On It with Offit Newsletter

On It with Offit

BY BEN OFFIT, CFP®

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nteresting Tidbits

"If your ship doesn't come in, swim out to meet it!"
- Jonathan Winters

Over the last 40 years, when the U.S. yield curve inverted, the market was up 66% of the time 1 year later and 33% of the time 3 years later. Globally, the market is up 86% of the time 1 year later and 71% of the time 3 years later.
-Source: DFA

"It is our choices, that show what we truly are, far more than our abilities."
- J.K Rowling

"Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do."
- Mark Twain

"Courage is being scared to death, but saddling up anyway."
- John Wayne

"A successful man is one who can lay a firm foundation with the bricks others have thrown at him."
- David Brinkley

Over the last 50 years, the U.S. has been in expansion over 85% of months and been in recession under 15%. More money has been lost than made betting on avoiding these brief pullbacks.
-Source: NBER
 
"We make a living by what we get, but we make a life by what we give."
- Winston Churchill

"Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give."
- William A. Ward

Four decades ago, the average time you had to escape a house fire, from the moment your smoke alarm went off, was 17 minutes. Today, it’s three minutes or less. Despite fire codes and building regulations, modern homes just burn faster.
-Curiosity

On average, consumers buy 60% more clothing today than they did 15 years ago but keep the items half as long. Nearly 60% of the more than 100 billion garments produced annually end up in incinerators or landfills.-The Wall Street Journal

The typical American eats the equivalent of about 50 chickens or half a cow every year.
-The Week

“A man who has never gone to school may steal from a freight car; but if he has a university education, he may steal the whole railroad.” 
-Theodore Roosevelt


My wife and I are thankful to welcome our son, Reed Gordon Offit, to our beautiful world on August 21st, at 11:30 PM. Reed was born at Mercy Medical Center in Baltimore and my wife is the strongest person I know mentally and physically!

My wife and I are thankful to welcome our son, Reed Gordon Offit, to our beautiful world on August 21st, at 11:30 PM. Reed was born at Mercy Medical Center in Baltimore and my wife is the strongest person I know mentally and physically!

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We are happy to celebrate 10 years in business on Thursday, October 3rd, 2019! We will have a celebration from 5-7 PM at the Maple Lawn Community Center in Fulton, MD with drinks, heavy hors d'oeuvres, and live music from Chris Diller. To RSVP, click the image above!


Financial Planning Tips - Can I claim from the Equifax breach?

Was your data compromised from the Equifax breach in the past couple of years? If yes, you may be able to claim some money as part of a class action lawsuit. To see if you are eligible, click here.


Market Update

The volatility that equity markets experienced in August really kicked-off in late July when stock market highs, trade concerns and Fed uncertainty collided. The S&P 500 Index achieved a new all-time high in July and broke above the 3,000 level for the first time in its history, but suffered a rather large sell-off following the July FOMC meeting.

Investors were not pleased to hear Fed Chairman Powell’s characterization of the rate cut as more of a mid-cycle adjustment versus a new loosening cycle, and President Trump announced new tariffs on China soon afterwards. Fed policy uncertainty and trade concerns were front and center during most of August and led to some significant swings in the market. Volatility, as measured by the VIX Index, hit its highest levels in August since early January as equities had a hard time finding their footing during the month. As August concluded, trade issues remained unresolved and the meeting of central bankers in Jackson Hole, Wyoming led to another volley of tweets by the President pressuring the Fed to cut rates.

To say the markets will watch closely the lead up to and conclusion of the FOMC meeting on September 17-18 is an understatement. Additionally, progress and/or setbacks on the trade front with China will preoccupy the market until some clarity is achieved on this matter.

The ongoing theme of large-cap growth stocks outperforming other equities continued in August despite stock market declines across the board. Small and mid-cap stocks underperformed their large-cap counterparts, growth outperformed value and U.S. equities outpaced international stocks. The value/growth relationship continues to be stretched to historic extremes and should the current situation revert to more historical norms, value-oriented stocks should benefit.

The numbers for August were as follows: The S&P 500 declined – 1.58%, the Dow Jones Industrial Average fell – 1.32%, the NASDAQ Composite dropped – 2.46%, and the Russell 2000 Index, a measure of small-cap companies, lost – 4.94%. Large-cap value stocks, as measured by the Russell 1000 Value Index, lagged their growth counterparts once again in August declining – 2.94% compared to large-cap growth stocks, as measured by the Russell 1000 Growth Index, which fell only – 0.77%.

International equities continued to feel the brunt of U.S. dollar strength and declined during August. In fact, the U.S. dollar index continued to rise and put in its highest mark since 2017. Sluggish international economies also contributed to global stock market weakness. With this backdrop, emerging market equities, as measured by the MSCI Emerging Markets Index, fell by – 4.88% in August and the MSCI ACWI ex USA Index, a broad measure of international equities, declined – 3.09% for the month. International stocks are positive year-to-date, but in general, their gains have been well below the returns of U.S. stocks.

Fixed Income Market

The headline story in August (in a month of many headline stories) was the dramatic drop in U.S. Treasury yields. By the end of August, all points along the Treasury yield curve were below the Fed Funds target rate. The 10-year U.S. Treasury yield approached lows last seen in July 2012 and July 2016 below 1.5%. The 30-year U.S. Treasury yield dropped below 2.0% during the month, its lowest point on record.

The amount of global bonds with negative yields continued to increase in August with the count well above $15 trillion. The yield on the 10-year U.S. Treasury ended July at 2.02%, but plunged to close August at 1.50%. Even more dramatic, the yield on the 30-year U.S. Treasury closed August at 1.96% after closing July at 2.53%. During a month of sharply declining yields, bond prices rallied.

The yield curve inversion now exists throughout the curve when comparing yields to the Fed Funds target rate. We acknowledge that an inverted yield curve has been a historically negative signal for the direction of the U.S. economy. At the same time, other economic readings that tend to be on the front end of the economy, like the leading economic indicators index and job market data, are not showing the same cautionary signals. We continue to monitor developments in this area closely but expect ongoing economic growth through 2019 and into 2020.

The Fed is trying to engineer a challenging balancing act by supporting economic growth, but at the same time, not cutting rates too much too soon. Market forces are already lowering rates on their own when one looks across most points on the yield curve. Negative global yields, declining rates in the U.S. and continued pressure from the Trump administration to cut rates only complicates the job of the Federal Reserve as we move toward the September FOMC meeting.

