August Client Newsletter
Happy August! It is amazing to me that we are now approaching the start of a new school year and all that goes along with it. High school sports are getting into full swing and the back to school shopping is maybe already to late to be beginning. For my family, we have started the last several Augusts with a family camping trip. We have experienced a lot of what Michigan has to offer and the last two years we have made trips out west. This year we found ourselves camping in Glacier National Park in northwest Montana. It was a long drive (over 30 hours) but wow, was it amazing. Seeing the mountains, amazing turquoise blue glacier water, spotting moose, bears, mountain goats, and big horn sheep is an experience that I have had growing up but is completely new for my daughter. We hiked on trails that took us to valleys, the side of mountains and to the top of mountains. We swam in water that still had icebergs floating in it and ate lunch in some of the most beautiful landscapes we have ever seen. This for us is a time of reconnecting, relaxing outside, living without technology, and just enjoying a few days away from the distractions of life and preparing for the busy seasons of life that lie ahead.
Trips like this are a part of what my wife and I have defined as part of our Personal Statement of Financial Purpose. These are times that do not add to the bottom line of a financial statement, but add to memories and life experiences that we greatly value. On this trip we had a conversation that this may be our last big camping trip, because kids grow up and life changes - I hope that it wasn’t because I truly cherish this time. However, the one constant that we know is that life changes all of the time and we need to be flexible and proactive to change with it. This is where we need a guide, a thought partner, someone who can help us see the bigger picture and the opportunities that lie ahead of us. I hope that I can be that for you and your family. If you see changes on the horizon, or are just having trouble seeing what the next step may be, let me know and we can take some time to talk through your options and how these options may help you achieve your Personal Statement of Financial Purpose.
(If college planning is at the forefront of your mind right now, like it is for me, let’s talk through some options.)
August Element Focus is…Equity Rate (ER)
The element focus for August is Equity Rate. To determine your Equity Rate, we take the total amount that you own in stock (stock based mutual funds and exchange traded funds, individual shares of stock, stock based variable annuity units) and divide that by the total of all of your cash and investments. This provides a percentage of your portfolio that is in equities (stock) and allows me to have an understanding of how much risk you are taking and how much growth you can expect as we go forward.
I will be reviewing your Equity Rate scores throughout the month of August and will be reaching out to you if I believe that there may be changes needed or if I have questions for you. If you have questions around the your Equity Rate score, please reach out and we can set up some time to meet.
August Planning Opportunities
As we move into the latter half of the year, it is important to take some time and make sure that there haven’t been any major shifts that have occurred so far this year that may require an adjustment to the overall risk objectives that we began the year with. In order to better understand how much risk you should have within your portfolios, I first start by utilizing the Equity Rate score and then compare that to your most recent Investor Risk Profile results. If you have not completed an Investor Risk Profile within the last 6 months, please be watching your email for this and complete it as soon as possible so that if there are adjustments that need to be made, we can make sure to complete this before the end of the month.
Client Actions
As we look to manage risk within your investment portfolios, it is also important to be proactive about other risks that exist. One of the largest risks that we face is identity theft and the use of our credit profiles by other people. In order to be proactive around protecting ourselves, one of the the steps we can take is periodically checkin our credit report for to make sure that there isn’t anything that we don’t know about being reported. Just like we did in April, I ask that you go to www.annualcreditreport.com and log in and pull another one of your three credit reports - you should have 2 options left. Then take a few minutes and review all of the information on the credit report and if there is anything you do not recognize, please let me know and we can work towards correcting it.
Along with this, I continue to monitor any new account activity through our use of the Sora platform. The goal is that with you checking your credit reports, and my monitoring your credit through Sora that we can act quickly if anything unauthorized does occur.
Portfolio Update
The beginning of August did bring some changes to the portfolios. An improving economic picture in the US compared to international economies now indicates an overweight to the US. Within the US, longer term trends in growth versus value stock valuations continue to favor value, despite the surge in growth and technology stocks over the last few months. The difference in valuations had widened substantially throughout 2021, but over the last few months has gotten closer to its recent averages. Shorter-term technical indicators have also moved away from international stocks and now favor US large cap growth, large cap value, and small cap. Credit spreads have continued to improve, keeping the element’s view that high yield bonds remain more attractive compared to Treasury bonds. While the Federal Reserve has maintained its more aggressive tone towards inflation, continued trends in short- and intermediate-term government bonds maintain the bias toward longer-term bonds. Continuing positive trends in international bonds have maintained their attractiveness as a further opportunistic holding.
You will see some trade information on your accounts based on your portfolio objectives. The largest moves that you will see this month is a pullback from the international positions with those proceeds being added to US large cap stocks. If you have any questions, or would like to walk through the individual trades on your accounts, please reach out.
Have a wonderful August!