Our Blog

DWM is committed to learning for its team, clients and friends. In this changing world, it’s extremely important to stay current in all areas impacting your financial future.

We encourage all of team members to “drill down” on current topics important to you and contribute to our weekly blogs.  Questions from our clients and their families are often featured in our blogs.  

Financial literacy for clients and their families is very important to us.  We generally hold an annual wealth management seminar for all of our clients.  We encourage regular, at least semi-annual, meetings in person with our clients to review family updates, progress on financial goals, asset allocation and performance of investments.  We’re happy to assist younger members of the family as part of our total wealth management program.

Here’s our latest blog:

 

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Bull Market Runs Come in All Lengths

Written by Lester Detterbeck.

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Let me help you with the details of the above chart- though it is difficult to read, it’s quite important.   This graph from First Trust reflects the historical performance of the S&P 500 index from 1926 through June 2018. The blue represents bull markets; the red bear markets. It’s obvious that there is a lot more blue on this chart than red. That’s why we encourage you to “stay invested” through the ups and downs of the markets in a risk appropriate, diversified portfolio.

There are 8 bear markets shown. These represent periods of time when markets went down 20% or more. The longest and largest, from 1929-1932, was caused by the Great Depression. This bear market lasted 2.8 years and represented a cumulative decline of 83.4% overall; 47% per year. Ouch. Other bear markets have been much tamer. The average bear market period for the eight periods shown above lasted 1.4 years with an average cumulative loss of 41%. The bear market in 2008-2009 caused by the financial crisis lasted 1.3 years, with a 51% cumulative decline, 41% per year.

There are 9 bull markets shown. The longest and largest occurred after World War II from 1948 to 1963. This bull market lasted 15.1 years and represented a cumulative total return of 936%, or 17% per year. The average bull market has lasted 9.1 years with a cumulative total return of 476%; 21% per year. Some bull markets have been as short as 2.5 years and there have been other longer bull markets of 12.8, 12.9 and 13.9 years.  Our current bull market started in Spring 2009 and has lasted 9.3 years, with a cumulative total return of 350%; 17.5% per year.

At DWM, we are asked the question: “How long can this bull market continue?” This question seems to be based on a concern that a bull market comes with a pre-ordained expiration date; when it runs out of whatever made it go. However, selling equities because a bull market run is longer than average has been a great way to miss out on lots of gains. Remember, bull market runs come in all lengths.

While a bull market may be technically defined as a period of time after a 20% drop (bear market) has reached its end, it’s probably healthier to view a bull market from an economic perspective. Barry Ritholtz in a Friday Bloomberg article defined a bull market as follows: “An extended period of time, typically lasting 10-20 years, driven by broad economic shifts that create an environment conducive to increasing corporate revenue and earnings. Its most dominant feature is the increasing willingness of investors to pay more and more for a dollar of earnings.” This is exactly what we have seen in periods after WWII, the 1980 and 1990s biotech boom and now the maturation of internet, software and mobile companies.

Bear markets are typically brought about by recessions; often when the markets have gotten overheated (such as the dot.com bubble bust in 2000). Bear markets can also be brought on by a financial crisis, as we had in 2008-2009. Recoveries from financial crises are quite different from recoveries from depressions.   A post crisis recovery is marked by slow and erratic economic growth, weak wage gains and disappointing retail sales. Furthermore, investors, after being burned, remain skittish for years. The 2008-2009 crisis scarred consumers and left them more determined to sock away funds.

Case in point, the Wall Street Journal reported Monday morning that the personal savings rate is up to 7.2% from the 3.3% estimated previously. The new number exceeds the 6.4% average savings rate since 1990 and is almost three time the savings rate in 2005. The “wealth effect” that we saw in the mid 2000s that increased spending and dropped savings rates, is not happening now. This news, along with the reduction in corporate taxes, historically low unemployment and continued increased corporate earnings bodes well for a continuation of the current Bull Market despite ongoing negative factors.

Yes, we don’t know how long this bull market will run. And, we’re not going to try to time it. We do know, at some point, this bull market run will come to its natural end. Before it does, we may see more pullbacks (declines of 5% or more) or corrections (declines of 10% or more).   Remember this graph- lots more blue than red- and stay invested.