In this environment, fixed income results were as follows: The Bloomberg Barclays U.S. Aggregate Bond Index was up 2.59% for the month, the Bloomberg Barclays U.S. Credit Index gained 3.13%, the Bloomberg Barclays U.S. Corporate High Yield Index inched higher by 0.40% and the Bloomberg Barclays U.S. Treasury Index gained 3.40%. TIPS showed gains for the month and muni bonds also advanced in August. One of the most interest rate sensitive fixed income categories is long maturity U.S. Treasury bonds and, reflecting this sensitivity, the index measuring 30-year U.S. Treasury performance gained 12.53% for the month alone.

S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index.

Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy.

NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices.

Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million.

Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.

Government bonds are guaranteed by the U. S. Government and, if held to maturity, offer a fixed rate of return and fixed principal value.


Offit Advisors
28 E Susquehanna Ave
Towson, MD 21286
Phone + Fax: 410 600 PLAN (7526)
E – BOffit@OffitAdvisors.com
W- www.OffitAdvisors.com

To schedule an appointment with us, click here!

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. OffitAdvisors. is not affiliated with Kestra IS or Kestra AS.

On It with Offit Newsletter

On It with Offit

BY BEN OFFIT, CFP®

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Interesting Tidbits
You’re not ready to be a successful stock market investor if you are nervous when the market is up and scared when it’s down.
-Peter Lynch

I'm a great believer in luck, and I find the harder I work the more I have of it.
-Thomas Jefferson

Innovation distinguishes between a leader and a follower. 
-Steve Jobs

My favorite things in life don't cost any money. It's really clear that the most precious resource we all have is time.
- Steve Jobs

Half of the net worth created across the entire US stock market since 1926 comes from just 90 companies. The best way to make sure you participate in the next 90 is to own a diversified portfolio.
-Source: Hendrix Bessembinder/Arizona State

It's good to have money and the things that money can buy, but it's good, too, to check up once in a while and make sure that you haven't lost the things that money can't buy. 
- George Lorimer

That man is richest whose pleasures are cheapest.
- Henry David Thoreau

Las Vegas is the only place I know where money really talks - It says, "Goodbye.
- Frank Sinatra

He who loses money, loses much; He who loses a friend, loses much more; He who loses faith, loses all.
- Eleanor Roosevelt

It's not the employer who pays the wages. Employers only handle the money. It's the customer who pays the wages. 
- Henry Ford

Wealth is not about having a lot of money; it's about having a lot of options.
- Chris Rock

Both poverty and riches are the offspring of thought.
 - Napoleon Hill, American Author
 
The top 3% of taxpayers make about 29% of all adjusted gross income and pay just over 50% of all income taxes.
-Source: IRS

Formal education will make you a living; self-education will make you a fortune.
- Jim Rohn

Many people take no care of their money till they come nearly to the end of it, and others do just the same with their time.
- Johann Wolfgang von Goethe

While pundits are trying to figure out the timing of the next recession, it doesn’t hurt to be aware that the stock market actually posts positive returns through recessions! While the average isn’t great at just 3%, returns are both positive and higher than current bond yields.
-Source: New York Times

Wealth consists not in having great possessions, but in having few wants.
- Epictetus

Offit Advisors is pleased to welcome Financial + Student Loan Advisor, Jamie Callighan, to our growing company.   We believe that student loans are one of the most paramount financial planning issues facing our society today.     For years we have been offering our Financial Planning clients student loan advice, including Public Service Loan Forgiveness, Income-Based Repayment options, and refinancing suitability analysis. Now we have taken that a step further with Jamie. By directly offering Jamie's expertise to our Financial Planning clients, and stand-alone consultations for Physicians, Dentists, Lawyers, Graduate Students, and anyone with student loan debt, we can help them pay down their debt as efficiently as possible.  Jamie has extensive experience in managing student loan debt and other debt repayment strategies. In addition to debt matters, she also has experience in college savings, retirement, and estate planning.  Jamie graduated from Metropolitan State College of Denver with a degree in Behavioral Sciences and holds Series 63 (Uniform Securities Agent State Law Exam) , Series 65 (Uniform Investment Adviser Law Exam) , Series 7 (General Securities Representative) registrations, as well as Life, Accident & Health Insurance licenses.  We welcome the opportunity to review this niche subject matter as part of your overall financial plan to make sure you have the best strategy possible.

Offit Advisors is pleased to welcome Financial + Student Loan Advisor, Jamie Callighan, to our growing company.

We believe that student loans are one of the most paramount financial planning issues facing our society today.


For years we have been offering our Financial Planning clients student loan advice, including Public Service Loan Forgiveness, Income-Based Repayment options, and refinancing suitability analysis. Now we have taken that a step further with Jamie. By directly offering Jamie's expertise to our Financial Planning clients, and stand-alone consultations for Physicians, Dentists, Lawyers, Graduate Students, and anyone with student loan debt, we can help them pay down their debt as efficiently as possible.

Jamie has extensive experience in managing student loan debt and other debt repayment strategies. In addition to debt matters, she also has experience in college savings, retirement, and estate planning.

Jamie graduated from Metropolitan State College of Denver with a degree in Behavioral Sciences and holds Series 63 (Uniform Securities Agent State Law Exam) , Series 65 (Uniform Investment Adviser Law Exam) , Series 7 (General Securities Representative) registrations, as well as Life, Accident & Health Insurance licenses.

We welcome the opportunity to review this niche subject matter as part of your overall financial plan to make sure you have the best strategy possible.

Financial Planning Tips - Can I afford to buy Starbucks coffee?

The personal finance space has no shortage of tips to managing your spending, from bag lunches in lieu of eating out at work to home-brewed coffee instead of the morning Starbucks routine. Yet the truth is, we dig ourselves a tremendous spending hole because of our big purchases, and then worry about the small stuff trying to make up the difference. If you really want to change your financial reality for the better, though, it’s the big stuff you really need to focus on – where you live, and what you drive.

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If we add up all of the Housing categories and sub-categories, and add Transportation on top of it, we come to a whopping 63% of the household’s total annual expenditures. Entertainment? Only 5.5%. Clothing and apparel? 3.5%. Food at least is almost 13%, although we can still only trim so much, since we do still have to eat a few times every day.

In real terms – we buy the most expensive house and car we can afford, and then drive ourselves crazy clipping coupons to make up the difference. Perhaps the better conversation is about owning more affordable houses, and driving less expensive (or dare I say it, USED!?) cars.

Choosing an apartment that’s $500/month less expensive or a smaller house that has $500/month in mortgage costs, similarly, saves so much money on “the big stuff” that many wouldn’t have to sweat the small stuff at all anymore. And sadly, the more affluent the individual, the more that significant housing and automobile costs consume huge portions of the annual income!

