Eclectic Associates Quarterly Review Letter (Q2 2016)
Below is a copy of our quarterly client review letter. As always, take a few minutes to review it and please reach out with questions.
Enclosed are your investment reports for the second quarter of 2016. Near the end of the quarter, volatility spiked following Brexit. Overall, however, investment returns for the quarter were positive. US stocks and global bonds saw positive returns across the board while international stocks ended the quarter modestly negative, weighed down by the UK.
In the aftermath of the Brexit vote, global financial markets initially hit the panic button. Overnight, stocks fell, bond yields dove, and both the British pound and the euro swooned. We also saw, and continue to see, the flight to safety typical at times like this, with U.S. Treasury bonds, U.S. dollar, Japanese yen, Swiss franc, and gold all rising sharply.
With regard to the U.S. economy, on the positive side the consumer’s financial position is strong. Consumer finances have benefited from persistently low interest rates on auto and mortgage debt. Household assets are now 7 times liabilities. Banks have shown greater willingness to make loans to consumers. Auto loans were up 8%, recently, compared with the same period last year. Unemployment is low and job openings are rising. However, the counterweight to consumer strength has been weak business spending. Without meaningful business investment, economic growth will keep muddling along.
We believe patience, discipline, and diversification will be important attributes for navigating the next five years. We doubt investors will be able to simply rely on the U.S. market tailwinds of declining interest rates and rising P/E multiples that have boosted returns for core bonds and stocks over the past several decades.
As we consider what this means to you, our client, we think it is even more critical to honestly assess and understand your temperament, risk tolerance, and objectives. This helps us to invest in a manner that is consistent with those attributes before market volatility strikes, rather than in the heat of it when emotions are likely to cloud judgment and lead to poor investment decision-making. We are glad to meet with you in person or by phone at any time to discuss your financial situation and get an update on your goals.
On that note, we would like to receive a copy of your 2015 tax returns for our review if we haven’t already gotten one yet. Feel free to drop by our office for us to scan your returns or send us an electronic copy by uploading it to your client portal. We like to review our clients’ tax returns every year to look for tax planning opportunities.
As we all anticipated, Carl Camp left his day-to-day responsibilities at Eclectic Associates on June 1st. Everything has been going well because we planned for the transition for several years and we’ve always functioned as a true firm, using a team approach. As we’ve previously announced, Carl is continuing to serve as the Chairman of the Board of Eclectic Associates. He is excited to soon begin working full-time with the Christian ministry organization, The Navigators.
James Moore, who has worked in our back office since 2013, was recently promoted to become our newest financial advisor in June. James passed the Certified Financial Planner (CFP®) exam last November and recently fulfilled all of the other requirements to earn the CFP® certification. With Carl’s transition and James’ promotion, we have updated our Form ADV Part 2A brochure. If you wish to receive a complete copy of our Form ADV Part 2A brochure, please let us know.
Thank you for entrusting us with your financial lives. We take that responsibility very seriously and we consider it a privilege to serve you. If you have any questions, please feel free to give us a call.