On it with Offit Newsletter
On it With Offit
BY BEN OFFIT, CFP®
Interesting Tidbits
People who say they value money highly say they are less happy in life than those who care more about love and friends.
-Source: Kahneman, Krueger
“In times like these it helps to recall there have always been times like these.”
-Paul Harvey
Surprisingly good news: debt service payments as a percentage of disposable income are at 40 year lows, at just 10%.
-Source: St. Louis Fed
The weakest dog usually barks the loudest.
-Norman Reedus
There’s been a lot of press about the wealthiest U.S. citizens. Who are they?
Net worth of the Top:
10% is $1.2 million and up,
1% is $10.3 million and up,
.1 is $43 million and up.
-Source: Forbes
The real measure of our wealth is how much we'd be worth if we lost all our money.
-Jowett
And in the end the love you take is equal to the love you make.
-The Beatles
Those recessions we are all so worried about? Well they last, on average, less than a year. For perspective, the average expansion lasts over 5.5 years.
-Source: Economic Policy Institute
What you teach your children, you also teach their children.
Source: Unknown
There are three kinds of people in this world. Those who see, those who see when they are shown and those who will never see.
-Da Vinci
Talent hits a target no one else can hit. Genius hits a target no one else can see.
-Arthur Shoepenhaur
A business that makes nothing but money is a poor business.
- Henry Ford
It's how you deal with failure that determines how you achieve success"
- David Feherty
In June I had the opportunity to go to Los Angeles and spend some quality time with some dear friends of mine that I known my entire life. As time goes on, friends and family may disperse geographically, but the ones who truly matter and care about you will always be nearby.
Financial Planning Tips
In March of 2019, I had the opportunity to present on Elder Abuse to the Society of Daily Money Managers in Rockville, MD.
Have you known someone who may have been a victim of elder financial abuse?
It is when someone takes advantage of an elder persons’ financial resources for their own personal gain or benefit.
This is predominantly perpetrated by those who are closest to the elder person ie. family members, caretakers, and "trusted" people who target their wealth. Most abuse occurs from people not associated with the money management industry.
Unfortunately, only 1 in 5 cases are reported and the victims are 3x more likely to pass away, experience depression, guilt, and anger and to isolate themselves. This also has an estimated $30B cost to society.
Warning signs of this can include sudden changes to their financial accounts, confusion about financial affairs, new "trusted" caretakers and best friends, and new romantic relationships that don't pass the smell test.
If you believe someone you know may be a victim of this issue, get in touch with an elder law attorney or a Fiduciary-oriented financial planner.
As always, if you have any questions, don't hesitate to reach out to us at 410-600-PLAN.
Financial Planning Tips
Equity Market
Coming off a tough month in May, equities showed great resilience in June and rallied sharply to close out the quarter. Trade concerns with China dominated headlines in May, and while no final resolution was made on that front, the market’s focus seemed to turn to the Fed in June. Markets have become more and more convinced that a rate cut cycle is rapidly approaching and under that context, interest rates fell and stocks rallied to close out the first half of 2019.
Although all major equity indices enjoyed a strong first six months of 2019, the theme of large-cap growth stocks outperforming everything else continued in the second quarter and year-to-date. However, large-cap value stocks enjoyed modestly better gains than large-cap growth in June. Other recent trends of large-cap stocks outperforming small-caps and U.S. stocks outperforming international equities continued to hold as well.
The value/growth relationship has stretched to historic extremes and should the current situation revert to more historical norms, value-oriented stocks should benefit. At Clark Capital, we employ value-oriented measures in our investment process and believe that over a full market cycle, these value characteristics will be rewarded.
The numbers for June were as follows: The S&P 500 advanced 7.05%, the Dow Jones Industrial Average (DJIA) rose by 7.31%, the NASDAQ Composite gained 7.51%, and the Russell 2000 Index, a measure of small-cap companies, was up 7.07%. These strong gains pushed Q2 returns into positive territory after sharp declines in May as these major equity indices advanced 4.30%, 3.21%, 3.87%, and 2.10%, respectively, for the quarter.
Large-cap value stocks, as measured by the Russell 1000 Value Index, gained 7.18% in June while large-cap growth stocks, as measured by the Russell 1000 Growth Index, advanced 6.87%. Although value outperformed in June, the quarter still saw growth outperform as those two indices gained 3.84% and 4.64%, respectively.
International equity results were also strong in June. The U.S. dollar weakened during the month due in part to expectations mounting of a likely rate cut by the Fed. We continue to believe that the headwinds faced by international equities in 2018, driven in large part by U.S. dollar strength, will be less intense in 2019 as the Fed has clearly turned more dovish in 2019 compared to a more hawkish stance in 2018.
With this backdrop, emerging market equities, as measured by the MSCI Emerging Markets Index, gained 6.24% in June and the MSCI ACWI ex USA Index, a broad measure of international equities, gained 6.02% for the month. For the second quarter, those two indices advanced 0.61% and 2.98%, respectively. International stocks have enjoyed solid gains over the first half of 2019, but have not been able to match the tremendous results of U.S. equities so far this year.
Fixed Income Markets
The 10-year U.S. Treasury yield has dropped dramatically over the last few months and closed June at 2.0%—its lowest closing level since the fall of 2016. Mounting expectations of a Fed rate cut, persistent low inflation and negative global interest rates have contributed to this recent decline in yields.
The short-lived yield curve inversion at the end of March (comparing 10-year U.S. Treasury and 3-month T-bill yields) resurfaced in late May and the yield curve stayed inverted for all of June. The length of time the yield curve stays inverted has mattered historically, and we continue to monitor this data closely.
We acknowledge that an inverted yield curve has been a historically negative signal for the direction of the U.S. economy; however, at the same time, other economic data that tends to be on the front end of the economy, like the Leading Economic Indicator Index and job market data, are not showing the same cautionary signals.
In this environment, fixed income advanced across the board in June. The Bloomberg Barclays U.S. Aggregate Bond Index was up 1.26% for the month, the Bloomberg Barclays U.S. Credit Index gained 2.26%, the Bloomberg Barclays U.S. Corporate High Yield Index advanced by 2.28% and the Bloomberg Barclays U.S. 30-Year Treasury Index rose 1.37%.
For the second quarter, these indices gained 3.08%, 4.27%, 2.50% and 6.76%, respectively. Longer-dated U.S. Treasuries, among the most sensitive bonds to interest rate movements, have clearly benefited from the significant drop in yields in 2019. TIPS and muni bonds gained in June and are positive for the quarter and year-to-date as well.
S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index.
Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy.
NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices.
Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million.
Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
Government bonds are guaranteed by the U. S. Government and, if held to maturity, offer a fixed rate of return and fixed principal value.
Offit Advisors
28 E Susquehanna Ave
Towson, MD 21286
Phone + Fax: 410 600 PLAN (7526)
E – BOffit@OffitAdvisors.com
W- www.OffitAdvisors.com
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