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Mother Nature is in Charge!

Written by Ginny Wilson.

Flooded House

Americans are getting a little disaster weary.  From the horrific wildfires out west to torrential rains and flooding all summer in the east, it has been quite a year.  And in the south and east, we all know what August means…hurricane season is upon us!  Mother Nature is getting on our nerves in 2018! 

How can we protect ourselves to minimize the risks to our homes, our property and our livelihoods?  Mitigating risks from catastrophic events starts with prevention and planning by both government and individuals.  Prevention can start with using damage-resistant building materials, having elevated home designs, enforcing safe building codes, developing flood plain management systems, securing or removing hazards ahead of storms and by having evacuation or escape plans in place.  FEMA has an 81 page guide of Mitigation Ideas to deal with earthquakes, landslides, floods, hurricanes, hail, lightning, tornadoes, severe winter weather and more.  https://www.fema.gov/media-library-data/20130726-1904-25045-2423/fema_mitigation_ideas_final_01252013.pdf  There are many threats coming from our environment, but many things that can be done to lessen some of the painful aftermath of these occurrences. 

We certainly can use property & casualty insurance to plan and prepare for the worst.  In hurricane-prone areas, for example, we have riders for “named storm” or “wind and hail” coverage that comes with our homeowner’s insurance.  The costs of the insurance can be reduced by increasing the amount of a deductible you want to have or, in other words, how much you can afford to pay out of pocket for repairs after a storm.  We also look for extra coverage for those circumstances when there is a widespread event like a hurricane that may drive costs up with higher demand for labor and materials.  Homeowners may want to have an extended coverage rider built in to help with those higher costs.  It is important to evaluate what your risk tolerance is for these situations and how much you want to pay to transfer some of the risk to the insurance company.  If your home is destroyed or badly damaged, do you have a comfortable level of protection for you and your family?

There has been much discussion on the 50 year old National Flood Insurance Program, as well. President Trump recently signed the legislation to extend the debt-ridden program until November 30th.  That means not dealing with necessary reforms until after hurricane season and mid-term elections.  The federal program, which is some $20 billion in debt to the U.S. Treasury, offers subsidized flood insurance to coastal or flood-prone areas where private insurers have pulled out or made it unaffordable.   As it is, the NFIP provides coverage with caps on claims for homes at $250,000 and on property at $100,000.  Many higher-value property owners may choose to also carry “excess” flood insurance to bridge the gap between the federal program caps and the value of their homes and property. 

Unfortunately, the reduced premiums from about 5 million NFIP flood insurance policies nationwide cannot adequately support the claims that have come from recent events, including storms like Sandy, Katrina, Harvey, Maria, Irma and Matthew.  And hurricanes aren’t the only cause of flooding.  We have seen some of these epic rainstorms cause significant inland flooding and damage.   As the head of the SC Department of Insurance said recently, “our entire state is in a flood-zone.”  And this may be true for many areas in the South, East and Midwest.  It is clear there is a need for a flood program that can provide support for affected residents after a storm, especially as we see changing climate conditions and rising sea levels. Lawmakers thus far have been unable to find a bi-partisan fix to the financially strained system.

As homeowners and members of our communities, we should certainly do our share to prepare for these natural events and make sure we have a solid plan in place for our families and our property.  We can maintain our property, keep our own emergency fund and can participate in the insurance coverages available to help protect us.  And we should hope and expect that our legislators - local, state and national- will compromise to find solutions to reform existing programs and to prepare disaster plans that can assist all of us in the event of a catastrophic event.  

At DWM, we use a holistic approach to evaluating your financial plan, including risk management.  We will help you review all of your property & casualty insurance policies to ensure that you have appropriate coverage for you and your family.  Let’s hope Mother Nature stays peaceful for the rest of the year!

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Innovation: Showcasing Efficiency and Tightening Security

Written by Jake Rickord.

Companies in the 21st century are constantly looking for way to move their services to the next level of the digital age. Accessibility, convenience, and speed are major factors that industry leaders always look to improve upon, and Charles Schwab & Co., Inc. is no different.

