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Articles on Wealth Management Topics

Financial Markets Update for Wealth Management Clients 2

At the risk of overdoing it with client communications, I'm feeling that developments in the financial markets in the past week warrant another outreach to all of you, and in particular to those of you who weren't Five Seasons clients during the October 2007 - March 2009 bear market. In the interest of brevity, this missive will take the form of a list of talking points that have occurred to me, or that have cropped up in one-on-one correspondence with clients, this week. Here's hoping the following will calm nerves, provide perspective, satisfy curiosity, or simply help you to pass time while "social distancing":

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Financial Markets Update for Wealth Management Clients 1

Despite the confidence exuded by the talking heads on financial news networks like CNBC and Bloomberg TV, it's always a tenuous business to try to assign big stock market moves (down or up) to one specific root cause. And frankly it's not a particularly productive exercise to try to do so, other than for the benefit of TV ratings. That being said, in my humble opinion, while the coronavirus was certainly the catalyst for, and is still an ongoing contributing factor to, this stock market correction or bear market, there are several other factors at work:

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The Relationship Between Economic Growth and Stock Market Returns

The most widely-followed U.S. stock market indices now all sit at or near record highs. One of the factors often given credit for our stock market's resilient performance is the recent strength in economic indicators. But should a strong economy lead us to believe that the outlook for future stock market returns is rosy? The indisputable answer is, surprisingly, "No".

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Investors Must Beware of Exchange-Traded Fund (ETF) Closures

It's no secret that the popularity of exchange-traded funds, or ETF's, has sky-rocketed since the very first one, the S&P 500 SPDR, was introduced more than 25 years ago. Investment flows continue to pour into these vehicles, and ETF sponsors continue to oblige investors by rolling out a never-ending stream of new products. The dark side of this onslaught of ETF introductions is that record numbers of mutual funds are also closing, and fund closures can have serious repercussions for the investors owning them.

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How a Financial Advisor's Business Model Affects the Advice They Provide

Financial advisors vary widely in the business models in which they operate and in the standards of care that they owe to clients. These factors determine the quality of advice provided, and of products recommended, by any given financial advisor as much as his/her education, experience, and professional designations.

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There's an ETF for That: Exchange-Traded Fund Issuers Get More Creative

Now there are almost 1800 ETF's being traded in the U.S., a remarkable number considering that there are less than 4000 companies listed on exchanges here. To distinguish themselves from the competition and to attract investment assets, these fund sponsors have stopped at nothing to slice and dice the financial markets in innovative, and in many cases just plain silly, ways.

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Consumers of Financial Advice Beware: Not All CFP® Practitioners Are Created Equal

The Certified Financial Planner (CFP®) designation is the most widely recognized certification for financial advisors. However, CFP® certificants vary enormously in the regulatory environments and business models in which they operate. These differences have tremendous implications for the quality of financial advice that a consumer should expect to receive from a given CFP® practitioner.

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Predicting Future Investment Returns: Implications for Retirement Planning

In the last installment of Articles on Wealth Management Topics, we discussed academic research on different ways to estimate the magnitude of future stock market returns. As a refresher, the worst of the ways studied was to extrapolate future returns from past returns. Nearly as ineffective is to base estimates of future returns on surveys of individual and institutional investors.

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Mean Reversion in Financial Markets: The Case for a Contrarian Approach to Investing

Returns in financial markets are often cyclical. That is, multi-year periods during which asset classes or investing styles or mutual fund sectors succeed in generating above-average returns are usually followed by multi-year periods of disappointing returns, and vice versa. Since this market behavior is a key tenet on which our contrarian investment philosophy rests, let's explore the academic research supporting it and the ramifications for successful long-term investing.

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The ABC's of QCD's: Qualified Charitable Distributions Explained

After having played political ping-pong with them for almost a decade, Congress finally made qualified charitable distributions (QCD's) a permanent feature of the tax code late in 2015. And that's a good thing: (a) for those who consider their IRA required minimum distributions to be an unneeded and tax-inefficient nuisance, (b) for charitably-minded retirees, and (c) for charities in general.

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