D3 Business Update:
Many of the mutual funds we invested in during the year paid out long term and short term capital gains, as well as large dividend payments. We estimated the capital gains distributions and attempted to offset them by harvesting losses in other portfolio positions. We also invested excess cash that we knew of from these various distributions to rebalance your portfolios to target asset allocations.
Starting in mid-January, after we reconcile all of your accounts, we will generate your portfolio performance reports. We anticipate loading those up on your client portal by January 31st and plan on reviewing them with you in February.
D3 Investment Insight:
As we said last month, “The economic numbers being reported by the U.S. government continue to show slow and slightly accelerating growth in the U.S. economy.” The ISM manufacturing index and pending home sales announced yesterday were both better than what economists had been expecting. All indications are that retail sales will be significantly higher for December when compared to last year. The four week moving average of reported jobless claims is at a 3 ½ year low. Slow and steady growth for the U.S. economy appears to be the watchword.
Although the headlines from Europe continue to generate market volatility, it is less than the previous two months. The European Central Bank is acting as a backstop to make sure government bond deals get done at reasonable rates.
At the end of this newsletter we included an article from Boris Schlossberg summarizing 2011. We will be providing more detailed information regarding asset class performance in January.
D3 Investment Outlook:
We may be moving to a 1950s investment environment where stock dividends are higher than government bond interest rates. For this reason we continue to emphasize investing in dividend paying U.S. equities (hence the big dividend payouts in your accounts this month)
Regarding interest rates; the Federal Reserve Bank (Fed) has hinted that they may keep interest rates low until 2014 (previously they had stated 2013). It is clear that the Fed wants the U.S. economy to avoid deflation pressures and grow out of this deleveraging cycle. It is also clear that the Fed will risk some inflation in favor of these policies.
D3 Investment Strategy:
Most of our efforts this past month were focused on tax minimization, rebalancing and replacing underperforming assets. We will continue replacing underperforming assets in January. We will also revise our asset allocation models and will share those changes with you. We will also share with you how different asset class investment performed during 2011.
If volatility in the bond market continues to subside, we will resurrect our move form short duration bond funds, to longer duration funds.
Don’t hesitate to contact us if your goals, needs or risk tolerance changes.
As always, thank you for your business and happy New Year. .
Donald D. Duncan MBA CFA™ CPA CFP® Adam Glassberg CFP®
Michael Meyers MBA CFP® Patty Shipinski, Office Manager
Neil Lefort MBA J.D. CPA Ryan Pace, Junior Financial Planner