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FEE ONLY - Financial Planning and Wealth Management

Tel: (314) 961-1850

Happy New Year!

I wish you the best for 2016 – happiness, health and yes, wealth.   2105 was not a great help for the latter! Nor is this post New Year holiday market – seems a little “hungover” and no one likes to ring in the New Year with stock market volatility.  However, it’s likely nothing to be remotely worried about.

What’s going on now?
The markets opened down due to expected negative data from China and their stock market plunge in combination with devaluation of currency.   Also, the escalation of tension between Iran and Saudi Arabia hasn’t helped nor provided any relief to the price of oil dropping.

Frankly, China’s decline, Middle East tension and dropping oil is nothing new.  Additionally, in most instances in history, a negative start to the year results in a bounce back in short order and trends towards stock buying throughout the rest of the month.

Retrospective of 2015
Soft domestic and global economies, declining corporate revenue and earnings, China’s economic slowdown, sharp declines in oil and commodities, and the strong dollar relative to other currencies, all collectively created market volatility as well as limited and narrow investment opportunities.  Actually, in 2015 cash/money market accounts had higher returns than the broad market, if we leave out dividends. With the decline in December, stocks finished 2015 on a down note: The S&P 500 lost ~ .7% (+~ 1.38% including dividends) last year – its first decline in 7 years!  The DOW stocks fared even worse, down~ 2.2% (not including dividends).   The technology heavy NASDAQ gained ~ 5.7% mostly due to the strong returns of the largest 100 stocks in this index, growing ~ 8.4%.  Removing these 100 stocks, the NASDAQ would also be negative for the year.  In fact, the significant out performance of a ~ dozen stocks including Alphabet/Google (GOOG), Amazon.Com  (AMZN) and Facebook (FB), carried the market.  However, with the average large and small company stocks down 4.1% and 11.2% respectively, most investors likely saw their equity portfolios fall in value.   Add to this the negative return of the aggregate bond index (AGG) with the decline in high yield bonds, emerging market stocks and most international stocks, 2105 proved to be a very challenging year! Of course, portfolio performance could  have been worse; Maxele’s portfolios’  generally held up well  by avoiding  the investment landmines of being overweight in  the 2015  negative sectors such as  energy (-14%),  materials (-18%), and  emerging markets (-17%).

Keeping Perspective on Investing
Yes, the last year was not great in helping create and maintain your wealth, however, remember, 2014 was a good year for the markets and the 4th consecutive year for positive US stock market returns.   In fact, 2014 was a volatile year too with 6 market declines ranging from ~ 3-8%.   The majority of aggregate portfolios, including cash and bond positions, ended up approximately 5 to 10% net of fees in 2014, depending on Investment Model.   Moreover, most portfolios are up very nicely over the last 3 years, even when including 2015’s negative return!   Since 2008, the broad market has been up 5 of the last 7 years.

It’s important to keep in mind your Annual Target Investment Return Average; what one needs vs desires for investment gains are generally two different things.  Also, we emphasize average as returns fluctuate year to year.   We keep risk in the context of each client’s tolerance and overall financial planning need to take risk. We want to manage risk - besides death and taxes, market volatility and even declines are a sure thing!

Our 4 Investment Models - Conservative with Focus on Preservation of Principal, Conservative, Moderate and Moderate Plus – captured substantial portions of market gains over the last 3 years- including 2015 - and did well in comparison to various relevant  broad benchmarks:  Total Bond Market Index, Balanced,( 50% S&P 500 Index / 50% Total Bond Market Index ) and the S&P 500 Index.  In most cases, portfolios were overweight in the best performing sectors and underweight in the lagging or negative sectors.  Additionally, one must take into account the timing of investing new money and the customization of each model for each client.  Sometimes, it can take a year or longer for new funds/cash to reflect Model Investment Returns.

2016: Going Forward From Here
Although investment returns are likely to remain muted in 2016, a US recession is unlikely.   Access to borrowed funds and the US consumer remain strong.  Despite geopolitical concerns, China, oil and the strong US dollar, average corporate earnings should trend positive; focusing on quality, higher earnings and revenue of domestic concentrated companies should be promising.   Additionally, presidential election years can be positive for the markets and years following a negative or flat year tend to lead to increased values.  The outlier returns of the growth stock sector, specifically those stocks that have substantially outperformed, may correct and could result in value stocks and the broader market having a much better year in 2016.  The markets will remain volatile, even incurring abrupt, sharp declines as our economy normalizes with increasing interest rates.   This will likely lead to investment opportunities.  Misaligned assets lead to diamonds in the rough.  Expectation for mid- single digit returns, not including dividends would be reasonable.  Bonds and fixed income likely providing flat to low digit total returns.

At Maxele, through your confidence in us, we focus on providing a foundation of trust that helps us help you achieve a multiple of benefits:  your  peace of mind that comes from  the knowledge and feeling that all “bases” are covered including achieving and maintaining a comfortable retirement based on your lifestyle, survivorship planning for loved ones, meeting savings goals such as paying college tuition, assisting with your investment income and estate planning in conjunction with your tax advisor and attorney. We do our best to take the time to understand your wealth management and financial planning picture; our Portfolio Models enable you to invest with confidence - managing risk rather than avoiding risk; helping you understand how much risk to take based on your individual needs, goals and objectives.

We look forward to reviewing your 2015 Aggregate Portfolio Performance, updating and confirming your customized client specific planning information as well as discussing the 2016 Investment Market Outlook.

We wish you and yours a happy, healthy and prosperous 2016!

Steve Erken, CFP®
January 7th, 2016

Market Performance


Maxele Advisors may only transact business with Missouri and Illinois residents or residents of other states where otherwise legally permitted subject to exemption or exclusion from registration requirements

Contact Info

Maxele Advisors, LLC is conveniently located in Webster Groves, Missouri with ample FREE parking.

20 Allen Ave.
Suite 330
Webster Groves, MO 63119

Tel:  (314) 961-1850

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