Video: A Look Back on Q3 2017

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In this video series, our Investment Committee discusses Q3 market returns, what to watch for with pending tax reform, how to protect yourself in the wake of the Equifax data breach, a special message to those affected by natural disasters, and what’s new at Personal Capital.

TOPIC 1: Q3 MARKET RECAP

The third quarter was an eventful one when you consider all that happened in the world. North Korea successfully tested a hydrogen bomb, devastating hurricanes battered the United States and Puerto Rico, Equifax suffered a major data breach, and the White House feuded with the NFL. Through it all, however, the bull market remained unfazed, with stocks marching to new highs. Stocks rose for the 8th quarter in a row, returning about 4.5% in the US. International stocks did even better, gaining nearly 6% for the quarter.

The third quarter was a good reminder of how to think about markets. Stock prices are always a function of supply and demand or basic economics. They are not a measure of geopolitical temperament or the general state of the world. That distinction can be hard to grasp, especially because dramatic events are thrust in our faces on a daily basis. But the fact is, stocks don’t care about non-economic world events or human drama—they often rise through extended periods of uncertainty and global tension, and they just as often fall when people feel the most optimistic, as we saw in 2000. The key lesson for investors is to not let emotions disrupt a sound investment strategy. Those who have stuck with a personalized, strategic asset allocation have benefited greatly from this bull market. They can feel confident knowing they are appropriately diversified for the full market cycle.

TOPIC 2: WHAT’S NEW AT PERSONAL CAPITAL

The third quarter was an exciting one for us here at Personal Capital. During the quarter, we officially passed $5 billion in total assets under management. We now manage money for more than 13,000 families, and more than 1.5 million households use our tools to track their financial lives. We’re of course very proud of all those numbers, but the number we’re most proud of is our client retention. More than 95% of all Personal Capital clients choose to stay with us year after year, which means more to us than any other accomplishment. We’re so glad that so many of you recognize the value in our services, and we remain committed to helping each and every one of our clients achieve their personal financial goals.

In that vein, we also released a few additional tools this quarter that improve on our already great dashboard, and provide you with even greater insight into your financial plan. On the web, we implemented our Personal Strategy feature, which allows you to drill down into trading activity and dividends received. Within our Retirement Planner, we released an education planner to help you track and prepare for college costs. In the tool, you can look up the expected costs of specific colleges, determine annual savings goals, and track progress. Best of all, the education planner is fully integrated with your retirement plan, so you can create multiple income or spending scenarios and see their immediate impact on your overall portfolio and retirement plan.

As always, we’ll continue to add new features moving forward, and we’d love to know what you think. Be sure to let us know if you have any suggestions, comments, or questions on any of the tools in your Personal Capital dashboard. Thank you for your continued trust.

TOPIC 3: NATURAL DISASTERS

In this video series, we wanted to take a brief moment to acknowledge everyone who was affected by one of the seemingly never-ending natural disasters this quarter. From hurricanes in Texas and Florida, to the current wildfires raging in California, this has been an incredibly difficult period for many people. We mentioned in an earlier section that natural disasters almost never have any impact on stock prices, nor have they this time. However, while we are dispassionate about these kinds of tragedies when it comes to assessing market effect, we are heartbroken when considering the human impact. Our hearts go out to all of you who were affected, or are still being affected, by one of these tragedies. This issue is especially close to our employees in California, many of whom have family or friends who have lost everything in the current fires. If you have any questions, special needs, or changes to your financial situation as a result of one of these disasters, please do not hesitate to contact us. In the meantime, our thoughts are with all of you for a safe and speedy recovery.

TOPIC 4: EQUIFAX

I’m aggrieved to have to talk about this, but I do. Equifax is a recent break, exposing or potentially compromising 140 million families personal and sensitive information. It is irresponsible and unforgivable. Their job is to not only collect, but protect, that data and they haven’t. Ok, what can you do about it? Well, first you can put security freezes on your accounts at Equifax and the other credit reporting agencies and we recommend that you do. But in addition, Personal Capital’s dashboard can be an incredibly valuable protection. There are things you need to do in order to prevent problems, but then there are also things you can do to monitor and then manage problems if they do appear. The dashboard, which can give you instant access to all of your financial accounts at all financial institutions is the best way to make sure that if anything goes awry, you know about it quickly and you can shut it down and ameliorate the issue. So please, make use of our free software to help protect your family’s money.

TOPIC 5: TAXES

Nearly a year into President Trump’s term, there is no wall being built and the Affordable Care Act remains intact. But we expect President Trump and the GOP will make their best effort to enact some tax reform. The next several months will probably be the last, best shot to pass meaningful legislation.

Everything related to taxes is complicated, but the basic point of the proposals being discussed is to lower taxes for corporations and very wealthy individuals. The latest proposal includes details related to elimination of AMT, fewer tax brackets, changes to the standard deduction and personal exemptions, estate tax repeal, and lower corporate tax rates. There is much more, as well, but at this stage we don’t think you should spend much time planning for reforms that may or may not occur. That said, here are a few things you might consider now.

  1. If you have high property tax bills and have the option to do so, you may consider accelerating payments into 2017.
  2. If you have incentive stock options that are priced above grant, you may consider waiting to exercise.
  3. If you are looking at an insurance product to reduce possible estate taxes, you may want to wait and see what happens to the estate tax.
  4. Existing tax management investment techniques, such as loss harvesting and tax allocation, remain valuable and should be incorporated in your strategy.

We aren’t tax attorneys, and much of what is to happen with these reforms is yet to unfold. So, be sure to check with your tax professional before taking any action.

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Kyle Ryan
Kyle Ryan is a member of the Personal Capital Advisors Investment Committee. He also serves as Executive Vice President responsible for Personal Capital Advisors sales, client service, and investment operations. Previously, Kyle held senior management positions within Merrill Lynch and Fisher Investments. While at Fisher, he was responsible for managing nearly every aspect of the organization, including all global trading operations, investment research, portfolio implementation, and high net worth sales. Kyle graduated with honors from the University of California – Los Angeles.
Kyle Ryan

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Disclaimer. This communication and all data are for informational purposes only and do not constitute a recommendation to buy or sell securities. You should not rely on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific situation. Third party data is obtained from sources believed to be reliable. However, PCAC cannot guarantee that data's currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.