How long does it take to become a long-term investor? Past performance is not a guarantee of your future results but ignoring history is unwise. According to Craig Israelsen, Ph.D., an academic whose research we license, over the last 93 years, the four major asset classes – stocks in large and small companies, 10-year U.S. Treasury bonds, and 90-day Treasury bills – through the end of 2018 offered returns and risk levels as shown. The period encompasses all of modern Wall Street history, some of the best statistics for understanding investing. Owning stock in large U.S. companies averaged a 9.99% return nominally, which is economic-speak for saying “before adjusting for inflation.”
The most important financial news of 2018 was that Modern Portfolio Theory (MPT), the strategic underpinning of prudent investing, worked. Yet you just don’t see front-page headlines saying conventional wisdom worked. Why? Because when what’s expected to happen actually occurs, it’s not news. Nonetheless, the fact that modern portfolio theory worked, just as academia has expected it would, was the most important financial news of 2018.
A key determinant of the growth of wealth for Americans over the next decade is likely to be the federal debt. On January 28th, the non-partisan Congressional Budget Office released its annual 10-year forecast of the debt. Here’s what the CBO said along with five observations adding context to understand this risk to U.S. investors.
As financial professionals, we believe understanding the dynamics of retirement income portfolio risk can be crucial to investment success. The survivability of five hypothetical retirement portfolios over the 20-year period ended December 31st, 2018 shown in the accompanying table is not intended as investment advice but is intended to help clients better understand retirement portfolio risk and conquer perhaps the worst of all financial fears: running out of money in retirement. The data is based on a continuing professional education session by Professor Dr. Craig Israelsen, an independent economist whose research we license.
The economy created 304,000 jobs in December, the Labor Department reported on Friday, much more than the 172,000 expected. It was the second consecutive month of much stronger than expected growth in net new jobs. The unemployment rate rose to 4% but remained in a low range last seen in 2000. While economic fears have been heightened recently, this strong jobs data is not the kind of conditions that have preceded recessions.
For business owners, professionals, and wealthy families, tax rules are about as favorable as they’ve been in decades, but the tax policy pendulum could swing back again. Be prepared to make some important financial decisions much sooner than had been expected.
Fears of a recession loomed larger last week after the chairman of the President’s Council of Economic Advisors, Kevin Hassett, doubled his estimate of the damage the U.S. economy will suffer from the partial shutdown of the federal government. He was widely quoted across the media as saying first-quarter growth of the economy could stall to zero. On Friday, the shutdown uncertainty was resolved, at least for now, and new data indicated the headlines were much more ominous than the current economic facts.
The Tax Cuts and Jobs Act (TCJA) gives business owners new ways to save significantly on federal income taxes, but there are obstacles to getting the full benefits. Here’s a primer on tactics to get around some of the barriers.
While the stock market plunged in December and headlines turned grim, small business owners overwhelmingly remained optimistic about the economy and business conditions.
Amid grim headlines and a widely-held perception that global growth is slowing dramatically, new economic data forecasts from The World Bank and The Wall Street Journal indicate that neither world economic growth nor the U.S. economy are in bad shape.