For the past dozen years or so, I have emailed a Thanksgiving letter where I reflect on the blessing of things like family, friends, a great country in which to live, and other big picture themes.

These blessings remain true, of course, but for this year’s letter I want to share some thoughts on three things that I like because I think you will like them too. And I’m also guessing that Thing #1 might make you a hero at the Thanksgiving table this year if you share the idea with your family and friends.

1. NoMoRobo
2016_06_29-robotcall-ill_homepage-3-24125164466If you are inundated with unwanted telemarketing calls, you will love NoMoRobo. Sandy and I signed up this summer and those computer-dialed calls that deliver annoying recorded messages (Robocalls) have completely stopped!

NoMoRobo intercepts illegal calls by cross-checking incoming calls with its log of suspected robocallers and blocks the number after just one ring if it’s a match. The service does allow certain automated calls to get through, including school closings, doctor’s appointment reminders, emergency warnings and prescription pickup alerts. Also, if you ever notice via caller ID that NoMoRobo has inadvertently blocked a wanted call, the number can be added to a whitelist for it to be allowed through the next time.

The service is free for landlines and $4.99 a month for mobile phones. Here’s a link to their website: http://www.nomorobo.com/

2. Photo Scan by Google
Google released a new app this week and I love it! If you have boxes of old photos or have little-viewed photo albums, you need to drop everything and get the new PhotoScan app. It lets you easily turn your old prints into digital photos, letting you save them to the cloud with a single tap. PhotoScan is available for your iPhone or Android device and lets you quickly scan tons of photos with excellent results.

The app opens to the camera and instructs you to position a photo within the frame (you don’t even need to take the photo out of an album). To scan it, you move your phone over four dots which appear in your viewfinder. Once you’ve done this, the photo is scanned – and you can immediately slide the next photo under your phone and repeat the process. It’s easy.

Photos are automatically cropped, rotated, and color corrected. You can save them to your Photos with one tap – and then, when you want to find them, you can just search for “scans” inside Google Photos or whichever photo app you use and they’ll all come up.

Here’s the link to Google PhotoScan: https://www.google.com/photos/scan/

3. The Self Journal by Best Self™
The summer before I left for college, my dad gave me a small leather daily planner called a “Day-Timer”. I remember it clearly; it was made from black Morocco leather, had a loop for holding my Cross pen, and was small enough to fit in the back pocket of my jeans as long as I didn’t mind that the top part of it extended above my pocket. For years, that thing was my constant companion. It kept me organized, helped ensure that my homework got done on time, and was a place for me to keep my class schedule.

After I graduated, the planner moved from the back pocket of my jeans to the breast pocket of a suit jacket which I wore to work at the Bank of New England each day. It was a part of my daily routine. When I eventually left banking and joined my dad’s financial planning firm, the Day-Timer came with me of course. But then, as time and technology marched on, I stopped using my planner and started using an on-line calendar and to-do list. While I love how technology allows me to sync my calendar from my desk computer to my iPhone, and vice-a-versa, I have somehow missed the feel of a book in my hands.

Earlier this year I went “old-school” and purchased a hard copy journal. It’s not exactly like my old Day-Timer but I love it just the same. The journal has become my goal-setting roadmap and I use it every morning to start my day. The premise behind the book is centered on creating 13-week goals. Part of the process is to then develop actionable steps, set daily “targets” (the three most important things to get done that day), and begin and end the day with reflection about the things for which I’m grateful. I can’t overstate how much I’ve enjoyed this process and how helpful it has been in improving my productivity, and even happiness.

If you want to learn more, the company offers a free PDF version of the journal. The first 30-pages provide a thorough overview of the concept. You can check it out here: https://bestself.co/pages/self-journal-pdf

Personally, one of the things I’m most thankful for is the opportunity to work in a field that I love, and with people whom I like and respect. On behalf of my family, I would like to offer you my thanks for your trust and confidence. To earn a living doing this work is a great privilege and one that I don’t take for granted. Thank you.

 

 

PS. It was President George Washington who first declared a national day of Thanksgiving. Here is more information about his proclamation from October 3, 1789: http://www.mountvernon.org/digital-encyclopedia/article/thanksgiving/

And now a message from the LPL Compliance Department:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult me prior to investing. All performance referenced is historical and is no guarantee of future results. Research material has been prepared by LPL Financial. Economic forecasts set forth may not develop as predicted. Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal, and potential liquidity of the investment in a falling market. Because of its narrow focus, specialty sector investing, such as healthcare, financials, or energy, will be subject to greater volatility than investing more broadly across many sectors and companies. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a nondiversified portfolio. Diversification does not ensure against market risk. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measure, and their value may be affected by the performance of the overall commodities baskets, as well as weather, geopolitical events, and regulatory developments.

