Weekly Market RecapThis Thursday, the UK voted to leave the EU. This is a nonbinding vote, but the UK is expected to leave the EU in a process that is expected to take a minimum of two years. The British Prime Minister also resigned, given he had supported remaining in the EU. He plans to aid in the transition until his replacement is appointed, which is expected to be by October. The British Prime Minister noted, "There will be no initial change in the way our people can travel, in the way our goods can move, or the way our services can be sold. We must now prepare for a negotiation with the European Union." Capital markets had been rising all week, expecting a "stay" vote. The surprise result has created short-term market volatility as investors evaluate what the Brexit will actually mean to businesses and Europe in general. Elsewhere in the US, housing sales data continued to show robust growth, with the volume of existing home sales rising 1.8% in May, though recent house price increases were softer than anticipated. Janet Yellen, Chair of the Federal Reserve (Fed), spoke publicly this week, confirming the Fed's commitment to a gradual trajectory of interest rate increases, dependent on future economic data. As we approach the midway point for the year, now is a sensible time to check in on your retirement plan contributions at work, such as for a 401(k), 403(b) or 457 plan. It can be jarring to adjust your contribution rates late in the year to hit your savings goal. So if you know you want to increase, or even start, your retirement plan contributions this year, then now may be a good time to do so. This way you spread the contributions across a number of your remaining 2016 pay periods. As a reminder, generally we are supportive of retirement savings plans such as 401(k)s given their potential tax efficiency and the potential for employer matching benefits, depending on your employer. Disclaimer: Your Portfolio Summary
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Saturday, June 25, 2016
Your Weekly Update - As the UK votes to leave the EU
Sunday, June 19, 2016
Your Weekly Update - Fed Holds Rates Steady
Weekly Market RecapThis week the Federal Reserve (Fed) held its target range for federal funds constant. Although the Fed noted US economic activity "appears to have picked up", jobs growth appears to have "diminished" and inflation remains below the Fed's target. The Fed has so far raised rates slowly, relative to history, with the last rate increase in December of last year. This slow pace of rate increases in the US has been one factor that has put diversified bond funds among the best performing asset classes so far this year. This shows why it's helpful to have multiple asset classes your portfolio. Stocks don't necessarily always deliver the highest returns, particularly over shorter time periods. Other economic news was broadly positive this week, both retail spending in the US and economic activity in the EU were encouraging. There is uncertainty around the UK's referendum on EU membership (the so-called Brexit vote) which is scheduled for next week. Remember that a FutureAdvisor Premium portfolio has diversified exposure to over 40 different countries such as America, India and Japan. Brexit is one of many situations in which we believe current information is "priced in" to the market. Thus, taking action based on any prediction is more likely to increase the potential performance drags associated with trading costs rather than improve performance in our view. Separately, there has been some discussion about different standards for financial advice in the news this week, as fans of John Oliver may be aware. At FutureAdvisor we are proud to be held to the fiduciary standard, and therefore must avoid conflicts of interest by putting clients' interests first, which we are very happy to do. Not all financial advisors are currently held to this standard, (though rule changes are proposed). Notes: Disclaimer: Your Portfolio Summary
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Saturday, June 11, 2016
Your Weekly Update - Oil Tops $50
Weekly Market RecapThis week saw oil rise above $50 for the first time since last July after making lows in the mid $20s earlier this year. We believe that the volatility in the price of oil over a short period of time serves as a helpful reminder on the importance of having a longer term view. In February, a Barron's cover story proclaimed "Here comes $20 oil" and in the same month the Economist asked "Who's afraid of cheap oil?". Sometimes these moments of relative pessimism, when it can be most tempting to change strategy, can signal market lows. In fact, since February, oil rallied over 60% as the outlook for the oil market improved. The recent volatility in oil also emphasizes the value of diversification to portfolios. As one would expect, energy stocks have generally been hurt by falling oil and helped by its subsequent rebound. However, other companies, from industrial users of energy to airlines, can benefit from oil's weakness as their costs may fall. This is one way that having a balance of companies in your portfolio, by owning broad and diversified assets, has the potential to smooth returns. Disclaimer: Your Portfolio Summary
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FutureAdvisor | Market movements have created an opportunity to rebalance
As part of our 24/7 monitoring of your investments and the markets, we want to alert you that it may be a good time to rebalance your portfolio based on recent market movements. Based on the market fluctuations since our last rebalance email on April 08, 2016, we are recommending that you take action in 1 of your accounts. Sign in for the most up-to-date rebalancing recommendations.  If you have any questions or want to talk to an advisor just reply to this email. Thanks again for using FutureAdvisor. | ||
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Sunday, June 5, 2016
Your Weekly Update - OECD forecasts 3% growth for 2016
Weekly Market RecapThe Organization for Economic Cooperation and Development (OECD) published their latest forecasts for the global economy this week. The OECD expects global growth in 2016 to be 3%; the same level as 2015. They view the global economy as "stuck in a low growth trap". The OECD called for coordinated actions beyond low interest rates, such as structural reforms and public investment to boost growth. They also warned of the negative consequences for growth should the UK vote to leave the EU in a referendum being held later this month. In other economic news, the US saw strong consumer spending growth in April, the highest rate of monthly increase since August 2009. However, the US economy added fewer jobs in May than many expected. As you consider your savings strategy, one of the most valuable things to have on your side as an investor is what Albert Einstein called "the eighth wonder of the world" - the impact of compounding returns over time. Compounding is when the earnings on your savings are reinvested, giving you the potential to earn more money over time. As you save, you earn money on your original savings, but, importantly, also any amount that your savings has grown by beyond your initial investment. As time progresses, the impact of compounding with a positive rate of return can become powerful. Saving early in one's lifetime and saving over longer periods can improve the impact of compounding. For example, if you owned a risk-free bond that earned a 2% rate of return over 10 years it creates a 22% total gain over the decade, but over 40 years that same 2% annual rate of return becomes a total 120% gain from the start to the end of the 40 years. Adding another 30 years of saving creates a final nest egg over 5 times greater. This is one of the reasons why we believe starting to save early for big life goals, such as your retirement, is an intelligent strategy. Notes: Disclaimer: Your Portfolio Summary
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