IS YOUR ADVISOR PROACTIVE?

Here’s hoping your financial consultant has kept up with the times.

The memory is indelible: in the last two quarters of 2008, investors with short- to mid-range time horizons cringed as their portfolios lost 20%, 30%, even 40% of value. This bear market was not only a test of investors … it was also a test of financial advisors.

Did your advisor respond to the changing environment? When the market corrects, a good financial advisor stays on top of things. As things turned bearish in fall 2008, many portfolios went the way of the market, with numerous investors moving to the money market for cover. Yet other investors found themselves making money during the downturn. Was it luck? Or simply the right strategy?

Some market conditions demand a change. In late 2008, was your advisor sharp enough to meet with you and alter your financial strategy to one appropriate to the bear market? Did he or she offer you an approach that could exploit opportunities in that market with your goals in mind? An astute advisor recognizes that being proactive in a changing market can potentially change the client outcome – for the better.

The market is dynamic. More bull and bear markets will follow. What do you think your current financial advisor will do next time? Sit back and relax when conditions improve? Mysteriously ignore you when the markets slump?

The nonprofit National Bureau of Economic Research (NBER) has recorded five recessions since 1980 and three since 1990. If you are investing by a 20-year or 30-year financial plan, you may ride through a handful of recessions over the next two or three decades if history is any guide. If recessions and bear markets rear their heads, will your investment strategy be updated? What is the risk of having it set in stone?

Today, anyone frustrated with current portfolio values has reason to consider a new financial advisor. If you feel that inattention and misdirection characterize your relationship with your current advisor, perhaps it is time for a change. You are not forbidden from changing advisors. You may look back one day and realize that the change helped your portfolio.

Stephanie Shinn is a Representative with KMS Financial Services, LLC and may be reached at 253.627.8101 or sjs@purcellas.com.

These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

Monthly Economic Update for September, 2009

Quote of the month. “We will either find a way, or make one.” – Hannibal

The month in brief. Pessimists thought the market would pull back; it didn’t. Stocks did well and there was mounting evidence of a real estate rebound. We got news of a decline in the jobless rate, and better news from the manufacturing and service sectors. The government’s health care reform effort met with rowdy public opposition. Consumer spending inched up, and new cars sold like mad. The commodities markets had a mixed month with oil futures hitting a 2009 peak.

Domestic economic health. The jobless rate went down to 9.4% in July from 9.5% in June; perhaps it was an aberration, or perhaps (could we hope?) the start of a trend. It was the first time that America’s unemployment rate had dropped since April 2008.
Consumers managed to spend just a little bit more. Consumer spending rose 0.4% in June and 0.2% in July (while personal incomes fell 1.3% for June and stayed flat in July). There will likely be a bump in the August consumer spending and durable goods orders – the C.A.R.S. program, although quickly replenished by Congress, went through its $3 billion allotment of rebates by August 24.
In July, factory orders rose by 0.4% (economists thought they would fall) and industrial production went north 0.5% (the first increase in nine months). Producer prices fell by 0.9%, and durable goods orders soared 4.9%, with an 18.4% leap in transportation orders. In the wake of the C.A.R.S. program, the Institute for Supply Management’s gauge of manufacturing activity went above 50 in August for the first time since January 2008, coming in at 52.9.
“The prospects for a return to growth in the near term appear good,” Federal Reserve Chairman Ben Bernanke said at the Kansas City Fed’s annual symposium in Wyoming. The Fed’s August policy meeting produced the opinions that “economic activity is leveling out” and that inflation will be “subdued for some time”. Public response to the government’s attempt to advance health care reform was not subdued at all, and the contention delayed any notion of progress until after the Congressional summer recess.

Global economic health. New Eurostat data gave us a look at how things were faring in the EU nations. The overall EU unemployment rate rose 0.1% in July to 9.5%. However, the jobless rate in its biggest economy (Germany) was just 8.3%. (Spain’s jobless rate for July: 18.5%.) A key purchasing managers survey had EU manufacturing output at a 14-month high in August.
In Asia, the big concern came late in August when the central bank of China issued an internal memo telling its branches to tighten lending practices. This hit stocks hard, but fresh data pointed to a nice recovery for some of the region’s economies. A pair of China’s PMI indexes stayed above 50 (indicating expansion). Hong Kong’s manufacturing pace increased for the first time since June 2008. South Korea had a surplus of $1.67 billion (U.S.) in August, compared to a $3.81 billion (U.S.) deficit in August 2008. Inflation in Indonesia had increased moderately to 2.75%, and consumer prices in Thailand had moderated their descent.

September outlook. Well, September started with a triple-digit hit to the Dow – you could hear bears growling, worrying about banks and wondering if the summer rally had been justified. Will everyone sell in September? Or will stocks defy expectations? Is this a cyclical bull market or a secular bull market? We do have some history to consider: on average, the Dow, S&P 500 and NASDAQ have declined a bit more than 1% during the typical September. Many eyes are on the jobs report coming out September 4, and whether the jobless rate climbs or descends. Any descent (for the second month in a row) would provide a strong hint of an ebbing recession and a shot of reassurance to Wall Street. Even pessimists have to concede that many indicators are improving and that the economy is definitely recovering.

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