Mid-Quarter Commentary: Q4 2017

Kyle Thompson, CFP®, CPA
11.21.17

MARKET CONVERSATION

As I sat down to write this mid-quarter commentary, I asked myself, “Do you, the client, really want more market prognostications that may, or may not, be correct?”  Let’s assume my short-term views and predictions end up being correct (which is unlikely), would it change your, or more importantly, our behavior?  Should it change our behavior?  The short answer to these questions is…no. 

At Market Street we believe investment markets are efficient and fairly-valued.  We trust the evidence that markets will rise and fall and trying to predict when these adjustments occur is nothing more than a losing proposition.  Since we do not believe in market timing, what value do our views on interest rates, monetary policy, and global concerns create for you?  If I am being honest, our views mean very little if we are maintaining a disciplined long-term investment approach. 

The tone of this letter is different from your traditional market commentary, which I hope you find refreshing.  I want to have a conversation, and more importantly, focus on the items that you can control…. your emotions. 

I spent last week at the annual Schwab IMPACT conference in Chicago.  This is an amazing event which features talks with thought leaders and educators from all over the world.  While there, I was asked a simple, yet profound question, “What is your passion?”  As I reflected on my career including my past mistakes and the thousands of conversations I have had with clients, it became blatantly obvious – I am here to help others.  I have always known this, but I often thought it was too generic.  Doesn’t everyone in our industry help people?  How is my approach, the approach we implement at Market Street, different?  As I wrestled with these questions, and admittedly got out of my own way, the differences became oh so clear. 

The truth is that our industry is becoming more and more commoditized.  With the continued success of the Independent RIA (Registered Investment Advisor), other financial service firms are attempting to copy our model - from banks, to the Wall Street brokerage firms, to the newly added robo-advisors.  These firms all sound alike and claim to provide a comprehensive list of services such as: financial planning; asset location; portfolio optimization; tax efficiency; low turnover; better fund selection; and the list goes on.  How do you, as the consumer, sort through the conflicted messages and tedious financial jargon when everyone is saying a similar message?  

I believe that you are seeking financial security by working with an advisor that you can TRUST and that is free from conflicts of interest.  This is the reason I joined the industry, and specifically, Market Street.   This is why I can confidently answer that my passion, our passion, is to help others.  So how do we help our clients and how is Market Street different than the industry?  This is achieved by teaching and educating you on how the markets behave and most importantly not allowing you to make knee-jerk reactions that have long-term repercussions.  Many of our competitors are built around scale, we are built on relationships.

The S&P 500 has averaged annualized returns from 1997 – 2016 of 7.7%.  If you exclude the top 10 days from this period, the return is almost cut in half to 4.0%. Exclude the top 20, 30 and 40 days your respective returns fall to 1.6%, -0.5%, and -2.4% (Source: Schwab Center for Financial Research).  As the data indicates, most of us rationally understand that markets go up over the long-term, but we allow media and fear mongering to instill poor investment habits.  If you missed any of the top days mentioned above, your investment performance over the last 20 years likely suffered. Benjamin Graham said it best, “The investor’s chief problem – and even his worst enemy – is likely to be himself.” 

If we can help you remain disciplined, you are well on your way to financial security.  Market Street helps by removing the false narrative and noise coming from the media allowing you to focus on your financial plan and long-term investment strategy, which is ultimately what guides your financial future.  We serve as the voice of reason that can clearly communicate the rational behavior of the markets over the long-term and help you remove the harmful emotional tendencies that erode long-term investment returns.  Please see my October blog for more information around this topic: Is Your Portfolio At Risk In Today's Bull Market?  The Numbers Tell The Story

Studies indicate that investors make 80% of their investment decisions based on emotion.  So, as the talking heads and pundits start chirping about the next market correction, crisis, or panic, your initial reaction is…to react. This is exactly what you should not do. Benjamin Graham eloquently stated in his book, The Intelligent Investor that “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and behavioral discipline that are likely to get you where you want to go.”  At Market Street, we will continue to heed the advice of Graham and help you remain a disciplined long-term investor.  

In closing, I encourage you to block out the media and so-called market experts that promote fear to stir your emotion.  We will help you achieve financial security by educating you and having honest conversations on proven, rational research that has passed the test of time.   

We will undoubtedly experience future corrections, recessions, and potentially even a market crash.  As these trying events occur, let us help you navigate the rocky waters and ensure we stay focused on the long-term goal of a peaceful and prosperous retirement.  Most importantly, let’s have a conversation.               


LET’S STAND TOGETHER

At Market Street, we believe in promoting health so that we can serve you for years to come.  We are in the process of purchasing each team member a standing desk (Benefits of Standing Desks).  While we all love what we do, we find that our careers are rather sedentary with hours upon hours sitting in front of the computer.  We hope these standing desks will allow us to spend a better part of our day standing and thus improving blood flow and overall efficiency.  We would like to hear the things that you are doing to keep moving in your life and anything that you feel we can implement into our practice.  Together, we can help each other to live healthier lifestyles. 


BABIES AND MORE BABIES

In addition to the three babies that have already been born in 2017 (Jamisyn Jo Fisher, Rhett Greyson Thompson, and Christian Thomas Woodward), Market Street recently welcomed Carson Paul Williams on November 11th.  His parents are Aaron and Cristy Williams and we are happy to report that baby and mom are doing great.  Last but not least, our Market Street family is anxiously awaiting the arrival of Eli Web Defore, son of Jared & Jeanna Defore who is expected to arrive today! 

These five precious lives have been a blessing to our Market Street family.  Please feel free to reference "In The News" section of our website for these updates and many others.  

 

HAPPY THANKSGIVING

In closing, our Market Street Family would like to wish yours a very Happy Thanksgiving.  We hope you enjoy your time with friends and family and remember all the things we have to be thankful for.  Our office will be closed on Thursday, November 23rd and Friday, November 24th in observance of the Thanksgiving holiday. 

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Want to have a honest conversation about your goals and personal finances? Email me to schedule a time to chat. I’m here to help.

Kyle Thompson, CFP®, CPA
Senior Financial Planner & Partner

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