Market and Economic Insights from Prof. Jeremy Siegel, 2019-11

Lots of informative insight from one of the long-time trusted investment experts, Wharton professor Jeremy Siegel.  Quick take:

·        stocks are fairly valued, not overpriced

·        value stocks will soon take over performance leadership from growth stocks, largely because their dividends are higher than the interest rates of bonds and we have increasing population of retirees needing investment income instead of growth and they'll seek dividends over bond interest more than ever

·        interest rates are low more because of economic factors than the strategies of major central banks

·        inflation is low and should stay low

·        economic growth in USA is low-ish, but no recession any time soon

·        workforce participation #s are improving (the "unemployment rate" gets the most attention, but workforce participation rate is arguably just as important)

·        predicts Trump will be impeached by the House, but not removed from office by the Senate

·        predicts House stays Dem, Senate stays Republican

·        says "trade war" with China is biggest economic threat and having one would trigger big drop in stock markets, but that Trump will avoid trade war because it would ruin him politically

For my clients' investments, I continue to recommend diversified portfolios.  Whether to be aggressive or moderate or conservative, or in-between, in that diversification is something with which I can be especially helpful.

Contact me with any questions.

Portfolio Model Performance Through 2019-09-30

US and Foreign Indexes		3 mo	1 yr	2 yr	3 yr	5 yr	10 yr	2008
Stock Markets (72-21-7 US-Foreign-EM)		0.1%	0.4%	5.5%	9.0%	6.3%	8.4%	-41.0%
S&P 500 PR		1.2%	2.2%	8.7%	11.1%	8.6%	10.9%	-38.5%
Dow Jones Industrial Avg PR		1.2%	1.7%	9.6%	13.7%	9.6%	10.7%	-33.8%
MSCI EAFE (foreign stocks)		-1.7%	-4.3%	-2.2%	3.6%	0.5%	2.0%	-45.1%
MSCI EM (emerging mkts stocks)		-5.1%	-4.5%	-3.8%	3.5%	-0.1%	0.9%	-54.5%
Barclays Agg Bond (US bonds)		2.3%	10.3%	4.4%	2.9%	3.4%	3.8%	5.2%
Citi WGBI nonUSD (foreign bonds)		-0.1%	6.8%	2.5%	0.6%	1.3%	1.2%	10.1%
Aggressive (95% stocks-5% bonds)		-0.4%	-1.7%	3.9%	7.9%	5.8%	8.0%	-38.9%
95 Strategic V		-0.6%	2.2%	6.9%	11.2%	8.4%	10.8%	-36.1%
95 Schwab index 2019		0.6%	2.2%	7.4%	10.8%	8.3%	10.6%	-36.2%
95 Strategic USA II		1.0%	8.0%	11.1%	12.4%	10.0%	12.6%	-26.3%
WealthFront 9		-0.2%	1.9%	4.9%	8.6%	5.9%	7.8%	-38.1%
Franklin Mutual Beacon A		1.2%	3.1%	4.2%	7.9%	6.3%	9.1%	-40.5%
American Funds Port Ser Growth		-1.4%	-1.0%	6.6%	10.5%	8.6%	10.9%	-39.5%
American Funds Growth+Global		-1.4%	-0.6%	6.1%	10.2%	8.0%
Confluence Aggressive Growth		0.4%	0.0%		7.0%	7.1%	8.9%
Confluence Value Opportunities		2.5%	1.7%		5.8%	7.8%	13.2%	-22.3%
Confluence Equity Income		2.5%	10.1%		10.6%	10.3%	13.1%	-18.9%
Confluence Small Cap Value		-1.1%	6.0%		10.9%	10.7%	12.7%	-21.8%
Confluence Large Cap Value		2.8%	11.5%		12.9%	10.3%	13.7%	-27.0%
Confluence IDEA		3.0%	10.3%		14.3%	12.0%	14.0%
Moderately Aggressive (75-25)		0.2%	0.9%	4.1%	6.2%	4.6%	6.7%	-31.0%
80 Strategic V		-0.4%	3.7%	7.0%	10.6%	8.0%	10.4%	-34.2%
80 Strategic III		0.6%	6.3%	8.0%	9.2%	7.8%	10.1%	-28.6%
80 Schwab index 2019		0.8%	3.3%	6.9%	9.5%	7.5%	9.6%	-30.9%
