Newsletter | May 2018 | Dumping Stocks, Dividends, & Peak Oil

by | May 19, 2018 | Newsletters

We separate the relevant from the noise, to bring you timely content that helps you on the path to and through retirement! 

This month’s newsletter starts off with an update on the stock market.  We then move on to a special announcement, a little housekeeping, & a discussion of dividends. Finally, we wrap up with a closer look at the concept of “peak oil” and small-cap stocks.

Enjoy this month’s newsletter!

State of the Markets

S&P 500: 2,722.46 (+1.83% YTD through 5/16/18)

Stocks regained their footing in early May as inflation fears diminished, corporate profits remained strong, and the fear gauge receded.

One positive contrarian indicator is the pace at which investors are dumping stocks. Since February investors have pulled $67 billion out of stock funds.[1] At market peaks, investors are piling into stocks, not selling, which gives us reason to think we have more upside ahead of us. Remember: “The elevator doesn’t go down until it’s fully loaded.”

Earnings are expected to grow 18% in the first quarter – the highest growth rate since 2011. Full-year 2018 earnings are expected to rise 18.4% and another 10.4% in 2019.[2]

This strong growth rate combined with lower stocks prices is compressing P/E’s and making stocks more attractive.  In short, we remain positive about the direction of the stock market.

35 years

Congrats to Dave who is celebrating 35 years as a financial advisor in June!

Dave: “I am pleased to announce that next month I will be celebrating my 35th year helping clients pursue their goals. I owe so much to my wife, Mary, who has supported me through all the ups and downs over the last 35 years.  My daughters, Dawn & Ashley, have always been there for me, and life is good with 4 grandchildren – Sam, Lexi, Keegan, & Cameron!

This year is especially exciting because Ashley and I have started our own firm – True North Retirement Advisors. There are now 6 of us serving you, and we’re so excited about the additional depth and expertise of our team!

While the mountain of paperwork was quite a challenge, we have settled into our new office space and are doing everything we can to provide a world-class client service experience for you.

Ashley is doing a terrific job as our CEO. She handles all the business decisions, as well as the 401k consulting and retirement planning work for clients.

Of course, we could not have done it without the trust and support of all of you, our loyal clients. I will never be able to thank you enough for allowing me to do what I love doing every day! …In case you are wondering, I love what I do and I want to keep doing this for at least another 10 years.”

Always call our office first

To best serve you, we ask that you contact us with any of your account maintenance needs, whether that be help logging into your Schwab account, a question about notices you receive from Schwab, or a request for funds. Please always call our office first, rather than calling Schwab directly.

If we do not have an answer at our fingertips, we can research your request and guide you to the right place, often finding a solution without further action from you.  We are here for your financial needs and we will do our utmost to address any questions or concerns you have as efficiently as possible.

The Portfolio Cornerstone – Dividends

We have always held strong to the belief that rising dividend stocks should represent a cornerstone of your portfolio – regardless of your age and stage in life.

Rising dividend stocks are important because they not only provide a growing stream of income, but dividends are a sign of a company’s profitability, as well as management’s confidence in the future.

According to Ned Davis Research, companies in the S&P 500 Index that have initiated or consistently grew their dividends have been the best performers at a 9.89% average annual return vs. 7.52% for an equal-weighted S&P 500 Index from 1972-2016 [3].

Growth of $10,000 (12/1960-12/2016)
Data Source: Morningstar, 12/16.

Peak Oil?

In 1938, geologist M. King Hubbert came up with the concept of “Peak Oil” which is defined as that point in time when we have extracted half of all recoverable oil reserves. He predicted that peak oil would occur in 2010. However, due to new technologies over the last 35 years, two new barrels of oil have been discovered for every barrel of oil consumed.[4]

The subsequent boom in oil, increased use of wind and solar, and Saudi Arabia’s refusal to drop production caused oil prices to drop from around $100 a barrel in 2014 to $30 a barrel in 2016.

Oil prices have since recovered to over $70 a barrel as synchronized growth around the world is increasing demand. Global demand for oil increased by around 1.6 billion barrels a day in 2017, to 98 million barrels.

If you don’t like the current prices at the pump, at least you can take solace in the reason why – the global economy is healthy and growing!

Small-Cap Stocks: A Compelling Growth Opportunity

According to Zacks Investment Research, small-cap stocks are “beginning to come out of a sustained downturn and are expected to see double-digit earnings growth over the next four quarters.”

The new tax law should help smaller companies disproportionately (compared to large multi-nationals), because of increased domestic demand and the lower 21% tax rate on revenues domestically.

If the above earnings projections materialize, small-cap stocks could get quite a boost in 2018. We’ve been steadily adding to small-cap positions in client portfolios over the last 2-3 years and we plan to continue to do so, especially in this current environment.

[1] Loder, Asjylyn. “U.S. Stock Funds Are Losing Investors” The Wall Street Journal, 27 April 2018, p. B12.

[2] Wursthorn, Michael and Akane Otani. “Earnings Are Strong, but Rewards Are Scarce.” The Wall Street Journal, 22 April 2018, p. B10

[3] “The Power of Dividends.” Hartford Funds, 19 Dec. 2017, https://www.hartfordfunds.com/insights/featured-perspectives/ThePowerofDividends2.html.

[4] Bary, Andrew. “Exxon Mobile Is a Bet On the Future of Oil” Barron’s, 5 May 2018, https://www.barrons.com/articles/exxon-mobil-is-a-bet-on-the-future-of-oil-1525482562.


Sign up for David's monthly updates delivered to your email.



David specializes in working with families and business owners as their personal “CFO” by creating and implementing a financial roadmap designed to help them pursue their goals. He is proud that he still works with clients from the very start of his career (in 1982!).

Retirement Success Forecaster
Retirement Quick Tips Podcast

Listen & Subscribe

How Much is Your Business Worth?


Did this answer your questions? Did you find it valuable? Please subscribe to our newsletter below to receive future updates in your inbox!


Gauge your retirement readiness to make a plan for the future.

Download our Retirement Success Forecaster and get FREE personalized results.

You have Successfully Subscribed!