Planstrong Financial Forum 12-31-16
Dec 31, 2016|
"Smart investing, simplified"
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
From those plans stroll in the broadcast studios it's good play and strong financial forum where your host. Kendra are very humbled president plans Romeo must remember. Hold portions it's time for Smart investing. Symbian phone. And happy new year it's a plus strong financial formally confirmed bird at the anchor desk along with Alex vendors CFA. Alex fees was planned strong he's. I was there and that means that all on vacations because you don't deserve this is solid playing golf in Florida after a good fair good shrimp if it's a deserved well deserved vacation we're happy to have you with us Alex it's been kind of crazy you are all in all and generally speaking this week in and last week are kind of quiet weeks in the market always quieter on holidays we'll talk about that a little bit and what did happen over the last week the we'll also look at what. Could have happened what did happen over the year and made what happened to folks portfolios was a good it was a bad was about the expected yup this time we take a look at things anatomy and it's the end of the year so whenever you made he's made already it's over this is the closest a bush time and time into time to count your winnings NC real losers where exactly -- memories I'll start -- on Monday morning but so this is a good day to do that and especially in the afternoon you know couple hours you can be celebrating the new year but always good to tell you money first gym whether or not should be celebrating. So let's start off with a little bit with the we're looking at what the last week is like cal is what we will do we were kind of up there for awhile and what that when we see over the last week. Here you know for awhile the Dow was flirting with 20000 and added to it became. Increasingly likely that it was gonna happen now comes another player just goes to maybe. Sonar and its it's a big hurdle to jump in and in some minutes it's a tactical level and I think once it gets above it. You know it shouldn't it. Beat it should be yeah an ice floor hopefully I'm at least for the time being but but you know it's it's always difficult to to reach these milestones in in major markets and on people watch again and you know other there wondering if if now is an okay time to put more money and given. Sure we've done we've already seen. Per console I just wanted to take as as always. Around year render into the new year. We always wanna look back on the last year and say hey what did well what didn't do well not at my strategy pan out. And I think you know as as you said what a crazy year this was so many ups and downs. Roller coaster ride to start the start the year round. We had. Concerns over recession we had. Plummeting commodity prices and oil was a 22 or three golden girls 1727. Up was was the low in February. But you know people were thinking it could go lower. I'm you know we had concerns over China they were devaluing their currency. You know the stock market is going crazy. We had concerns over demand because commodity prices were ponds and everybody knew there was a supply problem but it's started to become. And somewhat out there that it was a demand problem as well some people were talking about recession. On the amount of people you saw on CNBC. And on you know on Bloomberg all these other. Financial publications you know were were calling for the end of the bull markets start of a bear market a big market correction. A lot of fear a lot of selling. You know you big recover from that which I'll get to organize a recap mid year we had the breaks that. Brand and the uncertainty around Matthew Albrecht a cause a 5% selloff so mid year against stocks were were on below where they started the year. And then we had a nice recovery on you know I think a lot of that had to do with sun. With earnings. You know people were were expecting third quarter earnings to be a how than the seventh straight quarterly decline and we actually had a positive three. So I was pretty good and the market were marked for reform pretty much on the sidelines for awhile with some with the elections and then the elections came through people started to. You know and dispute what do trump presidency would mean for stocks and and you know there was a big rotation again but but a nice surge in stock price towards the end of the year or so. After the worst start ever to a year and Aaron I know you're Matt Harris talking about this earlier in the year in the show you know it was rough it was down 6% in the first week it was down another 4% over the next five weeks on the first five or six weeks the market was down more than 10% US stock market. And who would've thought markets roared back 25% from thereon out and finish the year plus twelve or 13% include violence just a phenomenal phenomenal ending to the market and you know some people probably made good decisions some people probably made bad decisions I can tell you that's. I'm a lot of our clients wanted to make bad decisions the phone was ringing off the hook in January and February saying hey you know I wanna get ahead this next big market downturn should we be selling should be moved to cash. What should we be doing. And you know we incurs from the hole and I think we earned our case for the year and many more years for just based on that talking them down in an explaining that. We thought the fundamentals of the US economy were strong. That a lot of the fears of recession were overblown. Commodity prices were good unsustainably low prices especially oil. And in some cases we increased our allocation to some of these beaten up areas and we saw the benefits of that. In the in the second three quarters of the year. And this wasn't just a Bly in whole scenario. Firm from from choir started know that Paul is in your every week. Explaining why you were recommending this your clients because of what you thought was going to handle the market which ultimately did happen right the market always overshoot silk and the market was overshoot and begin the year it was over shooting on the upside for bonds it was overshooting on the upside for defensive dividend paying stocks. And it was over shooting on the downside for risk sensitive stocks international stocks emerging markets stocks and so forth and frankly it was a big buying opportunity. Armed it was certainly an opportunity to at least rebalance. Out of the things that have done well and into the things that it on poorly that would have been a very good decision at the sometimes well and again after Greg's. So so these are things that frankly these this is what an active time investment manager brings food to portfolio. On the no makes makes an emotional decisions and and invest based on fundamentals not based on headlines and here. Don't a couple of weeks folks will be starting to get to your year and fourth quarter and year end numbers back. And they'll