Confluence Growth		0.9%	1.2%		7.6%	7.9%	9.4%
Money 75		0.2%	1.8%	5.9%	8.5%	7.1%	9.5%	-31.5%
T Rowe Price Personal Strategy Growth		0.5%	4.5%	6.5%	10.0%	7.7%	10.2%	-37.6%
American Funds Port Ser Gr+Inc		-0.1%	2.1%	5.5%	8.4%	6.8%	9.1%	-32.7%
Vanguard Target Retirement 2040 Inv		0.5%	2.6%	6.0%	9.3%	7.2%	9.6%	-34.5%
Moderate (60-40)		0.5%	2.2%	4.0%	5.5%	4.2%	6.0%	-25.6%
60 Strategic V		-0.1%	4.0%	6.2%	8.9%	6.8%	8.8%	-28.0%
60 Strategic III		0.8%	6.5%	7.2%	7.9%	6.8%	9.0%	-24.8%
60 Schwab Index 2019		0.9%	4.3%	6.2%	7.9%	6.4%	8.2%	-24.3%
Janus Henderson Balanced T		3.0%	7.9%	10.9%	12.4%	8.4%	9.2%	-15.2%
American Funds Port Ser Moderate Gr+Inc		0.4%	4.6%	5.4%	7.6%	6.1%
American Funds American Balanced F-1		1.4%	5.1%	6.9%	8.7%	7.5%	10.0%	-25.7%
Moderately Conservative (40-60)		0.6%	3.4%	3.9%	4.7%	3.6%	4.9%	-17.4%
40 Strategic V		0.3%	5.2%	5.1%	6.8%	5.3%	6.0%	-22.0%
40 Schwab index 2019		1.1%	5.5%	5.8%	6.6%	5.7%	7.3%	-20.1%
Confluence Income & Growth		3.2%	11.3%		6.8%	7.2%	8.3%
T Rowe Price Personal Strategy Income		0.7%	5.8%	5.0%	6.5%	5.5%	7.0%	-20.4%
Conservative (20-80)		0.8%	4.8%	3.6%	3.5%	2.8%	3.7%	-8.4%
20 Strategic V		0.6%	6.0%	4.6%	5.2%	4.3%	5.9%	-15.4%
20 Schwab index 2019		1.2%	6.5%	4.7%	4.7%	4.3%	5.5%	-9.8%
Fidelity Advisor Asset Mgr 20%		1.3%	4.9%	3.6%	3.8%	3.4%	4.4%	-14.4%
NOTE 1:  Past performance is no guarantee of specific future results.  This data is presented by Potomac Wealth Strategies, LLC.  This data is from Morningstar and should be accurate, but it has not been independently verified.
NOTE 2:  "Flex", "Strategic", and "Index" models are crafted/run by Potomac Wealth Strategies.  They show history of better returns, lower volatility, or both--or, with the Index models, closer tracking--vs benchmarks and competitors.
NOTE 3:  "XX Schwab index" and "XX Schwab ETF" models are relatively low-cost and tax-efficient portfolios.  They are comprised mostly of index funds or exchange-trade funds available free of transaction charges to my clients at Schwab.  This is what many might recommend due to low-costs and portfolio efficiency.
NOTE 4:  Nothing on this blog post is specific investment advice to any individual or organization.  If the information hereon is of interest to you, please send e-mail to Info@PotomacWealthStrategies.com for a consultation.

Market Volatility--Gary's Thoughts in August 2019

This market volatility is unsettling.  I think it is mostly due to economic slowdown in some key foreign countries like Germany, and to the trade dispute between China and USA.  But I’m still positive because earnings growth is good in corporate America, US consumer spending is strong, unemployment is low, and US-based stocks are not “overvalued” to a concerning degree.

I also think China does not want to actually hurt itself even if it may want to try to hurt the US.  China selling too many US bonds too quickly would hurt the US, but it would also cause the Chinese portfolio of US bonds to drop in value

Further, I believe the president focuses on tangible and recognizable measures, like unemployment rate and stock market performance, and thus will want to ultimately do things that keep those #s looking strong.  My hope is after some blustering by China and the USA, they will each pull back from the verbal brinksmanship.

