• Hannah Boundy

2016: A Year in Review

Despite global tensions and political uncertainty, the markets ended 2016 on a positive note with gains in both the stock and bond markets. During the course of the year, we offered our thoughts and insights on both the macro and microeconomic environments as well as tips and tricks for maximizing your savings and achieving your financial goals in an ever-changing world. While we look forward to all that 2017 has to offer, we believe it’s worthwhile to look back on some of the events that transpired in 2016 and what we learned from them.

China, Fear, and Greed

With such a robust end to 2016, it’s easy to forget that the year didn’t start off the way it concluded. In January we saw a sharp decline in the markets as fears about the health of China’s economy sent their stock market into a dive that was halted by government authorities when they made the decision to freeze the markets out of fear of a widespread selloff. By late January, US stocks had dropped by more than 6% while international stocks had fallen more than 10%. In response to this decline, we wrote a short article on the cycle of fear and greed and how our emotions often lead us to buy and sell at the wrong times. In hindsight, we know that the market did recover from this initial selloff and that the ultimate winners were the ones that held on and avoided impulsive trading.

The Rational Economic Man

In response to the election, we also started the year off with a series about behavioral economics and how our emotions often drive our decision making. We explored the problems that can result when what we think and believe is in conflict with reality and how biases such as overconfidence and the fear of regret can lead us to buy and sell at the worst of times. In response to our potential behavioral shortcomings, the solution provided was to make a genuine effort to seriously question our thought processes and educate ourselves whenever possible from a variety of perspectives.

Social Security and Cupcakes

In April we launched The Cupcake Club – a financial planning blog geared toward women – with an article on social security and how much less women receive over the course of their lifetimes. One of the driving forces behind this disparity is that women often leave the workforce to care for children or ailing relatives. As a result, they spend less time working and are less likely to be promoted, both of which reduce the benefits they’re eligible to receive. Since then, we’ve offered a variety of tips and tricks for saving for retirement written specifically for women in our monthly Cupcake Club newsletters. In addition to discussing the social security gender gap, we also noted the strategies still available as well as upcoming changes to social security in 2017.


In June we responded to the possibility of Great Britain leaving the European Union with an article on how the markets might respond and why we as investors should care about the vote in the first place. When the votes were counted and the decision to leave was finally made, the markets exhibited a short selloff. Despite the surrounding uncertainty about the future of the EU, we noted how little had changed in the short run and that the greatest risk to investors is an increase in aggressiveness in response to slowing growth in the international markets. We recommended our clients stay the course and maintain asset allocation in the face of heightened volatility.

Fiduciary Changes

In August the Department of Labor issued new regulations that resulted in significant changes in the way that brokers are allowed to sell and give advice to the American public. Our article on the topic explained how the new rules held brokers to the higher “fiduciary standard” that RIAs like us have been following all along. The fiduciary standard requires that investment professionals offer clients the best possible investment option for their given situation as opposed to simply a suitable option, or one that is considered “good enough.”

The Election

In November we responded to another historical election with an article on how the Trump administration will change the way we invest and approach wealth management. We noted that markets saw gains following the election largely because the economic signs remained positive regardless of who was elected. We then discussed several policies likely to result from a Trump presidency such as a pro-growth tax policy, changes in regulatory framework, new trade agreements, and changes to federal spending and how they might affect the economic environment. As more information was released, we also wrote a second article in December specifically on Trump tax reform and what to expect.

Higher Rates

Throughout the year we wrote about how an anticipated rise in the Federal funds rate might affect the markets. When that raise finally occurred in mid-December, we once again wrote about how the increase in rates was minor and would have a small effect on market returns in the near term because it had already been priced into the market. We noted that the raise was in response to a strong economy and should be seen as a positive sign for investors. In the year to come, the Federal Reserve will likely continue to raise rates but at a slow and cautious pace as the Fed seeks to maintain its dual mandate of keeping our population employed and inflation at a reasonable pace.

With another year of investing in the face of change and uncertainty behind us, we look ahead to 2017. While we certainly don’t expect the crystal ball of the future to become any clearer, we continue to be convicted of the importance of seeking out valuable investment opportunities in conjunction with being risk-minded and fee-conscious. In the months ahead we invite you to stay tuned to our weekly educational newsletter in addition to keeping an eye out for your invite to our annual investor conference scheduled for early March. As always, we thank you for your continued trust and support and wish you a very happy New Year.

#2016 #China #behavioraleconomics #Brexit #higherrates

DISCLOSURE Information on this website and others should be used at your own risk. Past performance does not guarantee future results. Securities investments involve risk; returns in such investments vary and may involve gain or loss. The materials and content herein are not a substitute for obtaining professional tax, personal financial planning, or other relevant financial advice from a qualified person or firm. For full disclosure click on the disclosure link at the bottom.

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