Letter to Stakeholders, January 2024
Monday, January 8th, 8:00 am EST. Another year behind us and this time, a proper Santa Clause Rally. After a wild ride, 2023 ended positively for the stock market and your diversified portfolio. 2024’s results are now a year away but the timeline we pay the most attention to is yours. What are you planning for this year? How will your goals change, or will they stay the same? How can we serve you better? Let’s get a coffee on the calendar.
Politics and Portfolios
“We will know whether democracy dies by the end of 2024.”
- Maria Ressa, Author of How to Stand Up to a Dictator
Ms. Ressa’s quote is not just a reference to US elections this year but the many (mostly) democratic elections being held all around the world. Our biggest rival – and awkwardly, economic partner – China will host elections this year, along with the semi-conductor manufacturing country of Taiwan. But our economy – not just our democracy – will also be reacting to elections in Mexico, a dozen countries in Africa, India, and the European Parliament. There are more countries with elections but having just highlighted 50%+ of the population, you probably get the point. Politics and your money react to each other so expect volatility – ups and downs – in your portfolio this year, depending on who appears to be getting elected (at any point in time).
Pop quiz! How much of the total amount of US spending (economic output) comes from spending by the US government? On average, about 25% (going back to 1900). I wondered if there was any correlation between the stock market and government spending and the only pattern I could pick up was how much extra spending our government does after a crisis (see 2008, 2020 and 2021). A couple of years ago, I wondered if instead of investing in the average of the stock market by proportionally weighting the largest industries by “market worth,” maybe weighting it by the amount spent by the entire country – Gross Domestic Product or “GDP” – made more sense. With a fellow professor from the finance department at my alma mater George Mason University and a few students, we did some research. It turns out that “GDP weighting” has a slight positive delta over “capitalization weighting,” at least for the time period we measured (only back to 1995). Our findings were published by the CFA Institute’s Enterprising Investor magazine. You can read more about the study if you’re interested but it all comes back to the significance of politics in your portfolios: if anything, the correlation is slight. If you are an activist, this is your year; but no matter what you see in your portfolios, we will be monitoring and react only when necessary.
Washingtonian TOP Financial Adviser 2024
For another consecutive year, peers and financial industry professionals have mentioned my name as someone they trust. They did this in response to surveys sent by representatives of Washingtonian Magazine. For more on what type of advisers are selected and how, click here. Of course, this is a recognition I share with Doug because without his partnership, I wouldn’t be able to “show up” in the community to represent our firm. Thank you Doug and thank you for letting me serve your family in this way.
1% for the Planet
Near the end of last month, we estimated our 2023 total annual revenue and donated 1% of it to Northern Virginia Food Rescue. You pay us 1% and we pay it forward in our commitment to 1% for the Planet. 1FP is an organization that “certifies” environmental giving and as they say on their website, “When businesses say they give back, we make sure they do.” Businesses (and individuals), select an organization to donate to and then send the receipts for certifying to 1FP. We’ve been members for a couple years and plan to continue; perhaps sponsoring a new organization in 2024.
Free Credit Reports
January is a great time to go to AnnualCreditReport.com to receive your free credit reports from the major credit reporting agencies. But now you can receive free credit reports weekly so if you forget, just do it next week.
Jason J. Howell, CFP®, CPWA®, CSRIC®
Jason Howell Company is a family wealth management firm that diversifies the portfolios and untangles the emotions associated with first generation wealth and family business. We help couples overcome financial imposter syndrome and family businesses diversify their risk and implement family governance structures.
Jason J. Howell, CFP®, CPWA®, CSRIC® and Douglas W. Tees, MBA, CFP® CAP®, CBDA have spent a lot of time in the Washington, DC area, and are aware that many people who are first generation wealth suffer from a kind of "financial imposter syndrome." Successful entrepreneurs are always looking over their shoulder; government contractors worry about the next contract; former Capitol Hill staffers privately wonder if they should "feel bad" for the money they now make. Imposter syndrome is common among people who work for the many corporate headquarters based in this area as well. These feelings get in the way of properly managing wealth. We empower them to get organized, build a team of advisors and make decisions.
Our typical "first generation wealth" families include dual income parents who work, save and have just the right amount of fun. We uniquely solve the typical problems that come with family owned businesses.
Our clients trend a little older - Baby Boomers (born 1946 - 1964) and Gen-Xers (born 1965 - 1980) - but we're starting to see more Millennials (born 1981 to 1996) who don't want to wait until it's too late. They earn impressive incomes and have accumulated a good bit of savings. As bona fide experts themselves, they expect fiduciary expertise from people they hire. They are just not sure about the "big box" brokerage firms that advertise one thing and seem to do another.
First generation wealth success stories and family business owners realize that they:
- Need to “do something” with the cash in their checking/savings
- Need to diversify their portfolio away from the family business
- Need an investment strategy for “up” and “down” markets
- Need a plan to mitigate market, credit, inflation, and political risks
- Need to start tax planning instead of just tax paying
- Need to be sure they are choosing the right work benefits
- Need to reduce financial miscommunications between partners
- Need to separate business finances from personal finances
- Need to plan for money while alive and for what happens after death