Business Update:

We are very focused on financial plan updates.  For our family office clients, if you have not returned your financial plan update questionnaire, please do so.  Updating your financial plan is critical to managing risk. As a reminder, our goal is to make sure the risk of your portfolio matches the risk necessary to achieve the goals in your financial plan (why take more risk than you need to). For asset management or hourly clients that want a financial plan update, please call Don.  Below is the link to the plan update questionnaire. //www.d3financialcounselors.com/plan-update/

D3 Breaking News:

Mitch Grant is our financial planning intern for 2015. He is an Indiana University business major trying to determine if financial planning is the right career choice for him.  If you call in, don’t be surprised if Mitch answers the phone.

We have been getting calls from people saying they heard about us on Next Door (essentially the Facebook for neighborhoods). Thank you to all of our clients that are sharing your experience about D3 through this social media site.  Feel free to share your D3 experience on other third party sites such as Yelp, Google + and Angie’s List.

Market Insight:

The dollar continues to trade near recent highs against many of the world’s currencies. This is due to the end of quantitative easing in the U.S. coupled with the unprecedented central bank intervention by the Bank of Japan and the European Central Bank.  While an appreciating dollar does save us money at the gas pump and makes it attractive to travel abroad, there ultimately is an impact on financial assets.

We believe the strong dollar has benefited domestic small cap equities due to the majority of their sales being denominated in the U.S. dollar.  It has also benefited U.S. treasury bonds.  With negative yields in countries such as Germany, Denmark, and Switzerland, yield driven and currency conscious investors have targeted U.S. bonds.  International companies that rely on exports to the U.S. should start to see increasing revenues. Large cap U.S. multinationals will likely be hurt the most due to the strong dollar making U.S. exports less attractive and less profitable for U.S. companies.

The U.S. dollar and many U.S. and foreign market indexes are at or close to all-time highs. When this occurs it reminds us to try to identify if there are bubbles in the financial markets (supply/demand imbalances).

We have been consistently concerned about negative real interest rates, but this may just be the “new normal” given slow growth and the high demand for fixed income investments from retiring baby boomers. The price of oil is always a wild card, but excess supply is a more likely scenario than increased demand.  Public equity prices are within 1 standard deviation of historic average valuations and from a relative pricing viewpoint continue to be reasonable.  Private equity on the other hand looks a little dicey, but that market is dominated by foundations, hedge funds and pension plans.  Pension plans and their impact on municipal finance may be at a tipping point, but this issue should not impact the general economy and the markets, unless it crescendos all at once and causes a panic. So in conclusion, we do not see the same issues that caused the tech bubble in 2000 or the mortgage crisis in 2007.

Investment Strategy:

Our focus continues to be on making sure all of our funds are meeting our risk reward objectives at a reasonable price.  We are also exploring the idea of adding a dollar hedged international equity fund to limit some of the currency risk in your international holdings.  As we update our client’s financial plans, we’d like to stress the importance of matching your portfolio risk to your financial plan risk.  We encourage all of our clients to review the level of risk in your portfolios relative to your plans and to the extent your plans are over funded, be willing to take some risk off the table.

Please let us know if your time horizon for needing cash flow from your investments changes or if your ability to tolerate risk changes.

Last Thoughts:

We thank you all for thinking of us when your friends and neighbors need help organizing, prioritizing and optimizing their financial lives. Now that summer is here, take some time to enjoy it.