By Steve Davis, CFP

 

My dad retired ten years ago this month and ever since, he and my mom have been spending their winters in Florida. Last weekend, Sandy and I had the good pleasure (and good timing!) of visiting them while another winter storm raged on here in New England.

There are two topics of conversation that inevitably come up when my folks and I are catching up after having been apart for a while. Dad and I always talk business – this is particularly enjoyable since the two of us worked together for 15 years before his retirement. Dad continues to offer great insight and it is fun for me to share some of the successes we are achieving. The second topic of conversation is one that my mom and I usually share around her computer, iPad, or smart phone. This conversation is actually more like a class or computer lesson. And to give you an idea of my mom’s great sense of humor, she taped a little saying above her computer for me that read, “I didn’t know how good I was with computers until I met my parents.” Thanks, mom!

Mom showed me an 8 ½ x 11 inch sheet of paper with a list of all her accounts and corresponding passwords. The sheet was well used and had the marks of many revisions to her myriad of online accounts. Mom asked, “There’s got to be an easier way, right?” Well, I’m happy to tell you there is! This month, let me introduce you to my own technology guru, Belinda Wasser. I have Belinda on retainer and she helps me with my own technology questions. I recently asked Belinda to address the password question for my clients and friends. She has written the following:

It’s Time to Gather Your Critical Data
By Belinda Wasser

The day I turned 25, my mom walked me over to her filing cabinet and showed me a “special” folder. In it were all her important papers. She had her life insurance policy, the title to her car, banking information, and the location of her safe deposit box. She wanted me to know, “just in case.”
As a parent myself now, I realize how responsible that was of her – to make it easy for me to take care of her affairs should the need arise.

In today’s digital age, though, the concept of a single file in a file cabinet has largely disappeared. We’ve all got so many passwords, automated bill payments, relationships with several banks and so much information stored online … the folder will no longer cut it. We need a new way to capture all the information our spouses or children would need in case of an emergency.

For me, that way is something called LastPass – a free application that is of particular use “just in case.” Here’s how I use it:

1. Passwords. Most people store their user names and passwords on scraps of paper, in a notebook or, least secure of all, in a file on their computer somewhere. LastPass stores all this – securely and in one place – for you.

When I visit my bank online, for example, and LastPass detects I’m entering a username and password, I’m given the option of storing this in my “vault.” If I agree, every time I visit that bank in the future I am logged in automatically. Not only that, LastPass offers to generate complicated and unique passwords, something you’re probably not doing on your own.

2. Secured notes. In a nutshell, secured notes are like classified pieces of paper that you create and store electronically within LastPass. This could be things like your wishes for your funeral service, details regarding your finances, notes to your children, or other vitally important and/or confidential ideas and messages that you want to maintain.

3. Shared family folders. LastPass allows you to invite up to five “family members,” who can access vital information in the event of an emergency or other, unexpected event. You specify which passwords, documents, etc. they’ll have access to (it can vary for each family member) as well as whether they can make changes or simply “read only.”

An accident or sudden death in a family is traumatic enough. Taking steps now to ensure that all your vital data is secure and easily accessed by those you love is something they will always appreciate.

Copyright © 2015, Belinda Wasser
—————

I hope you find Belinda’s information as helpful as I have. If you’re interested in giving LastPass a try, check out the free download on Belinda’s site.   And just so you know, I didn’t  escape the storm altogether when I was in Florida. What a difference a day makes! One day I’m sitting poolside with mom and dad. The next, I’m standing on my roof shoveling 4-foot snow drifts. Fun, fun, fun…

roof1  roof2

 

About Belinda Wasser:

Belinda

Belinda Wasser, Rocket Girl Solutions

 

A business workflow and logistics expert with 25 years of experience, RocketGirl Solutions Founder Belinda Wasser is hired by small businesses on a contract basis to act as their part-time, “business manager.” To subscribe to Belinda’s free, twice-monthly newsletter for solos and small business owners, “Rocket Fuel,” visit www.rocketgirlsolutions.com.

By Steve Davis, CFP

 

My longtime colleague, Gerry Conway died on November 13 and I have spent quite a bit of time over the past two weeks reflecting on how thankful I am to have had him in my life.

Gerry Conway and Bob Davis

Gerry and my father were business partners and founded Conway & Davis in the 1970s. Their firm was one of the first in Massachusetts to provide independent financial planning. Unlike many firms that concentrated in either insurance or investments, Conway & Davis offered both insurance and investment advice because Gerry believed that a successful plan needed to coordinate all aspects of a person’s financial life. In many ways, Gerry was a pioneer and was among the first to earn the Certified Financial Planner designation. He was passionate about his work, and spent more than 40 years in a profession he loved, helping his clients and friends achieve what he referred to as “financial peace of mind”.