find knowed how they did for the year with 116 good or better for the men and as you just described. The market did very well. After its after those are a couple of downturns. So folks might want to look at whether or not they think they do this Wellesley shootout of course they need to take into consideration what their own personal. The to taste for risky areas where they are in life etc. An aggressive investor should have expected different recurrent and a conservative pastor is pastor. And let me try to go through that in me. You know fair and balanced ways you can do your best job assessing how you do or how you're advisor did run over Koppel last year in and count your 2016. When we start by going over how the meat sure. Asset classes for for him and it'll break into how different portfolio should of performed given the performance of the underlying bench president. So DS and 500. Which we often discuss the an index of 500 you know that of the largest companies in the United States public companies the United States was up. 1213%. Or so including dividends. The MSCI all cap world index. Which is a an index that's representative of all develop market and emerging market stocks outside the US. On which is a very good proxy for international stocks. Was up about 4% including dividends that's a higher number than I probably would have guessed served a couple months ago yup yup well arm I'll get into that mean there's a lot of disparity even within that 4%. On the if you think of what Europe did and what Japan did it was on the lower end of that our common if you think of what certain emerging markets stated. You know there were some big winners there and that was all based on the rebound and modern song get to that in a minute. And so let me just recap S&P 500 up twelve and a half percent. International stocks up about 4% from bonds up 2%. And this was one of the big shocker because if you if you're call bonds were up. Almost 6%. And we weren't even knew we were little over halfway through the year not so bonds clearly got off to an unbelievable start. Arm and one interest rates starting rout started to rise in July they give up a lot of those gains and ended the year slightly policy. So if you're a US stock investor. It telling you do you know investing only in US companies in the stock market you should have expected to earn anywhere from around twelve or 13%. If you also. Invest an international companies then you might have expected somewhere. Sell the bat considering US stocks were up thirteen international Sox were up four. You're probably more heavily weighted to US stocks so you're you're you're probably looking at something in the 10% range from as a 100% stock investor. You don't balanced US and international. Let's say you have a mix of stock and bought stocks and bonds. You know let's say your 75% stocks 25% bonds. In of your Stoxx Europe some in the US mostly in the US some international. You should have expected seed media around 8%. Type returns and the further down you go and risk the more bonds you have. The less you should have expected and recurrence so if you worry modern investor or 6040 maybe you should expect about 7% return in 2016. More conservative investor 5050 stocks to bonds should have expected. You know closer to a five or 6%. And the more conservative you get you get closer to 2% since 200% and bonds. You know your benchmark need about 2% this year if you're mostly bonds you had some some stock exposure. You should have expected probably closer to about 45% so. Take a look at your statements Tom wants the statements come in compare your year end balance to the beginning of your year gone to balance. A figure out what your total return was. Obviously you wanna take into account any money that you put into the account work or withdrew from the account over the period. But that's gonna give you an idea of what you were current laws and if you want us to do a performance analysis for you tell you. What your return Wallace and what it should have been based owner asset allocation were offering free forms for use stuff for the first month of 2070. That's a good got a good point and this is the time meet their talks really should be taking a look at the performance reviews especially when they do get their numbers in the next week or two. On the toll free number for planned strong ADV. 9727526. That's 888972. Plan or go online to plan strong dot com and just send Alex. An email or some Paula email would you say they would like that free performance review and be happy to give back in touch with the set up time. When that can happen and and so basically you'll say based on your asset allocation and also based on where you are what type of investor you want to be. Usually you're you're good yeah you were invested in a 70% stocks for the majority of the year 30% in bonds and we would've expected your return to be. Seven RE percent. You came in 10% great Don you know you should be pleased with the results of this this last year. Or hey you you came in at 45% why was that the case was it because you. I'm were invested in the wrong things was it because of a timing issue you decided to sell when the market was going down. Were you got it late and these are all factors that we can look into two took to figure out some you know or why the return was was above or below benchmark. And what what sorts of fees eat and there are those terms and if if if that was on something that that was worth paying. So we're happening going to to a lot of detail on this thumb if you just give us call in and bring you statements. Again that's a no cost no obligation performance review. For their first month the month of January coal plants started a DD 972752688972. Plan or go online to play strong dot com. Alex we come back we'll look a little bit more at. Where folks may money we're folks lost money in the of course what's gonna happen next we'll be looking at the perspective from fidelity as what they think is coming government next year it's a restaurant financial form. This is tall Parsons president of planned strong investment management. And you're listening to them plans strong financial forum on WRKO. Boston's talk stations. If you like what you hear on our show and what need to take a look at your investments and retirement plan called my office of EDD 89727526. That's 888972. Plan. Securities and investment advisory services offered through metro metro group member to go as IPC clincher investment management and billions of mismanagement grouping concluded that any Russian diplomats who threw six. Hi this is Bobby Nelson people use different strategies to acquire enough money for retirement. Some try to do it themselves. Others buy insurance for investment products though sometimes load benefit the seller more than the buyer what makes sense is to hire an advisor with first rate credentials and why do investment management experience. Should have a fiduciary obligation to act in your best