Announcing Our New Client Portal

We are thrilled to announce that our new client portal will launch this quarter!

We plan on sending an email invitation for the portal to each client in the second quarter of 2018. The portal invitation email will come from BLB&B Advisors and will ask you to click a link in the email to set up a password. Once you set up your own password you can then log into and access the various features of the portal. Please note that only clients for whom we have a valid email address will receive a portal login email. If you have not yet provided us with your email address, or if you would like us to use a different email address than the one we are currently using, please provide us this information as soon as possible.

If you share an investment account with another person, such as your spouse, you will each receive an email invitation to join the portal and can do so separately. In other words, you may each select your own password and will have your own login credentials. However, if you and the other person on your account also share an email address then only one of you will be able to create a portal login.

Once you enter the portal, you will be able to view holdings, transactions, asset allocation, and some basic performance information. You will also be able to link all of your financial accounts (bank accounts, outside investment accounts, work retirement accounts, mortgages, home value, etc.) and get a view of your total net worth. If you choose, you can export your data from the portal into Excel where you can further review and analyze it. Your portal also includes a document vault. This is a secure place for you to store electronic versions of your important documents such as your estate plan, trust documents, wills, powers of attorney, etc.

Our new portal also features electronic delivery of your quarterly reports and our monthly and quarterly publications directly into your portal. You will receive notification that they are available for you to view and then when you sign onto the portal you will see them.

Portal delivery:

  • Is far more secure than printing and mailing client statements and other confidential information;
  • Means you will receive your reports sooner;
  • Makes digital storage much easier as you will have far less physical paperwork; and
  • Is environmentally friendly!

As you can probably already guess, our new client portal is a robust, interactive, and comprehensive offering. It will be accessible from a variety of mobile devices as well as your desktop. We expect the portal to be the primary means for delivering quarterly reports starting in the 2nd quarter of this year. Please be on the lookout for your invitation to sign up for the portal! Also, rest assured that our technical staff will be on hand to help should you have any questions or difficulties in accessing or using the client portal.

Volatility returned to U.S. equity markets with a vengeance during the first quarter of 2018 after several years of occasional and often barely noticeable downward market swings. In fact, for the first time since January 2016, a number of the major U.S. equity indices, including the S&P 500, Dow Jones Industrial Average, and NASDAQ, fell by more than 10% in February and thus officially entered “correction” territory. As you can see in the one-year VIX (CBOE S&P 500 Volatility Index) chart below, in February, volatility quickly and precipitously accelerated with the VIX even hitting an intra-day high of 50.30 on February 6th. The day before, the DJIA had its worst one-day point loss ever (1,175) and experienced a 1,597 intra-day point swing.

As you would expect, this sharp and sudden downward move caught many investors off guard. Even though most investors had been waiting with bated breath for months, assuming U.S. equity markets would correct at some point in the not-too-distant future, when it occurred, most were surprised by the speed and immediate conviction of the correction. The chart below of the S&P 500 since October 2014 illustrates how the correction came on the heels of a lengthy 23.7% upward move in the index over the preceding 11 months and then was immediately followed by another sharp upward move.

If you are like most investors, you are probably wondering what seemingly came out of nowhere to precipitate this spike in volatility and what will happen next? Is volatility here to stay? While we certainly are not able to predict the future, we believe US equity indices will continue to experience periods of heightened volatility throughout 2018 as the economy transitions through and absorbs a number of changes – including a new Federal Reserve chairperson (Jerome Powell), the impact of new legislation/fiscal stimuli (the recent tax bill for one), moderating monetary policies overseas, the potential of a trade war – and adjusts to the usual growing pains associated with an economy on the move.

In many respects, the most recent spike in volatility, which has been followed by a period of slightly higher than normal volatility, is perfectly ordinary. U.S. equity markets often experience lengthy periods of low volatility followed by shorter bouts of higher to much-higher volatility.
In February, U.S. equity markets responded swiftly to mounting evidence that the Federal Reserve may need to increase interest rates at a slightly faster pace than originally expected this year. In the chart of the 10-year U.S. Treasury below, you can see evidence of one of the recent market trends that precipitated the volatility. Since the start of 2018, yields on U.S. Treasury bonds have been moving upwards at a faster clip than originally expected. This upward trend in yields suggests investors are expecting interest rates to move up as well.