Unfortunately, these are difficult conversations to have. Many people view their nice homes and their nicer cars (1, 2, or even 3+ of them) as entitlements that we “should” get the moment a lender will approve us to finance them. But the reality, as the research shows, is that maxing out your capacity to borrow might not lead to a default, but it certainly does crowd out our ability to spend money on the experiences that ultimately bring us more happiness.

As long as there’s a secure roof over your head, and you have an automobile that’s capable of getting you to work and the kids where they need to go – even if that car isn’t as fancy as you hoped, or the house isn’t as big as it might have been – life will go on. And you might even enjoy it more. - Source: Kitces.com


Market Update

Equity Markets

The S&P 500 Index achieved a new all-time high in July and broke above the 3,000 level for the first time in its history. The momentum from June continued in July as the market’s recovery from the May sell-off, which was triggered by a negative turn in the China trade negotiations, kept going. Although trade issues remained unresolved, they were trumped by rising expectations of a more accommodative Fed and a likely rate cut in July, which indeed occurred.

Most major U.S. equity indices gained in July, but international stocks could not overcome U.S. dollar strength and declined during the month. It is worth noting that although U.S. equity indices posted gains for the month, a portion of those gains were lost on July 31 following the FOMC meeting as equities sold off sharply to close out the day.

The numbers for July were as follows: The S&P 500 gained 1.44%, the Dow Jones Industrial Average (DJIA) rose by 1.12%, the NASDAQ Composite advanced 2.15%, and the Russell 2000 Index, a measure of small-cap companies, edged higher by 0.58%. Large-cap value stocks, as measured by the Russell 1000 Value Index, lagged their growth counterparts once again in July with an advance of 0.83%.

Comparatively, large-cap growth stocks, as measured by the Russell 1000 Growth Index, advanced 2.26%. Although this continues to be a challenging period for managers using value characteristics, we believe the value/growth relationship continues to become more and more stretched and over the long-term, value companies will be rewarded once again.

International equities slipped lower in July. Despite the anticipated and ultimate rate cut by the Fed during the month, the rest of the world remains more accommodative than the U.S. on a relative basis and the U.S. dollar rallied. In fact, the U.S. dollar index rose to its highest level in more than two years in July. With this backdrop, emerging market equities, as measured by the MSCI Emerging Markets Index, fell by -1.22% in July and the MSCI ACWI ex USA Index, a broad measure of international equities, declined -1.21% for the month. Year-to-date returns have still been solid for international stocks, but in general, they have not been able to keep pace with U.S. equities so far this year.

Fixed Income Markets

The 10-year U.S. Treasury yield has dropped dramatically so far in 2019. The yield ended June at 2.0%, and early in the month (July 2nd and 3rd), it closed below the 2% mark for the first time since 2016. Although it bounced up from those lows as the month progressed, it slid lower later on in the month and ended July at 2.02%. (Quick update: Following the FOMC meeting on July 31st, the 10-year U.S. Treasury yield dropped dramatically below the 2% mark at the beginning of August.)

The Fed is trying to engineer a challenging balancing act by supporting economic growth but at the same time, not cutting rates too much too soon. Markets will continue to monitor any information from the Fed closely as investors try to figure out the pending course of Fed action. The situation seems to be complicated by ongoing pressure from the Trump administration to cut rates, which should, by definition, not be a consideration as the independent Fed determines policy action.

The yield-curve inversion (comparing the 10-year U.S. Treasury and 3-month T-bill yields) shallowed in July and had a brief day back in a positive position. However, the yield curve inversion resumed from that point and ended the month back in inverted territory. History shows us that the length of the inversion matters, and the yield curve has been in that position for the most part since late May.

We acknowledge that an inverted yield curve has historically been a negative signal for the direction of the U.S. economy. At the same time, other economic readings that tend to be on the front end of the economy, like the leading economic indicators index and job market data, are not showing the same cautionary signals. We continue to monitor developments in this area closely, but we believe economic growth will continue through 2019 and into 2020.

In this environment, fixed income results were as follows: The Bloomberg Barclays U.S. Aggregate Bond Index was up 0.22% for the month, the Bloomberg Barclays U.S. Credit Index gained 0.52%, the Bloomberg Barclays U.S. Corporate High Yield Index advanced by 0.56% and the Bloomberg Barclays U.S. Treasury Index fell by -0.12%. TIPS showed gains for the month and muni bonds were among the best performers in the fixed income space in July.

S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index.

Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy.

NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices.

Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million.

Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.

Government bonds are guaranteed by the U. S. Government and, if held to maturity, offer a fixed rate of return and fixed principal value.

Offit Advisors
28 E Susquehanna Ave
Towson, MD 21286
Phone + Fax: 410 600 PLAN (7526)
E – BOffit@OffitAdvisors.com
W- www.OffitAdvisors.com

To schedule an appointment with us, click here!

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. OffitAdvisors. is not affiliated with Kestra IS or Kestra AS.

On it with Offit Newsletter

On it With Offit

BY BEN OFFIT, CFP®

12ac2841-7608-4389-88ad-2124c9beb0f6.jpg

Interesting Tidbits
People who say they value money highly say they are less happy in life than those who care more about love and friends.
-Source: Kahneman, Krueger

“In times like these it helps to recall there have always been times like these.”
-Paul Harvey

Surprisingly good news: debt service payments as a percentage of disposable income are at 40 year lows, at just 10%.
-Source: St. Louis Fed

The weakest dog usually barks the loudest.
-Norman Reedus

There’s been a lot of press about the wealthiest U.S. citizens. Who are they?
Net worth of the Top:
10% is $1.2 million and up,
1% is $10.3 million and up,
.1 is $43 million and up.
-Source: Forbes

The real measure of our wealth is how much we'd be worth if we lost all our money.
-Jowett

And in the end the love you take is equal to the love you make.
-The Beatles

Those recessions we are all so worried about? Well they last, on average, less than a year. For perspective, the average expansion lasts over 5.5 years.
-Source: Economic Policy Institute

What you teach your children, you also teach their children.
Source: Unknown

There are three kinds of people in this world. Those who see, those who see when they are shown and those who will never see.
-Da Vinci
 
Talent hits a target no one else can hit. Genius hits a target no one else can see.
-Arthur Shoepenhaur

A business that makes nothing but money is a poor business.
- Henry Ford

It's how you deal with failure that determines how you achieve success"
- David Feherty

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In June I had the opportunity to go to Los Angeles and spend some quality time with some dear friends of mine that I known my entire life. As time goes on, friends and family may disperse geographically, but the ones who truly matter and care about you will always be nearby.