interest. And be paid the same amount no matter what your invested in if these things matter to you. Call Paul Parsons at planned strong investment management to learn more. Call 8889727526. Hiring the right advisor could be your best investment. That's 888972. Plan or vision plan strong dot com. Securities and investment advisory services offered through next financial group in member farmer SIPC plans to investment management is not an affiliate of next financial grouping and is located at 980 Washington street dead and. Okay. It's. It's. But I'm strong broadcast studios of the epicenter of definition yeah. This is the plan's strong financial forum with the whole portions president of planned stronger investment management. I'd encourage the anchor desk in civilian purple parcels today is Alex vendors CF bank. Our expert in disaster plan strong and we're talking the first segment about. What has happened over the course of this first year and more than you could do about it basically our truce California. A no obligation no cost performance review. Because the Euro in now the year is New Year's Eve so you're you're done making money this year so time to take a look at how you did. And did you do as well as you would hope you're as well as you should have done those kind of things and pollen Alex will be more than happy to talk about the toll free number to get your no obligation performance review 888972. 7526. That's eighty 8972. Plan or go online to plan strong dot com and send them an email today don't want that. Performance review you're talking during the last segment Alex about. How things started off murder rocky the beginning of 2060 amp. And they leveled out sort of do do better in the we have another dip in the summer and remember exit time. And then things started to pick up quite a bit and we really did pretty well from that point til about now. So I guess the first question from other from my putter view is why what what was it that made those things turn around. And why were they not doing so well then why did they turn around. Well I'm sure. You all remember he has listeners. VD rough start the we got off to and 2016 in the markets got off shore 46 team. The worst ever start to on its two year and the history of stock market stocks started the you're down 6% in the US stocks that have started leader down 6%. On end just the first week shed another 4% over the next several weeks so within the first six weeks a mark down already 10%. And a lot of investors had not seen volatility like that in the market and it really spooked fears of you know the DOE don't nine crash and it it spooked fears of you know. Nearing recession a nearing stock market crash and a lot of people were were frantic and and rightfully so. They wanted to know what was going wants let's talk about what was going on at the beginning of the year that caused the market to start off so poorly. If he is is your call the end of 2015 was one the Fed raise rates for the first time in you know and and many many years. They raise rates and the expected for rate hikes in 25 22016. Past. That was certainly a concern for investors going into the year. As they were on getting pretty used to lower interest rates and the support that gave it to the equity markets ran. So that was certainly a factor that that led to volatility towards the end of last year going into this year. And we've China. China was was you know letting their currency devalue against the dollar which was a concern for I'm you know a lot of US corporations that that tended to wanna I wanna do a lot of business in China seamless competitive. At at the same time the Chinese stock market was continuing its volatile bow on down as much as 50% from its peak come out last year. And a lot of people were concerned that that was gonna lead to or you'll spill over to other markets as well. We had let's not forget oil prices oil prices which were in a 140 dollars at the peak of 2008. More recently in 2014 they were around a 110 dollars per barrel. At the end of the year they were around forty. And in 2 February they continued to plunge. Reaching a low of about 27 dollars and people were really concerned usually you don't worry much about energy prices. You say hey my my prices are going down upon who really cares but as people were really watching this and wondering if hey you know they understood the supply story they they knew the US brought on a lot of supply due to fracking in a war zone drilling they knew candidate at this same oilsands and they knew OPEC. Frankly was was allowing the president to drop trying to push some of these people out this this hand and naturally increased price and that just wasn't happening quickly. And the same time you have some China fears people were saying oh we don't China's and trying to as a net debt bubble if problems can lead to a global recession. You know job numbers in the US are are slowing a little bit. The assault caused the market selloff pretty significantly in the beginning in the year right and then you know frankly within months of the lows. We know we recovered all the loss and you know I think part of that was the Fed reassured investors that it wasn't gonna be raising rates as quickly as they had said at the end of Tony fifteen. I'm so they say hey we've more Central Bank support it's good for stock prices oil prices recovered now up to about forty dollars. The energy information agency of the United States confirmed that demand wasn't going down it was actually consumed continuing to go up in the projection was for to continue to grow up. China was recovering a bit so the the fixed the recession fears were a bit over done and people realize that and they released quickly push stock prices back once people got a sense that the US economic recovery was still. You know in in good shape and Brad. So again you know market turned a bit higher than we got into the late spring early summer we have brings. And breaks it immediately caused another. 