1806 Belles Street, Suite 4B
San Francisco, CA 94129
For the week of August 21, 2017
Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.
Market Commentary provided by Robert O’Donnell, AIF® at
1806 Belles Street, Suite 4B
The Presidio of San Francisco
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* The Standard & Poor’s 500 (S& P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright August 2017. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 1876497.1
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Social Security's Cloudy Future
This month 82 years ago, President Roosevelt signed the Social Security Act to supplement retired individuals’ savings. Unfortunately, a cloud hangs over its anniversary. Thanks to millions of baby boomers retiring, longer life expectancies, lower birth rates, slow wage growth and the government borrowing from the Social Security (SS) trust fund for years, future shortfalls are certain unless action is taken.
Countless solutions have been proposed, but Congress has largely ignored them because most are politically risky. Here are a few basic ideas:
1) Raise the full retirement age from 67 (for those born in 1960 or later) to 69. In light of extended life expectancies, this seems reasonable for those who are able to keep working. But health issues already prevent many individuals from working until their full retirement age.
2) Either cut cost-of-living adjustments (COLA) for wealthy individuals or for everyone. But benefits already don’t keep pace with seniors’ rising expenses since the COLA is based on the general Consumer Price Index and doesn’t reflect the disproportionate rate at which housing, medical expenses and health insurance are increasing.
3) Raise the cap on earnings taxed by Social Security. Actually, the wage cap already increased from $118,500 to $127,200 in 2017. Because SS benefits are capped at $2,687 at full retirement age, higher earners would not get more back.
4) Increase payroll taxes for everyone. Since the actuarial deficit for Social Security was 2.66 percent in 2016, this would mean employees and employers would each pay an extra 1.33 percent.
5) Wait until Social Security’s reserves are depleted (around 2034) and cut benefits by up to 21 percent or dramatically raise taxes. Since solving the shortfall will become more difficult as time goes by, voters should press their representatives to work on a better solution soon.
We all may face future circumstances beyond our control. But as the old adage says, “You do what you can do.” That includes prudently saving and wisely investing. Call our office if you’d like to review your retirement plan.
Since November 2016 — The S&P 500 gained 15.9 percent (total return) in the 190 trading days since the Nov. 8, 2016, election of President Donald Trump (source: BTN Research).
Not so Hot — Of the 24 stocks in the S&P 500 index that gained at least 45 percent in calendar year 2016, 10 had a negative return YTD through July 31 (source: BTN Research).
Perception — Of 1,019 Americans surveyed in April 2017, 63 percent believed upper-income taxpayers pay too little in federal income tax. For tax year 2014, the top 1 percent of taxpayers (1.4 million returns) paid $543 billion in federal income tax. The bottom 95 percent of taxpayers (132.6 million returns) paid $550 billion in federal income tax (source: Gallup, Internal Revenue Service, BTN Research).
Stocks fell Thursday amid the President’s controversies related to the Charlottesville violence. They came back Friday with news of the resignation of Steve Bannon, the White House chief strategist and economic nationalist. At the close of Friday’s volatile session, the major indexes rolled over to close slightly lower. For the week, the Dow fell 0.77 percent to close at 21,674.51. The S&P lost 0.58 percent to finish at 2,425.55, and the NASDAQ dropped 0.64 percent to end the week at 6,216.53.
|Returns Through 8/18/17||1 Week||YTD||1 Year||3 Year||5 Year|
|Dow Jones Industrials (TR)||-0.77||11.43||19.44||11.56||13.10|
|S&P 500 (TR)||-0.58||9.76||13.23|
|Barclays US Agg Bond (TR)||0.07||3.21||0.06||2.62||2.32|
|MXCI EAFE (TR)||0.07||16.13||15.25||2.79||8.13|