Financial Planning Tips

In March of 2019, I had the opportunity to present on Elder Abuse to the Society of Daily Money Managers in Rockville, MD.

Have you known someone who may have been a victim of elder financial abuse?

It is when someone takes advantage of an elder persons’ financial resources for their own personal gain or benefit.

This is predominantly perpetrated by those who are closest to the elder person ie. family members, caretakers, and "trusted" people who target their wealth. Most abuse occurs from people not associated with the money management industry.

Unfortunately, only 1 in 5 cases are reported and the victims are 3x more likely to pass away, experience depression, guilt, and anger and to isolate themselves. This also has an estimated $30B cost to society.

Warning signs of this can include sudden changes to their financial accounts, confusion about financial affairs, new "trusted" caretakers and best friends, and new romantic relationships that don't pass the smell test.

If you believe someone you know may be a victim of this issue, get in touch with an elder law attorney or a Fiduciary-oriented financial planner.

As always, if you have any questions, don't hesitate to reach out to us at 410-600-PLAN.


Financial Planning Tips

Equity Market

Coming off a tough month in May, equities showed great resilience in June and rallied sharply to close out the quarter. Trade concerns with China dominated headlines in May, and while no final resolution was made on that front, the market’s focus seemed to turn to the Fed in June. Markets have become more and more convinced that a rate cut cycle is rapidly approaching and under that context, interest rates fell and stocks rallied to close out the first half of 2019.

Although all major equity indices enjoyed a strong first six months of 2019, the theme of large-cap growth stocks outperforming everything else continued in the second quarter and year-to-date. However, large-cap value stocks enjoyed modestly better gains than large-cap growth in June. Other recent trends of large-cap stocks outperforming small-caps and U.S. stocks outperforming international equities continued to hold as well.

The value/growth relationship has stretched to historic extremes and should the current situation revert to more historical norms, value-oriented stocks should benefit. At Clark Capital, we employ value-oriented measures in our investment process and believe that over a full market cycle, these value characteristics will be rewarded.

The numbers for June were as follows: The S&P 500 advanced 7.05%, the Dow Jones Industrial Average (DJIA) rose by 7.31%, the NASDAQ Composite gained 7.51%, and the Russell 2000 Index, a measure of small-cap companies, was up 7.07%. These strong gains pushed Q2 returns into positive territory after sharp declines in May as these major equity indices advanced 4.30%, 3.21%, 3.87%, and 2.10%, respectively, for the quarter.

Large-cap value stocks, as measured by the Russell 1000 Value Index, gained 7.18% in June while large-cap growth stocks, as measured by the Russell 1000 Growth Index, advanced 6.87%. Although value outperformed in June, the quarter still saw growth outperform as those two indices gained 3.84% and 4.64%, respectively.

International equity results were also strong in June. The U.S. dollar weakened during the month due in part to expectations mounting of a likely rate cut by the Fed. We continue to believe that the headwinds faced by international equities in 2018, driven in large part by U.S. dollar strength, will be less intense in 2019 as the Fed has clearly turned more dovish in 2019 compared to a more hawkish stance in 2018.

With this backdrop, emerging market equities, as measured by the MSCI Emerging Markets Index, gained 6.24% in June and the MSCI ACWI ex USA Index, a broad measure of international equities, gained 6.02% for the month. For the second quarter, those two indices advanced 0.61% and 2.98%, respectively. International stocks have enjoyed solid gains over the first half of 2019, but have not been able to match the tremendous results of U.S. equities so far this year.


Fixed Income Markets

The 10-year U.S. Treasury yield has dropped dramatically over the last few months and closed June at 2.0%—its lowest closing level since the fall of 2016. Mounting expectations of a Fed rate cut, persistent low inflation and negative global interest rates have contributed to this recent decline in yields.

The short-lived yield curve inversion at the end of March (comparing 10-year U.S. Treasury and 3-month T-bill yields) resurfaced in late May and the yield curve stayed inverted for all of June. The length of time the yield curve stays inverted has mattered historically, and we continue to monitor this data closely.

We acknowledge that an inverted yield curve has been a historically negative signal for the direction of the U.S. economy; however, at the same time, other economic data that tends to be on the front end of the economy, like the Leading Economic Indicator Index and job market data, are not showing the same cautionary signals.

In this environment, fixed income advanced across the board in June. The Bloomberg Barclays U.S. Aggregate Bond Index was up 1.26% for the month, the Bloomberg Barclays U.S. Credit Index gained 2.26%, the Bloomberg Barclays U.S. Corporate High Yield Index advanced by 2.28% and the Bloomberg Barclays U.S. 30-Year Treasury Index rose 1.37%.

For the second quarter, these indices gained 3.08%, 4.27%, 2.50% and 6.76%, respectively. Longer-dated U.S. Treasuries, among the most sensitive bonds to interest rate movements, have clearly benefited from the significant drop in yields in 2019. TIPS and muni bonds gained in June and are positive for the quarter and year-to-date as well.

S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index.

Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy. 

NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices.

Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million. 

Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. 

Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. 

Government bonds are guaranteed by the U. S. Government and, if held to maturity, offer a fixed rate of return and fixed principal value.


Offit Advisors
28 E Susquehanna Ave
Towson, MD 21286
Phone + Fax: 410 600 PLAN (7526)
E – BOffit@OffitAdvisors.com
W- www.OffitAdvisors.com

To schedule an appointment with us, click here!

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

On It With Offit Newsletter

On it With Offit

by Ben Offit, CFP®

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Interesting Tidbits

The U.S. Now Has More Millionaires Than Sweden or Portugal has people. More than 10.2 million households had a net worth of one to five million dollars in 2018, not including the value of their primary residence. 
- Bloomberg, March 13, 2018

A college degree is worth the cost if you earn a degree that translates into the new economy. The average undergrad college degree earner is expected to earn $2.8 million over her lifetime. The average high school only grad, $1.5 million.
- Center on Education

1 in 2 Americans now say they will work past age 65.  This is triple the number that said the same in 1989.
- Center for Retirement

If you want to feel rich, just count all the gifts you have that money can't buy.
-Inspirational Quotes

In not so surprising news, American prefer warm weather and lower taxes. Last year more Americans moved to Florida than any other state, and more left New York than any other state.
- Source: Census Bureau

Plan for what is difficult while it is easy.
- Sun Tzu

Taking drugs and thinking you are happy is like taking a loan and thinking you have money.
Thibaut

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Ben Offit, CFP® is featured in Baltimore Magazine as a 2019 Five Star Wealth Manager, for the second consecutive year.