5% decline in the US markets and 10% plus decline in international markets was part of that decline because nobody really saw it coming and exactly no knicks actually you know no one really knew what it meant what did it mean for the future of the eurozone would it mean for economic growth in the Euro region wonder what what with what was spill over to. Other areas. Who did so very similar to February the market got wind though this isn't as bad as we thought this is gonna take awhile to play out. The only difference was instead of you know waiting a month to recover all its losses and it waited two trading days so was a shorter opportunity to buy. But certainly another one that that dom push markets up and then they continued chug along to new highs why did the market recover from her exit was I said people got the sense for all you know the UK it's gonna take a long time to figure out what this means and even if it does negatively impact the UK growth. What impact is that really gonna have a in the US on China it's not gonna be that big it's gonna have some impact but not as good as we were originally feared. The same time investors realized hey you know more more turmoil. In Britain and the U probably means that the European arm. You know European central banks are picking you to continue to eats. And he's for longer so that that frankly pushed interest rates all time lows and in negative territory in many cases and lower interest rates is generally support of for stock price spread. As as investors go out of low yielding bonds and move into higher potential return and stocks around. A time we also saw. I think it was a little surprising was because some of the European and and other money was coming into this country for US bonds to we actually to sell the stock market be supported as models of our market. Yeah yeah I asked him and that's an unusual for for both to it to do relatively well yeah but think about what quantitative easing did from you know and frankly 2012. All the way through you know last year and is it is it put a lot of money but interest rates down. You know a lot of central banks were buying the bonds took solid all investors were buying bonds it was central banks. The investors were buying stocks. They just you know us you had demand for both on both sides. And frankly a lot of the stocks that did well in that period where the stocks that were were. You know dividend paying conservative stocks because people said hey. No I can't invest in US treasury and get one point 4% number ten years I need something else all investing utility. A good three or 4% in the utility company sells power. And power demand is relatively stable. And K you know it's a stock but it could shouldn't moved too much historically hasn't moved too much now but they bought that really bid up the price of the defensive dividend paying stocks right and once you saw interest rates bought him in July. They've bottomed at about one point 37% on the ten year. And since then now interest rates are sitting around 2.5 percent so you know more than 1% increase since July. And that caused the big shock. To the income markets and so you have been this person that says hey you know I don't wanna be in bonds I wanna be in seat dividend paying stocks. When you buy a dividend ETFs on me by dividend stocks. Because you know at least I know I'll get my dividends that was a bad move by chasing that performance because you know those stocks are down anywhere from five to 7%. Since. Since the bottom and let's say you were bond investor news and hey I'm not gaining anything from short term bonds and not getting anything from intermediate term bonds. Let me by a longer term bonds at least I'm getting a car you know percent or so more. By investing longer term harm on you know those bonds in some cases were down 20%. High quality government bonds down 20% in less than six months because interest rates move but 1%. That's the risk you face. Frankly by chasing returned by buying high bid up prices that you think are safe there's more risk in them and you realize and this is frankly been. Something that we've been avoiding for quite some time so we didn't see the benefit of it for the first six weeks. But since then. That's strategy of avoiding those names and avoiding long term bonds and I'm focusing on shorter duration investments has really paid out. So the phone rings at plants strong during some of those times when interest rates you're very very lower the stock market takes it. That's the time you you folks behalf to convince core instant sticker stick with it a bit right based on. How are you see the mark exactly and then you have to be patient you know these sometimes you have to be investing in some of the areas that are. Our you know perceived as risky or out of favor because those are the areas that are off the best opportunity. You know I'd say energy was definitely the top of the list there. And more recently financials you know people were looking into interest rates and and the health of financial companies and saying how are these companies making any money and we you had to believe that interest rates are gonna rise. On four for financial to start doing relatively well again because that they require higher rates on on overturn. So while those for a couple marries the market that really helped later in the year. We also saw our earnings start to come back corrupted money and that was a big concern six straight quarters of negative earnings growth you know earnings recession worst worst earnings recession since the Great Recession of the whole way don't nine. Armed. And and frankly the third quarter when he sixteen was supposed to be more of the same it wasn't supposed to turn positive until the fourth quarter of two when he sixteen but. The companies reported better than expected results the number came in a positive 3% earnings growth that helped support the market as well. So you know why I think all of these stings there were a lot of good in bad decisions to be neat over the years and hopefully you were on the positive side of that but. On this was definitely year we're you know whether it's the election whether it's the brings it whether it's the sort of a year. There are a lot of negative headlines that caused that could've caused investors to flee. And a lot of you know stocks whether it was gold that started the year on a huge run if you bought then it would have been a terrible times has given up a lot of those games. And so you know it it's it's it really takes a disciplined professional approach. Especially in. Uncertain times like these I'd say 2017 is gonna be pretty uncertain as well aren't people are really hoping to. Com as are we that that a lot of the trump policies of a tax cuts corporate tax cuts individual tax cuts as well listen pare back and some regulations is gonna be good for the economy and good for Sox. And bring back inflation and growth. But there's also the concern over what some of these protectionist policies mean. People not really focus much on that yet because it's not a supported in in the congress. Whereas are cutting back regulations and tax cuts is support in congress so that's of people focused on but it's it's again going to be a year where I think active management really pays off. Common it's gonna be important to have a disciplined approach and sprawling to be very different than what we saw last year. Me just remind you that number to call for your no obligation performance review with Paul and Alex a plan strong the number is 888972752680. Dade 972 plan or go online to plan strong dot com. When we return we will look forward thanks to Fidelity's perspective it's a plaster our financial four. This is tall Parsons president of planned strong investment management. And you're listening to them planned strong financial forum on WRKO. Boston's talk station. If you like what you hear on our show and what media take a look at your investments and retirement plan called my office. 