April, 2010
April 19, 2010
Dear Friends,
Enclosed is your Q1 2010 Performance Report.
We are now a full 12 months past the lows in the market reached in March 2009. With April 15thin the rearview mirror, now is a great time to reflect on a few important issues.
Market Update:
The First Quarter of 2009proved to be the low point in the market as the crisis of confidence reached its high point. The economic crisis was real. The recession we are digging ourselves out of has been one of the most difficult realities in the last century. We have a few key takeaways that will help us as we move forward.
We must be aware of the emotional aspects that come with fluctuations in the markets.
In the last decade, fluctuations seem to be magnified by the abundance of media outlets covering the financial markets. This added drama creates a wider fluctuation of human emotions. Markets in the short-term are affected by emotions. As we look forward, we must continue to keenly filter information that is presented to us, to look for opportunities that arise from the changes in emotion, and to refer back to our long term asset allocation strategy which takes market fluctuations into account. We must rely on core investment disciplines that will guide us through both good and bad markets.
In addition to information that is overhyped, there is information that is not properly scrutinized or understood. From our perspective, the economic crisis was caused by a crescendo of overconsumption and leverage on multiple levels, the seeds of which started decades earlier with the proliferation of easy credit. The massive amount of debt we see is present at several levels, including the Federal Government, State & Municipal Governments and individual balance sheets. Higher taxes seem likely as the means to repay this debt over the coming decade. As leverage is constrained, our economic growth rate will likely moderate unless we begin producing more goods and services the world wants to buy.
With our credit worthiness now in question (individually and as a country), the value and strength of the U.S. dollar faces a strong headwind moving forward. At the same time, other regions of the world are emerging as economic leaders driven by a host of factors. The moderation of U.S. consumption and growth in unison with international expansion is a natural economic occurrence. Rather than view this as a negative, we will continue to seek out investment opportunities available abroad as many third world countries quickly emerge.
We are aware that the markets will go up and down, unexpected things will happen, and people will react to these events. We will continue to focus on our disciplines in controlling risk and searching for opportunistic investments. Nonetheless, if you continue to have second thoughts about the financial markets, now is a great time for us to review your target asset allocation and discuss alternatives. We want to be proactive in monitoring your risk tolerance and making adjustments where needed. Please let us know if you would like us to review your asset allocation.
Financial Planning Update:
We began implementing our new financial planning software in January; and its reception has exceeded expectations. This web based product gives us a comprehensive view of your financial situation, regardless of where your assets are held -- and does so with real time data. This tool has been the most significant financial planning breakthrough in the last 10 years; and it will greatly improve how we deliver financial advice moving forward. If you aren’t yet logged in, please give us a call and we’ll set up your personal website.
What’s New at Shakespeare:
Our primary focus is on serving your needs and maximizing your situation. As part of our commitment to you and as a requirement for our membership in the National Association of Personal Financial Advisors (NAPFA), we must complete a stringent 60 hours of continuing education credits every two years. NAPFA is holding their national conference this May in Chicago, and we will be in attendance May 19– 21. Educational sessions will keep us on top of the latest trends, tax laws, investment methodologies, and industry developments. This will help us provide you the best possible advice. Because we will be out of the office during these 3 days, please plan any correspondence with our office around our absence.
As part of his involvement in the Financial Planning Association (FPA), Kevin has been appointed President-Elect of the FPA Chapter of Southern Wisconsin. This position gives Kevin the opportunity to influence the way local financial advisors do business, the types of continuing education programs that are provided, and the standard of ethics that each must practice. As Congress begins weighing in on financial regulation, FPA & NAPFA continue to push for legislation that will protect you, while not creating onerous rules that will impede commerce.
Conclusion:
We value our relationship and continue to search for ways to best serve you. Your feedback and suggestions are encouraged and we hope to speak with you soon.
Regards,
Kevin M. Reardon, CFP® Mark Ziety, CFP®
|