4th Quarter 2013
December 31, 2013

Happy New Year!

It is hard to believe 2014 is already here and 2013 is in the record books. This past year has been prosperous and productive in many ways. Thanks to you, we have been able to make a smooth transition to Waterway and continue to grow as a company.

Equity markets participated in this growth with a gain of over 20%, but the bond market struggled to hold any gains as interest rates finally started their expected rise. Although we are glad to see solid returns in stocks, we remain cautious. Economic growth over the last 2 years has been sluggish, yet the stock market has given us above average returns. The Federal Reserve’s announcement to reduce the amount of bond purchases (QE) from $85 billion to $75 billion per month is a welcome sign that they are seeing some strength in the economy and no longer need to make that level of bond purchases. We have been a proponent since mid-summer that the “taper” in purchases needed to happen. This will provide us with a clearer picture of the economy.

Our outlook for the future is optimistic, yet cautious. The greatest asset, in our opinion, has been the development of domestic natural resources (oil, gas, etc.). This has initiated a rebirth in US manufacturing. Texas is positioned to benefit for years to come and has been a leader in developing a pro-business environment. In a recent Forbes’ article, 7 of the top 10 cities were in Texas. Low labor cost per unit, coupled with affordable housing and reasonable taxes, all contribute to the optimism for this part of the country. Continued challenges include: the federal deficit, healthcare, unemployment and higher tax rates which went into effect January of 2013. This will take time to play out, but will be a drag on the economic growth over the next 3-5 years.

2014 will continue to be a time when balance in your portfolio is paramount to protecting gains, but also positioning for the growth that is on the horizon. The economy has managed through many difficult times before and we will persevere once again. At some point in the future, we will see additional volatility in the markets which will present us with opportunities to add to discounted assets rather than reduce positions. We are fully prepared to take advantage if, and when they come.

We are excited to announce the opening of Waterway Wealth Management in Albuquerque, New Mexico, this past December. The Albuquerque team is composed of David Michalk – Financial Advisor, Jennifer Lioce – Office Manager and Kayla Creamer – Client Coordinator. We are proud to have them as part of our family at Waterway Wealth Management.

We look forward to seeing you in your spring review meetings.

Dan Michalk, CFP®, ChFC