To receive the 2019 Five Star Wealth Manager award, researched and managed by Five Star Professional, a wealth manager must meet 10 objective eligibility and evaluation criteria associated with wealth managers who provide quality services to their clients. 1,759 wealth managers in the Baltimore area were considered for the award. 232 were named in 2018. Five Star Wealth Managers which represents less than 13% of the total wealth managers in the area. Wealth managers do not pay a fee to be considered or placed on the final list of 2018 Five Star Wealth Managers. The Five Star award is not indicative of the wealth manager's future performance.

Ben Offit, CFP® is the President of the Financial Planning Association.  Learn more about our Maryland chapter in our new video.


Is Cash Really King?

The 4th quarter market drop, concluding with the worst December since 1931, had many “investors” fleeing for the exits. The year closed out with several trillion sitting in cash, the most since March 2010.

When we think of risky asset classes, we tend to think of commodities, real estate, stocks, and even some bonds. Cash may be last on the list. Cash, however, has many inherent risks as well, but they aren’t as obvious.

First and foremost, cash is the worst performing asset class in history. Over long periods of time, cash has underperformed all other major asset classes. The more time you spend with a significant portion of your holdings in cash, the higher the probability your portfolio will underperform just about everything.

Second, holding cash for long periods of time practically guarantees that you will not keep up with inflation. Cash guarantees the loss of purchasing power. In essence, your cash becomes worth less and less each year as prices go up and your cash does not. Imagine you put $100,000 in the bank and earn 1% or so a year for 10 years. When you pick up your cash, you may feel pretty good. However, the 1% or so you earned did not keep up with the cost of a stamp, a suit, a candy bar, health care or education (Inflation is one of those things that creeps up on you. (Remember coffee at 25 cents, candy bars for 50 cents?). You may think you made money, but you lost purchasing power.

One reason many “investors” hold cash is to time the market. They do this despite the fact that there has never been a documented, real-world study done by anyone ever showing that moving from the market to cash and back to the market repeatedly works. After all, you need to be right about when to get out, then when to get in, and do it over and over again. On the other hand, there are many real-world studies showing that moving to cash and back does not work and in fact dramatically increases the risk of loss. For a real world example of how harmful market timing can be, just ask anyone that went to cash in early December, scared out by rising rates, China, the U.S. leaving the negotiating table, and the dreaded inverted yield curve. Yes, the market moves sharply down on that news. Unfortunately for those that tried to “sit it out,” the market swiftly adjusted back as the Federal Reserve changed its mind and provided guidance that it would not be raising rates after all, the U.S. and China decided it might be better to talk things through, and that inverted yield curve un-inverted itself. OOPS!!. All kidding aside, this sort of move to cash permanently harms many investors who have spent their entire lives, working tens of thousands of hours to accumulate their savings, only to see a significant chunk of it wiped out due to poor advice, a lack of discipline, or by getting sucked into the hysterical financial media narrative of the day.

So what happens to the investors who stay invested in the broad market instead of attempting to time the market? How many of them have permanently lost money? Zero. Unfortunately, the investor graveyard is full of people who fled to cash for “safety.” When you think of the great investors of all time, like JP Morgan, Templeton, Buffet, etc., you do not find people who go in and out of the market; you find long-term investors who buy more when there is, as Templeton said, “blood in the streets.” Our clients should not be increasing allocations to cash, in fact, where appropriate, clients should put more into the market when the market is down.

Finally, many investors hold cash in the event of financial Armageddon, a situation when the stock market goes to zero or near zero and never recovers. In reality, if we live in a world where Wal-Mart, Nike, McDonalds, Google and the rest of the world’s dominant companies go down and never recover, it will likely accompany a default by the U.S. government on Treasury bonds. How can the U.S. government make its debt payments on its bonds if major U.S. companies have collapsed? Who exactly would be working and paying taxes to cover the debt payments?  In this event, cash is worthless as the FDIC guarantee would essentially mean nothing. If you do not believe America’s major corporations can survive, then the natural conclusion is that the U.S. economic system itself cannot survive. In that event, cash may be the worst asset to own.

Despite all of this, Americans are currently sitting on more than 3 trillion in cash. Of course, the rush to cash started near the stock market bottom last year, at precisely the worst time.

Cash gives people comfort because it does not move around much. It is easy to understand, and it does not “go down.” But there is more to the story than that. While cash brings comfort, it does not keep up with inflation, constantly loses purchasing power, drags down long-term investment returns, and is of no value in the event of a true economic collapse. Keeping short-term reserves on hand is a good idea. Hoarding cash as a long-term investment, not so much.

Source: Peter Mallouk


Offit Advisors
28 E Susquehanna Ave
Towson, MD  21286
Phone + Fax:  410 600 PLAN (7526)
E – BOffit@OffitAdvisors.com
W- www.OffitAdvisors.com
 
To schedule an appointment with us, click here!

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.


Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS.  Offit Advisors. is not affiliated with Kestra IS or Kestra AS.

On It With Offit Newsletter

The Original On It With Offit

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SAVE THE DATE!
SATURDAY, OCTOBER 5TH, 2019 - 10 Years in Business Party!


We will be hosting a special party to celebrate 10 years to the day exactly that I started my financial planning business.  We will invite our clients and referral partners, so stay tuned for more information on this!


Since I started this newsletter for professional purposes, people have commented to me about the clever title "On It With Offit", a play of words on my strange last name.  However, while in high school, I was actually on our high school newspaper, The Pipeline,  for four years.  During that time, people knew me for my original "Get On It With Offit" column, a goofy and philosophical column of random thoughts, rhetorical questions , and dry humor that was also distributed monthly.  I know it's hard to believe, but it actually had a positive reception. 

Eventually during my senior year I became Editor-In-Chief of this newspaper and transitioned the column to a friend of mine which he aptly named "The Downlow from Dave".   This version of my newsletter now is far different than it was over 15 years ago, and I am a different person than I was 15 years ago.  The guy writing the original version never would have guessed he would one day become a financial planner and entrepreneur.  

What were you doing and where were you 15 years ago?  If you would like to share, I would love to hear it.

