Here's a brain teaser for you:
In July 2016, there were four.
In June 2016, there were 10.
Since 2008, there have been 673!
What are they?
If you guessed central bank rate cuts, you are on the money. Financial Times reported:
"In the eight years since the collapse of Lehman Brothers, the world's top 50 central banks have, on average, cut rates once every three trading days..."
The latest downward adjustment came last week when the Bank of Japan (BOJ) took its key interest rate into negative territory, reported CNN Money. Negative rates are intended to promote bank lending and consumer spending. They also create a surreal situation in which banks pay customers to borrow and charge customers to keep money in their accounts.
The United States has been pursuing a different course of action. The Federal Reserve has been raising rates; however, it left rates unchanged last week. More rate cuts may be ahead elsewhere, though. The Bank of England is expected to cut rates next week.
The Standard & Poor's 500 Index finished the week slightly lower after the Commerce Department reported growth of gross domestic product (GDP) - a measure of all goods and services produced - was weaker than expected during the second quarter. GDP grew at an annualized rate of 1.2 percent during the period. Economists had expected GDP to grow by 2.5 percent, according to Bloomberg.
Household consumption, which comprises about 70 percent of GDP, was up 4.2 percent during the second quarter, according to Bloomberg. However, those gains were offset by a decline in corporate spending on equipment, structures, and intellectual property (down 2.2 percent). That was an improvement on first quarter when corporate spending fell by 3.4 percent. Government spending declined during the second quarter, as well.
THE ENVELOPE PLEASE... Every year, Kiplinger's publishes a list of the best states for retirees. The publication considers the share of each state's population that is age 65 or older, as well as average income, average cost of living, and average healthcare costs for older Americans (relative to the national average). The economic health of each state and its citizens, and the taxes imposed on retirees also are considered.
For 2016, the best states for retirees include:
- South Dakota
- Utah
- Georgia
- Tennessee
- Alabama
- South Carolina
- Washington
- Florida
- Arizona
- Idaho
Interestingly, taxes weren't the most important factor in determining the states where retirees might be happiest. Just four of the most tax-friendly states in the nation made the list of best places to retire. Utah, Tennessee, Alabama, South Carolina, and Washington were all in the tax friendly category, while Idaho fell into the mixed group.
Quote of the Week
"If a country is to be corruption free and become a nation of beautiful minds, I strongly feel there are three key societal members who can make a difference. They are the father, the mother and the teacher."
--A. P. J. Abdul Kalam, Former President of India
Golf Tip of the Week
Don't Rely on Your Arms for Power
If your shots are falling short, you may be relying too much on your arms and hands to power the club instead of using your whole body. Practice using your body for power with this simple drill:
Set up as usual and address the ball. Try to push the ball into the air without taking a backswing, focusing on driving the ball with your core and body instead of your arms. Practice until you can consistently get some air with the ball and then return to taking normal shots. You should notice an increase in power as you turn your body more fully through the shot.
Financial Question of the Week
Do you really need a financial advisor?
If there is one thing that many investors "know for sure," it's that the need for financial advisers went out the window with the advent of online trading and index mutual funds.
Is that true? Are advisers the 21st Century equivalent of the buggy whip?
Not according to a recent research report by Vanguard called "Advisor's alpha." Vanguard suggests that advisers can help add value if they "act as wealth managers and behavioral coaches, providing discipline and experience to investors who need it." Here are three areas where Vanguard suggests advisers can add value.
Avoiding bad behaviors
In the most recent version of the study, Dalbar showed that the 20-year average returns for the Standard & Poor's 500 Index and Barclays Aggregate Bond indexes were 8.21% and 6.34% respectively. You would expect the average investor return to be in the same general vicinity as the benchmarks. Instead, the average equity investor earned just 4.25% per year and the average fixed income investor earned just 0.98% per year over the same 20-year period.
Vanguard suggests that "Advisors, as behavioral coaches, can act as emotional circuit breakers in bull or bear markets by circumventing their clients' tendencies to chase returns or run for cover in emotionally charged markets."
Portfolio construction
Asset allocation is a critical element of portfolio return. Some studies conclude that as much as 90% of portfolio return can be attributed to asset allocation. Vanguard points out that many investors "neglect it on their own, overlooking its contribution to their long-term investment success."
Having a suitable asset allocation cannot only bolster returns, but it can have an important psychological effect as well. Vanguard suggests that knowing the allocation "was arrived at after careful consideration, rather than as a happenstance of buying funds with attractive returns ... can serve as an important emotional anchor during those all-too-frequent uprisings of panic or greed in the markets."
Tax-efficient strategies
Taxes can have a significant effect on portfolio return. This is especially true during retirement when investors begin to draw money from their accounts.
A competent adviser can help clients design a distribution strategy that takes taxes and other important considerations into account, which can increase financial security. Again, according to Vanguard: "A well-thought-out drawdown strategy can improve the likelihood that the client's assets will be able to support his or her financial goals through retirement and beyond, which is a significant - if hard to quantify - added value."
Depending on your situation, a full service wealth manager may be able add value in many more areas than the three listed above. If you or someone you know would like help to analyze your financial position and determine whether or not professional wealth management can add value, please contact my office for a complimentary review.
