This letter covers 3 topics: 1.D3 Business Update 2.Financial Plan Updates 3. Investment Outlook

 

D3 Business Update:

  1. As a reminder, we moved our Chicago office to larger quarters. Through June it is being remodeled. We are still conducting business in Chicago at temporary locations.  Please call Patty for details if you want to set up a Chicago appointment.
  2. We learned a lot last month. Don attended the NAPFA national conference and the FPA retreat. Adam attended the Retirement Income Symposium and Ryan attended the annual Illinois CPA Society Estate Planning Conference. We will be incorporating some of this new planning information in the financial plan updates for our family office clients and the new investment information for all clients for whom we manage
  3. In our continuing effort to demonstrate the value we add through financial planning and investment management, Adam completed a white paper analyzing the impact of reviewing and changing our asset allocation models each year. The conclusion is that D3 has added portfolio alpha (extra return) by actively adjusting our asset allocation models when compared to a buy and hold strategy. This paper is attached to this email.  Feel free to share this with your friends.

 

Financial Plan Updates:

We are working through our Family Office clients financial plan updates.  If you have not returned your questionnaire or contacted us with updates, we will use your tax return as the primary source to complete your financial plan update. When we have completed and reviewed the updates, we will load them on to your D3 client portal or mail them to you.

 

Investment Outlook:

It appears that we are at an inflection point in U.S. economy where the private sector is finally getting back on its feet.  This is evidenced by the GDP numbers, housing numbers, personal sentiment numbers, and the unemployment rate (as well as a number of additional economic indicators). If the private sector of the economy can continue to show growth, in spite of the government sector contracting, the long term investment outlook improves for equities.  Unfortunately, whenever the economy is at this inflection point the stock and bond markets become more volatile because traders and investors start to position their investments for the potential change in the investment environment.

 

The evidence of the inflection point in the bond market has been extremely clear.  The 10 year treasury yield has increase from 1.66% to 2.13% (28% in relative terms), during the month of May.  We anticipate bond market volatility spilling over into the equity markets.

 

From the equity market perspective, valuations are still reasonable at 14.4 times price to earnings (based on projected forward  earnings).  International markets have even more favorable valuations. Additionally corporate earnings are still growing (3.3% for the 1st quarter) and are estimated to grow on average over 7% for the next three quarters.  This does not mean though that U.S. equities will be immune to volatility while we move through this inflection point.

 

As we move through this inflection point in the economy, our focus is on reviewing the investments our clients have exposure to, and making changes where the risk reward characteristics are not helping to achieve our clients’ financial goals. Some of our efforts are focused on reducing the volatility of the investments products we are using. You have seen us make some changes in your portfolios reflecting this objective and you will see  more transactions in the coming month.

 

As always, we thank you for your confidence in D3 Financial Counselors and we ask that you to keep us in mind when your friends or relatives have financial questions or face some financial uncertainty.  We are here to serve.

 

 

Don Duncan MBA CPA CFA™ CFP®                        Michael Meyers MBA CFP®

Adam Glassberg CFP® CIMA®                                  Patty Shipinski, Office Manager

Ryan Pace, Financial Planner

 

We serve our clients by providing Integrity, Trust, Wisdom and Confidence.