Clients Newsletters

January 21, 2016 / Hoover Financial Advisors

Client Newsletter: January 15, 2016

Good Riddance, 2015.  Hello 2016?

Nearly 70% of investors lost money last year, according to Openfolio, an app that allows people to track their investment performance and compare their portfolio with other users. U.S. stock markets had their worst year since the financial crisis in 2008. No wonder your year-end statements were less than desirable!

At the start of 2015, top Wall Street strategists were calling for the broad Standard & Poor’s 500 stock index to finish the year up around 8%. Instead, the benchmark index ended down 0.7%, far below predictions.  The sideways price action, however, doesn’t reflect the volatility and wild price swings throughout the year — as the S&P 500 hit an all-time high of 2130.82 in May and then in August suffered its first 10%-plus price correction in four years when it tumbled 12.4%.

What caused the decline?  Many factors – but the biggest was the energy sector.  A barrel of crude oil dropped an incredible 30% due to a global supply glut. However, even without energy’s big decline, the S&P 500’s performance in 2015, would have only finished up 1.4%.

The S&P 500 index was not the only investment loser in 2015. Our office follows 16 major indexes or benchmarks and only five were positive for the year.  The best performing index was the Russell 1000 Growth Index, which was up 5.67%, and the worst Index was the MSCI Emerging Market Index, which was down 14.92%.

HFA Benchmark List

Annual Return 2015

Annual Return 2015

Russell 1000 Growth TR USD 5.67 MSCI EAFE NR USD -0.81
Barclays Municipal Interm 5-10 Yr TR 3.28 Russell Mid Cap Growth TR USD -0.20
S&P 500 TR USD 1.38 S&P 500 PR -0.73
Barclays Gbl Agg Ex USD TR Hdg USD 1.36 Russell 2000 Growth TR USD -1.38
Barclays US Agg Bond TR USD 0.55 Russell Mid Cap TR USD -2.44
Russell 1000 Value TR USD -3.83
Russell 2000 TR USD -4.41
Russell Mid Cap Value TR USD -4.78
Barclays GBbl Agg Ex USD TR USD -6.02
Russell 2000 Value TR USD -7.47
MSCI EM NR USD -14.92

In 2015, the Federal Reserve raised the lending rate by .25% – the first time in over a decade.  Even with this very small interest rate increase, our two fixed income securities benchmarks (Barclays Municipal Inter 5-10 Yr and Barclays US Agg Bond Index) were both slightly positive for 2015.

As we say goodbye to 2015, we have already seen a great deal of volatility in the first weeks of 2016.  With the worst opening day decline since 2001 (down over 1%) and the worst opening week in many years, we are expecting a tremendous amount of market fluctuations in 2016.  Obviously, we cannot predict the future, but we can be here to continue to guide you through the choppy seas and keep you on the path to your financial goals and objectives.

What can you expect from HFA in 2016?

  • Our Investment Team will continue to watch our recommended money managers very closely. We take great pride in our manager selection and will continue to monitor their performance versus industry benchmarks and peer groups. Our office will make manager changes when appropriate.
  • Our Rebalancing Team will monitor market conditions and make changes to the stock/bond ratios when your asset allocation needs adjustment. Rebalancing helps you to buy low and sell high, a disciplined approach to investing.
  • Our Investment Advisors will continue to monitor your assets in relation to your financial planning goals. If any strategy changes are necessary, we will be happy to offer our guidance and advice.
  • Our Administrative Team will continue to support your needs and assist you with any service issues related to your investment accounts.

The importance of Asset Allocation…At every financial planning review, our advisors talk about asset allocation or the ratio of stocks to bonds and cash.  Studies have shown that the asset allocation decision is the most important driver of investment performance.  Our advisors spend a great deal of time to understand your financial situation and make suggestions on the appropriate asset allocation mix. Generally, equities offer long-term growth and a hedge against inflation and bonds provide income and stability in your portfolio.  The last few months illustrated the importance of asset allocation when equities were declining – bond prices were rising or holding their value, which helped to offset the negative impact from a loss in the stock market.  Please make sure you talk with your advisor about your asset allocation percentages and understand the rationale for that important investment decision.

We are here to help…Please contact our office if you have any questions/concerns or issues.  We want to hear from you and we value your input and feedback.  Do not hesitate to contact us if you would like to talk over the phone or set up a meeting.

HFA’s Lunch and Learn Series

With the installation of a new and enlarged downstairs conference room, we are pleased to offer smaller educational seminars on various subjects for our existing clients, guests and prospects.  Our initial thoughts are to offer periodic mini-educational programs on topics in which you would like to learn more about.  We will send a schedule of proposed topics later this month, but expect the list to include such topics as donor-advised funds, reverse mortgages, credit check-up, trust planning and income tax updates, among others.  Please let us know if you have a topic that might be of interest to you or others and we will try to get in on the schedule.  Look out for more information on this program in a future mailing.

Tax Time!

With the New Year, our tax department is gearing up for income tax season. For those clients for whom we prepare your taxes, you can expect a tax organizer from our office very shortly. This should serve as a guide to assembling the required tax documents.  For clients who prepare their own tax returns or use an outside tax preparer, Charles Schwab will be mailing 1099s and other tax related documents by the first week of February.  We expect all necessary tax information to be included on the 1099, including tax cost basis and investment advisory fees.  Please feel free to contact us if you need any additional tax data.

Growing Up and Out

HFA has expanded our offices to accommodate our current and expected future growth.  With the addition of new team members, we really were beginning to feel a bit too comfortably close. As you know, we all love the Moores Road building, so moving was not an option. When additional space became available in the building, we jumped at the chance to enlarge our quarters to accommodate everyone and allow for future growth.

The expansion gives us an additional 2,080 square feet for a total of 5,368. First and second floor conference rooms are now available with ample room for large meetings, work sessions and small special events. As noted earlier, you will hear more about our smaller educational events planned throughout the year in our larger downstairs conference room.

It is wonderful to have a larger more efficient work environment. We would love to give you a tour soon. Call us to arrange a visit. Look for open house news in future issues.

Please notify us if there has been a change in your personal financial situation, employment status or family situation.  We thank you for the confidence you have placed in our team and look forward to continuing to be of service to you in the future.  Please let us know if we can be of any help at any time.

Best Regards,

Peter K. Hoover, CFP®

 

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