80889727526. That's 888972. Plan. Securities and investment advisory services offered through an extra two group member to me as I can see Clinton mismanagement and filling in this country grouping that is located in Washington street domestic. Through six hi this is Donnie Nelson if you're fifty or older here's a suggestion. Commit to getting your financial house in order over the years you worked hard took chances made sacrifices. And built up as much wolf as possible so you'd never run out of money in retirement. Well. Now it's time to get organized and to make sure you have a financial plan will protect your retirement. If your financial life together. Call Paul Parsons at planned strong investment management. Just schedule financial checkup call 8889727526. That's 888972. Plan commit to getting your financial house in order call 888972. Plan or vision plan strong dot com. Securities and investment advisory services offered through next financial group each member tumor SIPC plans to investment management does not only an accident it's lucky or anything Washington's I don't know. This says financial talk continued signing and informative. At least is informative its plans to own financial forum where cold portions of the president's bold plans stronger investment management yeah. Yeah. You know. And I get Garber at the anchor desk and I'm joined by Alex Bender Alex is with plans strong and he works with ball falls on vacation this week he's so disarming in Florida probably play a little girl for me I imagine you have matches so this is that while obligation weeks Alex is sitting in the program and if you if you called this week you spoke gal expert to the next republic back and you can speak to either Alex or Paul Wellstone wanna ask from him the help of course you just may want X relics and Saturday in the show. 8889727526. Is a phone number 888972. Plan. We're going to play and strong dot com and to send them an email on the get right back to you were talking about the new obligation. Performance reviewed data plans from will perform with view. This month of January are you going to find out how you did 2016 did you do well did you do as well as you'd expected did you do as well as you should have. Those kind of questions you need to ask. And the post of plans would be happy to ask them with you to look at it they might say yes he did you do vote as well as you should happen and here's why are they might offer some suggestions. And that's that's quite the entire professional money managers. 8889727526. They'll be looking backwards for the for the program thus far I heard it on New Year's Eve special program here Alex so let's look forward a little bit. The Delhi came out with the paper looking forward based on what media happening with interest rates rising into we've had one bump already. The Fed tells us we should expect more. So what does fidelity thing all this will mean for 2070. Losing good week for articles from fidelity mom you know we we certainly use on you know some of their investments from time to time they've great researched and done their research when we actively manager are. Individual stock portfolio is well and bon portal so. And this is a good week they came out with a good interest rate piece M as well as each of the portfolio managers from the respective sector funds came out with their outlook. For Tony seventeen on different industries so we can get into a little more. Detail on. You know what industry should arrive what what trends to watch in these industries going forward not just 2017 but beyond her income is well so let me just start with interest for peace and and hopefully will have time next segment take to get to a couple of the sector outlooks and Paul will continue next week with the but the ones that we missed. So. Let me just get to the the conclusion of the fidelity peace and now all talk a little bit more more about how they got their turn the executive summary paragraph that's. So you know in summary fidelity does expect rates to rise a bit and when seventy you know as as you know we've already seen rates rise quite a bit from from July as we talked about on recent. Segments. The ten year bottomed at around one point 4% in July 205116. That is. Ended the year round 2.5 percent so one point 1% increase in less than six months. Caused major. And major consequences in several last several occasions both good and that. But on the bond side mostly that. So the question is we've seen an increase interest rates are still awfully low what's what more could come we did see the Fed come out. At the end of 2016. And as anticipated raise rates for the first time in 2016. As they did one time in 2015 so they've done two and interest rate increases now. From all time close come their target originally was zero to 25 basis points for the Fed Funds rate. In 2015 it became 25 to fifty basis points and and 2016 it became fifty to 75 basis points still incredibly low by historic standards. The Fed hinted. In December. That they into speech three rate increases for 2070. And you have to take that with the greens so I Leicester last year there's a war and we had one and many people thought for much of the year than it was going to be zero after the start we had snow again take it with a grain of salt. But with this new administration. Potentially a pro growth agenda. Pro inflation agenda that usually is supportive of higher interest rates so the question is well how high can they go. Well fidelity said that typically. Though the long term treasury greater what's what's called the ten year US treasury rate should be equivalent to about. The economic growth rate. Plus a flesh. So they're they're taking the fair value of the ten year treasury at around three and a half to 4%. There were 21 half percent now so that's signals another 11 and a half percent increase. Doesn't mean it's all gonna happen in 2017 it just means if the market was trading at normal the more normal levels this is where the ten year treasury should be right now. Did they when they say there are they expecting is that where they expect the Fed will push shift do they think that the market can handle that kind of parade we would do whatever they looking at just predictions are reserve little hope as well. You know I I think right now it's it's it's what should it be trading Erica it's not what's gonna cause it it's it's really what's what's the real what's a reasonable we what's a reasonable yield for the ten year comes environment and hey you know I'd say but the tenure yield of two and a half percent. You have to be a pretty bad market deceit or yield that and we're not and that that market you know this has been a pretty good stock market it's been a slow but steady economic recovery. For several years now and and the economy is not needed to be a much sport. We're just why the Fed is contemplating raising rates but they're doing it slowly because they don't want to. Put an end to this growth. I think trump presidency