New Years Greetings

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January 2, 2019

Dear Friends,

Warm greetings and a Happy New Year. I trust that your time over the holidays has been both enjoyable and refreshing.

 

So here we are in the first days of 2019 when a review of the past year allows for a more objective perspective on events. The initial tendency to seek for simple explanations to understand significant events is usually, upon further pondering, over-ruled by the recognition that more likely no one event was really responsible, rather it was a confluence of events. How wonderful is that? Our lives are not simply understood. We have complicated lives that require considered thought for a full appreciation for who we are and why we act.

 

Recent volatility in the financial markets has given pause to many investors as they have wondered if their asset investment plan is at risk. Too often and too quickly, market pundits seek to explain this volatility in ten words or less. But it is not so simple and our response should not be so simple either. While it is good to pause and seek to understand what is occurring, it is also time to place all that we see and experience into the context of our overall financial plan and asset management plan.

 

The past decade has been relatively quiet in terms of downward volatility. We have had plenty of upward volatility, but this has not been spoken of too often. The “market” is in a constant flow adjusting to many millions of decisions by investors on an hourly/daily basis. In the short term there will be ‘pull-backs’, this is normal. That we have not experienced too many of these ‘pull-backs’ over the past decade is more the abnormal. 

 

One thing is for sure: all times are times of transition. One current transition is the Federal Reserve’s decision to move away from ten years of low (zero) interest rates and very low inflation. A primary reason for this move is that the “real” economy is by most measures doing very well and likely to continue to do well into the near future. So why is the stock market apparently reacting negatively to this news? Well, for one, it is not the only transition taking place at present. Around the world there are any number of activities occurring, from the US Government shutdown to US Government debt to Brexit to the new USA trade agreement with Mexico and Canada to the strong US dollar to trade talks with China, to mention a few. Uncertainty with how and when these transitions will settle into their next phase can influence how investors respond in the short term.

 

Our portfolios are globally diversified in quality funds of quality companies operating in economies that in large measure are still indicating positive economic growth providing goods and services to support the needs of a world population that is slowly and steadily being lifted to higher standards of living. This economic activity is rhythmic, not linear. As such, we will experience periods of growth interspersed by periods of contraction. Market prices for our investments will over the long run mirror this expansion and contraction. Understanding the nature of the financial markets is really important - remember that the direction of the stock market is biased in the upward direction over 70% of the time and that for us to participate in that upward bias it is crucial that we stay invested during what some may imagine are days when the sky is falling.

 

It is suggested by tradition that we make some New Year’s resolutions. Resolutions fail for many reasons, but I believe that they fail primarily because we have not articulated clearly enough to ourselves the reason why we make the resolve in the first place. So it is with our financial plan, including the active management of our financial assets. The ‘why’ we build up a financial plan is the essential ingredient. Knowing this reason(s), this intention, is the key to success. A financial plan is in the service of this reason(s), this intention to live the life we want to live. Our outlook is intended to support both our short and long term goals over the course of our expected lifespan at a minimum. It can also include looking beyond that as we develop our estate plans for our spouse, our children, our favorite charities etc. Managing our financial assets requires this same long term perspective. Each individual and family portfolio is designed for this long-term outlook.

 

On the one hand this sounds quite simple, however, as we know, our lives are complex and as such our approach to life must take this complexity into account as we plan for the future. So, as we look into the coming year I suggest the following: stay true to your plan.

 

Thank you for inviting me to provide you with long term financial planning including management of your portfolio.  I look forward to continuing on this journey with you into 2019 and beyond.

 

With all my best wishes to you for 2019.

Bernard

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