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Interesting Tidbits

Just over a decade ago, 62% of Americans were invested in the stock market. Today, we are at the lowest level of American stock market investors in decades, at approximately 50%. Over this period, the stock market more than doubled.
-The Street

That top 1% you keep hearing about? Here’s what it takes in annual income around the world: $81K in India, $105K in China, $215K in France, $478K in the U.S., $694K in Singapore and $891k in U.A.E.
-Bloomberg

There were 3.85 million-American babies born in 2017, the lowest number since 1987.
-BBC News

The day after the Super Bowl is the #1 sick day every year and a third of all American workers believe it should be considered a national holiday.
-Fox 28, Spokane

Approximately 224 million roses are grown for Valentine’s Day and 15% of women admit they will send flowers to themselves.
-Crazy Valentine's Day Facts

The only member of the British House of Commons who is not allowed to speak is the person called the Speaker of the House.
-Wikipedia

The S&P 500 jumped 7.87% in January of 2019, its best January performance since 1987.
-CNBC

“Honest criticism is hard to take, particularly from a relative, a friend, an acquaintances, or a stranger.”      
-Franklin P. Jones

Market Commentary

Highlights

  • After one of the worst months for the S&P 500 Index in almost a decade, equities bounced back strongly in January to begin 2019 on a positive note.

  • The yield on the 10-year US Treasury dipped sharply in early January, hitting its lowest intraday yield level since early 2018. Although markets were more in a “risk on” mode for most of January, a more dovish stance by the Fed kept rates in check in the latter part of the month. Most pockets of fixed income turned in gains to begin the year.

  • The government remained shut down for most of January, although a temporary agreement was made late in the month to re-open the government through mid-February. As a result, some economic data was not released in January, but data that was released continues to point to economic growth.

  • Despite ongoing headline risks, we believe fundamentals are what matter in the long-run and current economic indicators remain positive.

 
Equity Markets

After a tough December and fourth quarter for equities, most investors were glad to turn the page from 2018 and move on to 2019. Pessimism had reached extreme levels and market metrics pointed toward oversold conditions late in 2018. Stocks across the board snapped back sharply to begin the new year as a “risk on” attitude ensued. January turned out to be a much more positive environment for equity investors with broad gains enjoyed across many parts of the equity markets.

The numbers for January were as follows: The S&P 500 advanced 8.01%, the Dow Jones Industrial Average rose by 7.29%, the NASDAQ Composite gained 9.79%, and the Russell 2000 Index, after being one of the worst pockets of equities in 2018, rallied 11.25% for the month. Growth stocks, as measured by the Russell 1000 Growth Index, resumed their leadership compared to value stocks, as measured by the Russell 1000 Value Index, gaining 8.99% and 7.78%, respectively, in January.

International equities also rallied in January. Trade issues with China continue to loom, but headwinds like multiple rate hikes in the U.S. and dollar strength will likely be less intense for international equities in 2019. With this backdrop, emerging market equities, as measured by the MSCI Emerging Markets Index, gained 8.77% in January. The MSCI ACWI ex USA Index, a broad measure of international equities, performed strongly as well as it advanced by 7.56% during the month.

Fixed Income Markets

Although there was more of a “risk on” appetite to the markets in January, yields moved lower and created a positive backdrop for broad areas of fixed income to begin the New Year as well. The yield on the 10-year U.S. Treasury declined during the month from 2.69% to 2.63%.
High-yield bonds were exceptionally strong in January and benefited from the “risk on” attitude, but most pockets of fixed income also advanced in January. Overall, the Bloomberg Barclays U.S. Aggregate Bond Index gained 1.06% in January, keeping up strong momentum from December.

The Bloomberg Barclays U.S. Credit Index gained 2.16% and the Bloomberg Barclays U.S. Aggregate Corporate High Yield Index advanced by 4.52% in January. TIPS and muni bonds also gained during the month.

S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index.
 
Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy. 
 
NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices.
 
Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million. 
 
Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. 
 
Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.


Offit Advisors
28 E Susquehanna Ave
Towson, MD  21286
Phone + Fax:  410 600 PLAN (7526)
E – BOffit@OffitAdvisors.com
W- www.OffitAdvisors.com
 
To schedule an appointment with us, click here!

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

On it with Offit Newsletter

Market Update - Questions Answered


What’s Causing the Recent Market Downturns?

There are a few factors contributing to recent market volatility:

  1. Concerns about a trade war with China are ongoing - However, we believe this will be resolved in negotiations before it comes to a full-blown trade war.

  2. Fears of a government shutdown - However, it’s important to note that government shutdowns have happened before and have never had a lasting impact on the economy.

  3. Year-end tax loss selling – this puts pressure on stocks, which are already down. However, this is cyclical and should finish its course by the end of the day December 31st.

  4. Fear among investors – this causes investors to sell out of their holdings and go into cash.


What Should We Be Focusing On Now?

Historically, we experience a 10% correction about once a year. While 2018 has experienced two of such corrections, we did not have one in 2017, so it balances out. We have also historically experienced a 15% correction about every two years. The S&P 500 was down 15% from its high at close on December 20 but remember—the last time we had a 15% correction was June 2012!

When corrections do occur, the average takes about 3.5 months to hit bottom and another 4.7 months to fully recover to its prior peak.

Also, having an experienced advisor and a diversified portfolio is key to weathering the turbulence. A change in market dynamics is likely to be accompanied by a change in market leadership. What has done well in the past may very well struggle in the period ahead. The diversification message is sometimes dismissed by investors in periods such as this year when every major asset class suffered a negative return. But the reality is that sometimes the benefit of diversification is holding asset classes or strategies that lost less than investors would have experienced in an all large-cap US equity portfolio.

What is The Bottom Line?

While volatility remains, now is not the time to panic. We believe this is a normal correction within an ongoing bull market, and the best thing investors can do is to stay the course.  We will continue to monitor and update the market conditions and your portfolio and planning relative to that.  Stay tuned for more communication and updates in the weeks and months ahead.

I wish you a great and safe evening tonight and a prosperous 2019!

Sincerely,
Ben Offit, CFP®

S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index.
 
Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy. 
 
NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices.
 
Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million. 
 
Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. 
 
Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. 
 

Offit Advisors
28 E Susquehanna Ave
Towson, MD  21286
Phone:  410 600 PLAN (7526)
E – BOffit@OffitAdvisors.com
W- www.OffitAdvisors.com
Fax: 410 826 7639

To schedule an appointment with us, click here!

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

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On it with Offit Newsletter

Better Than Between Two Ferns!

Ben Offit, CFP®, Principal of Offit Advisors and incoming President of the Financial Planning Association of Maryland discusses his company's rebrand, the state of the financial services industry, his plans and vision for the FPA of Maryland, and more in this interview with Elville and Associates' principal Stephen R. Elville.


