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Summer's SignalsSubmitted by CHARLES CARROLL FINANCIAL PARTNERS on August 8th, 2017
Client Account Reporting
Quarter Ending July 31st, 2017
The summer is in full swing and I hope that you can enjoy the treats that summer offers. Here in New England it is important that you take advantage of every day regardless of the 55-degree waters.
If the economy is a sign of things to come, then we should be in pretty good shape for the foreseeable equity market future. Many economists are now thinking that a 2% GDP growth rate is like taking a harbor cruise. You know that the bumps will be minimal and the journey will eventually get you back to port. In essence, the cry for faster growth may not be the most advantageous path to pursue unless your business is based upon the volatility of the markets, in that case it may just be a long never-ending summer.
The continued turmoil out of North Korea is indeed troubling. Pundits have concluded that intervention by either Russia or China in the turmoil is not coming. (After all, wouldn’t you want to see how the U.S. reacts militarily both offensively and defensively?) So far, the seriousness of the North Korean military has not had an ill effect on the market. While we are watching this issue closely, we have been already taking actions with regards to your portfolios. We have been scaling back your portfolios with regards to equity exposure. You may have already seen the sale of some of the stalwarts of the portfolio, namely: Google, Facebook, Amazon, and Alibaba to name a few. In some instances, we have sold securities that have been in portfolios for some time but no longer meet the criteria that we set.
The market has been kind to most portfolios and returns are above or well above market indices through the first seven months of the year and full year. This is the main reason for reducing your equity exposure.
This summer has seen upheaval and nonsense coming from our executive branch. The President is certainly using his stage phrase liberally as “your fired” is echoing down the halls of the White House. Luckily, none of the shenanigans have interfered with the upward march of the market indices.
This past week provided evidence of strong earnings from the likes of Facebook, Google, and Netflix. Even the beleaguered biotechnology and healthcare stocks showed strong earnings. Unfortunately, energy still trails most sectors of the market as oil prices staged a comeback, a fallback, and another comeback before settling just below $50 per barrel at the end of the quarter. This $50 level doesn’t have much impact on market averages and the outlook does not look favorable for oil to move much higher.
While your personal income taxes may not be a high priority for you during a summer vacation, they are front and center for us as we look at your portfolios. This past month I met with the Wagners, Susan and RIkki and reviewed all client accounts with regards to capital gains, dividend income, and life events that will influence your 2017 tax return. We are anticipating some type of tax plan before the end of the year but perhaps not for individual filers but for business owners and corporations.
The past ten years has left major corporations at a disadvantage when it comes to taxation versus other global competitors based outside the U.S. Hopefully, Congress can act in a manner beneficial to all its citizens and make changes to the corporate tax structure to better compete in a global marketplace.