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We routinely publish news, information and insights to keep our clients informed while also deepening their understanding of a variety of wealth management topics.

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Jul 17

Low Yields = High Risk

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For 95 years since 1902, the cyclically adjusted earnings yield for the S&P 500 has averaged 7.9% and the dividend yield, 4.6%. Since 1997, they have averaged 3.7% and 1.8% respectively. Currently, they are 2.8% and 1.3%. Combined, investors could expect to earn 4.1% from corporate earnings growth and dividends, which is a full 8.4% below the long term, almost 100-year average. It is also below the “risk-free yield” of the 10-year U.S. treasury at 4.25%. Below, we can see just how anomalous this return profile for the market is and has been. Historically, we’ve seen other low points just…
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Jun 24

Beware the Target-Date Fund Cookie Cutter

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It has been nearly six years since we published a Cadence Clips piece on target-date funds.  Since then, they have continued being implemented to the point that I cannot remember the last time I saw a client’s 401(k) investment choices where target-date funds were not offered.  Much has happened in six years, and despite COVID, war in Europe, continued political acrimony at home and abroad to name a few, the price of the S&P 500 has doubled since June 2019 when we published that target-date fund piece entitled, “It Pays to Know What Is Under the Hood with Target-Date Funds”. …
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Jun 13

Economic Indicators: Employment

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A couple data points to ponder… First is an update of disabilities across the general population, and more relevant to the economy, within the U.S. workforce. You can see the trend continues to rise since early 2021. Some would have ideas around what might have contributed to this rise. Regardless, there are fewer healthy, productive people available within the workforce to drive economic productivity. AI couldn’t come quickly enough, but with more people sidelined, it begs the question as to the ability of the consumer to spend tomorrow the same way it did yesterday. The below chart looks at disabilities…
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May 16

Certainty

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One of the things we’re heavily deficient in these days is certainty. Whether one views current events as good, bad, or indifferent, most would agree that the ability to predict where we’ll be in six to twelve months with any confidence is more difficult than it’s been in quite some time. This is anxiety-provoking, and as homo-sapiens, we don’t like to feel anxious or scared. Fear leads to poorly calculated decisions, and bad investment decisions, especially when made repeatedly, can set one back irreparably on their financial path. As ephemeral as it might be to obtain in reality, the perception…
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Apr 15

Market Fireworks – What Now?

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As of the moment I’m rapping on these keys, the market as measured by the S&P 500 is down roughly -5% so far this year, with its peak to trough drop of around -12% happening from mid-February through mid-March. That’s been enough to get some people anxious that declining portfolio balances could get worse, while others, with plenty of support from financial media, are viewing this decline as an opportunity to buy more of their favorite stocks cheaper. Only time will tell which group is correct with respect to this particular decline and over a short timeframe, but as we…
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Mar 17

Remembering Japan – No Sirens

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In the decade leading up to the 1989 peak in the Japanese stock market, there was little to complain about. Almost everybody with shares of stock or real estate was watching their net worth rise, month after month, nearly uninterrupted. It became so easy to make money in the stock market that work ethic declined, leisure time increased, and many corporations found it easier and more profitable to augment their core business activities with stock market activity. According to Edward Chancellor in “Devil Take the Hindmost”, “Japanese politicians were not solely guided by public duty in their desire to support…
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Feb 12

Tax Math: Weirder Than Regular Math

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No one really looks forward to tax season, do they?  Many of us enjoy the end of winter and the beginning of spring, and when you think of it that way it’s pleasant enough.  As soon as you call it “tax season”, well, that doesn’t usually evoke the same emotions.  Call it spring, and you think of flowers and sunshine; call it “tax season”, and you think of forms, deadlines and checks to write. With the negative feelings “tax season” evokes, it’s no wonder that along with it comes some frequent misperceptions.  For example, how do you feel about paying…
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Jan 14

Ask Cadence: What is the Japanese carry trade and is it something to worry about?

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A carry trade is when you borrow money and use it to make another investment that you believe will be more profitable than the costs associated with borrowing. In the case of the Japanese yen carry trade, participants with the intention of investing in the U.S. will borrow money at low interest rates in Japan, convert the local currency (yen) to U.S. dollars, then invest those dollars in an asset or assets in the United States they believe will earn more than the cost of the loan in Japan. Assuming currency exchange rates are stable, the math is really quite…
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Dec 17

Incentives, Conflicts, and Capture

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One of the reasons we formed Cadence back in 2010 was to rid ourselves of the embedded conflicts of interest that are inherent in large, profit-seeking public firms. I’m not suggesting that profit-seeking is bad, after all, it makes our economy go, jobs available, and is a genuinely positive aspect of the American way of life. But what we see every day working in financial markets is that there are immense pressures put on public companies by shareholders and Wall Street to increase profits quarter after quarter to fuel rising stock prices. Stock options within public companies, in many cases…
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Nov 18

Ask Cadence: With all of the large forces out there now that affect us yet are out of our control, what can we do to stay grounded and positive?

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When you hold as many meetings each year as we advisors do, you can gain a perspective at times on the general mood out there.  After years of COVID protocols, inflation, and a seemingly ever worsening political climate, to name a few, it is understandable if you are one of those feeling a general sense of malaise right now.  We’re hearing about it on a very regular basis these days.  Though it may be difficult or impossible to take action that will affect the large forces that feel like they are moving against you, taking action on things you actually…
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