MARKET COMMENTARY

Equity Markets

Equities went on quite a ride in November. Following the worst month in years in October, the S&P 500 rebounded sharply at the outset of November only to slide back down, hitting the lowest closing level since April. However, equities picked up momentum once again later in the month, boosted in part by a change in tone by Fed Chairman Powell This resulted in gains overall in November. Compared to much of the late summer and early fall, volatility remained elevated. But it did not hit the levels seen during the market sell-off in October.

Large cap equities fared better than small caps during November, but the disparity was not as pronounced as was the case in recent months. The numbers for November were as follows: the S&P 500 gained 2.04%, the Dow Jones Industrial Average rose 2.11%, the NASDAQ Composite advanced only 0.49%, and the Russell 2000 Index increased 1.59%.

Growth stocks, as measured by the Russell 1000 Growth Index, lagged value stocks, as measured by the Russell 1000 Value Index, gaining 1.06% and 2.99%, respectively. However, growth still enjoyed a clear advantage over value on a year-to-date basis from a style perspective, as did large cap stocks compared to small cap stocks.

International equities posted gains in November, with emerging markets bouncing back after some of the weakest results of any asset class throughout the year. The positive news out of the G20 meetings largely occurred after the final trading day of November, but markets started December off strongly after a trade war truce between the U.S. and China was announced.

Emerging market equities, as measured by the MSCI Emerging Markets Index, gained 4.12% over the month. While this was one of the best overall asset classes in November, emerging market equities remain one of the weakest asset classes in 2018. The MSCI ACWI ex USA Index, a broad measure of international equities, gained 0.95% in November. Both of these indices are still down double digits on a year-to-date basis in what has been a very difficult year for international equities following strong gains in 2017.

Fixed Income Markets

The yield on the 10-year U.S. Treasury declined during the month from 3.15% to 3.01%. Yields on treasuries maturing in one year or less increased, and as a result the yield curve flattened significantly during November. The three-month to 10-year Treasury spread decreased to 64 basis points from 81 basis points. The decline in yields beyond the one-year maturity point created a more constructive backdrop for most fixed income sectors, with the exception of corporate bonds, and most notably high-yield bonds.

For much of the year, high-yield bonds had been one of the few pockets of strength in fixed income, but this bond sector had some of the sharpest declines in November with the Bloomberg Barclays U.S. Aggregate Corporate High Yield Index declining 0.86% during the month. Despite those declines, high-yield bonds remained fractionally positive on a year-to-date basis, up 0.06% through the first eleven months of 2018.

The declining rate environment helped the U.S. Treasury market show gains across the board during the month. Overall, the Bloomberg Barclays U.S. Aggregate Bond Index gained 0.60% and the Bloomberg Barclays U.S. Credit Index slid modestly lower, down 0.07%. TIPS and municipal bonds also gained during the month.

Outside of high-yield bonds, municipal bonds, and the front end of the U.S. Treasury curve, most bond sectors remained in negative territory heading into the final month of the year. The widely followed Bloomberg Barclays U.S. Aggregate Bond Index is down 1.79% so far this year and should returns stay negative to close out 2018, it would mark only the fourth time since the index’s inception in 1976 that this index has recorded a negative calendar year.

Interesting Tidbits   Over the past two years, the average price of a Christmas Tree rose 17% from $64 in 2015 to $73 in 2017.  -Bloomberg, November 13, 2018   Of the $43 billion in U.S. music sales generated in 2017, the musicians took home only  $5.1 billion of that,  or 12%.   -Business Insider, August 7, 2018   With sales of $288 million, orchids are now the most valuable potted plants in the America, having edged out poinsettias for that distinction over the past decade.   -Numlock, October 4, 2018   In the U.S. between Thanksgiving and New Year’s Day, waste increases about 25%, or one million extra tons compared with the rest of the year. That includes about 38,000 miles of ribbon, enough to tie a bow around the entire Earth   -Waste360, December 11, 2017    Since WWII, the average correction for the S&P 500 lasts 4 months and sees equities slide 13%. The average loss for a bear market is 30.4% and lasts 13 months.   -CNBC, October 26, 2018   Over the past 20 years, there have been more than a dozen local and state elections in the United States that either were decided by a single vote or ended in a tie. - NPR.org   The average monthly cost for U.S. childcare now sits at $1,385- inching closer to the country’s median rent of about $1,500.  -BNNBloomberg, August 29, 2018    “The trouble with having an open mind, of course, is that people will insist on coming along and try to put things in it.”  -Terry Pratchett   History shows that the midterm elections act as a launching pad for stocks. The S&P 500 has been higher each year after every midterm election since World War II- a perfect 18 for 18.   -USA Today, November 8, 2018   To be in the top 1% worldwide, you need a net worth of $871,320 in U.S. dollars. To be among the top 10%, a net worth of $93,170 will do it. If you just have $4,210 to your name, you are still richer than half of the world’s residents.  - Credit Suisse 2018 Global Wealth Report   It is expected that this year will be the first trillion-dollar holiday season, with a total projection of $1.002 trillion in retail sales between Nov 1 and Dec 31, 2018.  -Quartz, November 6, 2018   Cable and satellite TV providers lost about 1.1 million subscribers in the third quarter of 2018, the largest quarterly loss ever- and the first time the industry lost more than 1 million subscribers in a quarter. Today, 78% of U.S. TV households subscribe to some form of Pay-TV service, down from 86% in 2013.  -USA Today, November 7, 2018   “Trendy is the last stage before tacky.”  -Karl Lagerfeld

Interesting Tidbits

Over the past two years, the average price of a Christmas Tree rose 17% from $64 in 2015 to $73 in 2017.
-Bloomberg, November 13, 2018

Of the $43 billion in U.S. music sales generated in 2017, the musicians took home only $5.1 billion of that, or 12%.
-Business Insider, August 7, 2018

With sales of $288 million, orchids are now the most valuable potted plants in the America, having edged out poinsettias for that distinction over the past decade.
-Numlock, October 4, 2018

In the U.S. between Thanksgiving and New Year’s Day, waste increases about 25%, or one million extra tons compared with the rest of the year. That includes about 38,000 miles of ribbon, enough to tie a bow around the entire Earth
-Waste360, December 11, 2017

Since WWII, the average correction for the S&P 500 lasts 4 months and sees equities slide 13%. The average loss for a bear market is 30.4% and lasts 13 months.
-CNBC, October 26, 2018

Over the past 20 years, there have been more than a dozen local and state elections in the United States that either were decided by a single vote or ended in a tie.
-NPR.org

