4 Important Lessons on Financial Success That 2017 Taught Us


Mark Twain was fond of saying, “History does not repeat itself, but it often rhymes.” We phrase that wisdom a bit differently at Keen Wealth when we tell our clients, “past performance is no guarantee of future results.”

No, we can’t look back at 2017 and tell you definitively how the market is going to behave in 2018. But we can look for potential “rhymes,” the lessons of the past year and the trends that may echo into the next.

In particular, I think there are four important takeaways from 2017 that you should keep in mind when discussing your 2018 financial plans with your fiduciary advisor:

1. Don’t let politics – at home or abroad – determine your investment thesis.

In the run-up to the 2016 presidential election, I had questions from folks on both ends of the political spectrum calling my office, asking how to adjust their investments depending on whether Hillary Clinton or Donald Trump won. Back then, many economists thought that Trump’s surprising victory would be bad for the economy. Now, at the end of the year, some people are worried that Trump’s dipping approval ratings might finally bring an end to the so-called “Trump rally” in the markets, and lead to a downturn in 2018.

Yet through all the political and global tumult we’ve had this year, the US markets have remained strong. The S&P 500 has stayed above where it closed on December 30th, 2016, and with only a few days of 2017 remaining, it’s up over 20% year-to-date. We’ve also seen that geopolitical uncertainty doesn’t necessarily equate to negative market movements globally. For example, 2017 was another very turbulent year in East Asia and one could argue that South Korea has some very serious geopolitical risks, but the South Korean market is currently up around 20% for the year.

Now obviously presidents and Congress do affect economic policy, and you can expect a future Keen on Retirement episode to walk you through the new tax bill before April. But when you step back and look at our economy through a wide lens, the markets continue to trend upwards. Who the president is and where that president’s approval rating sits do not necessarily correlate with the market historically, and we expect that trend to continue in 2018. We think it’s prudent to keep political feelings out of your portfolio. Stick to your long-term strategy, and don’t make knee-jerk emotional moves.

2. Changes to short-term interest rates do not guarantee changes to long-term rates.

Our economy has been growing steadily since the markets bottomed out in 2009, and after another year of record highs, many economists are anticipating the Federal Reserve to continue raising interest rates in 2018.

This is another area where the new tax laws will have some impact. But it’s important to note that when the Fed did raise short-term interest rates in 2017, long-term rates did not follow suit. Overseas investors still view 10-year US bonds as a stable investment, and if they keep buying those bonds, then long-term rates could remain low. However, if the Fed continues to increase rates or if short-term rates become higher than long-term rates (i.e. an inverted yield curve), that could be an indicator that the economy is preparing to slow down.

3. Diversification and rebalancing are still key.

When the economy has been so strong for so long, some investors start worrying about overconfidence, and peer around the corner for signs of a downturn.

In 2017, three key economic indicators – employment, retail sales, and housing – remained positive, and our analysis at Keen Wealth is that the economy should continue to grow in the near future. A couple of ways that we try to maintain flexibility in our clients’ investments is through diversification of assets and periodic rebalancing. I know it can sound counterintuitive to sell assets that are doing well and buy some that are not. But time and time again, pairing this investment strategy with others has reduced risk and helps to cope with market volatility, which is inevitable no matter how strong the economy may be right now.

4. If you’re already retired, revisit your withdrawal and spending strategy.

On a previous episode, we discussed how the old 4% withdrawal rate per annum, while a helpful guideline, doesn’t necessarily fit with the changing landscape of retirement. However, just because the market has had a good year, and appears primed for a strong 2018, that doesn’t mean you should make larger withdrawals next year while the going is good, or even maintain your current rate.

Remember: one of the “taxes” that investors pay for harnessing the wealth-building power of the markets is volatility. The lessons of last year are just that: last year’s lessons. In the spring of 2009, I don’t remember many experts predicting that the economy was about to enter eight straight years of growth. This time last year, most of the experts were worried about 2017’s prospects, and yet look at where the markets are today.

At Keen Wealth, we consistently advise our clients against trying to “time the market,” making rash moves based on what’s happening right now. The financial plans we craft are designed to last a lot longer than just the most recent peak or valley – they’re designed to go the distance.

So if you want to get a better understanding of how the performance of your investments in 2017 might affect your financial picture in 2018, make an appointment to talk with one of my fiduciary advisors at Keen Wealth. We believe that our experience, expertise, and commitment to our clients’ interests are the best tools we have to analyze the market’s recent past, and help folks plan for a better future.

Bill Keen: Stick to your long-term strategy, and don’t make knee-jerk emotional moves.

About Bill

Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 24 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

Keen Wealth Advisors is a Registered Investment Adviser. Nothing within this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Keen Wealth Advisors manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed here. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.  

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