By Mark Knackendoffel, CEO
We shared a number of the following changes during our Wealth Management Summits in Lawrence, Columbia and Manhattan on January 28th & 29th.
Investment Committee Members Michael Carlisle, CTFA - VP & Trust Officer (TO) – Committee Chair Katie Seay, CFP®, CTFA - VP & TO, Director of Financial Planning Mark Knackendoffel - CEO Eli Sallman, MBA, CFP®, CIMA® - VP & Investment Officer Toby Marks - VP & Investment Officer
We removed our CIO, and we have no plans to replace that position.
We’ve historically had seven Investment Objectives ranging from “Capital Preservation to “Ultra-Aggressive Growth.” We have increased this to 11 targeted portfolios, which will be identified by their general Equity:Fixed Income allocation percentages. For example, our Balanced Growth Model will be identified as “60% Equity : 40% Fixed.” We have all asset classes targeted in 10% increments across the asset allocation/risk spectrum, going from: 0% : 100% - Capital Preservation to 100% : 0% - Ultra-Aggressive Growth This will allow us to more clearly refine the investment objective and asset allocation decisions in consultation with our clients.
We added a “passive” component to all our portfolios. This means we are investing a portion of each asset class in a low-cost index fund or ETF, whether that’s stocks or bonds. We will also continue investing in actively-managed mutual funds in our Core: Satellite portfolios, which has worked well for our clients, even in 2018. But, the combination of Passive & Active funds offers another level of diversification. We will also continue to invest client portfolios exclusively in passive index funds if that is their preference.
We’ve restructured our “Separate Accounts,” which are invested in individual stocks and bonds for some clients.
Current Top Ten Core Equity Stocks:
*Company has not paid dividends
We have targeted our portfolios to hold no more than 2% in our Money Market Fund (which currently yields 2.58%). But clients have varying needs or preferences for cash, so each Trust Officer has the discretion to customize each account’s cash % allocation in consultation with the client. This will avoid the occasional large cash allocations we generated in 2018.
We’ve enhanced our commitment to tactically rebalancing portfolios, which has been demonstrated as a proven method of enhancing returns & reducing risk.
There will be far less trading of portfolios, both stocks & bonds. One of our long-held principles is that buying & holding is a solid method of building and preserving wealth . . . and I believe we had drifted away from that philosophy the past eight years or so.
Overall, we believe these changes will produce more consistent, diversified portfolios, which reduces the risk of missing benchmarks. They will also enhance our ability to be nimble and timely in our rebalancing and provide more customized client asset allocations.
Please feel free to call or sit down with us if you have any questions or comments regarding these portfolio management changes. Or, if you have any questions or comments about our other Wealth Management Services . . . or the quality of our Client Service itself.
The overall stock market enjoyed a robust 1st Quarter. Each of the benchmark indexes generated gains of more than 10% (except for the Global Dow). Despite signs of a weakening global economy and low inflation, news that the Fed is backing off its plan to increase interest rates softened investors’ concerns. Both the technology and energy sectors enjoyed a strong first quarter. Positive feedback from ongoing negotiations between the United States and China, coupled with strong job growth, low inflation, and stable interest rates, helped fuel investor confidence. Bond rates jumped around during the quarter. The 10-Year Treasury Rate started the year at 2.68%, rose to 2.78% in January, and then dropped to 2.41% at the end of the Quarter.
Employment: Employment rose by only 20,000 in February after adding 311,000 new jobs in January. The average monthly job gain in 2018 was 223,000. The unemployment rate declined to 3.8% in February, and the number of unemployed persons decreased 300,000 to 6.2M. Average hourly earnings rose 3.4%. On balance, all these stats are positive.
Interest Rates: The Fed did not increase its short-term target rate. The FOMC’s report noted that economic growth has been slowing and no rate increases are projected in 2019.
GDP: The 4th Quarter GDP showed the economy grew at an annualized rate of 2.2%, 3.4% in the 3rd Quarter, and 2.9% for all of 2018. Again, fairly positive numbers!
Inflation/Consumer Spending: Over the previous 12 months, the CPI rose only 1.5%.
Manufacturing: This sector remains somewhat stagnant as manufacturing output is only 1% above its level in 2018.
Imports & Exports: Compared to January 2018, the U.S. goods and services deficit has decreased $1.9 billion, or 3.7%.
International Markets: In Great Britain, the Brexit decision has again been delayed, this time to October 31, 2019. The Eurozone’s 4th Qtr GDP rose at a sluggish annual rate of only 0.2%. Negotiations between the U.S. and China continue to drag on with the difficult issues yet to be resolved.
Consumer confidence: The Consumer Confidence Index® dropped from 131 in February to 124 in March. Consumers expressed growing doubt over the labor market. Consumers’ outlook for income, business, and labor market conditions over the short term also fell.
We have partnered with our software provider, Infovisa®, to implement exciting improvements on The Trust Company’s Client Portal. Using the newest available technology, this upgrade will provide an intuitive user experience, enhanced functionality, and a responsive design that optimizes the layout to the screen size of your device.
https://icp.infovisa.com/0214.
If you have questions regarding these upcoming changes, please call us at (785) 537-7200 or (800) 285-7878.
A friend of TTC captured this moment when it began raining in Zurich, but he did not ascertain the identity of the mystery traveler. Do you know who it is?
To print or download a copy of our Q1-2019 newsletter, click here.
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