk to chase higher (and often times needed) returns. Given an aging population and less than optimal savings rates, this is a bigger dilemma than many seem to acknowledge.” This has gotten worse rather than better unfortunately.
What We Think We Know
(1) The lack of job opportunities for graduates commensurate with what they are paying for their education is way out of whack.
(2) We believe that job creators will begin viewing “co-op” or “internship” based education as much more valuable than the traditional systems now in place.
(3) Now add that expenses related to taxes, healthcare, housing – and education - have become far too burdensome for “the 99%”. Retirement savings are already being grossly ignored. Something has to give – and we think it will be college education as we now know it.
What We Don’t Know
With respect to that last question, we think we know – that we know – that it never is.
To all of our clients, we can never thank you enough for the continued trust and confidence you have placed in Round Hill Wealth Management.
The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Statements of forecast are for informational purposes and are not guaranteed to occur. Trends discussed are not guaranteed to continue in the future.
All performance referenced is historical and is no guarantee of future results. Investments mentioned may not be suitable for all investors.
Equity investing involves risk, including loss of principal. No strategy – including tactical allocation strategies - assures success or protects against loss.
Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through HighPoint Advisor Group, LLC, a registered investment advisor. HighPoint Advisor Group, LLC and Round Hill Wealth Management are separate entities from LPL Financial.