As many of you know, I joined Conway & Davis after initially starting my career in banking as Commercial Loan Officer. When Sandy was pregnant with our first child, the banking industry went through some difficult times and I was caught in one of the many rounds of layoffs that rippled through the industry. After a year of working for an insurance company in Boston, my dad suggested that I consider joining him in business at Conway & Davis. It was a great opportunity and working with my father from 1990 to his retirement in 2006 was a wonderful time in my life and career.

Looking back, Gerry could not have been kinder or more supportive of my joining the firm. I imagine that in some ways having the son of his partner join the company could have been viewed as a threat, or at least, as an inconvenience, but Gerry welcomed me with open arms. He was encouraging, and offered guidance and mentorship, particularly in the area of investments. He was a proponent of Sir John Templeton’s approach toward value investing, low expenses, and the efficient frontier theory of adding international exposure to actually reduce risk. Gerry was a student of the industry and enjoyed teaching what he learned. I consider myself a beneficiary of his wisdom.

It seems fitting that my recollections of Gerry are taking place around the Thanksgiving holiday. Every year for as many as I can remember, I have been sending out a “Thanksgiving letter” to my clients like you. I do it because I want you to know how thankful I am to have the opportunity to help you and your family in your financial plans. This year, it seems especially fitting to also offer thanks to Gerry, a colleague, mentor, and friend. Along with my father, Gerry showed me the value of honesty, sincerity and trust in business. He was a major contributor behind my success and achievements, and I’m forever grateful.

 

 

 

Mansfield Fall Day

I love this time of year.  During yesterday’s gorgeous fall afternoon I went out for a bike ride and got hit in the head by a falling acorn. As you might guess, for the rest of my ride, I had this fairy tale running through my mind…

 One day Chicken Little was walking in the woods

when — KERPLUNK — an acorn fell on her head

“Oh my goodness!” said Chicken Little. “The sky is

falling! I must go and tell the king.”

Speaking of Chicken Little, have I reminded you of the 24-hour News Channel?  Just a few months ago, when the Dow fell over 300 points in one day, I jumped onto the MarketWatch website and found a section highlighting the most popular stories.

— “Warning: the Plunge in Stocks Is Just Beginning.” Well, stocks quickly recovered and claimed new highs.

—  “S&P 500 Suffers Largest Weekly Loss in 2 Years.” True, but we emphasize the longer term and continually stress that your plan should take into account setbacks in the market. Be very careful of allowing weekly volatility sidetrack a multiyear plan.

— “10 Things Winemakers Won’t Tell You.” This article may have been worthwhile, but it’s not market-related.

—  “3 Market Warning Signs that Predict a 20% Tumble.” See my comment on article number one, above.

 Three of the top four stories are playing on the fears of investors. Simply put, bad news sells. But it can be confusing if the noise isn’t filtered.

Remember that the portfolios we recommend have a long-term time horizon and are designed to get you to your ultimate financial goal. So let me encourage you to stay focused on the goal and make adjustments that take into account changes in your personal circumstances, not fear-mongering that can be deafening during market volatility.

Here are the things I’m watching:

US Economy:  There are many indicators that suggest the U.S. economy continues to improve at a moderate pace. Some bright spots for the economy continue to shine despite the onset of grayer weather in many parts of the country:

– The job market continues to gradually improve. Initial jobless claims as a percentage of the labor force have never been lower and the economy created an average of 216,000 jobs per month over the past seven months.

– The latest round of U.S. manufacturing data suggests businesses are increasing their level of capital spending, a sign of confidence that corporate profits may continue to grow at a steady pace in the quarters ahead.

– Household net worth is on the rise and is currently about $13 trillion above its pre-recession peak, providing solid support for consumer spending in the coming quarters.

 

Bond Risk: 

Over the past number of years, US monetary policy has seen the Fed keep interest rates at very low levels.  But with the economy continuing to improve, the Fed says it’s likely that rates will eventually start to rise, but not too soon. LPL Financial Research expects the Fed to begin hiking rates in about a year’s time.

In the meantime, the Fed’s low rate policy has encouraged a reach for yield.  With investment-grade bond yields at unattractive levels, hundreds of billions of dollars have gone into low-quality, high-yield debt.  This could pose a risk because higher interest rates could lead to rising defaults, especially among debt-laden companies that have high leverage and low bond ratings.

In a perfect world, we’d have a seamless transition between the Fed’s decision to raise rates and a stronger economy which would make it easier for companies to pay down debt and meet scheduled interest payments. But we don’t live in a perfect world, and that brings about volatility.  What’s unknown: Will the jump in yields stabilize as the improved return attracts buyers to the investment-grade bond market, or will we witness selling of these bonds amid expectations of eventual hike in rates by the Fed?

