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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.

Either You Believe in Magic or You Believe in Math

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What we have been experiencing in financial markets the last few years has been truly mind-boggling. We would venture to say that nobody could have come even remotely close to forecasting the combination of events that have played out since the global financial crisis in 2008. Above average U.S. stock market growth with below average economic growth? No way. Foreign stocks being worth less ten years later? Not likely. More than $10 trillion in sovereign (governmental) bonds yielding less than 0%? To be clear, this means you pay the government to lend them money. That would be ludicrous. It will…

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There Will Be A Downside To This Investment Cycle

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Since the US stock market bottomed after the Financial Crisis in March of 2009, large cap US stocks have returned around 15% per year.  The vast majority of other investment categories have not enjoyed nearly the returns of the US stock market, however as that is the investing area that receives the most media attention, its behavior over the past ten years has shaped a lot of our expectations for what will happen going forward.  Our brains have a tendency to assume the conditions to which we have grown accustomed will keep going, a tendency which has been labeled “recency…

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What’s Changed Since December?

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Simply put, stocks have continued to rise in February while growth data has continued to weaken – fairly decisively. If all one cares about is investing in what’s currently going up, then this rally in stocks seems like a no-brainer. The only problem is that the preponderance of evidence suggests that this rally is the textbook bear market variety, which means it will likely change course just as quickly as it began. If one’s looking to generate fast losses, there’s really no better way. Our position on portfolio composition for the time being hasn’t changed. We will change it when…

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The Monkey and the Volcano: A Cadence Fable Revisited

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While we don’t know whether or not the rumblings heard during the 4th quarter of 2018 were just more noise or the precursor of a much larger pyroclastic flow, we thought it may be a good time to revisit the Cadence Fable: The Monkey and the Volcano, originally published in August of 2017… Halfway up the slope of a volcano lived a monkey. Like his fellow monkeys, he spent the majority of his days picking and eating fruit off the trees growing on the side of the volcano. Unbeknownst to his friends, however, he dreamed of one day opening his…

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What to Think of Interest Rates and Bonds – Revisited

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We wanted to revisit a blog post from exactly one year ago today that touched on why a rapid rise in interest rates matters for stocks. At the time – Feb 9, 2018 – interest rates had risen over 100% from their lows in 2016. Our point was that when interest rates, one of the key lubricants particularly in a highly indebted economy rise, it presents a strong headwind to continued growth and could serve to catalyze the changing of the business cycle. This dynamic could be even more pronounced in an environment where financial markets are extremely overvalued which…

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Losses Get No Respect

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When it comes to investing, everybody thinks about progress in terms of returns. This makes sense since without them financial goals are much harder to achieve, but very little time is spent thinking about losses and the role they play in achieving (or not achieving) those longer-term returns. Even when looking at most financial plans – whether simplistically crude or detailed – usually there’s some assumption for returns achieved based on a pre-determined risk tolerance. Aggressive investors usually assume higher returns while those with a more conservative predisposition will assume lower, safer returns. We’ll address the fatal flaw of assuming…

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Ask Cadence: How does today’s geopolitical environment influence markets?

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There’s no question that geopolitical headlines can affect markets on any given day. An escalation of tariff disputes with China, a change in tone coming from the European Central Bank (ECB), tension with our allies in the Middle East – all of these things have the potential to move markets. What’s incredibly difficult to ascertain however, is in what direction. A funny thing happens in markets sometimes – news that should be bad for markets can have the opposite effect. In a world of central bank intervention where interests are strongly aligned with higher asset prices, sometimes bad news can…

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Ask Cadence: If I haven’t participated in the stock market gains over the last couple of years, will my retirement be negatively affected as a result?

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Put simply – no, and here’s why. Think about it this way: Stocks at any point in time can be ranked on a scale of one to ten based on how expensive they are. The vast majority of the time, they’ll score somewhere between 3 and 7 where they’re neither cheap nor expensive. This is where one can have a traditional exposure to stocks based on the timeframe of their goals and risk tolerance. If stocks are scored below 3 and considered cheap, one might take a little more “risk” since over time prices stand a much better chance of…

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Warnings Can Take Time To Play Out

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For an activity that is supposedly best done using pure logic, investing can be incredibly emotional. There will inevitably be times that test one’s intestinal fortitude and to expect otherwise is envisioning a path that has never existed in financial markets. But to some extent, investors do get to choose which type of volatility they are willing to accept. Since the price we pay is the primary determinant of future returns (over longer periods of time), if we invest in something that is expensive relative to its historical norm, there’s a very good chance we’ll take losses eventually – in…

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Thoughts from the Investment Team – This is Where Mistakes Are Made

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John Pierpont Morgan was known to have said, “Nothing so undermines your financial judgement as the sight of your neighbor getting rich.” Understanding the bigger picture can help us avoid unrealistic performance extrapolation (both up and down) and stay focused on those things that truly offer the most opportunity for lasting gain. There’s no more important time than now to look forward rather than backward. This year has been particularly dangerous, not because markets have imploded, but because the way they are moving exposes our psychological vulnerabilities as investors. After a strong 2017, U.S. stocks ran up very aggressively in…

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