Professional Investment Management Financial Guidance Since 1992 - Celebrating 26 Years

Tudor Financial January 2019 Update

"Secure the Future"

What Fun it is to Ride: For several years prior to 2018, investors had a special gift from investment markets: little fluctuation. Hardly a budge of volatility. This was not natural. Markets are designed to shake out weak hands - but individual investors were in a meditative state for years with market volatility absent. Some invested in riskier assets to get a performance and adrenaline boost. Something had to give. Markets had to get back to normal. So here we look back at a volatility catch-up year: 2018. Whatever you want to blame - Brexit, tariff fears, European economic malaise, political wrangling, inverted yield curves, recession risks - it was there as a reason for volatility. In December, fear swelled in investors' minds and markets experienced their third correction of the year - the largest December decline in 90 years. The prior two corrections occurred in February and October - both quickly recovered. Ironically, news in December was no different than widely known news telegraphed in the months prior. If December was a correction (vs. the beginning of a bear market), as fears subside, markets will bounce. Historically, they have always bounced after a correction - and bounce faster than market timers can fathom. We suspect that relative to the last few years, the largest number of investor mistakes were made in December and will be likely be made in January this year. The ideal remedy to market tantrums is to assure that you have a good investment strategy with strong history. Not enough can be said to extol the virtues of a good strategy. Strategies allow for the possibility of volatility and adjust allocations over time. Make sure the strategy fits your risk profile and that it performs well in most market environments...slowly adjusting to changing financial dynamics. Market History : One - Let's See If History Holds: Since 1926, the three quarters including the prior one (which includes a mid-year election) and the subsequent two in the first half of the third year of the presidential cycle show markets positive 87% of the time. Average return during that period? 14%. Two: Since 1926, U.S. stocks have produced 34% average returns during the 12 months following a 10 to 20 percent correction. Even more when dividends are added in. (Source: ibbottson)

April 15 Sticker Shock Mutual funds held in non-retirement accounts must report capital gains and dividends from their security holdings and sales each year - this information arrives on a 1099 form. However, this year will be exceptionally painful for mutual fund shareholders - nearly a record number of mutual funds will distribute more than 10% of their value in the form of capital gains and dividends in 2018 - the highest level in five years. This adds some pain to challenging returns for most of these funds in 2018. Why such high payouts and tax consequence? 2018 has been more volatile than the prior few years. Shareholders in mutual funds panic sell in volatile years forcing fund managers to sell security positions to raise cash for withdrawals. This sometimes requires them to sell highly-liquid, high-gain positions. This selling often causes large tax consequences. Note that investors in ETF's and individual securities are not forced into this sort of tax scenario. This is one good reason to move away from mutual funds as investor finances grow. (Source: capgainsvalet.com)

Bonds are Telling You Something

When short-term bond interest rates exceed long-term bond rates, should you panic? Stock investors often do - you saw it in recent declines. When interest rates are not in a normal up-slope, bond investors are transmitting the message that recession probabilities are higher and this scares stock investors. When this scenario - interest rate inversion - has occurred historically, what happens to market performance? Historically, stock bull markets do not come to a screeching halt after interest rate inversion. From the point of inversion (and prior to the last five recessions) the S&P 500 peaked 19 months later, on average. The average gain during that average time frame? Another 22% . Interest rates are not a perfect forecasting tool - other variables, such as GDP and job creation also determine market direction. So it is important to understand that using interest rates in a vacuum may not help investors without a look at other factors driving the economy. (Source: cnnbusiness.com)

43% of the Fortune 500 Companies in 2017... ... were founded or co-founded by either an immigrant to the United States or by the child of an immigrant. (Source: Center for American Entrepreneurship)

111.8% The latest measure of the Conference Board Leading Economic Index. The Leading Economic Index tracks the economy and projects future economic activity. Historically, it is one of the best forecasting tools for a recession. The current reading shows growth and is not pointing to a recession. (Source: conference-board.org)

Dow Industrial Index March 2009 - 6,600 January 2019 - 23,400 (1)

Your Financial Quote: "The way to make money is to buy when blood is running in the streets. " John D. Rockefeller

"Strategy Determines Outcome - Securities are Merely Tools"

Enjoy the week... Grant S. Donaldson, MS, CPA

(1) yahoofinance.com, S&P500 historical data, Barron, Morningstar.com, Vanguard benchmark returns (2) Information available upon request

Past performance is not indicative of future results.  Nothing in this communication should be construed to contain a solicitation to buy or an offer to sell any security.  Some information contained in this communication has been provided by sources other than Tudor Financial, Inc., the accuracy of which is the responsibility of the provider.  Advisors affiliated with Tudor Financial are Registered Reps. of Westminster Financial Securities, Inc.,40 North Main Street, Suite 2400, Dayton, Ohio 45423, member FINRA/SIPC. If you would like a copy of our Schedule ADV Brochure, a written disclosure statement outlining our background and business practices, please contact our office.