Stock Volatility:

So while Fed rate hikes impact the bond market, they have often created short-term jitters in the stock market as well.  Will this be the thing that forces the long-awaited correction?  Time will tell, but historically these interest rate increases have not caused stocks to deviate from their longer-term upward trajectory. Stock market returns between the start of Fed rate hikes and the peak in the stock market have been attractive. And let’s remember why the Fed hikes rates—it’s because the economy is performing well and the Fed believes that normalizing policy is the best path to sustainable long-term growth. The market’s tendency to do well during the fourth quarter (especially during midterm election years) and continued growth of corporate profits are other causes for optimism.

 

I will continue to watch the U.S. economy, the Fed, and the financial markets. LPL Financial Research maintains its positive stock market view, and the bond market is unlikely to do much more than provide a buffer against stock market declines, especially if interest rates rise as expected. Still, I believe a diversified portfolio makes sense to mitigate unforeseen risks.

Enjoy the season.  I can tell you that despite the dangers of falling acorns, this is my favorite time of year (and mom, if you’re reading this, please know that I was wearing my helmet!). As always, if you have questions, I encourage you to contact me.

 

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, please consult me prior to investing. All performance reference is historical and is no guarantee of future. Research material has been prepared in part by LPL Financial. The economic forecasts set forth may not develop as predicted.

By Steve Davis, CERTIFIED FINANCIAL PLANNER

A few weeks ago — on my birthday no less — I received one of those phony IRS calls.  That’s right, someone tried to scam me.  I almost fell for it hook, line, and sinker too.  In hindsight, I feel a little foolish but want to share my experience since the news continues to report that scammers are targeting “seniors”.  Hey, the AARP sent me a membership card last year so I guess that means I’m a senior now?  Since I work with so many who are nearing retirement or have recently retired, I want to share my story with you. IRS Badge

I was working in my office when my wife Sandy told me that we had a message from the IRS on our home phone.  Sure enough, the caller ID listed the call as coming from the IRS in a 202 area code.  I promptly called the number.  The voice on the other end of the phone asked me to give her the phone number where I had received the message.  I did, and that’s when things got weird.

The woman identified herself as IRS Agent Julie Smith and she even gave me her “IRS agent number”.  She then asked me for the name of the attorney who would be defending me in the IRS case that had been lodged against me. “This is the first I’ve heard anything about this,” I said while trying to remain calm. In my mind, I’m thinking that this has to be a mistake!  I’m a Certified Financial Planner and not only abide by a formal code of ethics, I have a moral belief in “rendering to Caesar what is Caesar’s”.  I’m always very diligent with my tax reporting and recently hired a new accountant who I had personally interviewed and reference checked.  Still, my mind was racing.

“Agent Smith” then reported that the IRS was taking legal action against me for tax fraud.  “I’m going to read you a two or three-minute statement and you must not interrupt me while I speak.  When I’m done, you will have an opportunity to ask questions,” she said sternly.

For the next two minutes I listened with my mouth agape while “Agent Smith” told me that a warrant for my arrest would soon be issued, and that the Sheriff from Bristol County would be coming to my home to take me to jail that evening.  She said my passport was suspended, my bank and credit card accounts would soon be frozen, and that I could face up to 5-years in jail.  “When the Sheriff arrives tonight, you will then be given an opportunity to post bail.  Any questions”?  My first question was, “Is this a joke”?  Her reaction to that was a curt, “No!” She then warned me to stay at home until the Sheriff arrived and hung up.

So let me ask you, how would you tell your wife that you can’t attend your own birthday party that evening because you’re going to jail instead?  Before I ventured into that conversation I called my accountant whose office was closed for the weekend. Next I called an attorney friend of mine who also was not answering his phone.  Finally, I called the Mansfield Police.  The officer at the Mansfield Police station started to listen to my story and quickly cut me off.  “Don’t worry about that”, he said.  “My father got the same call a week ago. It’s a scam.”

I did the right thing in contacting the police to ask about the legitimacy of the arrest warrant.  This simple step allowed me to call the scammer back to let her know I was onto her bogus threats.  She quickly hung up after I told her I had reported her and her phone number to the authorities.  Had I not made that call, here’s what likely would have happened next.

Within an hour or so, the scammers would have called me back to say the Sheriff would not be arriving that night because the warrant couldn’t be issued in time.  Instead, he would come the next day, but if I wanted, I could settle the matter and avoid the arrest by paying the amount owed immediately. Reports from those who fell for the scam state that they were asked to agree to three conditions:

  1.  They had to agree to be recorded via telephone stating that they had never attempted to cheat the IRS.
  2. They had to agree to pay the full amount, or agree to make installment payments over a short period of time.
  3. Since the bank and credit card accounts were frozen (or about to be frozen), they had one hour to bring the payment to an IRS office, or could alternatively pay using a pre-paid debit card or wire transfer.

