December 29, 2016

Happy Holidays From all of us at GPS and the entire building committed to helping you with all of your financial needs!  Cheers to a great 2017!

 

The Markets

 

Missed it by that much…

 

The Dow Jones Industrial Average (DJIA) got within 13 points of 20,000 last Tuesday. It finished the week about 90 points below the vaunted milestone. “The Dow has gained nearly 10 percent since the end of October, more than double its 4.1 percent rise during the first nine months of the year, spurred in part by Donald J. Trump’s victory in the 2016 U.S. presidential election,” Barron’s reported.

 

The major U.S. indices have been strong performers since early November. Many people are wondering whether they will continue to do well in 2017. The Economist suggested 2017 could hold a surprise that will negatively affect investors’ expectations:

 

“By definition, a surprise is something the consensus does not expect…investors are expecting above-trend economic growth, higher inflation, and stronger profits…So it is not too difficult to see how the first surprise might play out. Expectations for the effectiveness of Mr. Trump’s fiscal policies are extraordinarily high. But it takes time for such policies to be implemented, and they may be diluted by Congress along the way (especially on public spending). Indeed, it may well be that demography and sluggish productivity make it very hard to push economic growth up to the 3-4 percent hoped for by the new administration.”

 

On the other hand, profitability has improved. American companies have seen earnings rebound, and many companies are positioned to benefit from the corporate tax cuts promised by the new administration. However, this good news may already be reflected in current share prices. Robert Shiller’s cyclically adjusted price-earnings (CAPE) ratio, a measure of valuation based on average inflation-adjusted earnings of companies in the Standard & Poor’s 500 index from the previous 10 years, was at 27.99 on December 23. That’s almost 70 percent above its long-term average of 16.05 and indicates markets may be overvalued.

 

Regardless of potential negative surprises and current market valuation, many analysts expect a positive performance from U.S. stock markets next year. MarketWatch reported, “Most house projections from the big investment banks and brokers converge around the S&P closing the year at 2350 – a scant 5 percent above current levels. Only one strategist…dares to suggest that 2017's gains could be as much as 20 percent.”  Several analysts predict the opposite as where valuations are historically high and the average “bear” analyst suggests declines of double-digits might be in store.  Historically speaking, analyst averages are typically wrong.  2017 could be another volatile year…

 

GPS Strategies remain the same.  Other that rebalancing many accounts to the “Trump Trade” – financial stocks, infrastructure stocks, rising rate friendly fixed income among others we have held steady the past week.  We still feel alternative investments should be a core part of the portfolio and we have had success in global macro, life settlements and “go anywhere” managers.  Next week we will release our outlook for 2017.

 

We have also been “tax-harvesting” for taxable accounts which can be an added benefit to a portfolio. Tax harvesting is a little used strategy (unfortunately) though GPS does it every year.  By harvesting losses we can provide you with immediate and future tax benefits.  Below is an example:

 

  1. Using a generic portfolio as an example let’s say the taxable account is worth $500,000. Let’s say that the positions in the account are up 10% on average with half up 15% ($75,000) and half are down 5% (-25,000).  By tax-harvesting or selling the down securities will save approximately $8,750 in taxes based on a Federal and State combined tax rate of 35%.  For those in higher bracket the savings could be over $10,000.  In this example this adds 1.75% to over 2% of account performance
  2. While this doesn’t show up on a performance account it’s real money in your pocket
  3. You get the savings by using the harvested losses to offset future sales with gains and/or a $3,000 annual tax deduction. These losses carry forward to whenever you need them
    1. Note: Please consult your tax advisor for your current taxable income rate

 

 

america’s most wanted… Don’t worry. Robots have not yet replaced human workers. In fact, according to The World In 2017 (published by The Economist):

 

“…automation seems to be pushing people from routine jobs, such as factory work, into non-routine ones, particularly those that require cognitive and social skills. Technological progress will cause a shift in the nature of jobs available and the skills they require. It is impossible to know for sure what these new jobs will be – the Luddites who campaigned against the mechanization of weaving in the early 19th century could not have imagined that new fields such as railways, telegraphy, and electrification were coming. But two tools can help us take a stab at identifying the jobs of the near future: hard-nosed statistics and predictive intuition.”

 

So, what do statistics tell us about the new jobs young people and career changers should be preparing to do? The U.S. Bureau of Labor Statistics looked at current trends and projected the fastest growing jobs from 2014 to 2024 would be:

 

  1. Wind turbine service technician (up 108 percent)
  2. Occupational therapy assistants (up 43 percent)
  3. Physical therapy assistants (up 41 percent)
  4. Home health aides (up 38 percent)
  5. Commercial drivers (up 37 percent)
  6. Nurse practitioners (up 35 percent)
  7. Physical therapists (up 34 percent)
  8. Statisticians (up 34 percent)
  9. Ambulance drivers (up 33 percent)
  10. Physician assistants (up 30 percent)

 

Predictive intuition suggested quite a different set of careers. The World In 2017 suggested there could be demand for drone technicians and support staff as the use of autonomous vehicles increases. There may also be demand for bot wranglers, such as ‘chatbot’ specialists, who help bots provide customer service through speech and text. Indoor farming may prove to be a growth industry as urban populations increase. Other career possibilities included virtual fashion designers, robo-psychologists, and synthetic tissue engineers. Clearly, there is a world of opportunity.

 

Weekly Focus – Think About It

 

“So, I'm going to challenge all of you. I want you to true your wheels: be honest about the praise that you need to hear. What do you need to hear? Go home to your wife – go ask her, what does she need? Go home to your husband – what does he need? Go home and ask those questions, and then help the people around you.”

--Dr. Laura Trice, Therapist and life coach

 

Best regards,

 

The Jim Goodland Team at GPS

 

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

Sources:

http://www.barrons.com/articles/dow-gains-for-seventh-week-but-misses-20-000-1482555878?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-27-16_Barrons-Dow_Gains_for_Seventh_Week_but_Misses_20000-Footnote_1.pdf)

http://www.economist.com/news/finance-and-economics/21712144-how-markets-may-take-investors-surprise-what-not-expect-2017 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-27-16_TheEconomist-What_Not_to_Expect_in_2017-Footnote_2.pdf)

http://www.multpl.com/shiller-pe/ (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-27-16_Multpl-Shiller_PE_Ratio-Dow_to_Drop_80_Percent_in_2016-Footnote_3.pdf)

http://www.marketwatch.com/story/will-us-stock-markets-soar-20-in-2017-2016-12-23

The World In 2017 by The Economist (go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-27-16_TheEconomist-The_World_in_2017-Footnote_5.pdf)

https://www.bls.gov/emp/ep_table_103.htm

http://www.ted.com/talks/laura_trice_suggests_we_all_say_thank_you/transcript?language=en

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Spire Wealth Management, LLC), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Spire Wealth Management, LLC.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Spire Wealth Management, LLC is neither a law firm nor a certified public accounting firm and no portion of the website content should be construed as legal or accounting advice.  A copy of the Spire Wealth Management, LLC’s current written disclosure statement discussing our advisory services and fees is available upon request.

 

.