Business Update:

Now that Adam is a part owner of D3 Financial Counselors, I asked him to help our clients understand the current market environment and to try and put it in the perspective of their financial plans. He and I collaborated on this update.

Over the next month, we will be finalizing our estimated tax review, taking advantage of the recent market decline to conduct “capital loss harvesting” in our clients’ taxable accounts.  We will also start working on our annual insurance review later in the month.

Last month we completed our strategic planning retreat. We focused on upgrading our financial planning and portfolio management software to better serve our clients by making the output of our plans and plan updates more interactive and easier to understand.  We will begin beta testing this new software in the fall and will make the determination to convert by year’s end.

D3 Breaking News:

Don Duncan named 5 star wealth manager award image

  1. D3 Financial Counselors was named one of the top 13 financial advisors in Chicago by AdvisoryHQ.com.  D3 was recognized for its independent, fee only structure and focus on Ethics, Education & Experience.
  2. For the 4th year, Don will be listed in Chicago Magazine as a 5 Star Wealth Manager. We are also very proud that Adam was also named as a 5 Star Wealth Manager. We will send you the press release this fall. Be sure to look for the announcement in the November issue of Chicago Magazine.
  3. Don was interviewed for an article in Money Magazine on key issues to consider before downsizing. The author expects the article to be published this fall.

Market Insight:

Over the past 2 weeks we’ve seen return volatility within all risk assets as a result of concerns of slowing growth in China, falling oil prices, and a potential Federal Reserve rate hike in September.  Although China may not be a growth engine for the U.S. economy, it does pose a legitimate threat to global growth, as China’s GDP accounts for about 15% of global GDP.

Our long-term investment thesis of slow global growth has not changed. We have been expecting China’s growth to slow from 7% to 5%. The issue causing all of the market volatility is the concern of whether China will have a soft economic landing (our expectation) or a hard economic landing (a recession), and how severely this will affect the rest of the world. We won’t know how severe the affect will be until we know how much China is going to slow down.

We do know that slower growth in China will have an impact on countries that export commodities. We also know that the Chinese economy is a managed economy (by virtue of communist rule) and they have significant financial resources to manage that economy.  The question that we don’t have an answer to is whether or not the Chinese government successfully manage the headwinds for their economy.

One positive from the recent developments is additional spending power for U.S. consumers due to a reduction in energy prices and an increase in the U.S. dollar.  As the airlines energy hedges roll off, there should be some downward pressure on flight prices over the next year.  Lower flight prices coupled with a strong dollar make this a relatively good time to travel abroad.

Investment Strategy:

This recent correction has allowed us to put our strategies to the test. Last year we implemented a focus in our quarterly investment review on downside protection. The alternative investment strategies, which have trailed the market on the upside, have displayed the downside protection characteristics that made them worthwhile to add to our portfolios.  Assuming volatility continues, we will assess the risk-reward characteristics of all of our funds and keep a watchful eye on our alternative investments to ensure that these funds act to counter-balance market declines.

We are currently taking advantage of the recent market declines to conduct “capital loss harvesting,” or capturing losses to offset realized gains in our clients’ taxable accounts.  For our more conservative clients, we are reinvesting the “loss harvesting” proceeds into more conservative funds.

As always, the most important component to our success in helping to structure your portfolios to achieve your long-term financial planning goals is communication. Please let us know if your time horizon for needing cash flow from your investments changes or if your ability to emotionally tolerate risk changes.  If this uncertainty is too great for you to tolerate, or if the time horizon for your plan is shorter than 5 years, please let us know.

Last Thoughts:

Thank you for your confidence in D3 Financial Counselors and share with your family and friends that “We help smart people make smarter financial decisions.”