Not long after I breathed a long sigh of relief, my accountant and attorney friend both called back.  They did a good job of ribbing me for being so gullible.  And while I was a bit embarrassed about almost falling for this trap, we all agreed it was a powerful wake up call.  If you’re like me, you read about all these scams and think, “I would never fall for anything like that!”  But I almost did, and it goes to show that fear is a powerful emotion that can sometimes cause smart people to make dumb mistakes.  According to a recent CNN Money article, the Treasury Inspector General for Tax Administration, which oversees the IRS, has received 90,000 complaints about this scam so far, and about 1,100 victims have been duped out of $5 million.

Be careful out there, and be sure to contact me if you have any questions or would like to learn more about how to protect yourself from falling victim to scams like this. While this IRS phone scam is pretty prevalent right now (http://www.irs.gov/uac/Newsroom/IRS-Warns-of-Pervasive-Telephone-Scam), even more pervasive is the ongoing threat of identity theft.  Being vigilant before the fact is obviously important, but should you ever fall victim to any type of identity fraud, be sure to act quickly.  If you’re interested, I’ll be happy to send you a reference guide prepared by the Federal Trade Commission on immediate steps to take if your identity is ever stolen.

Finally, let me tell you about one of my favorite birthday presents.  Years ago my sons gave me a Bicycling magazine subscription and as a joke, they subscribed under the fictitious name of “Doofis Davis”.  For the past 10 years the magazine arrives every month addressed to Doofis!  And guess what?  The AARP sent me the following AARP card upon turning 50.  If only they knew how much I felt like a “Doofis” after almost falling for the IRS Scam that targets seniors!  Here’s my card: 306300_10150971688511239_1200679886_n

By Steve Davis, Certified Financial Planner, Mansfield MA

 

Flint Farm, Mansfield, MA

Flint Farm, Mansfield MA

I live down the street from Flint Farm in Mansfield. The place has become an institution and gathering place in our town as evidenced by the long lines which form each night for some of the very best ice cream around. For 5 generations, starting in 1896, the Flint family ran a dairy farm, but in 1986 they sold the cows and changed the focus of their operations to growing vegetables instead. As a neighbor, I’m happy about this. Not only do vegetables smell a lot better than cows, the sweet corn is to die for. One of the things I look forward to most each summer is riding my bike down to the farm to pick up a dozen ears after seeing the “Corn-is-In” sign go up, usually sometime in August. Riding past the farm today, I can tell you that the corn stocks are starting to grow tall. It won’t be long now!

So what does corn and farming have to do with a personal finance letter? You may recall that at the beginning of the year I sent my annual Market Outlook report which we entitled, Investor’s Almanac. Similar to a farming almanac, our Investor’s Almanac is a publication containing a guide to patterns, tendencies, and seasonal observations important to growing. The goal of farming is not merely to grow crops, but to sustain living things—investing shares the same goal.

Now that we’re half way through the year, I’m happy to share our Mid-Year update.

As we expected, markets in 2014 have been more dependent upon growth, and less influenced by politics and policymakers than in 2013. Growth is an essential characteristic of all living things, and in 2014, growth is vital to our outlook for the economy and markets. Our notes from the field contain these key observations and reaffirm our forecasts for the second half:

• After an extreme winter weather-induced slowdown in the first quarter, the U.S. economy began to thaw with the warmer temperatures in the spring. We continue to believe U.S. economic growth is on track to accelerate by about 1% over last year, owing to the return of business spending and the elimination of the drag from fiscal policy. As a result, the Federal Reserve (Fed) is likely to continue to taper its bond purchases and end its bond-buying program in the fall, leaving rate hikes on the calendar for some time next year.

• Stocks spent the winter months dormant, but emerged in the spring rising to new highs and producing a gain of about 6% by early June—halfway to our target range of 10-15% for the full-year of 2014.* Historically, double-digit gains are typical for years in the middle stage of the economic cycle. The current mid-cycle environment has even produced double-digit gains in 4 of the past 10 quarters. Critical to our outlook, earnings for S&P 500 Index companies are on track for 5-10% growth—with 6% achieved in the relatively weak first quarter. Confidence in the durability of growth may contribute to a slight rise in valuations and, along with earnings growth, generate a low double-digit gain for stocks in 2014.

• Opportunities in the bond market have become scarce. Yields are unattractive and gains are not likely in the second half. We find fewer sectors attractive than at the beginning of the year. We expect yields to rise in the second half of 2014 as global growth strengthens and inflation picks up from the low point in the first half.