Over the past few weeks, Schwab has put on several presentations in cities across the nation to showcase their technological advancements in a series they call Schwab Solutions. At DWM, we were lucky enough to attend one of these presentations and learned of a lot of exciting new features and opportunities that we believe can assist our clients. Here are some of the highlights:

  • E-Signature->For existing clients looking to open a new account at Schwab, we can utilize a new process called e-signature to send the documents over to your Schwab portal. Simply let DWM know your intention to open a new account, and we can work up the forms to do so. Once the forms are ready, we can send a request for your e-signature, which will send a notification to your Schwab Alliance account. This will assist in opening your account faster, more securely, and with no paper waste!
  • E-Approval->For check and journal requests (moving money from one account to another at Schwab), we can follow a very similar process to the e-signature process, with e-approval! Once again this reduces processing time, paper waste, and improves document accuracy. Schwab is also working to bring this feature to MoneyLink requests, so stay tuned for that improvement!
  • Mobile Deposit->The Schwab app also allows investors to scan/take a picture of the front and back of a check and upload them for deposit, usually within the same day!
  • The Schwab platform itself is receiving an overhaul in the coming months, which should provide clients with a much sleeker, more intuitive experience. A major difference to come will be a personal value chart, which will display a simplified net worth statistic based on the accounts at Schwab, as well as the ability to add in accounts outside of Schwab (think 401ks)!
  • In addition to the aesthetical changes, the Schwab portal now has much more client interactivity than before, which will allow investors to update various information on their accounts all from within the website, no paperwork involved. These various services include:
    • Updating accounts in case of address change
    • Beneficiary updates on IRAs
    • Tax withholding percentages for IRAs

As with any technological advancement, new security challenges often emerge, and Schwab, as well as DWM, are your first line of defense against these threats. For Schwab's part, they have bumped up security in some major ways:

  • Whenever a new device is used to access a Schwab portal, a text or e-mail is sent (depending on how the security of the specific account is set-up), to ensure that fraudsters are not trying to access your account information electronically.
  • In addition, Schwab offers a security feature called two-factor authentication, which allows for an app on your phone to provide a six-digit code to follow your Schwab Alliance password, further ensuring that only the account holder can access their sensitive information.
  • Finally, one further security measure clients can choose to utilize is called Schwab Voice ID. With this service, a client calls in and answers some basic questions to the Schwab Alliance team, through which their Voice Biometrics system analyzes the quality of your voice. Then, if any suspicious activity occurs in your accounts, Schwab will call and verify the activity with you, using the Biometrics system to ensure that the voice on that end of the line is actually the account holder.

As far as DWM goes, our stance and determination in protecting our clients’ information remains resolute. We are completely committed to client security, and will continue to both provide education to keep our clients informed of rising threats, as well as keeping ourselves up-to-date about viral issues and staying abreast of any suspicious account behavior. For example, one of the most dangerous areas regarding theft and fraud currently going on are real estate scams. Hijackers will find a way into legitmate e-mail threads regarding wire information for a client buying property, and provide phony wire information. As a result, verbal verification is the new normal. As part of our safeguarding protocol, DWM will be calling the client and/or the title company to verify these wire instructions to ensure that everything goes as planned.

At DWM, we are passionate about protecting our clients and helping them shape their financial future, worry-free. This is seen throughout our wealth management process, from investing to account management, to financial planning. We aim to help clients notice and avoid any landmines that might be hiding in their long-term financial plan. Providing safer, more efficient ways of accessing and updating their accounts, while also actively monitoring for suspicious activity and ensuring accuracy is an effective method of doing so. 

Please feel free to stay updated on Schwab's technological advancements through their "Client Learning Center" page found here:

http://content.schwab.com/learningcenter/

Please also feel free to contact DWM with any questions or concerns regarding either advancements or safety.

At DWM, we are passionate about protecting our clients and helping them shape their financial future, worry-free. This is seen throughout our wealth management process, from investing to account management, to financial planning. We aim to help clients notice and avoid any landmines that might be hiding in their long-term financial plan. Providing safer, more efficient ways of accessing and updating their accounts, while also actively monitoring for suspicious activity and ensuring accuracy is an effective method of doing so. 

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