Wealth Management Blog

Posts tagged Markets

Financial Lessons from Charles Dickens’ “A Christmas Carol”

By JJ Burns

December 24, 2015

Famous miser Ebenezer Scrooge was introduced to readers in Dickens’ 1834 classic tale of redemption that takes place on Christmas Eve.  Scrooge has lived a life focused on growing his financial wealth with little regard for life outside his counting house.  In one remarkable evening, on a Christmas Eve seven years after the death of his partner Jacob Marley, he is visited by Marley’s Ghost and three other Spirits.  Their visits offer Scrooge an opportunity to objectively look at himself and others from an abstract point of view, and revisit his past actions and beliefs.  The now-famous result is well known, but we might ask, how does this apply to investors?

Seven years ago this very day, in the throes of the Financial Crisis, here’s where the markets sat compared to where they are today:

The global economy in 2008 was mired in slumping markets, broken banking systems, panic selling in every market segment and plagued with a lack of financial controls.  More pain and dislocation in the job and securities markets were waiting for investors in 2009 and beyond.  It was a very difficult period to navigate, from both an emotional and analytical perspective.

Now let’s fast forward to 2015.  Many investors are disappointed by market returns this year.  There are no global tailwinds at play (other than low oil prices), and different regions and countries are executing different monetary and fiscal policies.  We are truly in a state of global flux.  But we also think that as U.S. investors take stock of the year, there is certainly more to be thankful for in 2015 than during the Crisis.  We don’t mean to imply that everything related to the U.S. markets and economy has been rosy during the recovery, but the U.S. is certainly in a better place than many other areas of the world.  We can also confidently predict that we don’t know what will happen next year or the year after, but at this writing, we expect continued modest recovery in global growth and in modest returns for stocks and bonds.

We can also use Dickens’ three ‘spirits’ to help set our behavior and our expectations going forward:


  • DON’T focus on GREED (at any price) and FEAR (panic selling) due to lack of planning
  • DO focus on long-term results that are right for you,  NOT the short term noise


  • DON’T tinker and chase returns based on “feelings” and avoid short term opportunism
  • DO be aware and rebalance to your correct allocation as your plan calls for


  • DON’T ignore the lessons of the past and what the real data says
  • DO focus on what can be controlled – allocations, investments and EMOTIONS

Scrooge’s transformation occurred on many levels; most of us have a lot to be thankful for, too, and we hope that Dickens’ message of charity and forbearance resonates at this time of year.  

We offer best wishes for a peaceful and grateful holiday, and a Happy New Year!

Does China Matter?

By JJ Burns

September 16, 2015

World stock prices have been volatile lately, and China’s crashing stock market has been in the front seat of the roller coaster. Many investors are worried that China’s economy is slowing down significantly faster than reported, and that a hard landing in the world’s second-largest economy will pull the global economy into recession with it. 

For years, China has been the main economic-growth engine for many developed and emerging markets around the world. Latin America, most of Asia, parts of Africa and beyond have supplied the raw materials needed to fuel the economic boom in China. Mega-cap multi-national companies from developed economies have also prospered by tapping into China’s industrial revolution. Despite China’s impressive economic growth over the years and its impact on countries around the world, investing in China has been unconventional and guarded.

With the support of the central government, local investors swiftly bid the market up this year.  The Shanghai market was up nearly 60% during the first six months of 2015 alone. Yet, the explosive growth had almost no impact on U.S. stocks. The S&P 500 traded sideways during the period. Moreover, when the Shanghai market tanked in July, U.S. stocks continued to be flat.  The chart below is a terrific pictorial on what a classic bubble looks like; happily, it didn’t involve U.S. stocks.

Source: CNNMoney, For Informational Purposes Only

U.S. stocks didn’t react to China’s news and markets until recently.  We believe the recent correlation to China’s stock market is temporary, and that U.S. investors have become more sensitive to other risks as we approach a key Federal Reserve meeting on interest rates. The Fed has indicated that it plans to raise rates at some point this year, and the September meeting has been targeted by many analysts as the date of the first increase in over a decade.

The potential of raising interest rates in the U.S., while China is retrenching and pulling many emerging markets down with it, has become a reason to take profits for many investors. However, the recent volatility has also spurred a wave of new money entering the markets. U.S. stocks have avoided a correction (a drop of at least 10%) since 2011. A four-year run without a correction is unusual for the U.S., and there seems to be pent up demand on the sidelines that has been waiting for entry points.

