March 19, 2019

Reminder: It’s Time to Schedule Your Tax Appointment

We are now taking appointments for the 2019 income tax season. Even if you haven’t yet received all of your statements, we recommend scheduling early in order to find a time that’s convenient for you.

Call 203‑967‑2231 or email advisors@thedowlinggroup.com to reserve your session. We look forward to seeing you!

The Markets

Stock and bond markets rallied.

Last week, major U.S. stock indices finished higher for the 10th time in 12 weeks. Bond markets moved higher, too, with the yield on 10-year Treasuries dropping just below 2.6 percent, reported Randall Forsyth of Barron’s. Yields on 10-year Treasuries haven’t been this low since January 2018.

The simultaneous rallies are curious because improving share prices are often an indication of a strong or strengthening economy. Improving bond prices tend to be a sign of weakening economic growth, reported Michael Santoli of CNBC.

Why are U.S. stock and bond markets telling different stories?

It may have something to do with investor uncertainty. A lot of important issues remain unsettled. The British government appears incapable of resolving Brexit issues, the United States and China have not yet reached a trade agreement, and recent economic reports have caused investors to take a hard look at the U.S. economy.

Barron’s pointed out investors appear to be hedging their bets by favoring in utilities and other stocks that have bond-like characteristics and participate in the stock market’s gains. An investment strategist cited by Barron’s explained:

“The strength in utilities reflects the attitude of investors who ‘don’t really buy the rally’…While they’re skittish, they still want to participate in the stock market rally but opt for its most conservative sector.”

We’ve seen this before with stocks and bonds, according to a financial strategist cited by Patti Domm of CNBC. “It’s a little bit of a funky correlation. We've had both things rallying, which is strange. This is what happened in 2017, when all asset classes did well. In 2018, nothing did well…I would suspect it goes away soon.”

Times like these illustrate the importance of having a well-diversified portfolio.

Stock market data table

Gen Xers And Millennials: What Are Your Priorities?

The 2018 Insights on Wealth and Worth survey provided some startling information about the priorities of high net worth (HNW) investors. More than one-half (54 percent) indicated long-term capital appreciation was a higher priority than income generation. The other 46 percent were looking for steady income.

Let’s look at the percentages by age group:

  • Millennials: 56 percent capital appreciation / 44 percent steady income
  • Gen X: 56 percent capital appreciation / 44 percent steady income
  • Baby Boomers: 56 percent capital appreciation / 44 percent steady income
  • Silent Generation: 46 percent capital appreciation / 54 percent steady income

Millennials (ages 21 to 37), Gen Xers (ages 38 to 53), and Baby Boomers (ages 54 to 72) prioritize steady long-term income to the same extent.

Older investors, who are near or are in retirement, tend to emphasize steady long-term income because they need to maintain their standard of living in retirement. However, one of the advantages of youth is these investors have the time and flexibility to take on higher levels of risk and recover from any market downturns. In other words, younger investors prioritize capital appreciation (i.e., growth) while older investors prioritize income.

It’s important for younger investors to consider their life goals and how their finances may support the pursuit of those goals.

Weekly Focus – Think About It

“There are risks and costs to action. But they are far less than the long range risks of comfortable inaction.”

—John F. Kennedy, 35th President of the United States

Best regards,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management

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  • Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
  • Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
  • The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
  • All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
  • The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
  • The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
  • Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
  • The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
  • The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
  • International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
  • Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
  • Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
  • Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
  • Past performance does not guarantee future results. Investing involves risk, including loss of principal.
  • You cannot invest directly in an index.
  • Stock investing involves risk including loss of principal.
  • These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
  • This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
  • The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
  • Consult your financial professional before making any investment decision.

Sources:

https://www.barrons.com/articles/why-investors-are-rushing-into-stocks-that-act-like-bonds-51552700368?mod=hp_DAY_4 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-18-19_Barrons-Why_Investors_are_Rushing_into_Stocks_that_Act_Like_Bonds-Footnote_1.pdf)

https://www.cnbc.com/2019/03/14/stock-investors-wonder-whether-the-bond-market-knows-something-they-dont.html

https://www.bls.gov/news.release/empsit.nr0.htm

https://www.barrons.com/articles/why-utility-stocks-are-worth-a-second-look-1531344310 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-18-19_Barrons-Why_Utility_Stocks_are_Worth_a_Second_Look-Footnote_4.pdf)

https://www.cnbc.com/2019/02/06/bonds-and-stocks-going-up-together-could-be-signaling-market-at-an-inflection-point.html

https://ustrustaem.fs.ml.com/content/dam/ust/articles/pdf/insights-on-wealth-and-worth-2018/Detailed_Findings.pdf (Pages 3 and 39)

https://www.moneyunder30.com/asset-allocation-for-investors-under-thirty

https://www.brainyquote.com/quotes/john_f_kennedy_109216?src=t_risks

ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.