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The Northern Star 08/02/18 Special Report: Quarterly Update


Message from Jon

Financial planning, a Unique Take

 In my nearly 20 years of being in the money business, I have learned and observed a lot! There is not much now that comes as a surprise to me and even less that comes as a shock. A conversation with a family member over the weekend caused the inspiration of this newsletter and I hope you enjoy it. I was speaking with a family member about success and what it takes to become successful in my opinion regardless of the field or occupation. They seemed intrigued by my insights, so I thought I would share them here because they tie into the topic at hand. The following are observations and learnings I have witnessed over the years that make successful people, successful in their fields and pursuits. Many will translate success to how much money someone is worth, but success carries with it a wide array of aptitudes. For instance:
  1. They seek council whenever they do anything substantial.
    1. Often times, successful people already know the answers, they just need a sounding board off which to bounce their ideas.
      1. There is a BIG difference between a sounding board and a "yes man" and successful people have learned the difference.
        1. Mentors, Coaches, CPA's, Accountants, Financial Planners, Spiritual Advisors are all counselors of successful people.
  2. They have goals that guide their actions.
    1. Sometimes, they need help identifying goals, setting goals and certainly how to achieve them.
      1. There is a BIG difference between goals and wants and dreams and successful people have learned the difference.
  3. Successful people have learned the value of accountability.
    1. Being accountable for your actions and processes is key to achieving your goals.
      1. Take weight loss for example.  Even the strong have weak moments and it's in those weak moments that accountability serves its greatest purpose.
  4. Successful people realize that being the smartest person in the room works against them and is not a good thing.
    1. Successful people became successful by surrounding themselves with those who are experts in their respective fields of study.
    2. Successful people are not intimidated by intelligence and have learned to use it to their advantage.
  5. Successful often comes in the disguise of hard work.
    1. Successful people have a dedicated work ethic that is found in more than one area of their life.
      1. Look at Farmers who, even at older ages can outwork many young people even though they could afford to hire help and are often worth millions, choose to work the fields everyday themselves rather than sit idly by.
  6. Risk in not a four-letter word.
    1. Successful people learn about taking risks early in life and even though they take risks where others do not, they do so in a calculating manner.
      1. NASCAR Drivers are said to be very cautious drivers outside the race track because the risks are much higher than they are during race day.
  7. Successful people have good critical thinking skills and often approach problems differently.
    1. They are used to encountering adversity, hardship and obstacles but have learned to increase their critical thinking ability to problem solve so that those hardships and adversity do not handicap their efforts in achieving their goals.
  8. Perseverance is present in every successful person I have ever met.
    1. Because being different often comes with success and that difference carries with it adversity and obstacles, they have learned to persevere and never quit on the goals they have set before themselves.
Success in financial planning carries with it a lot of the same traits and behaviors as I have mentioned above. You have to seek counsel in establishing and setting your goals for your plan. Simply growing your investments or one day retiring are not goals. Those are dreams that have no substance or behavioral model.   You need to have goals that are rooted in values and meaning that are very important to you. If you do not root your goals in your values, when you are met with adversity, tough decisions or critical moments, you will buckle and cave in to what is comfortable instead of what is important. You need to surround yourself with smart people who are not only academically skilled, but who have also achieved success in their own lives, so that their counsel and guidance is sound and tested. In your plan, many of your goals will take years of planning and work to achieve and therefore will require a diligence and dedication that is unwavering. Your plan to achieve your goals may have risks in it, but those risks should be calculated, measured, and addressed with every angle understood beforehand so that you can know what critical changes to make and when to make them as you push towards your goals. Not everything is going to go according to plan. Your investments, your life, your loved ones, your health, and any number of other things can take a turn that is unexpected. Having the ability to critically think through the hardship, adversity, and disappointment will help to minimize any damage to your path and goals you set. Last but not least, your ability to stay the course when others are abandoning theirs is key. Perseverance is crucial to success of your goals and plan. Changes to your plan will be necessary and alterations to your pathway may also be required, but your steady and consistent march to your goals is the only way to seem them through. A gentle or forceful push by your accountability partner is never a bad thing in the end! Till we speak again, enjoy your week! Jon
Examining Economic Growth

Markets experienced a push-and-pull last week between data indicating strong economic growth and lagging performance from several tech stocks' earnings reports.[1] Domestic indexes had mixed results, as the S&P 500 gained 0.61%, the Dow was up 1.57%, and the NASDAQ dropped 1.06%.[2]International stocks in the MSCI EAFE had more of an uptick, gaining 1.32% for the week.[3]
On Friday, July 27, we received the initial reading of 2nd quarter Gross Domestic Product (GDP). The report indicated that the economy grew at a 4.1% annual rate between April and June. This reading was the fastest pace in almost 4 years - and significantly higher than 1st quarter growth.[4] Markets, however, had a relatively mild reaction to the GDP data due to rumors predicting even higher results.[5]Let's dig beyond the headline GDP growth number to see what else it tells us about our current economic circumstances.2nd Quarter GDP Details
  • The tax cut helped drive growth.The recent $1.5 trillion tax cut contributed to the latest GDP performance.[6] Both consumers and businesses spent more in the 2nd quarter.[7] Some economists believe this result will not last; without further tax cuts, consumers and companies won't have additional funds at their disposal.[8]
  • Trade tension affected GDP.
    This year's ongoing trade drama impacted the economy during the 2ndquarter, but perhaps not the way you might expect. Many soybean farmers tried to get ahead of coming tariffs by shipping their crops to China earlier than normal. This move helped GDP increase between April and June.[9]
  • Inflation slowed.
    When examining inflation, the Fed uses the personal consumption expenditures (PCE) without food and energy, also known as the core PCE. The 2nd quarter reading was 2%, down from 2.2%. Between healthy economic growth and solid inflation numbers, the Fed is likely still on track for two more rate hikes in 2018.[10] 
Seeing strong growth this late in an economic expansion is good news. However, now we will have to see whether the growth can continue at this rate. When discussing the GDP readings, President Trump predicted even better results in future quarters. Some economists, on the other hand, believe trade wars and consumer spending could provide headwinds.[11]We can't predict the future, but we do know that economic fundamentals continue to be strong.[12] This week, we will receive a number of new readings - from manufacturing to employment to motor vehicle sales - and earnings season will roll on.   If you would like to discuss any of these details and how they may impact you, we're ready to help.
Tuesday: Personal Income and Outlays, Consumer Confidence
Wednesday: Motor Vehicle Sales, ADP Employment Report, PMI Manufacturing Index, ISM Mfg Index
Thursday: Factory Orders, Jobless Claims
Friday: Employment Situation, International Trade, PMI Services Index, ISM Non-Mfg Index


Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

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