SPRING NEWSLETTER / APRIL 2018
Market Update
(all values as of 08.31.2020)

Stock Indices:

Dow Jones 28,430
S&P 500 3,500
Nasdaq 11,775

Bond Sector Yields:

2 Yr Treasury 0.14%
10 Yr Treasury 0.72%
10 Yr Municipal 0.81%
High Yield 5.38%

YTD Market Returns:

Dow Jones -0.38%
S&P 500 8.34%
Nasdaq 31.24%
MSCI-EAFE -6.23%
MSCI-Europe -7.39%
MSCI-Pacific -4.42%
MSCI-Emg Mkt -1.18%
 
US Agg Bond 6.85%
US Corp Bond 6.94%
US Gov’t Bond 8.09%

Commodity Prices:

Gold 1,973
Silver 28.43
Oil (WTI) 42.82

Currencies:

Dollar / Euro 1.19
Dollar / Pound 1.33
Yen / Dollar 105.37
Dollar / Canadian 0.76
 

CCM Update

Colorado Capital Management is excited to announce that Colleen Harvey, previously serving as the Portfolio Manager, moved into an advisory role as of January. With almost twenty years of experience in the wealth management industry, Colleen has been with CCM since 2014 and has spent the majority of that time directing investment strategy, research, and trading for clients; along with chairing the firm’s Investment Committee. Prior to joining CCM, Colleen worked as a financial advisor at Merrill Lynch in Boulder and spent close to ten years with Fidelity Investments in Boston where she served as a portfolio manager for high net worth clients. Colleen has a bachelor’s degree from the University of Notre Dame, a master’s degree from Tufts University, and holds the Chartered Financial Analyst (CFA) designation.

Colleen’s transition initiated the promotion of Kirsten Roeber, previously Assistant Portfolio Manager, into the Portfolio Manager role, as well as the hiring of Zuzana Birova to fill the Assistant Portfolio Manager position. Zuzana joins CCM with a decade of experience in equity and fixed-income trading, portfolio reconciliation, client reporting and research on traditional asset classes. Originally from Slovakia, where Zuzana received her undergraduate degree in International Business, she went on to pursue her passion in investment management by receiving an MBA at Butler University in Indianapolis. She is currently in the process of acquiring the Chartered Financial Analyst (CFA) designation.

We are excited that our team continues to grow with refined aptitude in new areas, and also champion the advancements that staff have made internally.

A photo from the CCM staff ski day at Copper Mountain. Ladies who shred, from left to right: Zuzana Birova, Liz Jacques, and Julia Wentworth.

Macro Overview – March 2018

Volatility was rampant throughout the markets as fear of inflation and rising interest rates pilfered gains that had accumulated from the beginning of the year. Some see a fundamental trend is in place as a normalization of interest rates evolves.

The release of a jobs report in early February was the catalyst for volatility, as the pace of wage growth was greater than expected thus raising the specter of more aggressive Fed tightening to combat inflation. The Federal Reserve communicated that it is on track to raise rates three to four times this year, stating that “substantial underlying economic momentum” exists for further rate increases.

Historically when markets experience a volatility spike as we experienced in February, a strong economy is a buffer against any long-lasting downturns. Regardless of the catalyst, both stocks and bonds tend to regain their footing following such an environment.

The abrupt rise in bond yields over the past month is in anticipation that the Fed will

 

 

 
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continue to raise short-term rates this year. The 10-year Treasury yield, which is established by the markets, rose to 2.87% in February from 2.46% at the beginning of the year. The higher yield on U.S. debt is starting to attract additional foreign assets relative to lower yields from other developed countries. The increase in rates is beginning to affect consumer loans from homes and autos to credit cards, and quite possibly offsetting the initial benefits of the recently passed tax cuts.

The roughly 50 percent increase in crude oil prices from lows in June 2017 has helped push inflation higher over the past few months of which oil is an integral component. Economists do not consider inflation a threat to economic prosperity as long as it is gradual and controlled, of which inflation is measured by the Consumer Price Index (CPI).

The Labor Department said the cost of employing the average American worker rose 0.5% in the final three months of 2017 and was up 2.6% in the 12 months ending in December. That’s the biggest 12-month gain for the employment cost index in almost three years. There was a 2.9% jump in average hourly earnings over the past year, the highest increase since June 2009. The average work week fell to 34.3 hours from 34.5 hours.

