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  • News
    • 2021 News Articles >
      • What is it about September?
      • Will Tax Law Changes Increase Your Taxes?
      • Tax Watch: SECURE Act 2.0?
      • The unstoppable bull market?
      • Stocks Cruise at a High Altitude
      • Tax law changes on the horizon – 5 things to consider
      • Not Your Fathers Economic Recovery
      • Are HSAs the New IRAs?
      • REVENGE OF THE NERDS - Internet forums vs. the professionals
      • Protect Your Financial Information
      • 2021 January Market update - A rollercoaster year ends on a high note
      • Avoiding 7 Retirement Traps
    • 2020 News Articles >
      • December Client Letter - Cruising at 30,000 Feet
      • 9 Tax Facts & Tips to Save You Money
      • 9 Smart Planning Moves to Consider
      • November Client Letter - Election 2020
      • 7 Financial Planning Steps for Year End 2020
      • 6 Tips on Filing the FAFSA
      • Circling Back to the SECURE Act!
      • A September Pothole
      • 6 Steps That Put You on the Path to a Successful Retirement
      • Consumer Scams Part 2
      • September 2020 Client Letter
      • Consumer Scams
      • May Client Letter-- Worst-Ever Economy Yet Stocks Show Best Monthly Gain Since '87
      • Why Waiting For A Market Rebound Could Cost You
      • How The Greatest Generation Approached September 11th
      • Laid Off And Near Retirement - What Now?
      • The SECURE Act
      • Market update: When favorable fundamentals collide with uncertainty
    • News - Archives >
      • 2015 - To be happy, be grateful. - It's science!!
      • 2015 - Market Volatility - So Now What?
      • 2015 - Retirement planning: Start early or start late – just start
      • 2015 - Financial Planning Checklist
      • 2014 In Review - A bullish mood and risks that dot the landscape.
      • 2015 - A sneak peek at 2015 – What to keep an eye on
      • 2015 - Getting The Most Out of Financial Aid for College
      • 2014 - Cheaper by the Dozen: 12 smart year end planning moves
      • 2014 - How safe is your personal information?
      • 2014 - Hey, what’s your number?
      • 2014 - What did we do before GPS?
      • 2014 - Changing Jobs Checklist
      • 2013 - US Government Shutdown - What it means
      • 2013 - Investing in College
      • 2012 - Getting (back) on track - The best part of my job…
      • 2011 - The Henny Penny School of Investment Wisdom
      • 2011 - 8 Ways to Help Couples Overcome Money Conflicts
      • 2011 - Intelligent Computer Shopping
      • 2011 - 7 things you and your student should discuss before they head off to college
      • 2011 - 7 mistakes to avoid when exiting your business
      • 2011 - Why you need an Estate Plan even if you don’t live in a mansion
      • 2011 - Celebrating Irish Heritage
      • 2010 - Priorities: Retirement Planning Vs College Savings for Children
      • 2010 - in review, and a look toward 2011
      • 2010 - New Years Resolutions - 2011
      • 2010 - Business Owners – a special case for diversification
      • 2010 - Year End Planning 2010
      • 2010 - Paying for college - Applying for student aid, determining your Expected Family Contribution
      • 2010 - Paying Taxes
      • 2010 - Job-Loss
      • 2010 - Habits
      • 2009 - Shopping
      • 2009 - Gift-Idea
      • 2009 - Thanksgiving
      • 2009 - Q3
      • 2009 - Recovery
      • 2009 - Results
      • 2009 - Digging
      • 2009 - Time
      • 2009 - Considering
      • 2008 - Planning
      • 2008 - Resolutions
    • Life Transitions >
      • Get A Job/Leave Job >
        • 9 Questions to ask your CPA at tax time
        • Getting (back) on track - the best part of my job
        • Changing Jobs Checklist
        • Job Loss
        • Taxes - 7 ideas to ease the burden - 2018
        • Year End Planning Checklist: 12 smart planning moves to consider
      • Marriage/Divorce/Re-Married >
        • 8 Ways to Help Couples Overcome Cash Conflicts
      • Kids (Birth/College/Marriage) >
        • 7 Things you and your student should discuss before they head off the college
        • Getting The Most Out of Financial Aid For College
        • Investing In College
        • Budgeting For Students
        • Save on Textbooks
        • Subsidized vs unsubsidized loans – what’s the difference?
        • 7 Tips for Your College Bound Student
        • “What I did on my Summer Vacation – 2019”
        • Budgeting for College Students - 2018
        • Most Significant FAFSA Changes in over 20 Years!!
        • Direct 529 Plan Changes To Be Implemented
      • Birth/Death >
        • Is a cash windfall in your future?
        • Planning for People with Special Needs
    • Client Letters >
      • 2019 - July Client Letter: Records Are Made To Be Broken
      • 2018 - Summer's Hot Issues
      • 2018 - November Market Update:
      • 2016 - January Client Letter - A volatile year ends with a whimper
      • 2016 - September Letter to Clients: The Ides of September?
      • 2016 - November Letter to Clients: The Final Countdown?
      • 2016 - December Letter to Clients: Near Term Impact of Trump's Victory
      • 2015 - September Client-letter: Looking past scary headlines
      • 2015 - November Client Letter: The Clouds Part
      • 2015 - December Client Letter, A Baker's Dozen: 13 Smart Planning Moves

