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Wet Ground, Sunny Markets! - April 2019 - Market Commentary

Someone recently remarked, “It rained twice in Nashville during the first quarter. The first time was for 28 days. The second time was for 33.” February was particularly sloshy with 13.5 inches of rain, exceeding the previous record of 12.4 set in 1880. Nashville was not alone in breaking records. Throughout the United States, dozens of snow, rain, and heat records were tied or broken.

This weather maelstrom, a government shutdown, ongoing trade tensions, and a Brexit mess, have likely depressed first quarter U.S. and global economic activity. We’ll soon know more as companies begin reporting first quarter earnings and the government’s economic data estimates are released. In March, we learned the U.S. economy grew just 2.2% in the fourth quarter versus an initial 2.6% estimate. The trillion dollar question is whether this growth slowdown is temporal or if it portends a coming end to the second largest economic expansion on record.

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Planning Perspectives - March 2019: Don't Forget the QCD!

2018 is the first year for tax filers to be impacted by the 2017 Tax Cut and Jobs Act (TCJA).  This law included many changes affecting business and individual filers.  For individuals, some of the more significant changes included increasing the standard deduction while limiting how much mortgage interest (for new mortgages) is deductible.  It also limited the amount of state and local taxes one can deduct on their Federal taxes.  We recommend consulting with a tax advisor to understand what the TCJA means for you.  With these big changes, we think this tax season will be one to remember for professional preparers and filers alike.

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Glad that's over, or is it? - January 2019 - Market Commentary

Thanksgiving fell early this year, which meant the resulting holiday shopping season included six weekends. Retailers welcomed the extra time to promote their wares. Shoppers had more time to find an additional gift or two. The combination produced the strongest holiday shopping season in six years – a welcome end to the year for a sector still trying to find its footing in an online world.

Investors hoping for their own strong end to the year were mightily disappointed. December’s 9% decline was the worst December for the S&P 500 since 1931. As a result of this sell-off, 2018 was the first year since 1948 that the S&P 500 finished negative after being up through the first three quarters of the year.

We know markets tend to surprise investors just when they begin to rely on a particular pattern. The explanation for the December and fourth quarter market malaise, however, is not that simple. On the following pages we’ll recap what turned out to be the most difficult year for all asset classes since 2008. We’ll also provide some insights into how we are approaching 2019.

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In 2018, the place to be for investors has undoubtedly been U.S. stocks. Up 11% year-to-date, the S&P 500 has outperformed virtually every other major, and not so major, stock market in the world and by wide margins. The disparate performance has given new meaning to Dorothy’s proclamation in the Wizard of Oz that “there’s no place like home!” This nostalgia for “home” is particularly strong among U.S. investors with enough income independence to allow for meaningful exposure to U.S.-listed growth stocks, which generally do not pay dividends.

There are exceptions to this 2018 growth stock success. Tesla and Facebook probably prefer a 2018 do over, or at least the retraction of a few tweets. Yet, in general, the strength of U.S.-listed large-cap growth stocks has pulled the market higher. In fact, Apple, Amazon, and Microsoft alone are responsible for almost 40% of the S&P 500’s 11% year-to-date increase, resulting in approximately $500 billion of additional market capitalization for just these three companies.

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This week our nation celebrates 242 years since our Declaration of Independence. We’ve been rather radical from the start, establishing rule by elected officials versus the aristocratic and wealthy, and thinking that thirteen still disparate colonies could defeat the British army. Many years later, although our representative democracy experiment now stands as a model for the world, we are still a nation and people full of surprises. The first half of 2018 is proof yet again of this unconventionality. After all, who was expecting a Presidential summit with North Korea, many Republicans defending the economic utility of trade tariffs, some Democrats criticizing them for it, and a twenty-eight year-old Democratic Socialist spending under $200,000 to unseat a high-profile, ten-term Congressional incumbent?

The numerous policy and political curveballs of 2018 have awakened most investors from the atypical, albeit rewarding, low-volatility market slumber of 2017. While the increasingly tech-heavy S&P 500 and NASDAQ posted first-half gains of 3% and 9%, many dividend-centric, historically defensive, and global trade dependent stock sectors are down 5% to 10%. Seven of the thirty Dow Jones components are down 13% or more year-to-date. The count climbs to eight if we include recently dropped Dow component, GE, which was dismissed after 111 years in the index.

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