D3 Dates to Remember:
November 15th: Shredder service pick- up day. Shred Docs which is staffed by Transitions 99 school children (handicap enabled) will pick up documents to be shredded at the D3 Downers Grove office. Drop off documents you would like shredded at our Downers Grove office any time before November 15th.
December 7th, 6pm -9pm: D3 Financial Counselors annual client appreciation dinner at the University Club in Chicago. As a benefit of being our clients, we have arranged for a limited number of hotel rooms at the University Club for $179/night. If you are interested in staying downtown on the 7th, give Patty a call to reserve a room. First come first served. Everyone will be receiving a formal invitation to the client appreciation dinner next week.
Don presented the “Intersection of Financial Planning and Investments: Quantifying the value of Financial Planning on Investment Portfolios” at the University Club’s Investment Society on October 24th.
Don will be presenting “A Decision Tree for the Affordable Care Act” to the Downers Grove Chamber of Commerce on November 13th at Seven Bridges Golf Club.
Don will be presenting “The Impact of the Affordable Care Act on Individuals” to the Retired Teachers Association of Chicago on November 19th.
Taxes: Both the Feds and the State are taking hard lines on estimated taxes. No longer do they accept the safe harbor dollar amounts made before the end of the year. They are penalizing people if the total safe harbor payments are not made in first quarter or made in even amounts by each of the four payment dates. We are re-reviewing all family office clients estimated taxes in an attempt to eliminate the possibility of penalties.
Estate Plans: During November we will be reviewing all of our family office clients estate plans. Our review will primarily focus on estate tax mitigation at both the federal and state level and document completeness. Please let us know if you have updated any of your estate documents.
In our last newsletter, we stated that a resolution of the debt ceiling, the Fed’s announcement on October 30th, and 3rd quarter earnings would be the main drivers of market performance in October. The debt ceiling resolution, and Fed announcement of no “tapering” of quantitative easing met market expectations. Earnings though have been better than expected. 60% of the S&P 500 (as measured by market capitalization) have reported 3rd quarter earnings as of Monday and those earnings have exceeded market expectations. Of the companies that have reported earnings, 70% have beaten analyst earnings estimates. The S&P 500 stock index reaction to these events was a 4.46% rally during October.
Although 70% of reported earnings have beaten analyst estimates, only 42% have beaten revenue estimates, indicating that most of the earnings improvement is derived from profit margin expansion (or cost cutting). As the labor force improves, and interest rates edge higher, many companies will incur higher labor and financing costs, creating headwinds for further margin expansion. Moving forward, earnings growth will likely need to come from increasing revenue, which can only be generated by a growing economy.
From a valuation standpoint, the S&P 500 price to earnings (P/E) ratio stands at 14.8x, which is a number that has not been seen since 2007. Although valuations when compared to the recent past are not as attractive as they have been, they are near their 10 year average of 14 times earnings; and are therefore far from expensive (P/E ratios were in the high during the tech bubble of 1999-2001). Bear in mind that all mean-reverting metrics cross through their averages on the way up, as well as on the way down. Typically, mean-reverting statistics tend to keep moving in their direction until there’s a catalyst for change. At this point, we see no catalyst for the equity market to reverse direction.
We will continue to focus on minimizing the tax impact of your portfolio’s capital gains distributions by tax loss harvesting (if possible) through the end of the year. We have finished reviewing cash balances in conjunction with cash targets, and will be making minor rebalancing trades next week. In December, we will review our asset allocation models in conjunction with our long term risk reward projections for each asset class and determine if we should make any changes to our asset allocation models.
Thanks to everyone that came to our Family and Friends event at Pinstripes in Oakbrook. The weather cooperated and we actually did play Bocce Ball. As always, we thank you for your confidence in introducing your family and friends to D3 Financial Counselors.
We ask all of our clients to keep us in mind when your friends or relatives have financial questions or face some financial uncertainty. We can help almost anybody with a financial question regardless of how much they have to invest because we can work on an hourly basis.
Don Duncan MBA CPA CFA™ CFP® Michael Meyers MBA CFP®
Adam Glassberg CFP® CIMA® Patty Shipinski, Office Manager
Ryan Pace CFP®
We serve our clients by providing Integrity, Trust, Wisdom and Confidence