More often than not, we look back at the year that has just ended and we tend to focus on what happened “financially” in the past 12 months. Is my net worth more or less than last year? If you are a business owner, did my company grow or decline? If you are an employee, chances are your performance reviews are also based upon how well your team or business unit performed throughout the year. While all of this is relevant, is this what matters most?
So many great things happened in 2018. Wyatt, Lissa and I celebrated the following client events last year along with many more.
Three 50 Year Anniversaries
Countless travels throughout the world
Two cancer survivors now cancer free
One client engagement
13 Grandchildren were born
Eight Milestone Birthdays (40,50,60,70,80)
Four clients relocated
One business was sold
Three large pieces of real estate sold
Four Employment changes
14 new clients added to the KFM Family
62 clients are now one year closer to retirement
From an economic perspective, there was tremendous positive news throughout the year.
Tax cuts took full effect
Earnings were better than expected
Interest rates, while volatile, remained low
Unemployment hit a 50 year low
Manufacturing levels remain high
Consumer confidence continues to be solid
Consumer spending remains strong
Records were set in retail sales in the fourth quarter
Inflation is relatively benign for the year
Gross Domestic Product grew faster than expected
Does my year end statement reflect all of the economic positivity? From our perspective, yes and no. But MOST IMPORTANTLY, your game plan that you put together with Kemp Financial Management is still intact. So as we celebrate 2019 and all of the great things that will occur with our clients, please know that 2018 did not derail your personal game plan in any way.
If we were in a perfect world, all asset classes would go up each and every year and there would be no reason to question your game plan. The problem is we are not in a perfect world. Having been a trusted financial advisor for 31 years, we know firsthand all asset classes go up and down at different periods of time, in which we have no control. What we do know is that over extended periods of time, the capital markets, along with a prudent long-term Legacy Action Plan, will guide our clients to meeting their desires over time.
While working together at KFM, we make a point of acknowledging that we will go through periods of good times and challenging times. This is both at a financial and personal level. What we want you, our client, to stay focused on is pursuing what is most important in your life. Allow us to take care of the details while you pursue what matters most. To schedule your next update meeting, contact Wyatt at 714-257-0800 or click here: Schedule My Update Meeting.
We look forward to a lot of positive changes in 2019. Technology continues to be a significant driver in our industry every year. Wyatt, Lissa and I are excited about enhancing our communication efforts through our website and through a mobile application that we plan to launch in the third quarter of 2019. While we discourage reviewing your accounts on a daily basis, we will have the ability to have direct contact with one another through your mobile device. You will be able to receive updates and greater access to KFM as well. We will share more information with you during your update meeting in the first and second quarter. If you have not set up your update meeting yet for the New Year, please feel free to do so now by contacting Wyatt at 714-257-0800 or clicking here: Schedule My Update Meeting.
Required Minimum Distributions for 2019 will be lower than last year. Those of you that exceed the required minimum distribution for income purposes will not be affected by this reduction. But for those of you that do not “spend” your minimum distribution, this will be helpful in reducing your taxable income for 2019. Your minimum distributions have been recalculated based upon year end values along with your new divisor. You can find your 2019 required minimum distribution on your statement from your custodian. For additional assistance or questions, please contact Lissa.
Year End Trading 2018. As normal, we began reviewing taxable accounts in October 2018. Based upon the fluctuation of the capital markets in the fourth quarter, where appropriate and able, trades were made to assist in the offset capital gain distributions for taxable accounts in 2018. Not all taxable accounts were able to take advantage of the fluctuation. For those that did, most of the trades were reversed at the end of the year. For the remainder, they will be reviewed in 2019 and reversed as needed. All of the changes that were made were consistent with your long-term plan and the trades maintained your current allocation as indicated in your personal Investment Policy Statement.
Trading is now on Autopilot. In the 31 years of practice, I have never witnessed a shortened trading session like Christmas Eve, 2018. Since it now happened once, it would not be prudent for me to say it will never happen again.
Generally speaking, shortened sessions prior or after a major holiday have been uneventful. If the market was not even open, it wouldn’t matter. But the policy of the market is never to be closed more than 24 hours for major Holidays.
Just using Christmas Eve as our example, it would be impossible to discount the impact of “autopilot” on modern day trading. According to data from Tabb Group, computer models and trading algorithms account for 28.7% of the trading. This has more than doubled since 2013. According to the Wall Street Journal, when computers start buying, everyone buys; when they sell, everyone sells (December 26, 2018).
Volatility is something that is only going to increase. This means, calmer behavior must be necessary. We have always stated: Performance equals market returns plus investor behavior. Investor behavior, without question, is going to play an increased role going forward. Since computerized trading has doubled since 2013, one should expect for it to double again over the course of the next 5 years, which will further add to the market volatility going forward.
At the end of the day, you have built a long-term game plan with the assistance of Kemp Financial Management. We have been through the good, the bad, the easy and the difficult. Its times like this that you may question the wisdom of your long-term plan. You may even be saying “It’s different this time”. It’s not. Stay focused on what matters most. That will guide you through to the finish.
Please feel free to schedule your next update meeting now by contacting Wyatt at 714-257-0800 or clicking here: Schedule My Update Meeting.
We can’t wait to see you in the New Year! We look forward to hearing about all that you have to celebrate in the New Year! Wishing you continued great health, happiness and success in the New Year and beyond.
For more extended Capital Market outlook, click here