Yearly Archives - 2017

Is the Trump bump here to stay?

As President Donald Trump hit his 100th day in office at the end of April, the Dow Jones Industrial Average had its best performance in the last 60 years under a first-term president for that same time period.

Since election day, the Dow has surged upward nearly 14% due in large part to Trump’s business-friendly policies, including his desire to repeal and replace Obamacare, a tax reform proposal that aims to cut taxes for the middle class and corporate America, rolling back regulation on important sectors such as energy, and boosting infrastructure spending.

The “Trump Bump” is not just limited to industrial stocks, however. It has spread across the entire market as evidenced by an 11% growth in the S&P 500 and a 16.5% rise in the Nasdaq Composite Index. In terms of dollars, Trump’s election and economic agenda have added slightly over $3 trillion dollars to the value of the market.

For everyday Americans that means a nice raise in the value of their 401ks and IRAs. In practical terms, if an individual has $100,000 or more invested in the market, the market rally could be adding years to their retirement nest egg.

So with the market now at an all-time high, it has many investors asking, is the Trump rally here to

stay? Many economists believe the answer is it depends. The fact is, a good deal of the market growth we have experienced is due solely to investor optimism. Hard economic numbers are not yet available or meaningful because it is too early in Trump’s presidency to “read the tea leaves”.

However, most investors like the direction the President is headed with the economy. This is supported by a recent Fox News poll conducted June 25-27th 2017. According to that poll, 48% of voters approved of Trump’s handling of the economy while only 43% disapproval. That was his highest mark since taking office. Those numbers reveal optimism on the part of voters, especially when you factor in the turbulent political environment in which we live.

The bottom line is the continued rise in the market will depend on three big factors. One, the passage of a healthcare bill. This legislation must effectively lower the cost of insurance for individuals and businesses to have a positive effect on the market.

Two, tax reform must become a reality. The code needs to be simplified and the rates need to be lowered for middle-America. That will stimulate spending, which in turn will boost the economy. But more importantly, the tax bill must lower rates for corporate America. The increase in net income will generate greater spending in plant expansion and inventory. That means more jobs and higher income for the middle-class!

Finally, we need peace and stability abroad. Any crisis in North Korea, the Middle-east, or with Russia, could upset the apple cart. Foreign affairs are not always in our control, but Trump needs to send a clear message that he will do whatever it takes to maintain peace. If he is successful on these three fronts we may all be singing ”Happy Days Are Here Again.”


The Key to a Great Retirement – Keep Working

If you are debt free and have a nice nest egg built up, retirement can be a wonderful time of life. However, for many people retirement can be a scary thing because there are so many financial uncertainties. Will Social Security benefits survive? Will health expenses increase dramatically? Will inflation take off and unexpectedly eat up assets? In short, will you have enough money to survive retirement?

Twenty years ago, financial advisors set up retirement plans based on the assumption that their clients would live to be somewhere between the age of 80 to 82. However, that is no longer the case. With advancements in science and medicine, and a greater emphasis on healthier lifestyles, it is becoming more commonplace to see people living independently well into their late 80’s and even early 90’s. For that reason, sound financial planning requires an asset base that will sustain 25 to 30 years of retirement living.

The fear of outliving one’s money is not without basis. For most people, subsisting solely on Social Security benefits would mean a drastic reduction in lifestyle. There would be no extras—no vacations, no club memberships, no helping grandkids—just getting by on the bare necessities. I recently helped one couple in their 80’s that was in such a position. They had to borrow money from their children to pay for a $250 automotive repair. They hated to do it, but it was the only option they had.

That is why I frequently recommend that couples entering retirement continue to work as long as their health allows them to do so. That does not mean they have to continue working in the same profession, for the same number of hours, for ten more years. That might be an option for some people, but most people are burned out when they retire and they simply need a change of scenery and more free time. Consulting work and part-time teaching may be an option for some retirees. But even if it’s not, a part-time minimum wage job can go a long way in stretching out those retirement dollars.

Considering the consequences of out living your money, it might be a good idea to visit with a trained financial professional to get a retirement plan “check up.” This will help you see how prepared you are for retirement and whether it makes sense to keep working a little longer than you had originally planned. That is one of the services we provide at Cambridge Wealth Management. If you contact our office we would be happy to evaluate your current financial position at absolutely no cost.