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While the S&P 500 remained near its all-time high, the recent massive selloff in the technology sector went mostly unnoticed. But for investors who follow the so-called “FANG” stocks (Facebook, Amazon, Netflix, Google) the hit was painful: About $60 billion in value was wiped out in just one afternoon, representing the largest selloff in nearly 2 years.

The wipeout was a function of just how big these companies have become and the position they are in with new tax reform looming. Tech companies are expected to receive little benefit given its already-low average tax rate of 18.5% (below the 20% proposed rate).

This has caused investors to rotate out of the tech stocks and into the financial services sector, which stands to benefit more from a corporate tax rate that would drop from the current 35% to 20%.

Interestingly, the S&P 500 was relatively unaffected while this rotation into financials and out of tech ensued.  The index’s volatility actually remained low, as did correlations among the S&P 500’s member stocks.

In other words, the diversity offered by the S&P 500 Index allowed for the index too remain relatively unscathed by the trading within the tech and financial sectors, a key reminder to investors that having proper exposure across the markets continues to be important with the S&P 500 near its all-time high.


Passive investing as the foundation for an optimal portfolio

To investors who have spent years accumulating wealth through active entrepreneurship or business management, the notion of being “passive” may have a negative connotation. But when designing a portfolio strategy, evidence suggests that passive investing produces superior results with lower expenses than one built around active trading.

In a passive investment strategy, an investor is not looking to beat the market. Rather, the goal is to gain exposure to the broader market – all the good and all the bad – at the lowest possible cost. (Source: Managing Investment Portfolios: A Dynamic Process)

The broader market is represented by indices, for example the Standard & Poor’s 500 Index for stocks and the Barclays Aggregate Bond Index for bonds. Investors do not buy into an index per se, but in funds that closely mimic the index.

Asset Allocation

No single input is more important to a portfolio’s success than asset allocation, or determining how much to allocate to various asset classes.

In 1986, authors Gary Brinson, Gilbert Beebower, and Randolph Hood conducted an in-depth study of the various sources of investment returns. Specifically, they analyzed quarterly returns from 1974-1983 for the 91 largest pension funds, and determined that 93.6% of the returns generated were a result of asset allocation.

In a follow-on study in 1991, the authors concluded that 91% of portfolio returns are determined by asset allocation.

Matt - close upJaniczek is excited to announce that Matthew Gray has joined the firm’s Wealth Optimization Team to enhance Janiczek’s disciplined Evidence Based Investing (EBI) and Strength Based Wealth Management™ platform.  

Thus far, the 2016 presidential race has been nothing short of surprising. It has been laden with controversy and criticism. With a victory in California, Hillary Clinton is the clear democratic nomination frontrunner. Donald Trump, the only Republican candidate left in the race, has won enough delegates to clinch the GOP party nomination.

vote-stock-slideWhile the outcome of the election is still months away, history suggests the markets respond far better to a predictable outcome. Markets hate uncertainty. Investment managers will seek clarity over the coming months by looking carefully at the economic proposals of each candidate. For example, markets might respond well to a reduction in the corporate tax rate, a bullish economic indicator. Party affiliation does not offer much insight into strong or weak performance of capital markets. We can look back to times when markets have performed well under both parties.

The turmoil in the energy sector was widely publicized since the historic decline of prices starting mid-2014. This has largely been due to a glut of oil in the market with relatively flat demand.
As a result, the energy sector was plagued with volatility and decreasing prices as investors fled for safety.KK Blog 04.22

This negative sentiment has spilled over into what should be an uncorrelated segment of the energy industry: mid-stream providers. Think of mid-stream as an infrastructure of toll roads that transport and store units of energy, not just oil. As Jim Callahan discussed in his latest edition of Portfolio Matters, the U.S. pipelines currently transport 70% natural gas and 30% oil. The demand globally for oil has decreased the volume of oil flowing through pipelines, but natural gas production is growing. The Energy Information Administration, estimates that natural gas consumption will increase by 60% on a global basis by 2040. The U.S. is the largest producer and exporter of natural gas and estimates point towards an increase in volume of 9% in 2016. While oil gets all the press, we remind our clients that its natural gas that is more important to the U.S. mid-stream MLPs, and because of this, we are very comfortable with our mid-stream focused investment thesis.