The primary risk to our outlook, the possibility that better growth in the economy and profits do not develop, has gained even sharper focus as we move from the threshold of the new year into the midst of 2014. That risk is likely to be more significant in the second half of the year than the distractions posed by the end of the Fed’s bond-buying program and the mid-term elections.

Farmers’ almanacs have been a source of wisdom, rooted in the core values of independence and simple living, for American growers for over 200 years. In our Investor’s Almanac Field Notes, we seek to provide a trusted guide to the second half of the year filled with a wealth of wisdom for investors. We forecast a healthy investment environment in which to cultivate a growing portfolio. If you would like to read the details of our forecasts, please click on the photo link below:

LPL Mid-Year Investor's Almanac

2014 Mid-Year Outlook

IMPORTANT DISCLOSURES The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult me prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The economic forecasts set forth in this letter may not develop as predicted. Research has been prepared by LPL Financial.

By Steve Davis, Mansfield Financial Planner

After a long, hard winter – and with more snow forecast for tomorrow – I bet you are as ready for spring as I am. Enough already, right? If you can’t wait any longer, maybe listening to the beautiful spring sounds of the songbirds will tide you over.

American_Robin

 

 

Click here to listen to an American Robin

Click here to listen to a Tufted Titmouse

Click here to listen to a Purple Finch

Click here to listen to a Northern Cardinal

 

 

Happily, I saw my favorite sign of spring the other day. It wasn’t the sound or sight of a Robin on the lawn — it was a yellow street sweeper. Weird, I know, but as a long-time cyclist, nothing warms my heart like seeing all the winter sand and salt swept from the roads! Spring is a time of renewal and as this wonderful season approaches, I believe the stage is set for renewed growth in the U.S. economy. What follows is a report from the LPL Research Department highlighting the reasons for our optimism.

The US Economy is Growing

The seeds of growth in the economy have taken root underneath all the snow and ice. Several recent data points underlie our optimism. The latest edition of the Federal Reserve’s Beige Book, which is essentially a “window on main street,” provided a positive assessment of the U.S. economy and still characterized growth as “modest to moderate,” despite significant weather impacts. In fact, the word “weather” showed up 119 times in the report, far more than it appeared when SuperStorm Sandy struck in October 2012. Many Beige Book comments pointed to optimism once the weather normalizes.

Despite the slower, weather-affected start to the year, we continue to expect economic growth, as measured by real gross domestic product (GDP), to reach 3% in 2014, based upon many of the drags of 2013 fading, including U.S. tax increases and spending cuts and the European recession, and growth accelerating from additional hiring and capital spending by businesses. We expect some bounce back from the severe winter weather, propping up near-term growth as postponed economic activity takes place.

The Job Market Continues to Improve

Additionally, underlying fundamentals in the labor market suggest that the job market may be thawing. Businesses are directing more of their profits into spending on growth, with the private sector creating 162,000 net new jobs in February, despite weather-related power outages and transportation disruptions. Initial claims for unemployment insurance fell to 315,000 during the week of March 7, a level last seen on a sustained basis in mid-2007, prior to the onset of the Great Recession. Hiring expectations by small businesses have been moving higher as tracked by the National Federation of Independent Business.

Stock Market Expectations are Positive

We believe that this better growth should provide the foundation for attractive stock market returns this year. Despite recent stock market volatility, primarily driven by ongoing concerns about the Ukraine conflict and slowing growth in China, the S&P 500 is still near its all-time high. As we look towards the remainder of the year, we continue to expect a 10 – 15% gain for U.S. stocks, as measured by the S&P 500 Index (based on earnings per share for S&P 500 companies growing 5 – 10% and a rise of half a point in the price-to-earnings ratio).

Of course, it’s always important to be mindful of risks, despite the positive indicators in the economy and the markets. One of the most noteworthy right now is the conflict in Ukraine, which may continue to impact the U.S. markets after driving a more than 20% decline in the Russian stock market. Even following the secession vote in Crimea and sanctions imposed against Russia by the West, we believe it is unlikely that the conflict will drive a significant stock market decline in the U.S. Also, the slowdown in China, the world’s second largest economy, is worth watching, though we continue to discount the probability of a “hard landing.” We will be watching these geopolitical events closely as we continue to follow key economic indicators.

As we look to spring for renewed economic growth, and hopefully more potential gains for stocks, I believe the foundation is in place for you to pursue your financial goals in 2014.

 

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult me prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The economic forecasts set forth in this letter may not develop as predicted.

Research has been prepared by LPL Financial.

Steve Davis, CERTIFIED FINANCIAL PLANNER™, Mansfield, MA

 

It’s not often that we can gain investment insights from an 18-year-old wunderkind.  If you’re like me, you probably marveled at the performance of American Mikaela Shiffrin at the Sochi Winter Olympics.  It was there that she became the youngest slalom champion in Olympic history.

