On it with Offit
BY BEN OFFIT, CFP®
Wishing you the Best of this Holiday Season!
As my family has grown this past year, and as we celebrate this holiday season, we wish you and yours the best of the season. This has been our best year in the business, and it is thanks to you, our loyal clients and friends. Thank you to all, and may you have a joyous holiday season, and a happy, healthy New Year. We look forward to the coming year, and hope to offer more exciting updates in 2020.
Interesting Tidbits
"The great thing in this world is not so much where you stand, as in what direction you are moving." - Oliver Wendell Holmes
"We cannot become what we want by remaining what we are." - Max Depree
Optimists solve problems when they arise. Pessimists invent problems before they start.
86% of wealthy people who work full time put in 50 hours or more each week at their career. Source: Thomas Corley, Rich Habits
Feeling threatened by Marxists in the late 1800s, Germany’s leader, Otto Von Bismarck, started forced retirement with a pension at age 65 to create job opportunities for younger, unemployed workers. And we’ve bought into the concept of retiring in our 60s ever since.
"The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind." - T.T. Munger
"Gratitude always comes into play; research shows that people are happier if they are grateful for the positive things in their lives, rather than worrying about what might be missing." - Dan Buettner
"In many ways, the stock market is like the weather in that if you don't like the current conditions all you have to do is wait awhile." - Lou Simpson
67 percent of wealthy people watch less than one hour of television daily, and 63 percent spend less than one hour daily surfing the internet. Source: Thomas Corley, Rich Habits
"The achievements of an organization are the results of the combined effort of each individual." - Vince Lombardi
"Price is what you pay, value is what you get." - Warren Buffett
“Be assured it gives much more pain to the mind to be in debt, than to do without any article we may seem to want.” Thomas Jefferson in a letter to his daughter
Approximately 2 million millennials are living with their parents or rental housing due to student loan debt. Source: JP Morgan
The one thing that has surprised me all my life is how many people with high IQ's do massively stupid things." - Charlie Munger
"When everything seems to be going against you, remember that the airplane takes off against the wind, not with it." - Henry Ford
Contrary to what you're hearing in the general media, there is more hope for those impoverished than ever. In 1970, the world poverty rate was about 27%, and today is at 5%, a decline of 80%. Source NBER
"An investor who has all the answers doesn't even understand all the questions." - John Templeton
Ben Offit, CFP® is featured in Baltimore Magazine as a 2020 Five Star Wealth Manager, for the third consecutive year.
To receive the 2020 Five Star Wealth Manager award, researched and managed by Five Star Professional, a wealth manager must meet 10 objective eligibility and evaluation criteria associated with wealth managers who provide quality services to their clients. 1,759 wealth managers in the Baltimore area were considered for the award. 232 were named in 2019. Five Star Wealth Managers which represents less than 13% of the total wealth managers in the area. Wealth managers do not pay a fee to be considered or placed on the final list of 2020 Five Star Wealth Managers. The Five Star award is not indicative of the wealth manager's future performance.
Webinar: New Year, New Financial Resolutions
Wednesday, January 8, 2020 - 12:00pm to 1:00pm
Host: University of Maryland Alumni Association
I am proud to be featured in a webinar hosted by my Alma Mater, University of Maryland. Learn how YOU can set your course for a successful financial 2020. What can you think about now, and what actions can you take now and through the rest of the year to achieve your financial outcomes? Join us!
https://alumni.umd.edu/Webinar-Financial-Resolutions?utm_medium=social&utm_source=facebook.page&utm_campaign=postfity&utm_content=postfity12d42
Cost: Free to attend
RSVP by 1/8/2020
2019 Year-End Planning Checklist
As year-end approaches, there's still time to make sure you're on track toward your important financial goals, including maximizing retirement savings and taking steps to reduce your tax exposure. Begin by reviewing this year-end financial planning checklist:
1. Adjust your withholding - You can use the IRS's online, interactive Tax Withholding Estimator tool
2. Make employer plan retirement account contributions - there's still time!
3, Use any remaining Flexible Spending Account (FSA) balances - "use it or lose it" rule applies to these workplace spending accounts
4. Make 2019 HSA contributions - HSA's are tax-advantaged medical savings accounts
5. Make charitable contributions - The new tax law increased the limit for charitable donations to 60% of adjusted gross income - but you then must itemize your 2019 return
6. Bunch out-of-pocket medical expenses - With the adjusted gross income floor for medical expenses reverting back to 10% of AGI in 2019, you can prepay certain 2020 expenses in 2019 to bring itemized deductions over the standard
7. Satisfy RMD's - if you're age 70 1/2 and have traditional IRA's be sure to satisfy this requirement to avoid penalties
8. Consider a QCD - if you're age 70 1/2 or over and have money in an IRA-you may be eligible to make a Qualified Charitable Distribution paid directly to a charity - not taxable and counts toward your RMD
9. Harvest tax losses - selling certain positions with unrealized losses can help offset other gains
10. Make year-end gifts - the 2019 annual gift tax exclusion amount, which is $15,000 for individuals and $30,000 for married couples, allows you to make gifts without cutting into your lifetime gift and estate tax exemption.