2014 in Review - A bullish mood and risks that dot the landscape.

What a predictable and very unpredictable year 2014 was. Yet, that could be said about every year! For starters, the U.S. economy picked up steam throughout 2014, and the S&P 500 Index racked up another double-digit gain following 2013’s 30% advance. The economic forecast was reasonable. Though a call for another double-digit advance may have seemed to be a bit of a stretch, solid market fundamentals have yet to abate – more in a moment.

Still, who would have forecast utilities, which are normally a defensive sector, would lead the way if the S&P 500 Index had posted a double-digit gain? Credit the higher dividends they offer and falling bond yields.

Speaking of bond yields, there has been the rally in Treasury bonds and high-grade corporate debt. Weren’t we supposed to see a continuation in the upward drift in bond yields? At least that was the consensus.  It’s Exhibit A as to how markets can and do baffle the best minds. It’s also highlights why diversification among and between asset classes is such an important principle to successful long-term investing.

Finally, few could have predicted the outright collapse in oil prices. We began the year near $100 per barrel and ended just north of $50 per barrel. When and where oil will stabilize is anyone’s guess, but the decline in crude is responsible for the 10% drop in the S&P Energy sector. It was the worst performing of the 10 industry groups that make up the S&P 500 Index.

  
NASDAQ Composite

-1.16

13.40

22.05

S&P 500 Index

-0.42

11.39

17.86

Russell 2000 Index

2.68

3.53

17.59

MSCI World ex-USA**

-3.40

-6.74

7.41

MSCI Emerging Markets**

-4.82

-4.63

1.43





Source: Wall Street Journal, MSCI.com

*Annualized
**USD

The galloping bull

There were times when we hit a patch of volatility. October quickly comes to mind]. But the fundamentals quickly re-asserted themselves, driving stocks to new highs. These included:

  1. An acceleration in economic activity, which led a pickup in earnings growth. S&P 500 earnings improved from a modest increase of 5.6% in Q1 to a solid 10.3% by Q3, according to Thomson Reuters.
  2. A pledge by the Fed to keep short-term interest rates at rock bottom levels for a “considerable time.” Without drowning you in the tedious details of discounted cash flows, low interest rates provide little in the way of formidable competition for stocks.
  3. Stock buybacks by corporations continue to rise. According to S&P Dow Jones Indices, combined dividend and buyback expenditures set a new record of $892.66 billion for the 12 months ended September 30, with stock repurchases representing 62% of the total. Stock buybacks reflect confidence as well as real demand for shares.
 