The Chinese Transition Redux

The points below are a few basic elements to summarize the ongoing dialogue we will see about China over the coming year.  The media will likely focus on these issues:

  • Chinese economy moving from export based economy to a balanced economy – “a consumer driven economy.”
  • The transitional changes will be challenging and investments in China will be volatile.
  • China’s attempts to stabilize markets have not been as effective as hoped.
  • Reduced appetite for commodities and thus lower worldwide inflation is likely.

The U.S. Federal Reserve may be on hold for a while longer.  Low inflation is good, but deflation is not. If the Fed raises rates in September, it could be taking a big risk of tipping prices into a deflationary zone and strengthening the U.S. dollar. If the Fed leaves interest rates unchanged, Fed members will have more time to analyze data and let the economy further develop some employment and price trends.

We know volatility can be unsettling; regardless, our long-term outlook is still positive. We believe investors who have sufficient diversification and flexibility in their portfolios should be able to successfully navigate these choppy waters. To see if your portfolio is properly balanced based on your long-term goals, contact our team to assess your needs. Now is the time to review your situation and make adjustments accordingly to help mitigate your downside risks.

Ever Wonder What “Really” Happens in the Markets?

By JJ Burns

February 10, 2015

The first 5 weeks of the New Year have been pretty volatile for most markets; clearly, last year’s news has brought volatility back.  Many strategists have been “pounding the table” on stocks and declaring that the Large Cap US Equity Market will continue to lead the way in 2015.  Although possible, we believe that broad diversification is still the key to long-term success.  This philosophy means we will continue to have exposure to small cap, mid cap and international securities, even though they trailed US Large Cap equities last year.  We just received an interesting piece from Louis Navellier of Navellier & Associates.  A long-time market analyst and portfolio manager, he notes:

The biggest news last week was crude oil rallying 19% from its lows in just four days, which sparked a big rally in some beaten-down energy stocks and other stocks that have been beaten down by a strong U.S. dollar. By Friday, most major market indexes had made up for all of January's declines. But here is the real conundrum the stock market now faces…of the 20 stocks that account for approximately 30% of the S&P 500's total value, too many — like Caterpillar, Chevron, Coca-Cola, DuPont, ExxonMobil, IBM, McDonalds, Microsoft, General Electric, Goldman Sachs, JPMorgan & Co, Pfizer, Procter & Gamble, and even Google have all missed analyst estimates and/or issued cautious guidance below analyst estimates… essentially what is happening is that a strong U.S. dollar is squelching sales of large multinational companies and squeezing their underlying earnings. A massive flight to more domestic stocks with real sales and earnings growth is now underway, so I expect the stock market will get increasingly narrow in the upcoming weeks.

Since the brief U.S. market correction last fall, investors have had to adjust to new information and possibly reposition portfolios with respect to:

  1. The increasing strength of the U.S. dollar
  2. A precipitous decline in crude-oil prices and gasoline, followed by a brief but sharp rally in 2015
  3. Changes in European Central Bank policy that are expected to lead to expansionary moves similar to those taken by the U.S. Federal Reserve Open Market Committee following the financial crisis.
  4. A repricing of some commodities that react to changes in inflation expectations and the dollar such as gold.

Navellier also noted that the previous time a ‘leadership change’ occurred in the U.S. markets was a mega-cap retreat in the early 2000s following the Tech Bubble.  He goes on to say:

The S&P 500 has gotten too top-heavy once again…the bottom line is that we are now unquestionably in an increasingly narrow stock picking market, and the "sweet spot" in the stock market is moving down the capitalization ladder to the mid-capitalization area.

Time will tell if this analysis is correct.  However, we agree with the thesis, and think this is a good time for rethinking exposure to international stocks as well, which might expect a boost in revenues and favorable exchange rates against the U.S. dollar.   The best news, however, is that many of our clients are in portfolios that are diversified across the U.S. market-cap spectrum (including mid- and small-cap stocks), and have international exposure as well.  We appreciate that 2014 was a trying year for many investors, but we’re pleased that we already have many of the security exposures that might prevail going forward.  For more on the markets over the last two years and how some investors fared, please see our 2014 year-end review.