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The summer months are a historically dull time in the stock markets. This is a time when many of the powerful fund managers and traders take their vacations and there isn’t a whole lot of activity going on. The summer of 2019 has been different, however, as there have been a multitude of headlines that have moved the markets in both directions.

The topic that has ruled the headlines this summer has been the continuing trade talks with China. All year long there has been constant back and forth between President Trump and President Xi threatening each other’s economies with tariffs. This uncertainty is putting a strain on the global supply chain, causing stock market investors to be weary. The U.S. and China are still in discussions on what a trade deal could look like, but until that comes to fruition expect more ups and downs in global stock markets.

International stocks saw a nice rebound the first 5 months of the year, as the EAFE index (tracks large company stocks in Europe, Australia, Asia, and the Far East) was closely tracking the performance of U.S. markets. There has been a divergence over the past 3 months, however, mainly due to the bleak economic data coming out of the European Union. Europe may already be in a minor recession.

All the chatter surrounding tariffs and a global economic slowdown has seen investors flee for safety this past summer. When investors get spooked by the stock markets, they put their money in long-dated bonds. This demand for longer maturity bonds drives bond prices up, thus lowering the yield. When shorter term bonds are yielding more than longer term bonds, it’s called a yield curve inversion. This inversion has historically been a recessionary signal.

Are you starting to feel under the weather? Search your symptoms on WebMD. Need to talk through an emotional issue with a licensed professional? You can now text an online therapist. Have a few extra dollars and need help investing in the markets? Hire a “robo advisor”. Thanks to the evolution of technology, advice is more accessible than ever. With many inexpensive options for investing, why should you invest in a traditional financial advisor?

The role of a financial advisor has progressed tremendously over the last 50 years. Advisors used to specialize in one aspect of your financial life. Your financial advisor could’ve been your stockbroker who assisted in managing your investment portfolio, or they could’ve been an insurance agent who you bought life insurance from. Today, you can hire a CERTIFIED FINANCIAL PLANNER™ who will provide you comprehensive financial planning.

While investment management is part of your overall financial picture, it is only one component. Advisors now provide additional value by acting as an ally to clients during major life decisions that may create financial stress. Barron’s reports that the industry average cost for financial advice is 1% of assets under management. By working to control behavioral tendencies of the average investor and coaching clients through pivotal times, advisors as a whole can be worth the fees. According to a study done by Vanguard, advisors who follow best practices in wealth management can add an additional 3% in net returns over the long term, with half of that coming from behavioral coaching.

Investing is an emotional activity. Whether derived from fear, greed, or past experiences with finances, most investors have an emotional tie to money. Financial experts can work with you to keep these emotions at bay, while staying focused on your goals and identifying hidden risks along the way. A good financial advisor will provide a roadmap for your financial goals and keep you motivated to achieve them.

Investment Management is a very important part of our business here at Sharkey, Howes & Javer. Designing a custom investment portfolio is integral in helping our clients achieve their financial goals. Below is an outline of the investment process at SH&J, and an overview on how we choose investment portfolios for clients.

We first take a macro level view of the global economy and work to identify trends and how they could potentially impact clients’ portfolios. Macro economic research, as well as insights from various mutual fund managers and investment professionals, is used to determine what asset classes may add value to portfolios during various economic conditions.

The biggest driver of investment returns is the stock and bond exposure of a portfolio. The more stocks in a portfolio, the greater the long-term rate of return is expected to be. Portfolios can range from 100% stocks, which are the most aggressive, to portfolios that may have over 60% in bonds, which are more conservative by nature. We then discuss how much international stock and bond exposure is appropriate, and also evaluate if there are opportunities in alternative asset classes, such as real estate or commodities, for additional diversification.

Once the asset class allocation is outlined, the individual mutual fund or exchange traded fund (ETF) position for each asset class needs to be chosen. Third party investment research tools aid in scanning the entire fund universe. Many factors are considered in selecting each holding. Such as how long a fund manager has been managing a particular fund, what the fund’s underlying expense ratio is, how much risk the fund is taking compared to the benchmark, and if the fund has had consistent 3, 5, and 10-year performance numbers.

The economic conditions around the globe are fluctuating every single day. And, what’s also changing is the number of mutual fund and ETF options available for people to invest in. It is important to stay up-to-date on your investment portfolio and make adjustments as needed. If you would like to discuss your current investment portfolio or discuss our strategies, please contact Sharkey, Howes & Javer today to speak with a CERTIFIED FINANCIAL PLANNER™.