Quarterly Reports

First Quarter Report 2018
 
To Be or Not to Be Afraid of the News
 
Dan Kresh FPQP™
Michael D. Kresh CFP® RF™
 
“It is a tale told by an idiot, full of sound and fury, signifying nothing.” (Macbeth Act 5 Scene 5) Taken out of context we feel this Shakespeare quote aptly describes how the average long-term investor should view the day to day financial headlines. The first quarter of 2018 saw some seemingly “newsworthy” market swings, which oftentimes changed dramatically throughout the day. Since February 5th, when the Dow Jones Industrial Average (DJIA) had its biggest intraday point drop of 1,597i, there has been dramatic short-term volatility spikes. (Before the market closed that day it gained back over 500 points, closing down 1022.66). Short term volatility makes for good “news” but for investors with long term outlooks, if the economic fundamentals are strong, short term dips should be mostly ignored.
 
These swings seemed magnified because the markets recently hit all-time highs and volatility was abnormally low in 2017ii. In terms of percentages, these swings broke no records at all! Pundits like to compare market gyrations to roller coasters but they seem to forget that actual roller coasters end up exactly where they started. During roughly 10% of the trading days, the Dow’s range was greater than the net change for the whole quarter. As usual, we recommend clients ignore the noise as we look to see if any rebalancing should be done. When the market is bumpier, it is vital to remember that market timing is a fool’s errand.
 
As you have hopefully wrapped up your 2017 tax returns, it is important to start planning for 2018 and beyond. The new tax rules may have significant impact, especially for people in higher tax states who itemize deductions on their tax returns. As the standard deduction nearly doubles, the state and local tax (SALT) deduction is capped, and the rules on mortgage and home equity interest deductibility change, far fewer people will itemize deductions beginning in 2018, and those who do may have a bit less to itemizeiii. Many families will be affected by the loss of the personal exemption and doubling of the child tax credit. It is also expected that far fewer people will be subject to the Alternative Minimum Taxiv (at least until 2025).
 
New York State is trying to address the issue of the new limit on SALT deductions, but in the meantime, you need to ask your tax preparers if you should adjust your withholdings or your estimated tax payments for the rest of 2018. If you haven’t asked, get to it! We are, as always, happy to facilitate a meeting with you and your tax professional to help plan together.
 
Our next shredding party will take place on June 23rd. More information to follow in our email newsletter.
 
i https://www.cnbc.com/2018/02/05/dows-nearly-1600-point-plunge-marks-its-biggest-one-day-point-drop-ever.html
ii https://qz.com/1154499/the-vix-2017-was-the-least-volatile-year-in-decades/
iii https://www.forbes.com/sites/kellyphillipserb/2018/03/07/new-irs-announces-2018-tax-rates-standard-deductions-exemption-amounts-and-more/#118c45603133
iv http://money.cnn.com/2018/01/18/pf/taxes/2018-amt-exemption-increase/index.html
  • Fourth Quarter Report 2017

  • Michael D. Kresh CFP® ® RF™

     

    Well 2017 is over and we are now starting 2018, so it is time to look at the most important events of last year and think about our resolutions for 2018.

    On November 21st, 2016, the Dow closed above 19,000 for its first time in history[i], and by the end of Feb 2017 the Dow had its first monthly close above 20,000. [ii]  Regardless of the Dow’s rise in Feb, the single most important day of 2017, in my mind at least, was February 1st the day that Elliot and Jonah Kresh were introduced into the world.

  • Now, according to major news outlets, this event did not even make one of the top headlines for February let alone all of 2017, what do they know? In fact since February 1st our clients have had probably the highest 11 month aggregate return in our firm’s history. Is that a coincidence, who cares?

    There is no question in anybody’s mind that 2017 was full of disturbing headlines. Terrorist attacks in London and New York, mass shootings in Las Vegas, NV and Southerland, TX were among the deadliest in us history.[iii] Three major hurricanes hit Houston, Florida and Puerto Rico, additionally there were massive wild fires in Minnesota and California. Moreover, global political tensions remained constantly in the news, especially between the US and North Korea adding agita to our morning coffee. Yet, through it all, the S&P 500 finished higher every month last year. That has never happened before.[iv]

    In hindsight, one can always come up with reasons to explain every market turn. Typically, disturbing headlines have at least short-term effects on our markets, not last year. Well, what made this year different? Every year was and always will be different, expecting tomorrow to be the same as today is potentially perilous.

    Interest rates remained very low throughout the year, inflation remained subdued, and these two factors together act to help corporate profits which often lift stock prices. Many will speculate that the anticipation of a major corporate tax cut helped buoy the market. Now that tax reform has been signed into law, only time will tell if this is good or bad for the economy.

    As we look forward, we do recognize some important trends, we are living longer, and new technologies disrupting ways of doing business faster than ever. Our futures are unfolding right in front of us, and our mission is to continue guiding our clients into tomorrow, no matter how cold it is out there.

    Elliot, Jonah, Dan, Glenda, Lauren, Lori and I wish you all a Happy and a Healthy 2018!

     



    [i] Newsday

    [ii] https:// www.statista.com/statistics/261690/monthly-performance-of-djia-index/

    [iii] https://www.massshootingtracker.org/data/2017

    [iv] http://www.businessinsider.com/us-stock-market-higher-every-month-in-calendar-year-2017-12

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