Santa Claus Came to Town, Early…
It’s hard to believe another quarter is now in the books, let alone another year. The year in the US ended on a relatively strong note, with the Dow and S&P 500 reaching new highs. Unfortunately, the same could not be said for the rest of the global economy. To recap the Dow ended the year up 10% to 17,823.07 (sixth-straight annual gain, the longest streak since 1999) the S&P 500 was up 14% to 2,058.90 (third-straight annual gain) and the international markets as represented by MSCI EAFE ended down -4% to 1,778.04. The Santa Rally came to town during the last two weeks of December, and US markets turned positive for the quarter just before the Christmas holiday.
Punch Bowl Redux
As discussed in our last newsletter, Janet Yellen of the Federal Reserve, did indeed take away the “punch bowl” ending the quantitative easing (QE) program as promised, by the end of October. However, the closure of our QE program brought on the start of another, thank you Central Bank of Japan. In addition, the precipitous drop in oil prices created an economic boost in terms of real dollars for US consumers as the national average in gasoline prices came down just over $2.30 per gallon, the lowest since May 2009. This drop in oil price has not been well received by all. The Ruble has tumbled and the Central Bank of Russia made a bold move raising interest rates to 17%, highest since the Russian debt default in 1998.
A recent article by the Wall Street Journal summed up nicely the efforts by central banks throughout the globe:
- The world’s major central banks are falling into two camps. Those that are looking to walk away, gingerly, from their stimulus programs, and those that are all looking to add to their efforts to keep their shaky economies afloat.
We remain cautiously optimistic regarding global growth, and will continue to review and analyze the data as it comes.
2015 Here We Come
As we enter into 2015, our goal in managing our portfolios is to manage risk, as we know the returns will follow, respectively. Though we have seen some positive signs of growth in the US economy, the following headwinds remain. In Washington DC, the President may dig in his heals against a Republican tilted Congress. In addition to a strong US dollar, a slow increase in wages and higher interest rates may represent economic roadblocks. However, this should be offset by persistent GDP growth, better productivity and continued, albeit elevated, profit margins. In fact, companies focused on growth may actually bode well in 2015 as there is still over $11 trillion dollars in cash on the sidelines earning a zero return.
The Season of Giving
We established Archvest rooted with the belief to give back to the community as well as give on a national level. In addition to the monetary gifts given to the Wounded Warrior Project and FINCA, we have also been donators of another precious commodity, our time. We were involved in a local homeless outreach, a mentorship program offered through the UCLA Alumni Mentor Program, bell ringing for the Salvation Army and running a business clothing drive benefiting those seeking employment to better their future.
From the Tax Desk
As most prices adjust with inflation over time so does the ability to save for retirement. Starting in 2015 the deferral limits for retirement plans as well as the catch-up contributions will increase another $500, to $18,000 and $6,000, respectively. You may need to adjust your deferral amounts to maximize your contribution.
Also, home mortgage interest rates are on the move, yet again. The national averages for 30-year rates are in the sub-4% range. Please give us a call and we can determine if a refinance is in your best interest. Please note private mortgage insurance paid in 2014 is not tax deductible as it was not included in the Tax Credit Extension Act passed in December.
Housekeeping Items
Please keep in mind the performance of your investment accounts as well as our quarterly reports are run through the Black Diamond software. You should have already received a login invitation from Black Diamond to establish your account. This initial email comes from Black Diamond directly. If you have any questions please contact us.
In addition, we understand that for most clients, joining us meant changing custodians. As it is customary practice for us to review your tax return as a double-check, it’s all the more important this year for us to review to make sure all the numbers are correct. Please be sure to connect with us and let us review your return before you file this year.
An Ode to You
As we start fresh with a New Year, there are a lot of things we will be aiming to accomplish in terms of continued firm growth. We know this growth is only possible through the relationships we have with our clients. We want to thank you, our client, for the continued confidence you have placed in us. For some, we have had the privilege to work with you for many years. Here’s to you, our client, for without your trust and relationship, success would be impossible. Thank you and here’s to a profitable 2015!
We appreciate the continued confidence you have placed our firm.
Warmly,
Eric Lai & John Wenzel
Archvest Wealth Advisors
Eric Lai & John Wenzel | Archvest Wealth Advisors