ProInvest Financial, Inc. 29325 Chagrin Blvd. Suite 201 Pepper Pike OH 44122 www.proinvestfinancial.com
Prosperity
Dear Clients, Friends and Family...
I cannot recall the last time I felt we were
Spring 2015
Volume 7, Issue 2
IRA and Pension
Limits 2015
IRA Contribution $5,500
Age 50 and over $6,500
SIMPLE elective deferral
Under age 50 $12,500
Age 50 and over
$15,500
401K, 403B, 457
Elective Deferral
$18.000
Age 50 and over
$24,000
in such winter doldrums as we have experienced the weather patterns these
first three months of the year! Suffice it to
say, the weather seemed the only area
bringing the mood down when we look
back at the first quarter of 2015!
What encapsulated all the economics of
the first quarter this year can be summed
up with this sentence: “Travel abroad,
see the world, but do not forget to check
on a regular basis how things are back
home”! I am having a bit of fun here with
everyone’s current and all-encompassing
fascination and preoccupation as to
whether the Federal Reserve will inch
the interest rates up.
Given that the Fed’s dual mandate is low
inflation and full employment (as it relates to the dynamics of the current labor
market), the continued low rates and
March unemployment number down to
5.5%, it begs a question – what next and
when?
One of the key reasons why interest
rates nudge has not materialized yet in
spite of seemingly ideal inflationary
trends (steady economic growth, full employment and low rates) has been the
dollar rally which has our currency up
against the basket of foreign currencies
some 25% in the last year, as well as a
decline in oil prices. Further, a rate hike
could send the dollar even higher leading
to global liquidity crisis since most of the
debt outside of developed countries is
denominated in the greenback. So the
current pause from the Fed on the rate
hike is actually a subtle message they
are keenly aware of the global macro
picture while maintaining their dual mandate domestically.
Going back to “travel abroad” I shared
previously, what worked in the first quarter, were stocks of domestic small capitalization companies, global equities and
global Real Estate Investment Trust
companies. A diversified portfolio of
stocks (60%) and bonds (40%) a balanced investor would employ to manage
a portfolio returned +1.8%. U.S. Bonds
and stocks of large capitalization companies came in at +1.6% while commodities
continued to lag at -5.9% (Table 1).
Boring down more deeply, Dow Jones
Industrials barely inched up 0.33% in the
first quarter, with most of their value
growth driven companies affected by the
rise of dollar. In comparison, companies
in the Europe Asia Far East (EAFE) index came at leading 5.04% pace mostly
fueled by the optimism that European
Central Bank finally demonstrated its
commitment to monetary and fiscal policy support (their version of quantitative
easing which Fed had just wound down
domestically) couple with supportive
monetary policies in Japan and rest of
Asia-Pacific region (Table 2).
Index returns represent part performance and are not indicative of any specific investment. Indexes are unmanaged and cannot be invested in directly. Diversification and asset allocation strategies do not assure
profit or protect against loss.
Prosperity
Page 2
TABLE 1
Q1 2015 SAMPLE RETURNS
4.3%
5.0%
4.0%
2.5%
1.8%
1.6%
1.6%
0.0%
-5.0%
-10.0%
-5.9%
Diversified
U.S. Small
Cap
Global REITs
Global Equity
Balanced
(60/40)
U.S. Bonds
U.S. Large
Cap
Source: S & P Dow Jones Indices LLC
and/or its affiliates.
Data as of 3/31/15
Commodities
More
Sample
Returns
Portfolio
Series1
4.3%
4.0%
2.5%
1.8%
1.6%
1.6%
-5.9%
TABLE 2
10.00%
5.00%
0.00%
-5.00%
-10.00%
-15.00%
Series1
Q1 2015
4.32%
5.04%
Dow Jones
Industrial Avg.
Russell 2000
Europe / Asia /
Far East EAFE
0.33%
4.32%
5.04%
0.33%
When taking all this into account, I am
left with the impression that we may not
see Fed action before the end of the year
(if at all) and given that there is still some
apprehension about how robust our domestic recovery has been and whether it
is sustainable considering the challenges
of the strong dollar, difficulty in forecasting corporate profit margins and somewhat “overheated” market valuations, the
wisdom for the remaining quarters ahead
remains diversification with moderate
amount of adaptability. Domestic growth
companies, European exposure, technology and small company stocks may reward investors with a view to treating it
all with a long-term mindset, even if you,
as the investor may be in the income
distribution stage of your money management.
-10.64%
Oil
-10.64%
With that in mind, expect more adaptive
changes in your portfolios, and a much
greater emphasis on testing your overall
plan for its validity and more than anything, a search for value between all that
works and does not work.
My charge still remains the same, and
that is to deliver the most efficient inflation-adjusted after-tax income model that
you cannot outlive for all your best years
ahead. If you have not revisited your plan
with me recently, let me know and we
look to do so together!
Thank you for the opportunity to be of
service to you.
Ned Tufekcic
Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, Member FINRA/SIPC.
Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment
Advisor. ProInvest Financial and Cambridge are not affiliated.