Jeremy Siege noted at year’s end, "The last three, four years, I thought this was easy. I mean, it was a slam dunk. The market was so undervalued with the interest rates so low, and earnings momentum going up. ... Earnings momentum is going up, but we are closer to fair market value."

Siegel is often a featured guest on CNBC and other national news outlets and is a professor at the highly-respected Wharton School of Business.  He projected this time last year that the Dow Jones industrials would hit 18,000 by the end of 2014; the index cracked that milestone on December 23. Of course, it’s easy to be a Monday morning quarterback when you’ve accurately called the game, but his analysis is spot on.

Looking ahead, Siegel sees 20,000 on the Dow as a possibility, but he’s quick to point out, “We’re close to fully valued…it gets hard.”  His reasoning, “Interest rates are going to be…lower than what the Fed thinks…going forward.”

Before we get carried away with unbridled enthusiasm, it’s fair to point out that Siegel was relatively bullish on stocks as part of a panel discussion that was published by Business Week in May 2000.  And it highlights why I never pass up an opportunity to talk about diversification between and among asset classes. No one has a crystal ball. No one can accurately foresee the unexpected events that may derail the most thoughtful forecasts.

But as I already cautioned, let’s not get carried away. Let’s keep a balanced approach. Let’s adjust our approach when changes in your personal situation or goals make our current stance less than optimal.

Bottom line

I always stress the importance of being comfortable with your portfolio. As we’ve talked about in our meetings, my goal is to help you mitigate that risk. But you must be comfortable with the level of risk you’re taking as we set out to meet your objectives. If you are not, let’s talk and recalibrate.

Stick to the plan. Markets rise and markets fall, but unless there have been changes in your circumstances or you’ve hit milestones in your life, such as retirement, stay with the plan. By itself, a record high in stocks isn’t a good reason to bail out of stocks.

Rebalance. Last year’s rise in equities may have knocked you out of alignment with your target stock and bond allocations. Now may be the time to take profits on winners and selectively re-allocate proceeds.

I hope you’ve found this review to be educational and helpful. Let me emphasize, it is my job to assist you! If you have any questions or would like to discuss any matters, please feel free to give me a call.

As always, I’m honored and humbled that you have given me the opportunity to serve as your financial advisor.

John Davidson, CFP®

Your comments and questions are always welcome.
We look forward to hearing from you.  mail@kyleshill.com


