Pulse Check – 2018

This year will go down in the record books as one of the best years to be a journalist. It seems like you can’t go more than 15 minutes without hearing some new headline that throws everyone for a loop. One simple tweet and the entire market goes into panic mode.

What I wanted to do with the article, is to highlight most of the noise blocking investors from what’s really important. Whether you want to blame politics, economics, the Federal Reserve, or business leaders, it’s all just diverting your attention away from your own personal finances.

Let’s start with a quick snapshot of some major news headlines from this past year.

Major Events in 2018:

  • US/China Trade War tension
  • Federal Reserve raising interest rates
  • Flattening and inverting of the yield curve
  • Stock market volatility returns
  • Facebook-Cambridge Analytica data scandal
  • Bitcoin – major rise in 2017, followed by a crash in 2018
  • Marijuana companies become the next hype stocks
  • Johnson & Johnson’s baby powder has asbestos?
  • Robinhood jumps into banking…for a minute
  • Elon Musk’s erratic behavior
  • Huawei’s CFO arrested in Canada
  • Stocks enter Bear Market territory
  • Sears files for bankruptcy
  • The fall of General Electric

In 2018, we also lost two of the most iconic and influential people of our time, Stephen Hawkins and Stan Lee. Between the two of them, science and science fiction have both been dealt major blows.

Next, let’s look at some data points from 2018:

Stock Market Returns (YTD as of this post):

S&P 500 Index
Dow Jones Industrial Average
Barclays Aggregate Bond Index0.34%
FTSE 100 (Europe)-12.27%
DAX (Germany)-18.64%
NIKKEI (Japan)-15.27%
Shanghai (China)-23.70%

Source: Morningstar I plan to update these numbers post 12/31

US Economic Data:

GDP: The US Economy grew at 3.4% in the 3rd quarter of 2018. Some slight reductions in global growth due to early tariffs from China but, nonetheless, we still see positive economic growth in the United States.

US GDP Growth – Prior 10 Years

Inflation: Inflation is on the rise…but really only since 2015. We are still at historically low levels of inflation. Prior to 2008, we saw inflation run at a rate above 4%. We are still way below normalized levels of inflation. Most people confuse rising inflation with a sign of a recession. But, if we look historically, we are still very low relative to prior years.

US Inflation- Prior 10 Years

Unemployment: People not working is a pretty good indicator the economy is struggling. But if we look at our current unemployment rate, we are sub-4% unemployment. That means 96% of people in your community are going to work each day. That’s a lot of people contributing to a healthy and growing economy. Could tariffs and trade wars impact this? Sure, but right now, the data looks good, indicating that we have a strong workforce.

US Unemployment – Prior 10 Years

Corporate Profits: Business owners are a large portion of what drives the economy forward. As individual businesses become more profitable, they reward their shareholders, employees, and their communities. When we talk about the “Stock Market”, we are referring to the pulse of businesses across the globe. And in the US, we are continuously hitting record levels of corporate profits.

US Corporate Profit Levels

In summary, the US Economy is really in good shape. The Federal Reserve is working to raise interest rates for this exact reason. A healthy economy shouldn’t sit at such low-interest rates forever.

Companies are more profitable than ever, more people are working, and inflation really isn’t a big issue at this point. We can debate the economics all day but my point here is things are not as bad as the media makes them out to be.

What’s Important:

So what the does any of this have to do with you? Absolutely nothing.

News happens, life happens, and the economic and political landscape will continuously change. How quickly you are able to shift your attention back to what’s actually important is what defines good investors. 2018 should have been a year you spent focusing on your family, personal finances, career development. If it was anything else, you need to readjust your thinking.

For most all investor, the gyrations in the stock market are nothing more than noise. A speed bump between today and whatever goal lies ahead. Spending your time worrying about the ups and downs in the market is only going to increase your stress levels. Instead, plan for future vacations, create a real budget, or use periods like today to really ask yourself if you are comfortable with your current portfolio.

There is a common term known as the “Behavior Gap” within the investment community. What it simply means is that most investors will underperform the investments they own, simply due to bad behavior. Selling when the market is low, and buying when the market is high.

Think about this for a second. Underperforming the investments you actually own. This means you are emotionally making decisions to jump in and out of the market at the wrong time and missing the total return some fund/stock/portfolio provides.

If you look at the illustration below, which term best describes how you feel about the markets today? My guess is, based on this years market, desperation and panic are probably setting in full force.

At the end of the day, markets are erratic at best. Everyone know’s the market will get volatile at some point, yet no investors want to comfortably sit through it. A negative return in a calendar year is actually quite common. In fact, it’s happened 24 times since 1928!

I like to think of it like hurricanes in Florida. EVERYONE in Florida knows we will have hurricanes. Yet, instead of appropriately planning ahead of time, we wait until the last minute and all rush the hardware stores and gas stations like maniacs.

Source: WSJ
Image result for hurricane irma gas lines
Source: Google Images

Instead, prepare for volatile periods. Plan today as you would for tomorrow. Your investment allocation doesn’t need to be readjusted each and every time market volatility shows itself. By properly taking time to make sure your portfolio can weather storms like today, you can alleviate a lot of stress and help close the behavior gap!

Image result for hurricane irma
Source: Wikipedia – Hurricane Irma
Please ignore typo’s, I will be editing grammar as I go!
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

Portfolio Addiction

I recently started reading Adam Alter’s book Irresistible. This book is a kind of a shell shocker on how technologies, like our iPhones and social media, are morphing into the methamphetamines of the 21st century. A bold statement but the more you read the book, the more you start to think to yourself “I might actually have a problem.”

