Market Watch
Whether you call it the “Santa Claus Rally, the “Trump Rally”, or just a reaction to the finality of the election being over, one has to be impressed with the performance of the stock market in the 4th quarter this year. Even a 1/4 point increase in interest rates by the Federal Reserve in December, and a subsequent sell off in the bond market couldn’t derail the stock market in 2016. In fact, during the past year the markets defied many of the conventional, albeit facetious, indicators utilized by investors to gauge the market’s future performance, including the “first five days of January indicator”, the “January indicator” and the “Super Bowl indicator”. All of these gauges predicted a down year for the markets in 2016.
In a year when the pollsters seemed to get many of the important events wrong, including Brexit and the US Presidential election, the markets pulled out of the doldrums in February, and except for a summer slump and an election night scare, never looked back. This is another reason why market timing is so damaging to your portfolio. Just imagine if you would have converted your assets to cash on the eve of our election. You would have lost most of the returns for the entire year. With the DJIA* approaching the 20,000 point level, which is merely a psychological milestone, this rally has added a well earned end of the year increase in portfolio values.
For the last two years, the major market indices have been sending mixed signals, but as 2016 closed, all of the stock market indices finished in positive territory. The DJIA* ended the year at 19,762.60 for a 13.42% increase from its 2015 close of 17,425.03. The S&P 500* finished up 9.54% from its 2015 level of 2,043.94, while the NASDAQ* was up 7.50% closing at 5,383.12, which was 375.71 points higher than its 2015 close of 5,007.41. Whether this bull market can continue to perform into the new year depends on the US economy’s ability to continue to grow, and if some of the promises made by the new administration become policy.
Changes in tax policy, fiscal policy and regulatory policy are just a few of the promises spurring the markets to new highs. The markets seem to be shrugging off some of the rhetoric from the election campaign and are more focused on the repatriation of the enormous amount of cash earned overseas by multinational corporations at a lower tax rate, spending on the infrastructure in our country, which is in need of repair, and a lessening of the regulatory burden on the financial, energy and health sectors of our economy. The hope is that these promises will be the focus of the new administration, and that we will have a no nonsense leader in the White House, who will negotiate trade deals and various other deals with our allies and adversaries which will be more advantageous to the United States.
Financing infrastructure spending can and should be done while interest rates are still at historic lows. This will take agreement by the Executive and Legislative Branches of government in the early months of the new administration and leadership is imperative. While interest rates are slowly rising, there is a window of opportunity to finance debt with very attractive rates. This window will not exist forever, because spending at the Federal level with accelerated GDP growth, while reaching the full employment level can become inflationary. One factor the administration has going for it is the Labor Force Participation Rate in the US. It decreased to 62.70% in November. The Labor Force Participation Rate averaged 63% from 1950 through 2016. It was 67.3% in 2000.
Welcome to 2017
Have a Happy & Prosperous New Year
Workplace Retirement Plans and IRA Contributions
Once again, there are virtually no changes in various retirement plans for 2016, except that the total annual contributions to a plan increased to $54,000 from $53,000 in 2016.
IRA & ROTH IRA contributions can be made for 2016 until April 17, 2017 and they remain $5,500 with a catch up of $1,000 for anyone 50 and older.
SIMPLE IRA Plan employee salary deferral limits are still $12,500 with a $3,000 catch up for employees who are 50 years of age or older.
401k, 403b and 457 Deferred Compensation Plans allow a maximum employee salary deferral of $18,000 with a catch up contribution of $6,000 for those 50 years of age and older.
If you have any questions or concerns about your investments or insurance, please don’t hesitate to contact me.
Are Your Investments Ready for the New Year?
The dawn of a new year is an ideal time to assess your progress toward your investment goals, and make any needed adjustments. These 7 tips from FINRA can help you plan, stay abreast of changes in the market and their impact on your portfolio, and protect your investments:
1. If you don't know where you're going, any road will take you there. Are your goals current, or have they changed? Setting clear, prioritized goals—each with steps to achieve the goal, a price tag and a time frame—will help guide your investment approach.
2. Focus on your financial security. Take advantage of day-to-day opportunities to help build your finances for the long term, such as benefiting from tax breaks for college savings or retirement; paying your credit-card debt on time and in full; and setting aside some funds for the unexpected.
3. Understand the impact of higher interest rates. Yes, the Fed raised the federal funds rate and might do so again, but that alone might not change your investment strategy. There are several factors to keep in mind as you consider what action, if any, you need to take regarding rates.
4. Track and rebalance your investments. Whether you work with a broker or adviser, or you trade on your own, you should always monitor your investments to prevent minor mistakes from turning into big problems. In particular, evaluate whether it's time to rebalance your portfolio in view of your current goals and the changing investment environment.
5. Know your investment professional. Understand what the different types of investment professionals offer to help you achieve your goals. Whether you're looking for a new broker or investment adviser or just want to re-check the credentials of your current financial pro you can use FINRA BrokerCheck to obtain registration, disciplinary history and more on brokers, investment advisers and the firms that employ them.
6. Protect your money. Fraud is a growing threat, but can be avoided. Know the basic techniques of scammers and strategies to deal with them, such as how to end the conversation or ask questions and turn the tables on fraudsters.
7. Plan for a worst case. It's never too early to consider how you want your financial affairs to be managed if something happens to you. One solution is to grant a power of attorney (POA) for your investment account assets to someone you trust. Start by finding out if your financial institution has its own POA forms.
Setting clear, prioritized goals --each with steps to achieve the goal, a price tag and a time frame— will help guide your investment approach.
Company Information:
John H. Kaighn is an Investment Advisor Representative with and offering Investment Advisory Services through Jersey Benefits Advisors.
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 856 637-2479
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
John H. Kaighn is a Registered Representative with and offering Securities through Signator Investors, Inc. Member FINRA SIPC
197 Clarendon Street
Boston, MA 02116
800-322-7161
Member FINRA & SIPC
Signator Investors, Inc. is not affiliated with Jersey Benefits Group, Inc. or Jersey Benefits Advisors
Third Party Administration and Insurance Services offered through: Jersey Benefits Group, Inc.
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 856 637-2479
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are independent of Signator Investors, Inc. and solely those of John Kaighn & Jersey Benefits Advisors.
* The S&P 500, the DJIA, the NASDAQ and others referenced are unmanaged indices that are widely used as indicators of Market Trends. Past performance does not guarantee future results. The performance of these indices does not reflect fees and charges associated with investing. It is not possible to invest directly in an index.
*Dollar Cost Averaging through a systematic savings plan is an excellent way to build an account without a sizeable initial investment. Saving a portion of our pay each month is very important. Company sponsored pension plans are one method to save and should be used for retirement. Other systematic investment accounts, SUCH AS ROTH IRA’S, TRADITIONAL IRA’S, COVERDELL ACCOUNTS, 529 PLANS, BROKERAGE ACCOUNTS AND ANNUITIES can also be opened, and debited directly from your checking or savings account. For more information, just call to set up an appointment. REFERRALS ARE ALWAYS WELCOME.
John H. Kaighn
199-20170103-341390
