Safe Harbor Asset Management Services
4013 East Baker Avenue. ¨ Abingdon, MD 21009 ¨(410) 538-6800
Wednesday, January 15, 2014
Happy New Year! “Unlucky 13” turned out to be “Lucky 13” for our family, clients, and company. My father received a double lung transplant, which saved his life. As he became stronger each day, the markets continued to improve. As the Baby Boomers have aged, the need for comprehensive retirement planning has soared. Our company has been able to help many retirees feel more secure. Going forward, we are cautiously optimistic about 2014 and the future of the global economy.
2013 was an excellent year for stocks. Once again, the U.S. market was amongst the best in the world. The same cannot be said about the bond market that was slightly negative for the year. Any fixed income in your portfolio significantly lowered your returns. The global equities market was up just over 24% and the bond aggregate index was down approximately 2%. A balanced allocation of 50% stocks / 50% bonds should have a return of approximately 11%. Of course, the portfolio has some alternative investments such as commodities, gold, and managed futures for diversification that also hurt performance since gold was down 30% and commodities down 2%. We are proud of the returns we were able to obtain given the headwinds dragging performance.
We are optimistic about the global economy, as the financial meltdown of 2008 gets further into our rearview mirror. The low interest rates and high valuation markets are making it difficult to plan for retirees. Enclosed is an article written in December 2013 which helps to explain the probability of low returns going forward from current valuation levels. We are not trying to predict the future or forecast future returns, but it is important to be aware that the markets are highly priced relative to historical norms. The bond market faces many struggles over the next few years as we believe interest rates will continue to rise. The recommendation for most of our clients is to significantly reduce their bond exposure and redirect the majority of their bond allocation to fixed index annuities. Our analysis gives us confidence that the fixed index annuities(FIA) will outperform fixed income(Bonds) over the next decade. Most of you have already been exposed to the FIA concept and own some of the product(s). You can attest to their great performance. If you are not aware of how they can help your overall plan, or would like to consider allocating more to the product, please call to schedule a time to meet and review your options.
We are always grateful that you have chosen our firm to assist you with your financial needs. As always, please call if you would like to review your accounts or review your plan. Please do your family, friends, neighbors, and business associates a favor by referring them to Safe Harbor. Thanks for your continued patronage.
Gregory K. Bowser, CFP®