definitely accelerates growth and inflation and interest rates hikes relative to you know what another administration an administration might not have done. On the let's talk about how is if you if you do believe interest rates are gonna go out. How you would. Up protector portfolio how you might allocate within fixed income and with inequities. So. There are first of all the things that get hurt most by you. Rising inflation and rising interest rates are fixed income investments because it costs are going up. And you're income staying sick so if you own a bond that's the ten year bond and you're locked in a two and a half percent interest rates and then interest rates go to three and a half percent. Your two and a half percent bonds is gonna lose value. And it's not gonna be good for existing bonds. On the other hand if you own a thirty year bond. You're locked in at 3% rate got 4% your stock for thirty years turning 3% interest while when you could be getting four. That's a bad day you're on that's why long term bonds are more sensitive to changes in interest rates or if you take a church or going up you might wanna consider shorter called shorter duration investments that short term corporate on short term treasury bonds. He other types of bonds that that tend to do well in this kind of environment high yield bonds and high yield bonds ATA jump bounce. On these are so he's negative term video which is why they and they and they call high yield is well I think. Tom in in the idea of idea there is they do have some sensitivity to interest rates but a larger part of the story is spread its. And how much they're paying for the risk of default. And if you're investing in a company that has eight. Higher debt load that has me. A worse over worsening economic picture you're gonna require a higher interest payment to lend them money. So it's much more about the economic growth story and how the companies doing fundamentally than it is a now the interest rate. Well. So when it comes a high yield bonds you're gonna get more credit risk is gonna do worse and down stock market. But it will. Tend to do better if interest rates are rising due to economic growth. So if you do feel it interest rates are going up and growth is gonna be strong media high yield bonds will get you a little bit extra. I'm protection and potential upside in addition to their stronger yields OK so good mentioned dimensions short duration and high yield yet what also really consider sometimes do as well in this kind of Marleau will not all governments. Our prop are considering raising retreat now and there are still many governments out there that are still easing that are still cutting interest rates just to support growth. Armed and as a result those bond markets look very different than our bond market so maybe if you look internationally. And you know some of these markets government's corporate slow look relatively attractive on at least based on the interest rate outlook for those kind of spur on again risks associated with investing internationally move on especially with bonds. Are you have. Potential currency implications sure on some of the bonds you might buy or are issued non in US dollars but in euros or yen or two Chinese you want so teaser rates need to pay attention to as well because if if they lose currency value than that eats into Europe. Yield on at the same time they tend to be a little bit. Credit riskier than the US the US is a seat he's been considered to be risk free bonds are in terms of getting your money back on bonds. That's not necessarily the case in some of these emerging market areas and some of these and you know develop market areas. Where you're landing the government money and they've they're not as creditworthy as you so they tend to be riskier from credit prospectus and other other. Investments attended do well and and rising interest rate environment sort you know what's talk about treasury inflation protected securities. These are called tips and I'm a little bit on offense cheer I do think that they could outperform treasuries but I don't necessarily think they're gonna have a positive for car. And the reason is this. He's an these bonds tips in in that adjusts your payment. And and frankly your principle based on what inflation does so if inflation's up 2% you should see the value of you work on investment. You know it imply your a rate of return of 2% protection is you're gonna see that. Implement in the portfolio whether it's the coupon payment for the value of the asset. Treasury bonds do not typical treasury bonds did not offer that inflation protection it's a fixed rate you know you're getting it doesn't adjust upper the problem is. In. Treasury inflation pick each stories tend to be longer term her so they do have. A federation factor there are so even after getting a little bit of protection from inflation. You're still gonna lose value if interest rates go up and it it you know it it might not be as much as is it would have been without that inflation protection but it's still likely to be negative. Returning asset in a rising too sure environment so that's not something that I'm too wild about Erica it's going forward. Floating rate bonds these are bonds that. Unlike inflation protected securities that that. And just with inflation these are bonds that adjust with interest rates which is better because you want a bond that's gonna pay you with the current market rate. When rates are going. You're you're not stuck with a 3% on because if rates go up 4% dolce injury to 4% these are bonds that tend to do relatively well in this environment. I should caveat that by saying. That these bonds it it tend to be issued by lower credit worthy companies so a lot of the floating rate market is high yield. Which means that its load to ration but it also has more credit risk arms that's factors weld need to consider. Armed and if long term interest rates increased short term interest rates don't increase as fast and they're not gonna give you the same adjustment to your coupon payment as you might otherwise get. Alex we're talking about what investments. Should do well the rising interest rate environment we have more to go over when we return to supply a strong financial form. This is Paul Parsons president of planned strong investment management and you're listening to them plans strong financial forum on WRKO. Boston's talk station. If you like what you hear on our show and what media take a look at your investments and retirement plan called my office. 