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- John Davidson, CFP
  • Home
  • Background
    • About Us
    • Q&A
    • Disclosures
    • Privacy Policy
  • Services
    • Planning Process
  • Clients
    • Business Owners
    • Individual Professionals, Families, Retirees
  • Contact Us
    • Newsletter Sign-Up
    • Useful Websites & Quick Hits
  • Account Access
  • News
    • 2021 News Articles >
      • What is it about September?
      • Will Tax Law Changes Increase Your Taxes?
      • Tax Watch: SECURE Act 2.0?
      • The unstoppable bull market?
      • Stocks Cruise at a High Altitude
      • Tax law changes on the horizon – 5 things to consider
      • Not Your Fathers Economic Recovery
      • Are HSAs the New IRAs?
      • REVENGE OF THE NERDS - Internet forums vs. the professionals
      • Protect Your Financial Information
      • 2021 January Market update - A rollercoaster year ends on a high note
      • Avoiding 7 Retirement Traps
    • 2020 News Articles >
      • December Client Letter - Cruising at 30,000 Feet
      • 9 Tax Facts & Tips to Save You Money
      • 9 Smart Planning Moves to Consider
      • November Client Letter - Election 2020
      • 7 Financial Planning Steps for Year End 2020
      • 6 Tips on Filing the FAFSA
      • Circling Back to the SECURE Act!
      • A September Pothole
      • 6 Steps That Put You on the Path to a Successful Retirement
      • Consumer Scams Part 2
      • September 2020 Client Letter
      • Consumer Scams
      • May Client Letter-- Worst-Ever Economy Yet Stocks Show Best Monthly Gain Since '87
      • Why Waiting For A Market Rebound Could Cost You
      • How The Greatest Generation Approached September 11th
      • Laid Off And Near Retirement - What Now?
      • The SECURE Act
      • Market update: When favorable fundamentals collide with uncertainty
    • News - Archives >
      • 2015 - To be happy, be grateful. - It's science!!
      • 2015 - Market Volatility - So Now What?
      • 2015 - Retirement planning: Start early or start late – just start
      • 2015 - Financial Planning Checklist
      • 2014 In Review - A bullish mood and risks that dot the landscape.
      • 2015 - A sneak peek at 2015 – What to keep an eye on
      • 2015 - Getting The Most Out of Financial Aid for College
      • 2014 - Cheaper by the Dozen: 12 smart year end planning moves
      • 2014 - How safe is your personal information?
      • 2014 - Hey, what’s your number?
      • 2014 - What did we do before GPS?
      • 2014 - Changing Jobs Checklist
      • 2013 - US Government Shutdown - What it means
      • 2013 - Investing in College
      • 2012 - Getting (back) on track - The best part of my job…
      • 2011 - The Henny Penny School of Investment Wisdom
      • 2011 - 8 Ways to Help Couples Overcome Money Conflicts
      • 2011 - Intelligent Computer Shopping
      • 2011 - 7 things you and your student should discuss before they head off to college
      • 2011 - 7 mistakes to avoid when exiting your business
      • 2011 - Why you need an Estate Plan even if you don’t live in a mansion
      • 2011 - Celebrating Irish Heritage
      • 2010 - Priorities: Retirement Planning Vs College Savings for Children
      • 2010 - in review, and a look toward 2011
      • 2010 - New Years Resolutions - 2011
      • 2010 - Business Owners – a special case for diversification
      • 2010 - Year End Planning 2010
      • 2010 - Paying for college - Applying for student aid, determining your Expected Family Contribution
      • 2010 - Paying Taxes
      • 2010 - Job-Loss
      • 2010 - Habits
      • 2009 - Shopping
      • 2009 - Gift-Idea
      • 2009 - Thanksgiving
      • 2009 - Q3
      • 2009 - Recovery
      • 2009 - Results
      • 2009 - Digging
      • 2009 - Time
      • 2009 - Considering
      • 2008 - Planning
      • 2008 - Resolutions
    • Life Transitions >
      • Get A Job/Leave Job >
        • 9 Questions to ask your CPA at tax time
        • Getting (back) on track - the best part of my job
        • Changing Jobs Checklist
        • Job Loss
        • Taxes - 7 ideas to ease the burden - 2018
        • Year End Planning Checklist: 12 smart planning moves to consider
      • Marriage/Divorce/Re-Married >
        • 8 Ways to Help Couples Overcome Cash Conflicts
      • Kids (Birth/College/Marriage) >
        • 7 Things you and your student should discuss before they head off the college
        • Getting The Most Out of Financial Aid For College
        • Investing In College
        • Budgeting For Students
        • Save on Textbooks
        • Subsidized vs unsubsidized loans – what’s the difference?
        • 7 Tips for Your College Bound Student
        • “What I did on my Summer Vacation – 2019”
        • Budgeting for College Students - 2018
        • Most Significant FAFSA Changes in over 20 Years!!
        • Direct 529 Plan Changes To Be Implemented
      • Birth/Death >
        • Is a cash windfall in your future?
        • Planning for People with Special Needs
    • Client Letters >
      • 2019 - July Client Letter: Records Are Made To Be Broken
      • 2018 - Summer's Hot Issues
      • 2018 - November Market Update:
      • 2016 - January Client Letter - A volatile year ends with a whimper
      • 2016 - September Letter to Clients: The Ides of September?
      • 2016 - November Letter to Clients: The Final Countdown?
      • 2016 - December Letter to Clients: Near Term Impact of Trump's Victory
      • 2015 - September Client-letter: Looking past scary headlines
      • 2015 - November Client Letter: The Clouds Part
      • 2015 - December Client Letter, A Baker's Dozen: 13 Smart Planning Moves