Volatility is Back

April 19, 2018

One of the things successful equity investors need to accept is volatility in their equity portfolios is the price paid for greater potential long term returns.  Last year was unprecedented for equity markets as we experienced one of the longest periods of low volatility and a strong market.

More typical are equity markets fluctuating around a trend line which may be up or down.  It is the opinion of a number of equity managers I follow and based on equity valuations, current and projected earnings and considering equity holdings of the average investor (still below 2007 holdings) that this equity market has a year or so to run.

Link to Ben Carlson’s article on what to expect as volatility returns to equity markets


“Overall, U.S. households have $900 billion less invested in stocks than in 2007, according to Goldman Sachs research, leaving buying by U.S. corporations now the greatest driver of demand. In 401(k) retirement plans, meanwhile, investors now hold an average of 52.4 percent in equity-only funds, down from the 64.7 percent they held in 2007, according to Fidelity.

“Instead, investors now hold an average of 33.2 percent of their assets in blended target-date funds that combine stocks, bonds and cash based on a person’s expected retirement date, more than double the 14.5 percent of assets invested in the category in 2007.”

“Ten years after crash, Americans still have not fallen back in love with stocks,” 
Reuters, March 18 

Market Volatility

March 21, 2018
The article linked below, written by Michael Greenburg, CFA Franklin Templeton, comments on the recent equity market volatility which followed almost 12 months of extremely low volatility.


“We have been expecting interest rates to go higher and have urged the Fed to raise rates more quickly. Given the pace of economic growth, the Fed is a long way from being tight. At the same time, economic data have been strengthening and earnings are booming. With 337 S&P 500 companies having reported 4Q earnings as of the 8th of February, 76.9% have beaten estimates, and earnings are up 17.0% from a year ago. This double-digit earnings growth is forecast to continue through 2018, even with higher interest rates. Corporate balance sheets are stronger than they have been in decades, spending is accelerating and the recent tax cut is an unambiguous positive…The Fed is still easy and will be for the foreseeable future. Remember, there are still over $2 trillion in excess reserves (in the banking system)!”

— Brian Wesbury, “This is just a correction,” February 9

Death and the Present Moment

The prospect of death can be quite a motivator.  Financial Life Planning is about clarifying the things my clients want, determining the financial tethers and then helping make them happen. Sam Harris does a fantastic job of helping us understand it is always now!


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