Today, more than ever, we are so completely overloaded with information that it’s near impossible to stay focused on the important aspects of our lives. I can attest for this myself, in just the few minutes it took to write this article, my Apple Watch has sent me 5 alerts, I checked my e-mail a dozen times, and I keep staring off to check the market on CNBC. I also went to Amazon to find a URL for Adam’s book so there’s another distraction.

“…In 2000, Microsoft Canada reported that the average human had an attention span of twelve seconds; by 2013 that number had fallen to eight seconds. (According to Microsoft, a goldfish, by comparison, has an average attention span of nine seconds.)…” 

This makes perfect sense. Why does Google allow you to skip ads after 5 seconds? The answer, you don’t have the attention to listen much longer.

…Human attention is dwindling

Microsoft Canada

And this trend of diminished attentiveness is not going away anytime soon. The more technology is absorbed into our daily routines, the more we are doomed to NEED it.

It’s kind of ironic that Google will show me 294,000,000 results for “Internet Addiction” articles but zero results for any trends showing the growth of internet addiction.

Google Search – 294 Million Results
Google Trends – No Results

So this brings us back to your investments. With our brains only paying attention for maybe 7-8 seconds, how are we supposed to hold an investment strategy or plan a retirement for 20+ years? The world is becoming more and more complex for retirees and the reliance on the individual to provide for themselves is only growing.

As time passes, every bank, financial planner, investment firm or insurance agency is finding new digital ways to blast you to take action. You will never see an advertisement from any of these firms saying “just stick with your investments, you’re doing fine!” Instead, they tell you about making money quick, retiring early, avoiding losses and a mess of other nonsense.

And don’t think your financial advisor has immunity to this, honestly, they probably have it worse. I find myself having to step back from the ledge of stupid decision making all the time!

With that, I wanted to bring back a chart from my first post. This is a piece that JPMorgan put together that really helps break everything down.

I am perfectly fine with clients being hyper-attentive to their investments, and would never tell anyone to turn a blind eye to how they are invested. But WHERE we allocate the majority of our attention is where we are going to see the best results.

  • We have TOTAL CONTROL over our spending and savings strategies. 
  • We have TOTAL CONTROL over our asset allocation. 
  • We have SOME CONTROL over our health and employment. 
  • We have NO CONTROL over stock market gyrations, politics, tax changes, or impacts to social benefits.

Spending time on budgeting and taking an appropriate level of risk will nullify most of the noise the media blasts our way.

Focusing on our health through diet and exercise can potentially increase your longevity (longer retirement).

Bettering your employment through personal development, certification, and continuing education can improving your earnings and savings potential. 

What the market does on any given day, what any politician says, what CNBC just mentioned, or how your accounts performed relative to the S&P 500 are all useless. They have no direct bearing on your personal finances.

Please ignore typo’s, I will be editing grammar as I go!
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

Managing Our Emotions

2018 has become an unbelievably stressful year for investors. From tariffs and trade wars to politics and corporate fraud, 2018 will be remembered as quite the year of drama. It seems like you cannot go a day without seeing something concerning in the market, making you want to just give up. With volatile periods, I figured it would be helpful to look back at some themes from this year and hopefully help ease the concerns around the market.

We have seen volatility before: In March of this year, I wrote a post explaining what you should be focusing your time on. No investor can control the market, corporate profits, or anything relative to economics. As investors, we need to focus on HOW we are invested (our asset allocation), our job and career development, and our health. Nobody can control the output of the market so instead, we have to position ourselves for whatever comes our way. Good or bad, the market will do something, we just don’t know exactly what. So instead, focus on making a difference in the things that matter. Read more here.

Be patient: Warren Buffet is recognized as one of the best investors, not due to his investing genius alone, but more importantly his temperament and patience. Investing involves risk but more importantly TIME. Sure, certain years are going to fall flat of our expectations, not every year can be a winner. Growing wealth in the market takes years, maybe decades, for best results. This isn’t news to anyone but we need to make sure we are not too quick to make any bad/emotional decisions. Read more here.

Avoid Emotional Decisions: When our investments are down or maybe event flat, we feel the necessity to do SOMETHING. But the answer is not always to act. Sometimes, letting our investments alone, we see the best results from our portfolio. There are literally hundreds of articles explaining how investors always buy at the wrong time and sell at the absolute worst time. “Life is 10% what happens to you and 90% how you react to it” so make sure you are acting appropriately to any news! Read more here.

Ask for Help: If your job is not an economist, financial advisor, or investment professional, ITS OK to not understand what is going on in the markets. There is no rule that says you need to understand the complexities of trade wars, tariffs, or inverted yield curves. This is the EXACT TIME you want to connect with your advisor and make sure your investment match your goals. I’m going to repeat that…


Your investments DO NOT need to always react to tariffs, interest rates, or other political concerns. Instead, your investments should be changed as your life changes to make sure you are saving for the right reason. Getting married, having kids, changing jobs, or retiring. These are the areas you should be focusing on since they are controllable.

At the end of the day, the market is going to do whatever the market decides to do. We are not able to plan it but instead along for the ride. The best investors are always the ones with a diligent mindset to hold on. You don’t need to be picking the best investments each and every year but instead of focusing on an appropriate allocation for your stage of life. If your unsure of your investments, that’s what we are here for!

Please ignore typo’s, I will be editing grammar as I go!
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.