“I was dreaming when I wrote this, forgive me if it goes astray…"- Prince Rogers Nelson (1958-2016)
As I write this, I think of all who have passed in this surreal* year of 2016.
We lost a few epic icons like the one and only Minneapolis Boy-Done-Good: Prince, and now Princess Leia (Carrie Fisher).
I’m ready to sing Auld Lang Syne with a sentimental tear in my eye because we never forget those who truly make an impact.
“Should old acquaintance be forgot, and never thought upon..."
*Merriam-Webster Dictionary declares its “Word of the Year” by the most look-ups and this year surreal got the most bids in 2016.
Surreal is defined as: marked by the intense irrational reality of a dream.
But let’s talk Dow 20,000, shall we? We’re gonna party like it’s 1999!
The Dow is up almost 15% Year-To-Date (YTD) with over half of the year's gains piling on since the election on November 8th.
The holidays look bright with stock prices up. The last week of the year is a quiet time for trading so we coast into the new year with a sigh of relief at the 1 year numbers. That is, IF you had the gumption to stay invested in stocks through all the uncertainty. Ah, the plague of uncertainty, it seems to crop up a lot in life as well as in lackluster markets.
So, how do you plan to bring in the New Year? Partying like it’s 1999 or hunkering down awaiting the Post-Truth Apocalypse?
Just the Facts, Ma’am
Well, the peak of the Dow is an arbitrary cause for celebration but it does point to ebullience in the market. The S&P 500 Stock Index is up over 11% YTD and also hovering near its recent all-time high.
The Federal Reserve seems increasingly optimistic about the US economy as they hiked short term rates at their December 14th FOMC meeting. This is just the second time in a decade they’ve raised rates and the very first time in 2016. We still remain at rock bottom levels (Federal Funds Rate is now in the .5 to .75 range) but intensity of higher rate ramifications could increase as the projected plan is for three additional rate hikes in 2017.
Federal Reserve Chair, Janet Yellen, justified the rate hike by noting the strengthening U.S. labor market and the fact that inflation is hitting targeted levels.
The fact that we didn't have a dip in markets reacting to the Fed's hawkish stance is a combination of both a brightening global outlook along with a response to a future with the promise of increased corporate earnings, less regulation and a fiscal stimulus.
Some are calling this market boost a “Trump Bump” since November 9th marked a clear shift to the upside in stocks.
New Year’s Eve RSVP's
With investments, as well as parties, choose wisely…and remember these keys to investing:
1. In all things: moderation. Too much of one thing can swing you out of balance. Diversify your investments to protect yourself from over-weighting any particular market segment in your portfolio.
“The only investors who shouldn’t diversify are those who are right 100% of the time.” -Sir John Templeton
2. Hydration works wonders to prevent the dreaded hangover. Similarly, euphoric markets call for building up liquidity in your portfolio to protect against the inevitable meltdown. Rebalancing a portfolio can do the trick but liquidity is the best currency for striking new deals.
3. Focus on finding good value.
“Price is what you pay. Value is what you get.” -Warren Buffett
4) Risk is necessary for growth.
“The biggest risk is not taking any risk.” -Mark Zuckerberg
If you can remember these rules, live it up and enjoy yourself this New Year’s because:
“Life is just a party and parties weren’t meant to last.” -Prince
2017: Let's Do This
At Lundeen Abrams, we diversify amongst various money management styles and don't focus on predicting "what will happen" but more so, how we can optimize the investment experience for individual clients given each household's needs and personal risk parameters.
We utilize active managers alongside strategic and more passive strategies.
Our flexibility to hire and fire managers and flex our positions based on changing global markets and economic trends helps our clients take advantage of opportunities. Connect with us and learn more.