You may be think­ing, Okay Mack­ey, so you went to a con­fer­ence, big deal.  Well, this con­fer­ence is a BIG deal. It is the best tech­ni­cal finan­cial plan­ning con­fer­ence of the year.  Top­ics cov­ered include: invest­ment updates, mar­ket trends, tax updates, the lat­est in insur­ance and estate plan­ning, and best prac­tices for improv­ing your busi­ness.

At Mack­ey Advi­sors, we are com­mit­ted to stay­ing up to date with the avalanche of changes hap­pen­ing in the finan­cial world in order to help you craft a pros­per­ous future.

The world of finan­cial advis­ing real­ly boils down to those who prac­tice sales skills and those who prac­tice tech­ni­cal excel­lence.  We are the lat­ter and grow our busi­ness through your kind refer­rals rather than sales savvy.

Over the next few weeks watch for my blog posts on:

  • Mar­ket updates
  • Tax changes
  • Retire­ment plan­ning
  • Social Secu­ri­ty
  • Oth­er time­ly top­ics

In this arti­cle I have sum­ma­rized (from my per­spec­tive) the keynote address, Guide to the Mar­kets, by David Kel­ly, JP Mor­gan Funds.

 

Guide to the Mar­kets: By David Kel­ly, JP Mor­gan Funds

Mr. Kel­ly opened with a great state­ment; our job as advi­sors is to see the present with clar­i­ty, not to see the future with a crys­tal ball.  Look at the broad­er mar­kets, and see what is out of bal­ance.  Invest and wait.  Mar­kets always return to bal­ance.  Sim­ple, yes. Easy, no.   Attempt­ing to deter­mine when the mar­ket will end the year is fol­ly.

Today, mil­lions of Amer­i­cans are mak­ing poor deci­sions, because they are over­ly pes­simistic.

The US econ­o­my is grow­ing, an aver­age of 2.2% annu­al­ly since the reces­sion.  Slug­gish pace is pri­mar­i­ly a result of uncer­tain­ty and “help” from Wash­ing­ton.

What is most impor­tant about the US debt is not the debt in total dol­lars, but the debt as it relates to GDP.  If the econ­o­my grew at 5% sim­i­lar to his­tor­i­cal norms, and the deficit was 4% of GDP, we would make slow progress toward reduc­ing out debt.

The bad news is we have a drag­ging econ­o­my, so this is not pos­si­ble in the short term. 

The recent tax act did add cer­tain­ty to indi­vid­ual (not cor­po­rate) tax rates, which is pos­i­tive for mar­kets, but the elim­i­na­tion of the 2% FICA tax hol­i­day will be felt by  retail­ers, like Wal-Mart, and will slow over­all growth. 

Con­sumer bal­ance sheets are in much bet­ter shape. Amer­i­cans now have $5 in assets for every $1 of debt, and most of this debt is mort­gage debt, now refi­nanced at his­tor­i­cal lows.  Cur­rent­ly, we use less of our house­hold income ser­vic­ing debt than any­time since 1980.  Cor­po­rate bal­ance sheets are explod­ing with cash, as they wait for long term clar­i­ty on tax rates.

Many mar­kets indi­cate room to grow, such as hous­ing.   For exam­ple, we are now build­ing 900,000 homes annu­al­ly in the US, and hav­ing 2.2 mil­lion mar­riages.  Even­tu­al­ly these 2 data sets will merge and fill the pent up demand for hous­ing. 

Mr. Kel­ly sug­gests that today the mar­ket is under­val­ued, and rec­om­mends over­weigh­ing stocks giv­en val­u­a­tions based on his­tor­i­cal P/E ratios. Indi­ca­tions are the next 5 years will be strong for equi­ties.  Be sure to have enough cash and short term bonds to weath­er short term cor­rec­tions.   

We are unlike­ly to see height­ened infla­tion through 2014, maybe 2015.  Watch for real returns on bonds to be neg­a­tive soon and con­sid­er under­weight­ing fixed income allo­ca­tions with the excep­tion of high yield bonds.

As for the rest of the world, the dol­lar will edge down over time.  This will raise val­ues of over­seas mar­kets.  There is no expec­ta­tion for growth in devel­oped over­seas mar­kets.  As for emerg­ing mar­kets, demo­graph­ics will dri­ve poten­tial.

Today’s chal­lenge is the psy­chol­o­gy of investors.  Long term mar­kets always return to bal­ance.

As always, at Mack­ey Advi­sors™, we rec­om­mend you invest with regard to your cash flow needs and your goals, val­ues, and inten­tion.  We wel­come you to update your plan or invite you to learn more about our award win­ning plan­ning process, The Pros­per­i­ty Expe­ri­ence™ by call­ing Mack­ey at (859) 331‑7755 ext. 103.

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