Newsletter | September 2018

by | Sep 18, 2018 | Newsletters

Longest Bull Market on Record!

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 economy and the stock market.  We then move on to how to avoid probate, soaring small-cap stocks, keys to a great laddered bond portfolio, and why building wealth through dividends is an idea that doesn’t go out of style. Finally, we wrap up with the secret to living longer…work longer! And be sure to read through until the end for a little *surprise* column.

State of the Markets – S&P 500: 2,904.31 (+8.6% YTD through 9/18/18)

On Wednesday, August 22nd, this bull market became the longest on record – 3,453 days old! Stocks have risen 323% while the previous longest bull market (which ended in March 2000) rose 417% [1].

One of the most ironic aspects of this bull market is that nobody believed in it and many people remain fearful even today, after more than a decade of gains. We remain bullish on stocks for several reasons, and we are optimistic about the economy and the stock market as we close out 2018 and head into next year. 

The S&P 500 Index corporate earnings grew at their fastest rate in 6 years (+16.1% according to the Commerce Department). Thomson Reuters reported that sales grew 9.5% in the second quarter – the fastest rate since 2011. While share buybacks and lower taxes gave earnings a significant boost, strong sales showed that the economy continues to boom.

September is historically the weakest month of the year – it has averaged more than a 0.5% decline from 1945-2018 [2]. Thus, investors should expect increased volatility and potential weakness following the summer rally.

Given the potential for $267 billion in additional tariffs on Chinese goods, weak sales of existing homes (down four consecutive months), and concerns about the upcoming mid-term elections, we wouldn’t be surprised if stocks took a breather before resuming their uptrend.

In years where the S&P 500 Index has risen more than 5% for the year heading into September (which it did in 2018), it was up 0.36% in September and 4.51% the rest of the year. Let’s hope history repeats itself!

Bottom line: Economic indicators continue to point to more room to run for this bull market!

Aretha Franklin Died Without A Will

Aretha Franklin’s $80 million estate will have to go through probate because she didn’t have a will [3]! That means her four children will likely endure a potentially expensive and time-consuming probate process.

Probate can be a challenging process for your heirs to navigate. In most cases, this requires an attorney, possible court appearance, and massive amounts of paperwork. The whole process takes a lot of time, is expensive, and often, totally unnecessary. Plus, the probate assets become public record.

Finally, I recommend you prepare a “When I Die” letter detailing important information, documents, and assets to your executor. Tell him/her and others where you put the letter.

Many times, an elderly spouse is burdened with these estate issues, and it can be overwhelming. So for the sake of your family and loved ones, please get your ducks in a row! As always, consult an estate attorney prior to making any decisions.

Small-Cap Profits Soar

One of the greatest beneficiaries of new lower corporate taxes have been small-cap stocks, which have seen their profits soar 35% (from a year earlier) while sales grew 10.5%[4]. According to BlackRock, small-cap stocks have proven to be the best performing asset class over the last 20 years (ending in 2017), although they have the higher standard deviation (i.e. volatility & risk).

Given the continued economic boom, strong consumer spending, and expected higher earnings next year (possibly 25-30%), we would expect small-cap stocks to continue to excel. Small cap stocks remain one of our favorite investment themes heading into 2019.

Laddered Bonds – A Solid Solution For Rising Interest Rates

For investors seeking fixed income, we recommend they build a laddered portfolio of individual bonds. Bonds are important to almost any portfolio. They provide a stable stream of income you can count on (assuming the underlying company remains solvent) for a fixed time in the future. Income from bonds is particularly reliable if you own non-callable, high-quality issues.

There are two main risks associated with owning individual bonds – interest rate risk (from rising interest rates) and credit risk (downgrade of bonds or default). But if you stick with investment grade bonds and regularly monitor your holdings to make sure the underlying credit is still good, that should give you the best chance for success.

Bond ladders can provide for a consistent and growing stream of income, especially in a rising interest rate environment. Income has the potential to grow because a higher income stream can be locked in by replacing maturing shorter-term bonds with longer-term bonds in the ladder.

Please note: Bond laddering does not assure a profit or protect against loss in a declining market. No one can predict with any certainty the direction of interest rates.

How To Build Wealth Through Dividends

We strongly believe that rising dividend stocks have a place in nearly every portfolio. Rising dividend stocks are almost always the foundation of every stock portfolio we manage for our clients.

Here is just one of the many reasons why:

Let’s assume we start with a solid business that has increased its dividend consistently over time and seems likely to continue to do so in the future. If this theoretical business currently pays a dividend of 2.5% and increases its dividend 12% a year, in six years, the yield will jump to 5% (assuming no price appreciation).

If the market rewards this stock for consistent dividend growth and future potential, and the stock price appreciates, then the investor benefits from both the stock price appreciation and the dividends received each year.

Retire After 65 To Extend Your Life

According to a study in the Journal of Epidemiology & Community Health, if you retire after age 65, you may end up living longer. Those who delayed retirement one year to age 66, had an 11% lower risk of dying. That dropped even more for those who retired between the ages of 66 and 72. The benefits of remaining in the workforce longer occurred irrespective of gender, lifestyle, education, income, or occupation.

The study suggests that by postponing retirement, the natural decline in physical, cognitive, and mental functioning may be delayed, thereby reducing the risk of chronic illness. Compared to people who retired at age 65, workers who retired in good health at age 67 had a 21% lower risk of dying. By age 70, the risk was 44% lower, and at age 72 it was 56% lower. So, if you want to live longer, you might want to postpone your retirement!

True Talk 

We hope you enjoy the first installment of our True North “gossip column” – True Talk! We always love hearing about the happenings in your lives, and we’re excited to bring you a behind-the-scenes look at what’s going on around here!

September is such an exciting time of new beginnings, with back to school and the coming changes of fall. This month is definitely full of new beginnings for Ashley and her family, as little Cam turns 1 on September 23rd, and Keegan (now 4) started year 2 of pre-school.

Cameron is the sweetest little boy, and he is a very active explorer and climber! This first year has flown by and he already has 8 teeth.

Keegan adores her little brother and loves singing. Although she is decidedly tone deaf – just like her mother. So her singing is a bit more like shouting. One of her favorite places to belt out Little Mermaid tunes is at the grocery store. The other shoppers seem to enjoy her enthusiasm! 🙂


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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!).

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