808897275260. That's 888972. Plan. Securities and investment advisory services offered through an extra two groupings like number two and as I can sequester investment management is an affiliate of mismanagement grouping concluded that any Russian diplomats includes six. Hi this is Bobby Nelson. People use different strategies to acquire enough money for retirement some try to do it themselves. Others buy insurance for investment products though sometimes those benefit the seller more than the buyer what makes sense is to hire an advisor with first rate credentials and why do investment management experience. Should have a fiduciary obligation to act in your best interest. And be paid the same amount no matter what your invested in if these things matter to you. Call Paul Parsons at planned strong investment management to learn more. Call 8889727526. Hiring the right advisor could be your best investment. That's 888972. Plan or vision plan strong dot com. Securities and investment advisory services offered through next financial group member in her SIPC plans to investment management does not definitely residential Ruben and his little cute and I need to wash. His lead them. Ground zero for your financial news and economic commentary. This is just the plan's strong financial forum where all portions president of homeland stronger investment management yeah. I had. And his cholesterol professional forum I'm John Karr Maria being disk and joining me today is Alex vendors see after me. Alex is with plan strong and wooden she's filling in for ball today follows on vacation to Florida playing some golf and we're talked in the in the first segment quite a bit about the fact that plans prior is offering during the month of January no obligation performance review and let's face it Torre sixteen is over with folks today's New Year's Eve so well. You already made would you going to make a new beginning and I'm pretty nice couple weeks you'll be getting. The numbers back in the mail that basically what you know our. 2016 did you do as well as you thought you should did you do as well as you would hope to do. Did you do as well as the market said you should have done these kind of things that they will be asking our plans are on behalf particular. And what you have an actor investments which you know how well you did and how well. Perhaps you should have done and we said you know you does it. Someone who was primarily invested in stocks should have seen returns in you know anywhere from ten to 13% president he's a benchmark treatment has grown bonds were had a auto the worst year bonds were up. New US bonds were up only 2% this year round so if you're a 100% and bonds shouldn't expected those stock like returns turn on the I guess and I version would be why were you under sin embargo is are there will be you know there are some people were makes sense here and certainly they're not earning what they used to make in a 100% bond portfolio is why a lot of people have shifted. Out of bonds and stocks but it's certainly. You know you wanna get paid for the wrist or taken on the and you wanna if you're paying for device you wanna you wanna it to be worth. How worth and in terms of the returns you got married and so it's it's important and and if you're doing it yourself. You wanna say hey you know I ironies returns and I didn't pay much in fees but media like I could've had an advisor that they could've done better after. Paying them a fee and I would have been better off. These are all things that you know I think. As the new year approaches and then people are thinking about resolutions should certainly be one of them non is is you know paying a little bit more attention to the the retirement side in and making sure that their assets are. Are working for them as wells should be. Ozzie and that number 8889727526. ADB 972 plan. Our Alex so we're talking about. How fidelity was looking out their investments that historically do well in interest right interest rate rising environments which. It looks like we are in red right about now you wanna get a sense just take a look at how certain investments did from. July through the end of the year because that was an increasing interest rate environment and you expect that to continue and you should X. They're more of the same from those particular investments in just for me to give you a little bit of an idea as to what. Got her in that period since since the July low interest rates. We've we've seen the tenure US treasury go from 14. 2251. Point 1% increase in less than six months. We've seen long term bonds dropped more than 20% long term treasury bonds dropped more than 20% price. On during that period even factoring in their interest. We've seen. Defensive dividend paying stocks utilities lost 7% consumer staples lost 5%. You know these are things that people bought for safety and upper income and you know just to put it in perspective the US stock market was up. Almost 9% in the same period so not only did you cease significant losses but you missed out on a pretty good market for a lot of stocks in the same period so. If you expect that to continue let's talk about some things that can do well based on Fidelity's article can office last week. And so you addressed in the last a silly and we talked about floating rate belongs on tips that Euro Qatar to go to a shortening the duration of your portfolio growing shorter term bonds because if you buy your short term bond. In interest rates change. Hey you know it's not ideal but next year when your bond matures you can buy a higher yielding bonds so it doesn't impact your investment to too much. Whereas if you have a long duration bond that when your thirty year or even a ten year you're stuck with an interior rate. In arising in tertiary environment that's bad for your bond and Rory any mission and a jump orange or are you born as well again there there are caveats to each of these items that I'm mentioning. You know your your substituting interest rate risk for credit risk and and things like that common things don't always perform like you expect them to in this and in a certain environments so to stop it is certainly don't blindly take this has. Let's go on by these these are these vehicles to run from rising rates because. People have been wrong about interest rate increases you know we saw last year the Fed set for rate hikes. Next you know saying three all last year they only want in this this coming year who knows maybe it's three navy it's more people feel more comfortable with three. This year than it did with four last year but again a lot can change with a couple of bad economic reports here or there sure. So on what I didn't talk about yet was equities and might like talk a little bit about defensive dividend paying stocks and how they react higher interest rates generally negatively let's talk about what stocks tend to do better. In arise enter free environment. A lot of that has to do with us. Why are interest rates increase. If interest rates are increasing because growth is strong and inflation increasing. And certain stocks do better. I've interest rates are increasing because stump things are out of hand and and people are are fearing an oncoming recession. And you might start to see different Aries the market perform well let's start with the former. Which was interest rates are increasing because of an crew improving growth and inflation outlooks from me in