Sunday, January 23, 2022

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“I’m not confused, I’m just well mixed.”

Robert Frost

Question: With current market activity, should I review my portfolio?

Answer: Yes, let me use an example to illustrate why periodic monitoring is important. Until recently, our home decor was a mix of “contemporary cocker spaniels” and “early grandkids.” The kids are no longer toddlers and the dogs are well past puppy stage. External circumstances changed and it was time to respond. We enlisted the help of a professional, choosing to work with a woman who understands our lifestyle and priorities. Establishing this sort of relationship was a little scary and made me think of how our clients may feel when they begin working with us.

The first meeting focused on what we liked and disliked, our expectations, fees, future meetings, and what we needed to do before she could work her magic. Then we reviewed the process and reaffirmed our commitment. Not surprisingly, before we could start shopping for new accessories, which in my opinion is the fun part, I needed to clean up a few things like closets and cupboards. At this point, I reconsidered and briefly thought, “Hey, things aren’t really that bad” and “we can wait until summer to tackle this.” Ultimately, I knew we needed her help and guidance so we got busy. Knowing and doing are two separate events but now we’re thrilled with the results and are thankful for the gentle nudges into action. We enjoy the subtle yet meaningful changes to our home and wish we had taken the plunge sooner.

Changes in the overall economy, the market, and your life are reasons to reassess and reprioritize your financial goals. Just as there was no longer a need for a crib in our guest room, it might it be time to ask parallel questions concerning your investments. For instance, does your portfolio mix complement your current risk tolerance level?

Change is the only constant. Ongoing changes in the economy and our lives suggest that a disciplined process to monitor and review investments is advantageous. For instance, did you know that unexpected growth in consumer spending in the first quarter of 2013 and a revitalized housing market have helped sustain a stock market rally that has lasted half a year? More importantly, is your portfolio poised to respond favorably in light of these occurrences.

Were you aware that consumer spending increased 0.3% in January, 0.7% in February, and 0.2% in March for the largest quarterly increase in that statistic in more than two years? This calmed fears that the two-percentage point rise in Social Security payroll taxes that took effect on January 1 would seriously influence consumer spending. How has this affected your investments?

Trends change. Much of our décor was outdated and not particularly functional. Decorating styles and technology changed over the years and we had not kept pace. Similarly, the trend in housing prices is changing and affecting the economy. According to the latest S&P/Case-Shiller Home Price index, which measures the change in value of the U.S. residential housing, shows higher annual growth rates in housing prices since May 2006 – up 8.6% in the top 10 markets and up 9.3% in the top 20 markets. This index tracks the growth in value of real estate by following the purchase price and resale value of homes that have undergone a minimum of two arms’-length transactions.

One of the many factors contributing to the housing recovery is the reduced unemployment figures, as first-time jobless claims recently dipped to near five-year lows at the time this article is being written. That being said, most economists have lowered their GDP forecasts for the second quarter of 2013 due in part to the lingering effects of the fiscal cliff debate in late 2012. Gross Domestic Product (GDP) is the annual market value of all goods and services produced domestically by the U.S. The S&P

Other important information is that starting in July, the Bureau of Economic Analysis, the agency tasked with calculating our national GDP, is changing how this is measured. The new accounting will give more weight to intangible and intellectual assets of companies. The revisions will result in an increase in our current GDP by some $16 trillion, or 3%. These are facts that may influence investments.

Stock markets react to financial data, economic news, and government policy, all which affect your portfolio. A recent survey showed that most workers were unaware that payroll taxes rose in January (from 4.2% to 6.2%). They were also unaware that the payroll tax was cut two years ago. It wasn’t well advertised, and let’s face it; the typical American doesn’t read newspapers anymore (present company excluded). Workers will notice the drop in take-home pay over time although most workers never see a paycheck and others are paid in cash).

So what does this information mean to you? It’s important to know that for the top 20 percent of income earners, the payroll tax increase and the rise in gasoline prices are unlikely to influence spending. Actually, increases in stock market and housing wealth should have positive effects. Consumers tend to have a low propensity to spend out of wealth, but a large change in wealth (perceived home prices and rising portfolio values) can have a significant impact on spending. For the other 80 percent, the impact of the payroll tax increase and higher gasoline prices should arrive with a lag. None of this suggests a recession, but we should see a somewhat slower pace of consumer spending growth going forward. This may be valuable information in connection with your planning.

By taking time to understand our individual circumstances, our interior designer carefully customized a plan to match our goals and budget. Wealth management is much the same in that it requires communication to design a personalized, comprehensive financial plan. Changes in the economy, housing, employment, and taxes are external factors that affect our financial security. Just as it was time to modify our home decor to reflect lifestyle changes (no more crib!), it may be appropriate to address issues in your financial life. Regularly review investments to monitor progress and make adjustments to match your current situation. Stay focused and invest accordingly.

This information is general in nature, it is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or solicitation to buy or sell any particular investment. Investing involves risk and the possible loss of principal invested. It is not possible to invest directly in an index. Past performance is not indicative of future results. Investors may incur a profit or a loss. There is no guarantee any particular investment strategy will be successful. Opinions expressed herein are those of the author and subject to change at any time.

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame design) in the U.S.”


Darcie Guerin, CFP®, is Associate Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email

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