The average monthly cost for U.S. childcare now sits at $1,385- inching closer to the country’s median rent of about $1,500.
-BNNBloomberg, August 29, 2018

“The trouble with having an open mind, of course, is that people will insist on coming along and try to put things in it.”
-Terry Pratchett

History shows that the midterm elections act as a launching pad for stocks. The S&P 500 has been higher each year after every midterm election since World War II- a perfect 18 for 18.
-USA Today, November 8, 2018

To be in the top 1% worldwide, you need a net worth of $871,320 in U.S. dollars. To be among the top 10%, a net worth of $93,170 will do it. If you just have $4,210 to your name, you are still richer than half of the world’s residents.
-Credit Suisse 2018 Global Wealth Report

It is expected that this year will be the first trillion-dollar holiday season, with a total projection of $1.002 trillion in retail sales between Nov 1 and Dec 31, 2018.
-Quartz, November 6, 2018

Cable and satellite TV providers lost about 1.1 million subscribers in the third quarter of 2018, the largest quarterly loss ever- and the first time the industry lost more than 1 million subscribers in a quarter. Today, 78% of U.S. TV households subscribe to some form of Pay-TV service, down from 86% in 2013.
-USA Today, November 7, 2018

“Trendy is the last stage before tacky.”
-Karl Lagerfeld

In October and November 2018, my wife and I were fortunate to travel to Israel. It is a fascinating place for all of humanity, regardless of your faith. There is incredible history where you can literally see places from Biblical times for all of the major monotheistic religions, diverse and beautiful geographic landscapes (sea, desert, mountains, city skylines), great food, and fun culture.  This is my wife and I at the Dead Sea on Halloween (October 31st, 2018), which is the lowest point on Earth and the salt content of the water is extremely high, therefore there are no living plants or animals in the sea and you can float in the water very easily.

In October and November 2018, my wife and I were fortunate to travel to Israel. It is a fascinating place for all of humanity, regardless of your faith. There is incredible history where you can literally see places from Biblical times for all of the major monotheistic religions, diverse and beautiful geographic landscapes (sea, desert, mountains, city skylines), great food, and fun culture.

This is my wife and I at the Dead Sea on Halloween (October 31st, 2018), which is the lowest point on Earth and the salt content of the water is extremely high, therefore there are no living plants or animals in the sea and you can float in the water very easily.

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The Top Ten End of 2018 Planning Checklist

1. Will you itemize or take the standard deduction on your 2018 return? 
The Tax Cuts and Jobs Act of 2017 (TCJA) made sweeping changes to the individual and corporate tax system.  As a result, many taxpayers will benefit from the reduced tax rates and increased standard deductions, while others may pay more due to capped and/or eliminated deductions. That makes it important to understand whether or not you’ll be in a position to itemize when filing your 2018 return. If you’re on the fence, there may be strategies you can still put in place this year to push itemized deductions over the 2018 standard deduction limits of $12,000 for individuals and $24,000 for married couples filing jointly. If you’re not sure where you stand, get in touch with us or your CPA as soon as possible.

2. Verify Your W-4 Withholding
Changes in the federal tax law made it necessary for taxpayers to re-evaluate their paycheck withholding for 2018. The IRS introduced new tax withholding tables earlier in the year. If you have not yet evaluated your withholding for tax-year 2018, consider a quick “paycheck checkup” using the online IRS withholding calculator. Be sure any changes in your life—marriage, divorce, the birth of a child—are reflected in your allowances. The goal here from a strategic tax planning perspective is to reduce the potential for any surprises in the form of a high tax bill or too high of a refund when filing your taxes next April. Remember, getting a big tax refund isn’t all it’s cracked up to be. It simply means that you were providing Uncle Sam with a short-term, no-interest loan.

3. Maximize Your Retirement Account Contributions
 
Now is the time to maximize contributions to your retirement accounts. If you participate in a company sponsored 401(k) plan, try to meet your employers’ matching contribution at the very least so you’re not leaving “free” money on the table. Additionally, you may want to increase your own contribution in an effort to get closer to the maximum amount allowed; $18,500 for 2018 or $24,500 if you’re age 50 or over. If you contribute to an IRA, you have until April 15, 2019 to make a 2018 IRA contribution. The maximum you can contribute to an IRA for tax-year 2018 is $5,500 plus an extra $1000 catch-up contribution, if you are age 50 or older.

4. Check Your Flexible Spending Account Balances 
There is still time to take a look at your flexible spending accounts (FSAs). The “use it or lose it rule” generally applies to your flex accounts. You may also want to check with your employer to see if they have adopted a grace period allowed by the IRS to set aside 2018 money into the beginning of 2019.

5. Maximize HSA Contributions
A health savings account (HSA) is a tax-advantaged medical savings account available to taxpayers enrolled in a high-deductible health plan (HDHP). HSA funds may only be used to pay for qualified medical expenses. The 2018 annual contribution limit for individuals is $3,450 and $6,900 for those covered under qualifying family medical plans. Funds in an HSA grow tax-free and unlike an FSA, can grow from year to year.

6. Check Your Required Minimum Distributions
If you’re age 70 ½ or over and required to take distributions from your traditional IRA or other qualified retirement accounts, do a quick verification to ensure you’ve satisfied your distribution for 2018 to avoid paying up to a 50 percent excise tax if you fail to take the appropriate distribution.

7. Consider Tax-Loss Harvesting - Taxes should never be the only reason to sell an asset, but if you’re looking to make a change in your portfolio, selling out of a position with an unrealized loss can help offset other gains. Before taking action, be sure to consult with your tax advisor to see if it would be valid to book a loss before year end to offset any realized taxable gains.

8. Rebalance Your Investment Accounts
Has your portfolio shifted more than you realize.  Now is a good time to take inventory of your retirement plan from your job and other investment accounts to see if you need to recalibrate your account back to your desired asset allocation.

9. 2019 Company Plan Changes
Have you thoroughly reviewed your company employee benefits for 2019?  Do you need to make additions, subtractions, or changes depending on your family dynamic or changes to the plan?  Also, perhaps your company has updated their investment lineup options through their retirement plan and you may need to update accordingly?

10. Your 2019 Goals
Start thinking about what you want out of 2019 for your self, your family, your business.  Based on your desires, are there action items you can take now to put yourself in a position to actually achieve this or move closer to this goal in 2019?  Perhaps it is a family vacation, perhaps it is a large purchase, or perhaps it is taking more time off.  Let us know if we can help you forecast and make your vision a reality.

Partial credits to Forbes.com