On Wednesday, the Fed decided to put an anticipated rate hike on hold for at least another month. The planned hike was curbed due to the recent volatility experienced in the market. Although the job market has been resilient during this weakened economic period, broader economic factors have caused a period of increased market volatility, measured by the VIX index. U.S stocks have rebounded in the past month, mainly due to improving data, rising oil prices and an accommodative stance by central banks around the world.

Kyle Blog 03.17

When building an efficient portfolio, most market practitioners would agree to an allocation to bonds. This allocation reduces the overall volatility of the portfolio and adds a layer of safety. The two main components affecting fixed income returns are: 1). interest rates and 2). the credit quality of issuers. With the recent increase of interest rates and the Fed’s plan to incrementally increase rates over the next few years, we feel investments in credit, especially high yield, offers better return potential to investors.

High yield bonds tend to deliver the potential to improve a portfolio’s overall risk/return given the historically low correlation with other core asset classes. Due to their location on the credit spectrum, high yield bonds offer enhanced yields compared to high quality bonds and can potentially increase the overall yield of a portfolio significantly. Although this has not been the case as of late, historically speaking, high yield bonds have provided better downside protection than equities while delivering equity like returns with significantly less volatility and drawdowns.

KK Blog 02.04.16 Janiczek

Take a deep breath…  YOU have the golden ticket!  Your thoughts immediately jump towards all your wildest dreams, and reality starts to kick in that money is no longer a hurdle to life experiences or the worldly goods you desire.  If you can dream it up, you can do it!  With such a substantial jackpot, it’s hard to fathom that someone could possibly blow through this type of fortune.  Without a clear and concise plan, however… anything is possible!

So how do you protect yourself from becoming associated with the unwanted statistic that 70% of lottery winners eventually end up broke?

The task for growing and protecting your assets can be daunting, and there are 35 areas of wealth that need to be optimized in order to become an Accomplished, Depletion-Resistant Wealth Steward.

The 2016 New Year has started off with a downward trend in the Equity markets. Creative business ideaWe have spoken with many clients over the past few weeks and we have been asked the question of, “what is going on in the markets and what should we be doing”? Here are some facts;

• The U.S. Economy is estimated to grow at 2.5% this year. This rate increase is a slow and steady trajectory and a rate that doesn’t show signs of overheating.
• U.S. employers have created approximately 220k new jobs/month over the past year and today there was an announcement of 292k jobs created last month.
• Layoffs are at very low levels, according to outplacement firm Challenger, Gray & Christmas. Most workers in the U.S. today have good job security, which boosts confidence.
• American homeowners have recovered nearly all the equity lost during the housing bust. Overall net worth, which also includes financial assets, is close to record levels.
• Things have slightly improved in Europe as well, though more slowly than here at home. Euro-zone unemployment is inching down, confidence is improving and a string of back-to-back        recessions appear to be over.

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*Ranked/Named among Top, Best and Most Exclusive Advisors sources: Barron's March 2016, 2015, 2014; Advisory HQ March 2016; Financial Times June 2015; Five Star Professional November 2015, 2013, 2012,2011, 2010, 2009; Mutual Funds Magazine January 2001; NABCAP September 2010, 2011, 2013; Worth Magazine July 2002, January 2004, October 2004, October 2008; Wealth & Finance International, October 2014. Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Janiczek Wealth Management is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as a current or past endorsement of Janiczek Wealth Management by any of its clients. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Janiczek Wealth Management), or any non-investment related content, made reference to directly or indirectly on this website will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this website serves as the receipt of, or as a substitute for, personalized investment advice from Janiczek Wealth Management To the extent that a viewer has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Janiczek Wealth Management is neither a law firm nor a certified public accounting firm and no portion of the website content should be construed as legal or accounting advice. If you are a Janiczek Wealth Management client, please remember to contact Janiczek Wealth Management, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Janiczek Wealth Management current written disclosure statement discussing our advisory services and fees is available upon request.

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