For most of us...  generally, long-term investors with moderate to aggressive risk tolerance should pretty much ignore the stock market volatility and stay invested in the suitable diversified strategy, even as markets go up and down

I’m happy to talk more if you wish.  I’m also sharing some links to articles that I find informative.  My firm’s social media presence includes Facebook (Potomac Wealth Strategies, Twitter (@GLPartoyan), and LinkedIn (Garo Partoyan), in case you want to follow me that way.

Thank you, and happy Friday!

--Gary Partoyan

Potomac Wealth Strategies, LLC

Portfolio Model Performance Through 2019-06-30

US and Foreign Indexes		3 mo	1 yr	2 yr	3 yr	5 yr	10 yr	2008
Stock Markets (72-21-7)		3.2%	5.4%	7.7%	6.0%	10.0%	5.8%	-41.0%
S&P 500 PR		3.8%	8.2%	10.2%	11.9%	8.5%	12.3%	-38.5%
Dow Jones Industrial Avg PR		2.6%	9.6%	11.6%	14.1%	9.6%	12.2%	-33.8%
MSCI EAFE		2.5%	-1.9%	1.0%	6.1%	-0.5%	3.9%	-45.1%
MSCI EM		-0.3%	-1.4%	2.2%	8.1%	0.1%	3.3%	-54.5%
Barclays Agg Bond--US		3.1%	7.9%	3.7%	2.3%	3.0%	3.9%	5.2%
Citi WGBI nonUSD (foreign bonds)		3.9%	4.5%	3.9%	0.8%	0.2%	1.9%	10.1%
Aggressive (95% stocks-5% bonds)		2.6%	2.6%	6.4%	9.6%	5.3%	9.7%	-38.9%
95 Strategic V		3.4%	5.8%	9.7%	13.3%	8.1%	12.7%	-36.1%
95 Schwab index 2019		3.9%	7.0%	9.5%	12.2%	7.9%	12.3%	-36.2%
95 Strategic USA II		5.2%	12.2%	12.3%	13.4%	9.5%	14.2%	26.3%
WealthFront 9		3.0%	5.5%	7.6%	10.3%	5.4%	9.5%	-38.1%
Franklin Mutual Beacon A		2.4%	6.3%	4.6%	9.7%	5.6%	10.6%	-40.5%
American Funds Port Ser Growth		3.2%	4.3%	10.2%	13.1%	8.7%	12.7%	-39.5%
American Funds Growth+Global		3.5%	4.2%	9.7%	13.1%	7.7%
Confluence Aggressive Growth		2.9%	1.3%		8.9%	6.4%	10.5%
Confluence Value Opportunities		9.3%	-0.9%		7.2%	8.2%	14.4%	-22.3%
Confluence Equity Income		5.9%	10.0%		10.3%	9.6%	14.3%	-18.9%
Confluence Small Cap Value		4.1%	0.6%		13.0%	10.5%	14.1%	-21.8%
Confluence Large Cap Value		7.6%	16.8%		13.0%	9.9%	14.9%	-27.0%
Confluence IDEA		5.3%	12.9%		14.0%	11.2%
Moderately Aggressive (75-25)		2.5%	3.5%	5.6%	7.1%	3.9%	8.0%	-31.0%
80 Strategic V		3.5%	6.8%	9.4%	12.6%	7.7%	12.1%	-34.2%
80 Strategic III		4.0%	8.5%	9.2%	10.1%	7.2%	11.6%	-28.6%
80 Schwab index 2019		3.7%	7.0%	8.6%	10.5%	7.1%	11.0%	-30.9%
Confluence Growth		3.3%	3.8%		9.0%	7.3%	10.8%
Money 75		2.7%	4.4%	7.9%	10.2%	6.6%	11.1%	-31.5%
T Rowe Price Personal Strategy Growth		3.6%	6.4%	8.8%	11.8%	7.3%	11.8%	-37.6%
American Funds Port Ser Gr+Inc		2.7%	5.0%	7.6%	9.6%	6.8%	10.5%	-32.7%
Vanguard Target Retirement 2040 Inv		3.5%	6.0%	8.1%	10.8%	6.7%	11.2%	-34.5%
Moderate (60-40)		2.4%	4.0%	5.2%	6.1%	3.6%	7.2%	-25.6%
60 Strategic V		3.2%	6.5%	8.3%	10.8%	6.7%	10.6%	-29.1%
60 Strategic III		3.8%	8.0%	8.1%	8.7%	6.3%	10.4%	-24.8%
Janus Henderson Balanced T		3.9%	10.0%	11.3%	12.1%	7.8%	10.0%	-15.2%
American Funds Port Ser Moderate Gr+Inc		3.0%	6.4%	7.2%	8.4%	5.9%
American Funds American Balanced F-1		2.8%	6.9%	8.0%	8.8%	7.3%	11.0%	-25.7%
Moderately Conservative (40-60)		2.6%	4.7%	4.7%	5.1%	3.1%	5.7%	-17.4%
40 Strategic V		3.0%	6.3%	6.3%	7.8%	4.9%	8.4%	-22.0%
40 Schwab index 2019		3.1%	6.8%	6.6%	7.0%	5.5%	8./29%	-20.1%
Confluence Income & Growth		3.8%	10.2%		6.5%	6.3%	9.2%
T Rowe Price Personal Strategy Income		3.0%	6.5%	6.2%	7.4%	5.1%	8.1%	-20.4%
Conservative (20-80)		2.4%	5.0%	4.0%	3.6%	2.3%	4.1%	-8.4%
20 Strategic V		2.8%	6.3%	5.3%	6.0%	3.9%	6.9%	-15.4%
20 Schwab index 2019		2.6%	6.4%	5.0%	4.6%	4.2%	6.2%	-9.8%
Fidelity Advisor Asset Mgr 20%		2.1%	4.6%	3.7%	3.9%	3.0%	5.0%	-14.4%
NOTE 1:  Past performance is no guarantee of specific future results.  This data is presented by Potomac Wealth Strategies, LLC.  This data is from Morningstar and should be accurate, but it has not been independently verified.
NOTE 2:  "Flex", "Strategic", and "Index" models are crafted/run by Potomac Wealth Strategies.  They show history of better returns, lower volatility, or both--or, with the Index models, closer tracking--vs benchmarks and competitors.
NOTE 3:  "XX Schwab index" and "XX Schwab ETF" models are relatively low-cost and tax-efficient portfolios.  They are comprised mostly of index funds or exchange-trade funds available free of transaction charges to my clients at Schwab.  This is what many might recommend due to low-costs and portfolio efficiency.
NOTE 4:  Nothing on this blog post is specific investment advice to any individual or organization.  If the information hereon is of interest to you, please send e-mail to Info@PotomacWealthStrategies.com for a consultation.

