The Market in 2016
2016 was another good year for the market. U.S. stocks recorded an impressive 12.66% gain, international stocks went up 4.81% and even bonds eked out a 2.53% positive return. What makes this remarkable is that there have been almost 7 years since the market bottom in 2009 without a major correction, which is unprecedented. Currently the US economy is doing well, with unemployment low, GDP going up steadily and most economic indicators sitting in positive territory. There are many concerns that a correction is overdue, uncertainty about the new President, rising interest rates and a host of other worries. What do we do now with our portfolios? As usual, mostly nothing, apart from your regular rebalancing of your portfolio. Please remember, the market gains over the last 7 years do not mean that there are not going to be corrections in the future – down markets are guaranteed, but no one knows when and it is impossible to time the market.
The Market with a Trump Presidency
Now that after a very nasty run up to the election is over, and Donald Trump is our new President, clients have been asking me what changes should be made to their portfolios? Trump supporters are upbeat about the market and the economy and others are extremely anxious and are considering selling everything and going to cash. I am sticking to my advice stated in my last newsletter, and that is to stay the course and keep to your strategy of allocating your portfolio among a diversified set of stock and bond investments.
There are a lot of uncertainties about our political future under Trump. What will happen to tax rates, healthcare, environmental policies, international trade and how we deal with our foreign friends and foes? As I have said before, the stock market is forward looking, so a lot of the uncertainty has already been priced into the market.
It is a mug’s game trying to pick winners and losers in the market and now is no exception. Stick to your allocation with a balanced portfolio. Don’t fall prey to letting our emotions get the better of us, which generally results in selling low and buying high.
Contribution Limits Stay the same for 2017
Contribution limits for your retirement accounts stay the same for 2017, but some other limits have increased this year. They are as follows:
- $18,000 for 401k’s, 403b’s, 457b’s and the TSP. If you are 50 or older, limit is $24,000.
- $5,500 for IRA’s and Roth IRA’s. $6,500 if you are 50 or older.
- $12,500 for SIMPLE IRA’s or $15,500 for 50 and older.
- Phase-out limits for Roth IRA contributions have increased to start at $118,000 for single tax filers and $186,000 married filing jointly.
- Health Savings Account (HSA) maximum contribution is $3,400 for individuals and $6,750 for families. A catchup applies for age 55 or older of $1,000.
The 2017 cost of living allowance (COLA) for Social Security beneficiaries has increased a meager 0.3%. This is compared to the “official” rate of inflation for 2016 which was 2.1% (US Bureau of Labor Statistics).
Contact me for a review meeting if needed. Please plan early for setting up an appointment. Feel free to pass this newsletter on to whoever may be interested. They can also sign up directly, on the website.
 Vanguard Total Stock Market Index Fund ETF Shares VTI
 Vanguard Total International Stock ETF VXUS
 Vanguard Total Bond Market ETF BND