This One Concept is Critical to Investing Success

Making sense of stock price movements is a challenge for all investors. Share price fluctuations often seem illogical…they go up when we think they should go down, and they go down when we think they should go up. Here’s why.

Capital markets are forward looking mechanisms, meaning at any given moment, they reflect a certain set of expectations for the future. From GDP, to Federal Reserve monetary policy, to corporate earnings, etc., market participants en masse set expectations for nearly every economic measure. Markets move when actual results deviate from these expectations. If results are better than expected, prices often move higher and vice versa.

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Investors’ Handling of Market Corrections is Improving

Humans are hardwired to avoid danger, including financial dangers. This instinct causes many investors to panic and make costly mistakes during periods of market turmoil.  A Fidelity study, however, found several positive trends among investors during the recent 4th quarter market correction. It is encouraging to see these trends and, since market corrections occur regularly, it is crucial investors repeat the actions in future market downturns.

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Don’t Fear the End of the Current Bull Market

Investors of a certain age recall all too well the end of the last bull market. From late 2007 to early 2009, the S&P 500 Index fell 56% and lost a staggering $11 trillion in market value. That painful memory has many of today’s investors wondering how long the current bull market will last and how they can protect their portfolios from its eventual, inevitable demise. The simple answer, surprising as it may sound, is “don’t worry about it.” Rest assured, I have not lost my mind.

Study after study shows that most investors buy-high and sell-low. This is because they’re convinced they can correctly identify the beginnings and endings of bull and bear markets when, in fact, they can’t… no one can. As a result, the millions of Americans who sold in 2008 when stocks were low missed out on the extraordinary gains that began in early 2009 and persist today.

072318 Market Bottom.PNG

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Global Markets Shocked by Britain’s Surprise Decision to Leave the European Union

 Polling ahead of yesterday’s Brexit referendum in the U.K. pointed to a slim victory for Remain proponents, including Prime Minister David Cameron. As a result, stocks gained steadily in the days leading up to the historic vote. How misleading those polls turned out to be as a majority of Britons cast their votes in favor of leaving the EU. This is a bona fide historic event but it is not a cause for panic and should not alter the basic calculus for the vast majority of individual investors.

Not surprisingly, global equity markets sold off by as much as 8%, the British pound plummeted, the euro fell and the price of gold jumped to a two-year high. Morning trading on the New York Stock Exchange is much tamer than elsewhere with the major stock indices moving down by 2.0-2.5%, on average. Fixed income markets are moving decidedly higher.

In the short-term, MCM portfolio managers are busy sorting through the carnage hunting for mispriced assets that can be bought at attractive discounts and/or sold for outsized profits. Our objective to maximize investment rate-of-return in client portfolios remains unaffected by the events in Europe.

Longer-term, all eyes will be on other EU countries and whether or not they follow Britain’s example and stage referendums of their own. Italy, Spain and Greece immediately come to mind. A total collapse of the EU is not out of the question. The only sure thing is that capital market volatility will be with us a good while longer.

Behind the Curtain: My Path to MCM

After graduation in 2010 from Central Michigan University (CMU), I knew generally what I wanted from my career: to enrich people’s lives by helping them invest their hard-earned, hard-saved money. However, I didn’t have a clear idea how I would do that or how many different career paths were available within the investment management landscape. For example, there are firms that sell financial products such as mutual funds, insurance, and annuities, and there are firms that manage the money directly as a professional service, aka money managers. I knew of these different paths from my studies in college, but I was unsure which was right for me.

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Share buybacks. Good, Bad, or Ugly?

Publicly-traded companies buying their own shares (share “buybacks” or “repurchases”) increase earnings per share by reducing the total number of shares outstanding (identical earnings spread over fewer shares).  It’s commonly positioned as “returning value to shareholders,” because investors who maintain their shares end up owning a larger percentage of total company shares; in turn owning a larger percentage of future earnings.  As of February 10th, S&P 500 companies have announced plans for $99 billion dollars of share buybacks in 2016.   The largest start to the year ever.  Get ready to receive some serious value!

Not so fast – Continue reading “Share buybacks. Good, Bad, or Ugly?”

As Bull Market Reaches Seven Years Old, It May Still Have Years to Run

Stocks had a rough year in 2015 and face a number of challenges in 2016, including rising interest rates and a strong U.S. dollar. That doesn’t mean we’re not still in a secular bull market* where 2015 is the pause that refreshes before stocks continue grinding higher.

Since bottoming in early 2009, $15 trillion has been restored to share prices as stocks tripled in value over the ensuing 82 months. At 7 years old, some market pundits argue the current bull market is long in the tooth, and if history is any indicator, must inevitably die of old age. Supporting this argument is the fact that no bull market in history has ever exceeded 10 years. This viewpoint, however, ignores the possibility of a longer lasting secular uptrend consisting of larger bull markets and smaller bear markets.

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Required Minimum Distributions

What is an RMD?

A Required Minimum Distribution is the minimum annual amount that must be withdrawn from tax-deferred (qualified) accounts after an individual turns 70 I/2. RMDs are a way for the government to recoup the taxes that have been deferred for years, perhaps decades, in individual investors’ tax-deferred retirement accounts.

What accounts are subject to RMD?

 Any traditional IRA, SIMPLE IRA, SEP IRA or other tax-deferred retirement account, such as a 401(k), 403(b), Profit Sharing Plan, or Deferred Compensation Plan. Roth IRAs are not subject to RMDs.

When do I have to begin taking my RMD?

 When an individual turns 70 1/2 (6 months after their 70th birthday) they must begin taking distributions from their qualified account(s). They have until April 1st following their “half birthday” to take the first distribution. After that, it must be taken annually before year end.

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There’s No News Like Bad News

Wall Street forecasts for global GDP growth, earnings, and stock prices run the gamut for 2016. That means there are intelligent, well-reasoned analyses for both optimism and pessimism regarding where stock prices are headed. Why then, do negative headlines garner more attention and airtime?


The answer lies in a 1979 Nobel Prize winning study showing the overwhelming majority of investors dislike investment losses more than they like investment gains. This is the investing version of human history where threats to our survival have always been more urgent than opportunities to do something more than just “survive.” Be a pessimist and you’re a market sage who manages to peer past the obvious. Conversely, optimists, like Wharton Professor Jeremy Siegel, personify those negatively viewed as “perma-bulls” for traditionally positive outlooks of the stock market – a view Professor Siegel has held since the 1980’s. An inconvenient truth for the pessimists though; since the 1980’s the S&P 500 has increased in value 1,573%. Absolutely, it pays to invest with caution, but don’t let too much pessimism keep you from making money.