Reflect and Move Forward

By: Laura Chiesman

2017 was a wild and crazy year! We started it with a new United States President who had never held public office before, stunning the pundits and prognosticators. We suffered domestic terrorism in Las Vegas and New York, international threats from North Korea and the fall of many public figures due to their misogynistic behaviors.

Yet, the economy and investment markets set one record after another. The U.S. unemployment rate is at 4.1%, a seventeen-year low. 1 Inflation and interest rates are still at historically low levels. And the U.S. and international stock markets are at all-time highs2 , contributing to “the wealth effect” where investors feel more confident about their wealth, causing them to spend more.

Now we begin 2018 with passage of the largest income tax reform legislation since 1986. This is projected to reduce income taxes for individuals and businesses by 1.5 billion dollars, leaving most Americans with more money in their paychecks to spend as they choose and encouraging business growth and investment, leading to job creation and increased wages.

But, you know the old saying, “Figures lie and liars figure”. The econometric models used to estimate the consequences of legislation like this tax reform are the best available, but are rife with error. That is because the way individuals and businesses are expected to behave in response to these new rules is only an educated guess. Yet politicians use this false precision as the gospel truth to support their point of view, or undermine their opponents.

So how are we to take advantage of what some say is continued growth and expansion, yet protect ourselves from what others are saying is the end of the world as we know it? Here are three suggestions:

  1. Combine stocks and bonds to capture the returns that may occur without exposing your wealth to more downside risk than you can tolerate if the bottom falls out.
  2. Globally diversify your investment portfolios so you have money on the table in all parts of the market to catch the “FirstWave” of performance that may occur there.
  3. Periodically rebalance your investment portfolio to avoid riding a performance wave up, only to ride it all the way back down.

Following these suggestions will help you avoid the wealth-killing effects that can come from chasing performance, following the crowd, concentrated investing and attempting to time the market.

2018 promises to be another very interesting year and we are thankful to have the opportunity to spend it with you. The team at FirstWave Financial wishes you abundant joy and success as the year unfolds.

Find out what it might be like to have a personal WealthCoach by your side, helping you make smart decisions about your money in the context of your own personal situation, and creating the future you dream of. Call our wealth services firm in Satellite Beach, FL – Melbourne/Brevard area at (321) 773-7773 to schedule your complimentary initial consultation.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product, or any non-investment related content, made reference to directly or indirectly in this publication will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this publication serves as the receipt of, or as a substitute for, personalized investment advice from FirstWave Financial. A copy of the FirstWave’s current written disclosure statement discussing our advisory services and fees is available upon request.

1 https://tradingeconomics.com/united-states/unemployment-rate
2 https://www.reuters.com/article/global-markets/global-markets-stocks-scale-new-record-highs-dollar-stuck-idUSL8N1P01WY

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