Global Growth

“America First! America First! America First!” It was certainly a memorable line from Inauguration Day, but it was not prophetic as to 2017 stock market performance. Improving economic growth in Europe and Asia buoyed foreign markets to continuing progress in the third quarter, with major  benchmarks  on pace for the best annual showing since 2009. Domestic markets also performed very well, and are at all-time highs as of this writing.

On to Taxes

So much for health care reform. “Repeal and Replace” gave way to “Retreat and Reconsider.” We will continue monitoring legislative developments in this very important business sector, mindful that national health spending accounts for almost 18% of our economy today, up from 5% in 1960.  As we opined in our July commentary, we believe a combination of incremental adjustments could slow the rate of spending growth, and this moderation would work wonders over time, making room for other economic priorities.

Next up is tax reform. The IRS code accommodates a variety of “sacred cows.”  Thus, any overhaul means that lots of oxen stand to be gored or fattened. The process will be complicated and success could be elusive. We believe a major streamlining is long overdue, the last one having occurred in 1986. Simplifying and lowering corporate tax rates would benefit investors because higher after-tax profits could be used for larger dividend increases and greater capital spending. The latter is vital for the higher productivity that supports long-term growth and rising living standards. Reform would be especially positive for smaller businesses that contribute so much to innovation and job creation.

Bartlett believes optimism about reform has been a contributing factor for higher U.S. stock prices this year. Legislative delay or stalemate could precipitate a market setback. As for individual tax changes, we think reform and reduction is less compelling compared to corporate tax overhaul, and we believe the estimated growth benefits are usually overstated.

Good Behavior

A recurring theme in Bartlett commentaries is the importance of removing emotion from investing. We usually feature this topic when investor confidence is fragile following market selloffs. “Market timing” can be especially seductive after declines. Fear increases amid greater volatility and highly publicized uncertainties, leading regretful investors to sell stocks and plan for repurchase when conditions are more settled. The inevitable and lamentable result is to sell low and buy high.

More relevant for today is the similarly bad behavior of “performance chasing” that manifests when investor optimism is too high. Proven investment policies such as portfolio balance and diversification, which are vital for long-term performance, may seem antiquated when more and faster progress is wanted. This invariably happens at times of rising stock prices and low volatility, when prosperity stimulates complacency and overconfidence. The unfortunate result is that riskier investments are increased at the wrong time, buying high and later selling low.

What Aesop postulated over 2,000 years ago is relevant for investors today: the tortoise beats the hare. Investing is a marathon rather than a sprint; slow and steady wins the race. The elements of disciplined portfolio management –thoughtful asset allocation, appropriate diversification, security selections based on realistic assessments of value, careful planning for anticipated withdrawals, and judicious rebalancing — are continuing imperatives as we seek to achieve your long-term investment goals. With appropriate safeguards in place, we can look to eventual market dislocations with equanimity, viewing them as times of opportunity rather than peril. Bartlett’s most important goal is making sure client financial plans are sustainable over the long haul, secure from the temptations created by “fear” or “greed” during market cycles.

Good News

Chris Robbins, who joined Bartlett in March 2012, is our 13^th Chartered Financial Analyst (CFA), achieving this coveted accreditation in August. Meanwhile, two of our associates are making steady progress toward the Certified Financial Planner (CFP) designation, which would increase our CFP roster to five.

Concluding Comments

We are honored by our 98% client retention rate and strive to provide the highest level of service for our clients. Do you know someone who might appreciate having Bartlett in their corner? If so, please recommend us to others who could benefit from Bartlett’s investment management and financial planning services.