Getting Your Finances in Order for 2019
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. This week, we're looking ahead to 2019 and ways you can be smarter with your money. Finishing out the year means gearing up and getting together paperwork and receipts that have accumulated and making sure you're in tune with your financial planner's outlook for 2019. Richard Saperstein is Managing Director and Chief Investment Officer at Hightower Treasury Partners. He's got some thoughts on what to expect in the new year.
What documents should I gather before meeting my financial planner for 2019?
So, Rich, let's start with the kinds of records people should be gathering up and putting in a safe and organized place to have when they talk to their financial planner.
Well, I think it's important to look ahead as to what changes could occur in the environment and gather information that help you plan accordingly. So that would be assembling account documents and being able to determine an overview of your asset allocation. In addition, it's important to understand what the interest rate is that you're paying on your potential home mortgage. and to determine if there's any changes or resets in that interest rate. Other than that, you'll need your standard accounting documents for your tax advisor, but it's important just to be ready for what's going on in 2019.
Which sectors should investors avoid entering in 2019 and why?
So for those investors in the market who are looking to enter the market, what sectors would you avoid in 2019?
Currently, we're avoiding emerging markets as well as a very low exposure to international developed market equities. The reason for that is because of Fed quantitative tightening, where they're basically pulling back the liquidity that they've put out post-crisis. And that's causing a lot of agitation amongst non-U.S. markets that have to gain access to dollars.
What has surprised you most economically about 2018?
The biggest surprise has been the real fundamental strength in the economy, leading to tremendous jobs growth, strong economic conditions, and increased earnings that have been way above expectations.
And we'll have more with Richard Saperstein here on Your Money Briefing right after this.
We're back with Richard Saperstein and tips for getting your finances in order for the new year. What do you see as the most common mistakes people make when they're planning things out near the start of the year?
I don't believe that people pay attention to Fed actions and the impact that the Fed can have on the stock and bond markets. As a result, people with fixed income portfolios should pay closer attention as to what's going to occur with interest rates and the ultimate impact on their bond portfolios.
What economic surprises from 2018 should inform my 2019 investing strategy?
In addition, it's very important to speak with your advisor to identify what, if any, changes should be applied to the equity side of your portfolio.
So, Rich, what are the challenges on the horizon facing investors that they should be aware of that are coming at them in 2019?
Investors must realize that following the crisis, the Fed and global central banks have pursued very unorthodox and aggressive monetary policies to stimulate economies. That resulted in zero interest rate environments, as well as central banks purchasing large amounts of securities and injecting tremendous amounts of liquidity into the system. Now, post-crisis, we're in a very strong recovery, and global central banks, specifically the Fed, are now reversing the thrusters on that global flow of liquidity. So as that money now reverts back, either through quantitative tightening or allowing bond purchases to roll off, as well as rising interest rates in the way of increasing Fed funds, That's going to cause friction in various markets.
It's very important that investors always have some safe, dry powder in their portfolios by way of safe assets to take advantage of any market dislocations that might occur as a result of these very structural changes.
What common planning mistakes do investors make at the start of the year?
So have some cash put aside?
I would have very high-grade short-term bonds in the portfolio as well as some money market funds. We've experienced very robust financial markets, and I think it's time to build some dry powder as we start seeing the Fed normalize its policies.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:05–0:31
2
What documents should I gather before meeting my financial planner for 2019?
0:31–1:24
3
Which sectors should investors avoid entering in 2019 and why?
1:24–3:06
4
What economic surprises from 2018 should inform my 2019 investing strategy?
3:06–4:28
5
What common planning mistakes do investors make at the start of the year?
4:28–5:30
6
How might Fed policy and demographic shifts affect housing and bond strategies in 2019?
5:30–5:48
Speakers
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