the from presidency. On and talk about what sectors tend to do well in that environment poll think about the things that do well with inflation. Both inflation rising your privacy arch prices or energy stocks tend to do relatively well same with materials pricing whether it's steel. Com or agricultural commodities these are all things that that can do well in and help. Even outperform. Whatever the inflation rate is on stocks in general tend to do okay in this environment it in the do better than bonds. And think about financials financials if the economy is strong. And interest rates are going up they can lend money at higher rates. And thought collect more they'll be able to invest their loan deposits at higher rates. I'm insurers who who who who issue insurance products. Are able to invest in insurance proceeds and in bonds that are yielding higher percentages and that's all profit to the bottom line. And so these are all things that that should do relatively well. If interest rates do will vote go up and economic growth continues. There a couple of things that don't do mom income oriented investments think real state. You know interest rates are going up mortgage rates are going up you might see you reduced activity in in in buying. You know you might see. Prices come down a bit and and the same thing with the with real estate investment trust tight stocks. Utility stocks if if interest rates are going up. A dividend paying stocks especially as stable companies dividend paying stock is not to be as attractive as bonds. So people who left bonds to go into these stocks for higher dividends and safety. Are now gonna go back to bonds because they're paying higher rates well that's reduced demand. For consumer staples stocks in some cases for utility stocks in some cases that you dragged on the price of those. And the valuations in those areas are already hot so the the impact might be even more on the extreme than it has been historically. Little financial Bruce and not coming up. You know I I think gum financials it's really it's it's two prong one is higher interest rates negative interest rates and low interest rates really hurt them for quite some time. On and rising rates especially longer term rates are able to make some money now. And if you peer back regulations. They're not gonna have as much cost associated with these regulations. On the gonna be able to invest their portfolios and and and not have to have to have as much money in cash in in certain bonds they can really invest in what they'd like to invest in. Not saying that's always good. And comment but certainly gives them. Lower expenses and frankly taxes or tax rates are relatively high in attacks come down they should be a relative beneficiary of that. Rahm is well so. Financial let's say guy in this environment should. Should do better in a rate hike cycle than they have historically on the a lot of it has to do with how late are you in this economic environment if it's too late. Financial tended to pull you saw what they did during not 2007. Through 2009. They were on nightmare. I'm there were much better position now on not a highly levered mama not as integrated with one another. But certainly if if you're. Sensing that the market's gonna go down financial aren't necessarily going to be good place to be where you think that that the crystals and you slept in the paint like we do. Then financials might be come in and a relatively good environment at least short so it does seem. Seemed obvious our shooters and active management again released it looks argued will be key in seventeen yeah because think about. You know emphasizing the things that you think should do well when do you emphasizing the things that should do poorly. And if your read on interest rates than than not that should done should spill up pretty good combination for the portfolio. But again bonds traditional fixed rate bonds do still play an important role portfolio for diversification. Because we don't know if interest rates are going up they could go down what do we have a recession in interest rates go down again the only thing that's gonna do relatively well in that environment. Are going to be high quality. Government type and high quality corporate response I'm and that's. Always going to be that important staple to a portfolio especially on someone who's closer to war in retirement. To have as as a as a ballast and and that account. Once again Alex Bender good with this filling in for Paul Parsons who is playing golf in Florida this week enjoying his Christmas vacation. On the richest remind you of the tool free number because. As Alex mentioned the beginning the program a couple of times since they are offering no obligation performance reviews at plans front during the month of January you can call now sit at a time to two NC with Paul with Alex to discuss your portfolio. It's no costs no obligation. Just look at how you did are you did compared to the benchmarks that they have set up that we discussed during this program to do as low as you should have done did you do as well as you could've done. The dough for number 8889727526. That's eighty 8972. Plant. We go online to plan strong dot com and send an email to relish a ball and they will get right back Q and set up something on Tuesday its New Year's Eve here Alex can't we were doing the show for yet another year for sure this thing so long ago. Oh what year was down you know turn into literally a spectacular year and not just one wish everyone a happy new year there have been your tour listeners and having your Paul wherever he is in Florida we'll be back next week thank you Alex thanks it's a blast from financial forms. This is Paul Parsons president of planned strong investment management. And you're listening to them planned strong financial forum on WRKO. Boston's talk station. If you like what you hear on our show and what I mean to take a look at your investments and retirement plan called my office of 80889727526. That's 888972. Plan. Securities and investment advisory services offered through an extra to prevent the -- and as I can -- classroom investment management and filling them a special group thinks is located at any Russian diplomats and say let's strong investment management is located 980 Washington street Dedham mass 02026. And can be reached at eighty to 89727526. Political views may not reflect the views or opinions of next financial group the securities and investment advisory services offered through next financial group ranked number fender SIPC plaster investment management has not affiliate in its financial grouping. This radio show is for informational purposes only and is not a solicitation recommendation that any particular investor should purchase or sell any particular security information contained herein is obtained from sources believed to be reliable but its accuracy and completeness or not guaranteed neater next financial groupings nor represented of provides talked about.