Meet with your tax and financial advisors regularly, and especially at the end of each year, to review your financial goals and determine if there are any additional steps you can take now to prepare for the year ahead.
Source: Ron Carson, Founder and CEO of Inc. 5000 firm Carson
Market Update
Equity Markets
Markets have been climbing the “wall of worry” for most of the year and November was no exception. Trade uncertainty with China continues to exist and that issue likely links directly with a manufacturing slowdown in the U.S. A growing political divide in Washington continues to expand as the formal impeachment hearings enter a new phase with the House Judiciary Committee.
There was some clarity on the future path of Fed rate activity as Chairman Powell indicated that, after cutting rates for a third time in October, the Fed would likely be on hold for some time, unless economic conditions changed. We have written about these issues for most of the year, yet the market continues to be resilient and climb higher.
Concerns about the pace of U.S economic growth have lingered in the market, with manufacturing and trade issues a key concern. However, the U.S. economy has continued to grow, and the job market has remained strong. Workers have made real wage gains, and consumers have continued to spend as well. In fact, Black Friday online sales were up about 20% from last year. We believe that broader economic fundamentals continue to point toward ongoing economic growth.
In 2019, we have generally seen U.S. large-cap growth companies outpace most other parts of the market. However, we have noted that some other areas of the market have made some headway against this broader trend in recent months. September saw value and small-cap companies with some leadership and international equities outperformed U.S. stocks in recent months as well.
November saw solid returns across the board for U.S. equities with small-caps once again enjoying some market leading gains. International equities were the clear laggard in November and continue to trail U.S. equities year-to-date. However, it is important to have some perspective because although it is true that international equities have lagged U.S. stocks, they are still showing double-digit gains through the first 11 months of the year.
Earlier this year, we were seeing historical extremes in the market when looking at the discount that value stocks were trading at compared to the broader market. In many ways, this was reflecting the strong outperformance of large-cap growth companies over the last couple of years.
We continue to believe that should this growth/value situation revert to more historical norms, value-oriented stocks should benefit. While still too early to call a trend reversal, we have seen some pockets of the market perform better in recent months relative to areas that had dominated for some time.
For example, high yielding sectors like Utilities, Real Estate, Consumer Staples and Energy have struggled the last couple of months. Meanwhile four of the five top performing sectors for the last two months were bottom dividend yielders, which is a significant change in market leadership. As more diverse areas of the market make gains, diversified portfolios should benefit as well.
The numbers for November were as follows: The S&P 500 advanced 3.63%, the Dow Jones Industrial Average gained 4.11%, the Russell 3000 increased 3.80%, the NASDAQ Composite rose an impressive 4.64% and the Russell 2000 Index, a measure of small-cap companies, improved by 4.12%. Growth stocks moved back into a leadership position for November with stronger results compared to value stocks in both the large and small-cap space. For example, the Russell 1000 Value Index gained 3.09% compared to the Russell 1000 Growth Index, which advanced 4.44%. The Russell 2000 Growth Index advanced 5.89%, while the Russell 2000 Value Index rose by less than half that at 2.34%.
The U.S. dollar hit its strongest level in late September since the first half of 2017. The dollar reversed course in October and weakened, which helped international equity results, but that decline paused in November. Overall, the U.S. dollar rose in November creating a headwind to international returns. Emerging market equities, as measured by the MSCI Emerging Markets Index, declined on a dollar basis during the month by -0.14%. The MSCI ACWI ex USA Index, a broad measure of international equities, advanced a modest 0.88% in November. These two indices of international stocks lag their U.S. counterparts year-to-date, but both are up double-digits over the last 11 months.
Fixed Income Markets
Most pockets of fixed income have enjoyed solid year-to-date gains as interest rates have dropped rather dramatically during 2019. However, yields hopped around in November and bond results were mixed as the yield on the 10-year U.S. Treasury ultimately settled higher from the October close. The closing yield for the 10-year U.S. Treasury for October was 1.69% and it closed November at 1.78%
The “risk-on” nature of the stock market rally was reflected in bond returns as well, as credit and high yield bonds performed better than other areas of the fixed income market. We continue to believe it will be hard for U.S. rates to move too high with the current amount of global bonds with negative yields. Furthermore, we maintain our long-standing position of favoring credit versus rate exposure in this environment.
With this backdrop, fixed income results were mixed and were as follows: The Bloomberg Barclays U.S. Aggregate Bond Index was off -0.05% for the month, the Bloomberg Barclays U.S. Credit Index advanced 0.19%, the Bloomberg Barclays U.S. Corporate High Yield Index rose by 0.33% and U.S. Treasuries were generally down. TIPS and muni bonds both advanced in November.
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
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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.
