Nola Kulig
Kulig Financial Advisors
Longmeadow, MA, 01116 USA
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Putting Recent Market Events in Context

August 26th, 2015

Because the markets have been rocky recently, I write to put these events in context. Market drops usually create an emotional response, when what we really need to do is to step back, take a deep breath, and behave rationally. If you have done planning with me, that also helps, as it creates a guidepost not only for your portfolio, but management of other financial risks that have potential to thwart your financial well being.

Putting Market Declines in Context

First, a bit of long term perspective—-really long term, in fact. Analysts have noted that since 1900, there have been 35 declines of 10% or more (commonly called a correction) in the S&P 500. Of those 35 corrections, the index fully recovered its value after an average of about 10 months.

There is no guarantee that the length of future recoveries will happen in a similar time frame, or at all. But unless you have a need for the money in the short term, consider just being patient.

Moreover, the S&P 500 more than doubled in value from March of 2009 through 2013 with an annualized return of more than 20% (!).  The S&P 500’s average annual total return over the past 50 years is 10%.Over the last few years we’ve seen outstanding results – a seven-year bull market. With long-term historical returns of the S&P 500 as a benchmark, we can see that results like that are unsustainable; your expectations may have become unrealistic.

If you did not bail out of stocks in 2008 or 2009, some investors have seen their portfolios double in value since then. It is not prudent to assume that rate of growth can continue. These recent rates of return were a gift—one that certainly should have moved you forward toward meeting your financial goals.

Market Volatility in Context

The reason we expect higher long-term returns on stocks than on cash and bonds is because they have greater volatility. There is no free lunch in the financial markets, and we have to accept volatility in times like this in order to earn the expected higher long-term returns. We take a strategic, long-term view on asset allocation, and your portfolio is invested based on your unique financial and personal circumstances.

Market timing does not work

Market timing could be the holy grail of investing, if only it could be done consistently. More typically investors end up with sub-par performance due to the extreme difficulty of getting the timing right. Despite much attention in the media to being tactical (i.e. market timing), we are not aware of investors who have consistently gotten in and out of the markets with success. Although the Holy Grail does not exist, the good news is that one does not need a crystal ball to invest with success. The benefits of a long-term, strategic view are compelling, but the higher returns associated with investing in stocks is dependent on being disciplined through both good and bad times.

The importance of diversification

One of the important lessons from the financial crisis is that diversification works. While this may not be the case on a day-to-day basis, a mix of different types of assets provides a smoother and more stable ride for your portfolio. As an example, while stocks have performed poorly in the past few weeks, most bonds have provided positive returns. The time frame is extremely short, and no one knows how assets will perform in the next few weeks or months, but it is another testament to the benefits of diversification.

If You Have a Financial Plan, You Should Sleep Well at Night

Financial well being rests on far more than just a portfolio. It is highly dependent on good savings habits, prudent management of credit, adequate insurance for risks you may face and much more. If you have taken care of these parts of your financial plan, you have addressed many of the issues which can thwart your security; in fact some of these these are far larger threats than any market volatility.

That plan would also include not putting more at risk in the markets than you can bear. If you have done planning with Kulig Financial, we have striven to resolve these issues and enhance your security.

What to Do (or not Do) Now

It is entirely possible that if you have a financial plan and have implemented it, you may not have a lot to do in response to current market events.

However, it may present a rebalancing and/or tax loss opportunity. That is where we are placing our focus for portfolios that we manage. What we are not doing, however, is changing the risk level of the portfolios, as that has been carefully designed to fit our clients’ financial situations.

As your financial fiduciaries, we care deeply about your financial well-being, and it is in times like these that it is important to stay calm and refrain from making decisions that may be detrimental to your wealth. In the meantime, we will monitor for rebalancing opportunities that may add value to your portfolio.

Summer “Vacation”: Off Hours Activities that Provide More Perspective

August 26th, 2015

July is traditionally the time for vacations, and I did take a short one. But some other time away put way more perspective on markets, portfolios and financial plans.

Early in July, I accompanied my daughter as a co-team leader on a church youth group mission trip. Our destination was not far, just to New York, but in some ways we traveled a long way from our cozy life in Longmeadow.

We were sent by an agency call YSOP (Youth Service Opportunities Project—see to various non-profit groups in the greater New York area to serve as volunteers. To say that this was nothing like my typical expense account trip to New York was an understatement, but it was good to be in a completely different mode in the city. We worked in soup kitchens, day care centers serving children of incarcerated mothers, and the kids made and served a sit down dinner for homeless people. The youth were great. It was hot and humid, we commuted on the subway for hours, the work was demanding, and we slept on the floor of a church at night, but not one of them complained. It was an intense and meaningful trip that we are so glad we did.

My other volunteer effort is joining the finance committee of the YWCA of western Massachusetts ( This organization is the largest of its type in the commonwealth, offering shelter, support and self-sufficiency for women and girls in our community. I am only just getting started with the people who run that organization, but am already impressed with what they have accomplished and am eager to work with them helping other women.

So if all we have to worry about is our money, rather than our personal safety or where our next meal is coming from, we are all truly blessed. May you all remain so in the years ahead!

2015 Q2 Market Review: Greece Dominates the Headlines

August 26th, 2015

This is our second quarterly review of the markets for 2015. As you know, we do not believe in making forecasts, but we comment on cross currents influencing the markets. As usual, our goal is to look at recent market results, put them in perspective, and see how that experience should set our expectations going forward.

