Everyone seems to be excited about Dow 20,000, but we’re evaluating which overvalued stocks we should sell in anticipation of the HIGH wearing off. It never fails that human nature will run its course and around the next corner sits a financial controversy that will surely help the market SOBER UP. But before we get to that, let’s look at how we got here…
From the worst start for the stock market of any year in history – down 10% in just the first few weeks – to the best quarter in three years! What a ride! The news that precipitated the early drop was China’s slow down, but then we shifted our focus to the UK’s BREXIT vote, and now we have the unending election news and a new administration to concentrate on.
As entertaining as this year has been – especially lately – it hasn’t had much impact on the decisions we’ve made. We tried to follow the investing legend Warren Buffet’s advice again this year – Be greedy when others are fearful and fearful when others are greedy. Once again it was sound advice.
2016 was a good year for the portfolios we manage. Most fully invested accounts racked up greater than a 10%+ return (contact us for your specific return). We are pleased with this and hope you are as well.
However, as we look to 2017 we’d like to have a few bucks in cash that can be used to buy good companies that are down in price when the market gives us an opportunity. A few stocks we’ve discussed selling based on Morningstar’s fair value estimate: Paychex PAYX which is 35% overvalued, Fastenal FAST is 20% overvalued, and Discover DFS at 30%.
We’ll leave the bold predictions to people smarter than us, but here’s a few things we expect in 2017:
- Buckle up – 2017 will be anything but a smooth road for Donald Trump and his policies. We expect this to be reflected in the stock market and in our accounts.
- Trumponomics not magic – We don’t expect a surge in economic growth that the stock market is predicting. It could happen – as the Chicago Cubs proved this year – but our economy still has an aging population, high debt, and higher interest rates that will act as headwinds.
- Henry will love golf – This is just wishful thinking on my part, but I’m hoping my 5 year-old son will love the new set of golf clubs I bought him and give me an excuse to play more this next year. Fingers crossed!
Once again, thank you for reading and also trusting us with your investments in 2016. We appreciate the great relationships we have with our clients and will continue to work hard to produce another prosperous year for you in 2017.
Please contact us with any questions,
Tim Porter, CFP®