As we look ahead to the remainder of 2018, we think it is quite possible that periods of higher volatility will continue to persist. That being said, we do not believe this is necessarily a negative for U.S. financial markets. Rather, we think it is simply a normal byproduct of an economy in transition following a lengthy period of sluggish but fairly predictable economic growth.

So far this year, the U.S. economy appears to be grappling with, and processing, a number of positives including:

  • Accelerating economic growth
  • Healthy business confidence
  • Increasing corporate earnings growth
  • Historically low unemployment, robust job growth, and high consumer confidence
  • Rising wages
  • Upwardly trending (though not presently worrisome) inflation
  • Fiscal stimuli
  • Global growth building and consolidating throughout several key regions (Europe, Japan, China) which also happen to be a few years behind the U.S. in the economic cycle

As well as some potential negatives including:

  • The possibility of global trade disruptions or a trade war
  • The chance that the Federal Reserve will need to raise interest rates more quickly than
    expected (that means the possibility of more than 3 rate increases during 2018)
  • The prospect of rising U.S. budget deficits which could, in turn, push U.S. borrowing
    costs higher
  • Fiscal stimuli injected into an economy that already faces a shortage of employable people as well as a skills gap
  • The likelihood of gradually tightening monetary policies overseas (EU, Japan, China) beginning at some point in the next 6 – 12 months

At present, some uncertainties around how aggressive or hawkish the Federal Reserve will be or not be over the coming 12 – 24 months and the growing concern that a trade war may erupt are the dominant economic negatives in the headlines. As of this writing, we are on the eve of the Federal Reserve Open Market Committee’s March meeting at which they will likely increase the federal funds rate by 0.25% (25 bps) and provide additional guidance as to how the rest of the year may progress. Barring any unforeseen events, we think it is likely the Fed will stick with 3 minor rate increases (0.25% at a time) this year. While inflation has gradually strengthened over the last year off of a very low base, it is barely back to the lower end of the Fed’s target range and we do not expect it will move significantly higher over the remainder of this year. As always, the Fed is balancing the tightrope between encouraging reasonable and sustainable economic growth without also encouraging too much inflation or, conversely, stifling economic growth. There is every indication the new Fed chairman will continue the slow, steady, and fairly predictable approach towards monetary policy as seen in recent years in order to minimize unnecessary shocks to the U.S. economy.

With regard to the recent bluster and banter between President Trump and other world leaders about global trade, we think and hope that much of the recent rhetoric is more posturing and positioning for upcoming trade negotiations rather than a true attempt to limit or cut off global trade. The goal appears to be “fair trade” rather than free trade. It should be noted, however, that this is not a new goal or concept. Rather, it dates at least as far back as the 1990s when President Clinton and his administration took on the Japanese and Germans in an attempt to achieve fairer trade terms. Today, the goal appears to be the same, but the targets have changed – now it is mostly China. While there is certainly some risk that all the threatening language will escalate and bloom into a trade war, we do not think this is a likely outcome. At the end of the day, none of the parties involved will benefit from a trade war or any other major limitation on global trade. To the contrary, encouraging and supporting global economic activity increases efficiencies and reduces costs. At some point, we believe the parties involved will flinch and then true negotiations can take place. Until that occurs, though, we may be in for more heated and provocative rhetoric and associated uncertainties that could slosh over into U.S. financial markets and provoke volatility.

All in all, we remain fairly optimistic and think a number of factors are in place to support U.S. and global economic growth throughout the rest of 2018 and into 2019 although we continue to keep a close eye on inflation and interest rate data and trends. We also continue to believe that a well-diversified portfolio should help cushion the shock of what could be additional patches of heightened volatility. As always, if you would like to discuss U.S. or world financial markets or have any concerns or questions about your portfolios, please to not hesitate to reach out to your BLB&B financial advisor.