This month’s post (written in July 2015) looks at the following topics:

  • 2015 Q2 Markets Review
    • Summary of Returns
    • Factors Influencing Performance
  • What Does all This Mean?
    • For Greece
    • For You

2015 Q2 Market Review

Summary of Returns

June, the second quarter and year-to-date results can be described as lousy, lackluster or not bad, depending on how one’s portfolio was positioned:

  • June was a lousy month, especially for anything interest-rate sensitive
  • The second quarter was lackluster, but painful for REITs, MLPs and bonds
  • Stock market returns were not bad for the year-to-date, especially for US midcaps and small caps, non-US stocks and emerging markets
  • Twelve-month returns are not shown, but the US continues to lead non-US markets over that period
Market Returns
Market Index June Q2 2015 2015 YTD
Large Cap S&P 500 Index -1.9% 0.3% 1.2%
Midcap S&P Midcap -1.3 -1.1 4.2
Small Cap S&P Small Cap 1.0 0.2 4.2
Non-US Developed Markets MSCI EAFE -2.8 0.6 5.5
Emerging Markets MSCI Emerging Mkts. -2.6 0.7 3.0
US Bonds Barclays US Aggregate -1.1 -1.7 -0.1
REITs S&P US REIT -4.5 -10.4 -6.1
MLPs Alerian MLP -8.3 -6.1 -11.0
Gold Dow Jones-UBS Gold Sub index Total Return -1.5 -1.1 -1.3
Commodities Dow Jones-UBS Commodity Index TR 2.1 4.8 -1.5

Sources: AJO Partners, Factset, Dow Jones Indexes

Factors Influencing Performance

Greece and Possible Rate Increases

In our last quarter’s market review, we said we should expect to see continued volatility as the market tries to anticipate Federal Reserve policy. That is pretty much what we have experienced in the second quarter, which has depressed sectors which pay dividends and hence are more rate sensitive. While there are troubles not only in Greece, but notably China, the US economy seems to be slowly climbing out of a deep hole and exiting the funk it entered just a few months ago. This has caused investors to anticipate a rate increase by the Fed.

Investors have focused on positive news including the pick-up of job creation in April and May, according to data provided by the U.S. Bureau of Labor Statistics, as well as the faster pace of housing sales in the all-important spring selling season (National Association of Realtors, U.S. Commerce Department). They also point to the willingness of consumers to spend (U.S. Bureau of Economic Analysis).

That’s a plus for S&P 500 company profits, which are forecast to rise a modest 2.2% in Q2 versus one year ago, compared to an estimated decline of 2.8% expected at the start of the quarter (Thomson Reuters). These are all contributing factors to US outperformance, especially in the mid and small cap sectors which are viewed as less sensitive to overseas economies.

Europe Continues to be a Big Factor

Europe continued to be in the headlines, much of it attributable to Greece and its continued debt problems. Since this country has been in the news so much lately, we will attempt to put those events in perspective.

Greece is a small nation in southern Europe with a small economy.  In 2014, the U.S. exported $773 million in goods to Greece. That compares with a U.S. economy that totals over $17 trillion (U.S. Bureau of Economic Analysis). Greece is a beautiful country that is rich in history and culture.  However, from an economic standpoint, Greece should not have a large effect on the U.S. economy.

The credit markets, the financial markets, and the banking system are another issue, though. In these terms, Greece’s inability to address its insolvency could have an impact at home.

Should Greece’s ongoing debt problems be a surprise? Well, not for students of economic history. You see, since Greece became an independent nation in 1829, it has been in default or rescheduling its debt 51% of the time through 2006. That statistic comes from analysts at First Trust.

This most recent crisis started in 2009, so financial markets have had plenty of time to prepare. At least that is the prevailing wisdom.

What’s different this time around is that Greece no longer has an independent currency – the drachma. Instead, it is part of the 19-nation European bloc that shares the euro.

No nation that has traded in its old currency for the euro has ever torn up the contract or has been forced to give up the euro. Such an event, if it were to occur, creates a heightened level of uncertainty because markets are woven together.

Short-term, stocks do not like added uncertainty and that accounts for the nearly 2% selloff in the Dow on June 29 (MarketWatch).

But let’s put that into perspective. A 350 point daily loss in the Dow does grab headlines, but it is modest when compared with the 4.4% drop registered the day after Lehman Brothers collapsed in September 2008 (Wall Street Journal). Furthermore, the dollar, which we might have expected to surge on safe-haven buying, was little changed against the euro. That could change in the days ahead as this is good short-term barometer of risk.

What Does All This Mean?

For Greece

Although Greece and the European Union seem closer to a solution lately, the situation continues to be tense and extremely fluid. Greece seems to be agreeing to creditor terms, but based on previous events, anything is possible.

Should it eventually come to a default, the general consensus suggests it will not create treacherous conditions for global financial markets. That would not have been the case in 2010 or 2011 but may be the case today since markets have had time to adjust.

It’s a different matter for the country itself. Should Greece need to exit the EU and begin using its own currency, it would create very difficult conditions for an already stressed Greek population, as was suggested in recent report released by the Bank of Greece. Yet, a much-devalued drachma could help spur growth down the road.

For You

The financial plans we recommend take into account bumps in the road. Because no one knows the future with certainty, it sometimes surprises us when we get big daily moves. Stepping back and taking a broader perspective, it really shouldn’t.

As counseled on repeated occasions, look past the daily gyrations and keep your focus on the financial plan. The long-term, disciplined investor is the one who has historically been rewarded.

While markets have been reasonably calm over the last four years, we will eventually hit a rough patch, which could be caused by Greece or by something else entirely. While stocks should eventually recover from a decline (that has been the trend over the last 200 years), I want to be sure you are comfortable with such volatility. If not, let’s please talk.


Investment advisor representative of an investment advisory services offered through Garrett Investment Advisors, LLC, a fee-only SEC registered investment advisor. Tel: (910) FEE-ONLY. Kulig Financial Advisors may offer investment advisory services in the state of Massachusetts and other jurisdictions where exempted.