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Scannell Wealth Market Commentary: September 21, 2017

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THE MARKETS

“In theory, there is no difference between theory and practice, in practice there is.”

 

Yogi Berra was talking about baseball, but the concept also applies to diversification, according to the GMO White Paper, The S&P 500: Just Say No. From the title, you might think the authors – Matt Kadnar and James Montier – don’t like U.S. stocks. They do:

“Being a U.S. equity investor over the past several years has felt glorious. The S&P 500 has trounced the competition provided by other major developed and emerging equity markets. Over the last 7 years, the S&P is up 173 percent (15 percent annualized in nominal terms) versus MSCI EAFE (in USD terms), which is up 71 percent (8 percent annualized), and poor MSCI Emerging, which is up only 30 percent (4 percent annualized). Every dollar invested in the S&P has compounded into $2.72 versus MSCI EAFE’s $1.70 and MSCI Emerging’s $1.30.”

The authors’ concern is U.S. markets have performed so well, investors may be tempted to abandon diversification and concentrate their portfolios in indexed U.S. stocks. Kadnar and Montier wrote, “Human nature is to extrapolate the recent past. It is easy to see, given the strong performance of U.S. equities in both absolute and relative terms, why many are suggesting they are the only asset you need to own.”

Focusing assets in the United States, according to GMO, ignores the most important determinant of long-term returns: valuation. “From our perspective, one has to make some fairly heroic assumptions to believe that the S&P is even remotely close to fair value.”

High valuations haven’t dulled the appeal of U.S. stocks for investors, though. Last week, the S&P 500 closed at a record high, and the Dow Jones Industrial Average posted its biggest gain since last December, reported CNBC.com.

7 STEPS TO PROTECT YOURSELF AFTER THE EQUIFAX BREACH

From May through July, hackers exploited a website vulnerability at Equifax, one of the major consumer credit reporting agencies. If you have a credit report, there is a chance your sensitive and personal information including Social Security numbers, birth dates, addresses, and driver’s license numbers, may have fallen into the wrong hands. The stolen information could be used in tandem with passwords taken from other databases to commit financial crimes against you, reported a source cited by Consumer Reports.

Here are seven steps to take to help protect your assets and credit:

  1. Find out if you were affected. From a secure computer or encrypted network connection, go to the Equifax website, equifaxsecurity2017.com. Scroll down and click on ‘Potential Impact.’ You will be asked to provide your last name and the last six digits of your Social Security number.
  1. Enroll in TrustedID Premier. If your data has been breached, Equifax will offer enrollment in TrustedID Premier. The program provides up to $1 million in ID theft insurance, Social Security Number Scanning, 3-bureau credit file monitoring, and the option to freeze your Equifax credit report.
  1. Place a fraud alert or credit freeze on your other credit reports. Experian, TransUnion, and Innovis also provide credit reporting services. Contact each of the companies to place an alert or a freeze on your credit report:
    • A fraud alert warns both current and prospective lenders they must take reasonable steps to verify your identity before providing credit. When you’re a victim of ID theft, an alert can be put in place for up to seven years.
    • A credit freeze is different. It restricts access to your credit report. If you request a freeze, the credit agency will send a letter with a personal ID number (PIN). Keep the PIN in a safe place. You’ll need it to unfreeze your accounts, according to the Federal Trade Commission.
  1. Change your passwords. Create new passwords for online banking, brokerage, and financial accounts. Each account should have a unique password. Best practices suggest passwords have 12 to 14 characters.

 

You may want to consider using a password management application. They’re designed to store and retrieve passwords so you can keep track of multiple long, unique password combinations without security issues like storing passwords improperly or failing to remember them.

  1. Activate two-factor authentication. Two-factor authentication provides an additional layer of security for email and other accounts. After you enter your user ID and password, you’ll be asked for a code to verify your identity. You can have the account provider text a code to your phone, although that creates vulnerability if your phone is stolen. A better option may be to download an authenticator app so you can generate your own code.
  1. Beware email links. Some fraud attempts are obvious: text or email from a Nigerian prince or an update request from a financial institution where you don’t have an account. Others may be more difficult to spot. As a rule of thumb, if you receive an email with a link requesting you update or make changes to a financial account, don’t click on it. Call the financial institution or go directly to its website to make any changes.
  1. Keep an eye on your accounts. Check bank, brokerage, and other financial statements for suspicious transactions. If you find unauthorized activity, report it to the institution and the proper authorities.

If you have any questions or concerns about this breach or the markets, please contact us.

WEEKLY FOCUS–THINK ABOUT IT

“The most effective way to do it, is to do it.”

–Amelia Earhart, American aviation pioneer

 

Best regards,

The Scannell Wealth Management Team

 


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* These views are those of Peak Advisor Alliance, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
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Sources:
https://www.brainyquote.com/quotes/quotes/y/yogiberra141506.html
https://www.gmo.com/docs/default-source/research-and-commentary/strategies/asset-allocation/the-s-p-500-just-say-no.pdf?sfvrsn=7 (Pages 4 and 8)
https://insight.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_091517.pdf
https://www.cnbc.com/2017/09/15/us-stocks-weekly-gains-fed-retail.html
https://www.consumer.ftc.gov/blog/2017/09/equifax-data-breach-what-do
https://www.equifaxsecurity2017.com/potential-impact/
https://www.consumerreports.org/equifax/how-to-lock-down-your-money-after-the-equifax-breach/
https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs
https://support.norton.com/sp/en/us/home/current/solutions/v121052439_EndUserProfile_en_us
https://www.pcworld.com/article/3056827/security/4-password-managers-that-make-online-security-effortless.html
http://stylecaster.com/beauty/strong-women-quotes/
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Scannell Wealth Management is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

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