Quarter-End Snapshot: Q2 2018
from J. Carter Tolleson
Every few months I have lunch with our new employees to get to know each other better, allow them to ask questions, share some fun facts, etc. Not surprisingly, a lot of the questions revolve around growth strategy for the future of Tolleson Wealth Management (and their careers). I’ve heard a lot of the questions before, but one curious young employee unintentionally challenged me last meeting. He started by saying that he joined the firm because he believed in our mission of helping families, but went on to say, “I heard someone describe having wealth as a ‘burden.’ That doesn’t make any sense to me.”
His perception – and the challenge to define it – made me think. We sometimes use the word “burden” to describe the overwhelming responsibility of managing wealth. It is a complexity that few can comprehend. But that’s what Tolleson Wealth Management does: we simplify the complexities so that wealth doesn’t seem like a “burden.”
We remain deeply committed to providing the freedom you deserve. For the past 18 years, we have continually added and professionalized services within Tolleson Wealth Management to better serve you. This year is no exception. In fact, we have expanded our bookkeeping and bill pay team, which is an integral piece in providing comprehensive wealth management. Utilizing this expanded group, along with newly implemented technology, lets us more efficiently pay bills on your behalf and improve cash flow management and reporting. As summer is fully underway, it reminds me how important our role is in allowing you to focus on your family, your travels or whatever else summer means to you.
from Eric Bennett, CFA, Chief Investment Officer
We have officially started the summer season, which means for most of us here in Texas, we'll look to spend time in a cooler environment to avoid the summer heat! On Wall Street, there is an old saying, "sell in May and go away.” We'd argue that it's a good time to allow us to keep a close eye on the ever-changing market environment as you and your family enjoy your summer – wherever that may be spent.
The uptick in market volatility has steadily continued in 2018. News headlines this quarter discussed topics like trade negotiations, even speculating on a full-blown trade war; however, we remain focused on the fundamentals. Equity markets have benefitted from persistently high profit margins, record corporate earnings and stock buybacks paid for with repatriated cash (the ability to bring cash back to the U.S. that was earned overseas at a reduced tax rate). Business confidence – another indicator for the health of the economy – is now at the highest levels seen since the mid-2000s. What this all means is that U.S. economic growth continues to power forward, but many experts are speculating when this long economic expansion will stall with a recession. While this probability remains low when looking forward over the next 12 months, we remain positioned in high-quality, value equities that we expect will weather any volatility better than the benchmark through a market cycle.
While international stocks have lagged U.S. equities this year primarily due to trade fears, we are intrigued by solid earnings growth and relatively cheap valuations within the European and Asia Pacific regions. These economies have not had the same recovery as we’ve witnessed here in the U.S., which makes for attractive investment opportunities. We advise our families to overweight international equities in their portfolios as we expect that fundamentals will shine through the latest headlines.
As the market continues its unstable but upward march, the Fed has steadily increased short-term rates as advertised due to the U.S. economy doing well. Interest received from cash investments is now noticeable after years of earning near zero percent. Long-term U.S. interest rates have slowly risen as a strong economy applies upward pressure and low interest rates internationally have kept them from rising as fast as short-term rates. As a result, we favor short duration (low interest rate risk) assets to protect against what we expect to be a trend of rising interest rates.
While nobody seems to be too concerned about the markets today, we expect further volatility as companies manage through higher costs of capital and inflation, active separatist movements in Europe, lingering fears of slower global growth, and political agendas. While none of this has us concerned about tipping the economy into a recession, the markets fear uncertain outcomes. We continue to believe the best way to invest in today's environment is by structuring a globally diversified portfolio that is designed to achieve your goals with the highest probability of success, while also focusing on long-term returns rather than what is happening quarter to quarter.
As always, we are happy to speak further about our thoughts on the current environment and how we have structured your portfolio with these things in mind. We also understand if you'd prefer to wait until after a summer break. We will proactively reach out to you should there be a change in the events between now and then. In the meantime, try and stay out of the heat!
Bookkeeping & Bill Pay
from Jennifer Kirksey, Managing Director
Summer means time for vacations and family memories, not for worrying about paying expenses, cash flow management and financial reporting. As you embark on your summer plans, we wanted to reflect on how the Tolleson Wealth Management bookkeeping and bill pay team helps lessen the day-to-day burden of these responsibilities of our client families.
Although paying bills may seem simple, we do it with purpose. Wealthy families have complex relationships and activities that must be managed diligently. Our dedicated team is equipped to ensure your expenditures are paid on time, monitored for accuracy and reconciled timely. Internal control procedures, such as multiple levels of approval on invoices, give our clients reassurance in the integrity of our streamlined process. Our technology platform allows access to approve and pay electronically, as well as viewing backup documentation, anywhere at any time.
In addition to executing accounts payable, our team can also process your bookkeeping needs. Whether it’s for your business or you personally, we provide customized financial reporting options. This enables our client families to gain a more comprehensive perspective and manage their assets and cash flow effectively.
Tolleson Wealth Management is not a CPA Firm.