D3 Financial Counselors Update:

We’re in the process of reviewing investment performance with our Advanced and Comprehensive asset management clients, and we’ve observed that many of you have different levels of concern regarding the recent volatility in the stock market.  The performance reports we use compare client portfolios to a model asset allocation.  This asset allocation is based upon your risk profile and serves as one of the primary guidelines for managing your portfolios, in addition to other factors you have shared with us; such as, the purpose of the portfolio, your cash flow needs and the return identified in your plan. Included is a blank risk profile for you to fill out.  Please share with us your current thoughts about investment risk by filling this out, and sending it back (please remember to sign and date it). If you have any questions, please call.


Things You Should Know:

Last month we wrote that problems in the sub-prime mortgage market were spreading to other sectors of the bond market, and that we had reduced our client’s holdings in the bond markets, raising cash.   Also, we expressed our concern that this could negatively impact the stock market.  While we were correct in our forecast, we didn’t think the problem would create as much of a disruption in debt market liquidity as it has.  Earlier this month, hedge funds, from Australia to New York to Germany, announced big losses from sub-prime mortgages, which exceeded the market’s expectations, creating uncertainty regarding how broad and deep these mortgages would impact both the stock and bond markets.  Stock investors don’t like uncertainty, and all major U.S. equity indices have corrected since reaching all-time highs in late July.  The mortgage market is barely functioning, as lenders are reluctant to lend money to all mortgage companies.  So where do we go from here?


The stock market continues to be very vulnerable to both headline risk, and extreme day-to-day price swings.  Both stock market investors, and we at D3, remain uncertain as to how much of an impact the sub-prime mortgage mess will have on economic growth both in the U.S. and globally.  It’s likely to slow economic growth in the U.S., but will it slow economic growth in Asia and Europe, as well?  The impact of the housing recession on the U.S. consumer (which has just been prolonged) will ultimately be the answer.


Many sectors of both the stock and bond markets are priced attractively, but we know that this market can punish strong companies indiscriminately. Stocks overseas are starting to look attractive again, as well as the stocks of large U.S. companies with strong businesses outside of the U.S. Without a strong conviction on the prospects for global economic growth in the near future, we’re likely to remain defensive over the next month or so.  Money market fund rates are still attractive.


Remember a good financial plan is designed to weather short-term market volatility; that is one reason why we update the plans for our Comprehensive clients every year.


As always, thank you for your business and think of us when your friends or relatives need to

“understand the economic consequences of their financial decisions”.


Donald D. Duncan MBA CPA/PFS CFA™ CFP®             Nancy Lencioni & Becky Connery

Peter Marchese MBA CFA™                                            Michael Meyers MBA CFP®