1st Quarter 2015
March 31. 2015
The first quarter of 2015 brought more volatility back to the markets but overall most asset classes rose slightly during the quarter. The biggest news centered on the strong dollar and the decline in oil prices. The US economy continued in slow growth mode and with other countries providing monetary easing, the strength in the dollar will likely continue. The Federal Reserve has put the markets on notice that a rate increase is likely this summer or possibly in the fall. We believe the end of QE (last fall) along with slow adjustments upward in interest rates are inevitable in order to normalize the credit conditions in the US. The current policy of zero percent interest rates over the last 7 years helped borrowers initially, but as time has progressed it has little to no impact on the current economy and actually punishes savers who keep money in short instruments like money markets and CD’s.
The overall stock market as measured by the S&P 500 was up .4% during the quarter while the bond market saw rates drop to a low of 1.6% on the 10 year Treasury bond in mid-February, but ended near 1.9%. We fully expect rates to push higher as we get closer to the Federal Reserve meetings in the summer. Foreign stocks were the brightest area of the portfolio (up more than 6.5% YTD) while the energy sector recovered to post a gain (up 1.9% YTD). We continue to expect more volatility this year and have positioned the portfolios to take advantage of any downside moves. Valuations for large companies in the US have crept higher into a range that is expensive but not out of the ordinary. We believe a cautious approach will bode well in the event of a pullback but we will also look to add to stocks when it does happen.
During your spring reviews, you will notice a focus on our beneficiary project. This review of all account registrations and beneficiary designations will insure we are keeping all of your information up to date at Fidelity and other institutions. Adam has taken charge of this project and will continue to manage it through completion. If you have any changes or questions please free to contact him. The other area we continue to emphasize for long term tax planning is the use of Roth Contributions and Conversions. This can be a valuable technique for reducing future tax liability on IRA accounts. We will be prepared to discuss it in more detail during your next review meeting.
We also would like to introduce our newest team member, Annie Hames. She is a graduate of Houston Baptist University with a B.B.A. double major in Management and Marketing. Annie has spent the last 12 years in the banking industry and is starting on her CFP® Certification this spring. We hope you will welcome her the next time you are in the office.
We wish you and your family a great spring and look forward to seeing you at your next review meeting.
Dan Michalk CFP®, ChFC