What does Shiffrin’s success have to do with investment insights?  It’s her Gold Medal Investment Lessons from an Olympianapproach to the sport.  Unlike many of her peers, Shiffrin’s training focused more on technique and practice — the discipline of ski racing — rather than on competing.  While other kids were racing, Shiffrin was taking training runs on her home mountain, “fine-tuning an efficient, no-nonsense skiing style with dogged repetition and a reliance on fundamentals”.  So when Shiffrin lost footing and became airborne on the course, she was able to regain her position quickly because she had practiced her recovery many times before. Throughout all of her training, she relied on fundamentals and took the long-term view.

It can be difficult to take the long-term view in investing, particularly when we are challenged by bumps on the slope.

Stocks: 
February, for example, provided investors with mixed signals. Colder and snowier-than-usual weather adversely affected many economic reports and several high-profile companies also cited the negative impact of weather on future earnings.  I’d suggest that these events are merely bumps in the slope.

Skiers are taught to look through the turn at where they want to go instead of focusing on the obstacle they are passing at the moment.  Similarly, investors need to look at the bigger picture rather than at short term events.  Doing so helps us regain our sense of balance.

U.S. stock prices appear to be looking past weather disruptions and have rebounded back to near record highs following a soft start to the year. We see underlying strength in most economic indicators including a continued recovery in the housing market, which is supported by easier mortgage availability, limited home inventory, and near-record housing affordability.  We continue to expect a 10-15% gain for U.S. stocks in 2014, as measured by the S&P 500 Index.

Bonds: 
The bond market also hit some bumps, as Puerto Rico was downgraded during the month by all three major credit rating agencies, but municipal bond market investors have been thinking longer term and appeared to take the downgrades in stride by noting Puerto Rico is not reflective of the overall market.  Just like stock prices, last week the broader bond market also appeared to ignore another batch of weather-impacted data and rebounded nicely.  Again, the focus seems to be on what’s ahead.  Bond investors see a Federal Reserve that remains on schedule to reduce bond purchases and eventually raise interest rates in late 2015.

Policy: 
Policymakers in Washington, D.C. appear to be taking the longer view as well by focusing less on partisan differences and more on overall economic health. Congress agreed to a “clean” debt ceiling increase without links to the Affordable Care Act or the Keystone XL pipeline. This “clean” bill acted as a positive for the stock market, which may have rallied on the perception that a more business-friendly legislative environment may be developing.

Lesson:
As we look back at the concerns we’ve had during the past month, we realize — just as Mikaela Shiffrin did on her gold medal run — that we’ve been here before. We know we can trust the discipline and practice of sound investing and stay focused on our long-term goals. Even those of us who are industry veterans can take a lesson from the young champion.

IMPORTANT DISCLOSURES
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult me prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The expectation of a 10-15% gain for U.S. stocks in 2014, as measured by the S&P 500 Index is derived from earnings per share for S&P 500 companies growing 5 – 10% and a rise of half a point in the price-to-earnings [PE] ratio. The economic forecasts set forth in this letter may not develop as predicted. Research has been prepared by LPL Financial.

 

This week you will begin to receive the year-end financial statements from your investment and retirement savings accounts. This brief recap should give you a helpful backdrop as you review the statements. As always, please call me if you would like to chat about the performance of your accounts, the markets as a whole, or your specific financial plans.

Stocks
The S&P 500 Index was up a stellar 32.4% in 2013 — the best calendar year performance since 1997. The biggest driver of stock market returns came from investor sentiment and the improving economy.

LPL ResearchAs 2014 begins, LPL Financial Research believes the rally can continue, although gains this year may likely come with higher volatility than we experienced in 2013. Our 2014 outlook calls for better economic growth which we anticipate will lead to low double-digit stock market returns driven by earnings per share for S&P 500 companies growing 5–10% and a rise in the PE ratio of about half a point from 16 to 16.5. The primary risk to our outlook is that better growth in the economy and profits do not develop.

Bonds
Rising interest rates put downward pressure on bonds and with the 10-year Treasury yield rising 1.3% in 2013, the broad bond market finished the year down 2.0%. This rare annual loss for bonds was the second worst in the 40-year history of the Barclays Aggregate Bond Index, after the 2.9% loss in 1994.

Going forward, LPL Research expects bond market total returns to likely be flat as yields rise with the 10-year Treasury yield ending the year at 3.25 – 3.75%. Our view of yields rising beyond what the futures market has priced in warns of the risk in longer-maturity bonds now that conditions have turned for the bond market. High-yield bonds and bank loans are potentially attractive bond sectors for 2014 as they have historically proven resilient and often produced gains during periods of rising interest rates.

With that as background, remember that year’s end is neither an end nor a beginning but a going on. As you review your quarterly statements, evaluate how well you’re “going on” toward your financial goals. Please rely on me if you have questions or would like help.