Tax Withholding--advice from trusted tax pro

Here is important tax advice from Tung Tu, a CPA I trust:

"[Many taxpayers unexpectedly owed, or had significantly reduced refunds compared to previous years] because the 2018 Tax Cuts and Jobs Act made major changes to the tax laws, which in many cases resulted in lower tax withholding from [their] paychecks.

To avoid owing a large tax amount, it is highly recommend that everyone:

1.  Perform a paycheck checkup using the Withholding Calculator on IRS.gov; and 

2.  Submit a new W-4 form to your employer.

The calculator will help determine the right amount of withholding and can help prevent having too little (or too much) tax withheld.

Tax law changes affecting withholding include:

• Reduced tax rates;
• Elimination of personal exemptions;
• Increased standard deductions: $12,000 for singles, $18,000 for heads of households and $24,000 for married couples filing jointly;
• Increased child tax credit: $2,000 per child and a new $500 credit for other dependents; and
• Changes to itemized deductions.

A paycheck checkup is especially important if you:

• Are a two-income family
• Have two or more jobs at the same time or who only work part of the year
• Claim credits like the child tax credit
• Have dependents age 17 or older
• Itemized deductions in 2018
• Have high income or a complex tax return
• Have a large tax refund or tax bill for 2018

We hope this information helps you to have the appropriate tax withholding, and avoid owing large tax amount.

Tung"

Tung T. Tu, CPA, LLC
7297 Lee Highway Ste D2
Falls Church, VA 22042
Phone: 703-636-5588; E-fax: 866-395-2378
www.tungtucpa.com

The Business Cylce--getting a sense of the economy's direction

Here is a quick read on the business cycle, from my friends at Confluence Investment Management.