Tarheel Advisor Blog and Education Center

Our Book: Preparing for Retirement

Tarheel Advisors, LLC has produced an educational text on financial planning available at Amazon and Barnes & Noble. In order to have a successful retirement, you must have a plan that allows you to identify risks, reduce taxes, find good investments, understand insurance, save for education, and manage your estate planning. 

Preparing for Retirement: A Comprehensive Guide To Financial Planning  
does this with a 176 page guide that is full of easy to read charts, examples, and an appendix of commonly used financial planning forms. Whether you have managed your money for decades or you're new to financial planning, this 2018 edition of Preparing for Retirement provides the information and techniques needed to successfully create and maintain a financial plan.

Q2 2018 Newsletter

We’d like to wish  a very happy New Year to all our valued clients. 2018 is special for us as it is our 10th year in business, and without our clients we’d look silly writing these newsletters every quarter.  

What a crazy year of epic upsets, shocking meltdowns, and volatile outcomes — and I’m not talking about basketball! This roller coaster of a first quarter has left nobody with a perfect investment bracket, but there’s still time to position yourself correctly to claim your one shining moment by year end. With that in mind, let’s take a look at the top investment themes thus far in 2018 and see which ones will advance to our 6th annual Investor’s Final Four.

Coming out of the Midwest region, we have the Volatility Index (VIX) making an appearance after being absent from last year’s tournament. The VIX is the  market’s so-called “fear gauge”, and it hit an all-time low in 2017 and produced a year of record low volatility. So far in 2018, the exact opposite has come to pass. We’ve seen 7 moves of 20% or more in the VIX in the first quarter, which is the most ever. On the opposing sideline we have perhaps an equally volatile team led by Coach Trump.  POTUS takes credit for the impressive run in the Markets last year, but his coaching style has also contributed to the erratic flow of equities so far in 2018. While his program is still under FBI investigation, look for more staff turnovers and more zone coverage tariffs on defense to stifle POTUS’s run deep into the tourney this season.

In the East, we have a perennial powerhouse under new leadership. The Federal Reserve has a new coach as of February, and Chairman Jay Powell has started off his tenure by following the playbook of his predecessor. Having eased off the full-court printing press of years past, the Fed now has taken more of a ball “hawk” defensive style.  The Fed raised interest rates three times in 2017 and consensus points towards a repeat performance in 2018. This steady boring style of defense should curtail inflation, but leaves them susceptible to an upset early in the tournament. Enter bitcoin — making its first appearance in the investor’s bracket.  This crypto-currency is making headlines all over the world in 2018 and becoming a phenomenon that no one can ignore. While the meteoric rise since its founding in 2009 has caught significant attention, what garners the most consideration this year is the continued volatility and massive decline in value.  From its peak in January, bitcoin dropped nearly 60% by early February. Stay tuned for more gaudy headlines, and don’t be surprised to see an epic shocker like UMBC’s dismantling of UVA.

In the South region we have a matchup between the old guard and a relative newcomer. So far in 2018 we’ve seen a resurgence in initial public offerings (IPOs).  Especially those of the so-called unicorn variety. These once private companies with $1 Billion or more valuations, such as Dropbox, Spotify, etc. have come to market with a lot of hype and delivered hot shooting in their first quarter of trading. On the flip side, the bluebloods of FANG (Facebook, Amazon, Netflix, and Google) have been underwhelming this year after providing market leadership in 2016-17.  Talk of regulation in the computing world of data has investors spooked temporarily, but we wouldn’t be surprised to see FANG return to top form before the year ends.

Finally, in the West we see a surprising top seed.  The Bovespa, or Brazilian stock exchange equivalent of the S&P 500, is the best performing global index through the end of the first quarter. Don’t bet too much on this Cinderella story as most pundits think it will be difficult to replicate the 11.73% year to date performance in later rounds.  Their opponent, The Tax Cuts & Jobs Act (TC&JA), enters the field after making a buzzer beater in the conference tournament at the end of 2017. The lowering of both individual and corporate tax rates pursuant to the TC&JA should start to yield returns in the markets and economy in 2018. Hopefully, the stimulative effect will be more than just a handful of bonus free throws. However, we’ve yet to see how investors and companies will use the extra cash in their pockets.      Either way, we still expect a positive outcome for investors that stick to a diversified approach. 

-Walter Hinson, CFP®

Q1 2018 Newsletter

We’d like to wish  a very happy New Year to all our valued clients. 2018 is special for us as it is our 10th year in business, and without our clients we’d look silly writing these newsletters every quarter.  

Year in Review—The success of our 2017 predictions is a bit mixed, but we were spot on where it mattered.  Our core prediction was for the market momentum that started with the Trump election to continue for the entirety of 2017. Returns for the year were stellar for equities of all types, and the manner that they were achieved was quite interesting as well.  Despite the volatility that is perceived by many in politics, the markets had one of their least volatile years on record without recording a single negative monthly return. 

We also predicted the Federal Reserve would increase  rates twice during 2017, and we weren’t far off. Rates changed three times for a total increase of 0.75% for the year. We also predicted that these increases would cause the dollar to appreciate, however, we got that trend incorrect as the dollar depreciated around 10% against many major currencies during 2017.

Our biggest miss for the year was a prediction that we’d see the first major overhaul in Social Security since the Reagan years. While we did manage to close out the year with a historic tax reform bill, Congress was especially careful to not touch anything Social Security related. This proves that the topic is so cancerous in the political realm that we will most likely not see a voluntary overhaul to the system for decades to come.

2017 Scorecard

2018 Predictions—The big question for market prognosticators is how much gas is left in the tank of this nearly decade long bull market? The answer to this question is predicated on a debate that has raged in economic and political circles for nearly 40 years. The Reagan administration coined the term of “trickle down economics” based on the idea that individuals are better stewards of their money than the government, and if given a lower taxation rate we will see stronger economic expansion for all.

If trickle down economics works, then our current bull market may have been refueled with enough gas to go another 2-3 years. 2013 was the last time we saw a 20+% increase in equity prices, and the following year we saw another increase of 10%. For 2018 we’re looking for a similar story with expectations of low double digit returns for US stocks. However, it’s unlikely we go a second straight year with ultra low volatility, so it would be reasonable to expect a 5-10% correction sometime during the year.

For a second straight year, our baseline expectation is for two more Fed interest rates hikes for an annual increase of 0.5%. The reason for these increases will be continued domestic economic expansion and GDP growth of between 3-3.5% for 2018. The wild card may be the new leadership beginning in February when current Chairmen Yellen steps down and is replaced by Trump nominee, Jerome Powell. Mr. Powell according to most pundits is expected to maintain a similar style of operation and interest rate trajectory to his predecessor, but we really don’t have any historical data to base that on.

Finally, it wouldn't be fun unless we made an outlandish prediction on the value of Bitcoin. We’ve seen others make predictions from $0 all the way up to $1 million. About 0.1% of the world population has a meaningful holding in Bitcoin, but the way it has been covered in 2017 you’d think that number was 25% or higher.

While we are not bearish on the future of the block chain technology that Bitcoin was built on, we are less bullish on the forward case of Bitcoin and other non-governmental issued cyber currencies. Followers of Bitcoin may remember the collapse of one of their major exchanges in 2014, Mt. Gox. Our 2018 outlook for Bitcoin is negative, and we are expecting to see another major exchange failure commensurate with what was seen in 2014. If any newly minted Bitcoin millionaires are out there reading this, don’t quit your day job just yet.

-Ryan Glover, CFP®