Sources: Labor Dept., BEA, Federal Reserve, Bloomberg

New Rules Benefit 529 College Savings Plans As An Estate Tool – Estate Planning

The Tax Cuts and Jobs Act includes a provision to now allow 529 Plans to be used for private elementary and high school expenses, rather than just college related expenses. The new rules are a treat for both parents and grandparents looking for a better way to pay for private educational costs.

Until now, the only plan that allowed for tax-free earnings growth was a Coverdell Education Savings Account (ESA). Limitations on contributions and income has made these plans unfavorable for many families.

A key notable benefit to a 529 versus a Coverdell ESA includes transferability. Funds in a 529 account may be transferred from the original beneficiary to another. Another benefit is the fact that funds in a 529 may grow perpetually, and never have to be used. Some families are using this feature as an estate planning tool, allowing unused funds in a 529 to pass along to future recipients.

The new tax plan does limit the amount used for K-12 expenses to $10,000 per year. Any current funds held in an existing Coverdell ESA account may be rolled over to a 529 plan with no tax consequences.

Named after the IRS Code it falls under, Section 529 plans have ballooned to $282 billion in assets (as of the 3rd quarter of 2017) since their inception in 1997. Section 529 plans were initially intended to provide parents of young children the ability to invest money for future anticipated college related expenses.

These plans offer two primary benefits: assets grow tax deferred and come out tax free for qualified expenses; and, contributions made by parents and grandparents are considered a gift, thus proving a tax benefit for some contributors.

Source: IRS, www.congress.gov/bill/115th-congress/house-bill/1

 

 

Sailing with the Tides

Embarking on a financial plan is like sailing around the world. The voyage won’t always go to plan, and there’ll be rough seas. But the odds of reaching your  destination increase greatly if you are prepared, flexible, patient, and well-advised.

A mistake many inexperienced sailors make is not having a plan at all. They embark without a clear sense of their destination. And once they do decide, they often find themselves lost at sea in the wrong boat with inadequate provisions. Likewise, in planning an investment journey, you need to decide on your goal. A first step might be to consider whether the goal is realistic and achievable. For instance, while you may long to retire in the south of France, you may not be prepared to sacrifice your needs today to satisfy that distant desire.

Once you are set on a realistic destination, you need to ensure you have the right portfolio to get you there. Have you planned for multiple contingencies? What degree of “bad weather” can your plan withstand along the way? Key to a successful voyage is a good navigator. A trusted advisor is like that, regularly taking  coordinates and making adjustments, if necessary. If your circumstances change, the advisor may suggest you replot your course. As with the weather at sea,  markets can be unpredictable. A sudden squall can whip up waves of volatility, tides can shift, and strong currents can threaten to blow you off course. Like a  seasoned sailor, an experienced advisor will work with the conditions.

Once the storm passes, you can pick up speed again. Just as a sturdy vessel will help you withstand most conditions at sea, a well-diversified portfolio can act as a bulwark against the sometimes tempestuous conditions in markets. Circumnavigating the globe is not exciting every day. Patience is required with local customs and paperwork as you pull into different ports. Likewise, a lack of attention to costs and taxes is the enemy of many a long-term financial plan. Distractions can also send investors, like sailors, off course. In the face of “hot” investment trends, it takes discipline not to veer from your chosen plan. Like the sirens of Greek mythology, media pundits can also be diverting, tempting you to change tack and act on news that is already priced in to markets.

A lack of flexibility is another impediment to a successful investment journey. If it doesn’t look as though you’ll make your destination in time, you may have to extend your voyage, take a different route to get there, or even moderate your goal. The important point is that you become comfortable with the idea that uncertainty is inherent to the investment journey, just as it is with any sea voyage. That is why preparation and planning are so critical. While you can’t control every outcome, you can be prepared for the range of possibilities and understand that you have clear choices if things don’t go according to plan. If you can’t live with the volatility, you can change your plan. If the goal looks unachievable, you can lower your sights. If it doesn’t look as if you’ll arrive on time, you can extend your journey.

Of course, not everyone’s journey is the same. Neither is everyone’s destination. We take different routes to different places, and we meet a range of challenges
and opportunities along the way. But for all of us, it’s critical that we are prepared for our journeys in the right vessel, keep our destinations in mind, stick with the plans, and have a trusted navigator to chart our courses and keep us on target.

Source: Jim Parker, Vice President, DFA Australia Limited, a subsidiary of Dimensional Fund Advisors LP