Happy New Year, and best wishes for health, happiness and peace to you and your family.

 

 

 

IMPORTANT DISCLOSURES
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. To determine which investments may be appropriate for you, consult me prior to investing. All performance referenced is historical and is no guarantee of future results.
The Barclays Capital U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.
Past performance is no guarantee of future results.
The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time.
The Dow Jones-UBS Commodity Index (DJ-UBSCI) is a broadly diversified index that allows investors to track commodity futures through a single, simple measure.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
International and emerging market investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices. The bigger the duration number, the greater the interest-rate risk or reward for bond prices.
Stock investing involves risk, including the risk of loss.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values and yields will decline as interest rates rise and bonds are subject to availability and change in price.
The P/E ratio (price to earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower P/E ratio.
Research has been prepared by LPL Financial.

almanac_with_borderDo you remember The Old Farmers’ Almanac? One of the things I most enjoyed about it was its comprehensive listing of sunset times. Based on this information, I’m happy to tell you that today –and not the December 21st solstice — is the shortest day of the year in Boston. The sun set this afternoon at 4:13pm. And you know what that means. Starting tomorrow, the days will be getting longer! How’s that for good news?

For generations, farming almanacs have offered long-range forecasts and have been a source of wisdom for American growers. Borrowing on this theme, LPL Financial Research has just published its 2014 Market Guide which they have entitled, Outlook 2014: The Investors’ Almanac. For more than 20 years, I have partnered with LPL Financial due in large part to its independent research which provides me with timely perspectives on the ever-changing economy and markets. It is my hope that our almanac .

Key components of LPL Financial Research’s 2014 outlook are:

In 2014, portfolios are likely to enjoy more independence from policymakers than in 2013, when the markets and media seemed to obsess over policymakers’ actions both here and abroad. The economy and markets becoming more independent of policymakers while growth accelerates is likely to bolster investor confidence in the reliability and sustainability of the investing environment.

U.S. economic growth may accelerate to about 3% in 2014 after three years of steady, but sluggish, 2% growth. Our above-consensus annual forecast is based upon many of the drags of 2013 fading, including U.S. tax increases and spending cuts and the European recession, and growth accelerating from additional hiring and capital spending by businesses. After all, in the past three years, weakness in government spending subtracted about 0.5% each year from gross domestic product (GDP) growth. Just adding that 0.5% back to GDP in 2014 would, by itself, make a material difference in achieving 3% growth in 2014.

Bond market total returns could likely be flat as yields rise with the 10-year Treasury yield ending the year at 3.25-3.75%. Our view for yields to rise beyond what the futures market has priced in warns of the risk in longer maturity bonds and our preference for shorter-term and credit-oriented sectors of the bond market. High-yield bonds and bank loans are two sectors that have historically proven resilient and often produced gains during periods of rising interest rates. In 2013, both sectors were among the leaders of bond sector performance during a year of higher interest rates. Historically, longer-term bond yields have tended to track the change in GDP growth when unleashed from Federal Reserve actions. Our expectation for a 1% acceleration in U.S. GDP over the pace of 2013 suggests a similar move for the bond market.

Stock market total returns could likely be in the low double digits (10-15%). This gain is derived from earnings per share for S&P 500 companies growing 5-10% and a rise in the price-to-earnings ratio (PE) of about half a point from 16 to 16.5. The PE gain is due to increased confidence in improved growth allowing the ratio to slowly move toward the higher levels that marked the end of every bull market since WWII. As 2014 gets underway, the one-, three-, and five-year trailing annualized returns may all be in the double digits for the first time this business cycle. Our analysis of history shows that it is the five-year return that individual investors tend to chase, based on net inflows to U.S. stock funds. This may prompt many investors to reconsider the role of stocks in their portfolios, especially as interest rates rise and bond performance lags.

In 2014, there may be more all-time highs seen in the stock market and higher yields in the bond market than we have seen in years as economic growth accelerates. The primary risk to our outlook is that better growth in the economy and profits does not develop. That risk is likely to be much more significant than the distractions posed by Fed tapering and mid-term elections. We believe it will be safe in 2014 to again tune out much of the antics in Washington, D.C. as the mid-term elections turn up the volume, but not the impact. In the near term, Washington may be washed up when it comes to driving the markets.

 

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. All indexes mentioned are unmanaged and cannot be invested into directly.

The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes. The purchase of certain securities may be required to effect some of the strategies.

Stock investing involves risk including loss of principal.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values and yields will decline as interest rates rise and bonds are subject to availability and change in price.

High yield are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

Bank loans investing involve risk including credit, interest rate, market, default and liquidity risk

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This research material has been prepared by LPL Financial.