We're deep into the second longest bull market for stocks in history. From 2009 through 2018, the S&P 500 returned about 11%, not including re-invested dividends.

Because returns have been so elevated for so long, investors may expect them to continue at those levels. But taking a longer perspective, it's very likely that a period of more modest returns lies ahead. From 1980 through 2018, the S&P has returned a little more than 8%, not including re-invested dividends. Against this backdrop, the past decade looks like the exception, not the norm.

There's no doubt that the current bull market's hefty returns were fueled by low interest rates and economic stimulus engineered by the Federal Reserve to steer us out of the Great Recession. Ultra-low interest rates and the Fed's aggressive bond buying helped stocks soar, increasing their price to earnings ratios to expensive territory. Those high prices, along with the Fed's interest-rate hikes and stimulus drawdown, helped to trigger the big selloff in December.

The Fed recently signaled that it will hold off on further rate hikes, but that could prove to be a pause rather than a stopping point. Corporate earnings growth has also been slowing this year, even as the 2017 tax cuts continue to provide some fuel. Could the federal government stimulate the economy again in the near future? Of course-- particularly if a recession seems likely, or if lawmakers pass an infrastructure spending package.

While there will always be developments that nudge stocks upward or downward, it's wise to assume that stock returns will be more moderate over the next few years than they were during the past 10. Keep in mind too that the past decade has been one of unusually low market volatility. The kind of big market dips we've seen in the past few months are more of the historical norm, and investors should expect them to continue intermittently.

Investors who want to keep reaping the kind of returns that characterized the past few years will have to take on more risk. But with volatility making a comeback. overly aggressive bets could derail your retirement and other long-term goals.

As we cycle into a new market environment, it's critical to make sure you're prepared. Your financial advisor can help you make sure you're saving enough for your goals, and that your portfolio reflects your time horizon and comfort level with risk and volatility.

A good approach right now is to rebalance into high-quality companies with low debt and a track record of increasing dividends. Those dividends can be reinvested to help compound your gains more quickly, or they provide reliable income if you're retired. Furthermore, investors have historically flocked to high-quality companies in times of market uncertainty, which has provided price support for the stocks.

If you expect market volatility ahead, look at it as an opportunity to buy on the dips, creating a diversified portfolio that will carry you successfully through the changing conditions ahead. Investing isn't about what happened in the past, it's about navigating through a continually changing future.

One of the most important parts of successful investing is making course corrections on a regular basis.

In a nutshell, this means well-thought-out buying and selling designed to a) help keep your portfolio safe and b) ensure you'll be able to fund the goals you're investing for. I approach this in two main ways: Portfolio rebalancing and sector rebalancing.

Portfolio rebalancing means selling an asset type (stocks and bonds, for example) after they've been doing well, and buying them after they've been doing poorly. Against the current backdrop, where stocks are down 5% from a month ago, that might mean selling bonds, which are generally slightly up over the same period, to buy more stocks.

Selling the good performers to buy more of the bad performers is definitely counter-intuitive for many investors. Here's why it makes sense:

Any investor working toward funding retirement or other big goals should have balanced portfolios. These portfolios contain a mix of stocks, bonds and possibly other asset types that serve as counterweights. Depending on a typical investor's goals and risk tolerance, a balanced portfolio might be 60% stocks and 40% bonds. The idea is that if stocks plunge, bonds may fare better, and you'll own enough of them to mitigate the stock losses. And vice-versa. Hedging against big portfolio losses in this way is s proven way to earn higher returns over time.

By rebalancing, you restore the original, optimum ratio of stocks to bonds in your portfolio. When stocks soar, as they did for many years after the 2008/09 market crash, you might end up with a portfolio that's overweighted to stocks. The solution in such cases is to sell stocks and use the proceeds to buy bonds.

There's no need to go overboard with rebalancing; generally once a year is enough, and it's rarely necessary to do it more than twice. I recommend rebalancing when your stocks or bonds are 5% above or below their original level in relation to the other.

While rebalancing asset types has traditionally been enough to keep portfolios strong, it's been a little less effective in recent years. That's because stocks' and bonds' traditional behavior, in which one typically did well while the other struggled, has changed. For much of the past decade, the two asset classes have begun moving more in-step with each other. As a result, traditional rebalancing by itself hasn't been enough.

That brings us to sector rebalancing. This is similar to asset-class rebalancing in that it involves selling strength and buying weakness. In sector rebalancing, we sell sectors that have done well and buy struggling ones that may be poised to improve. An example right now might be technology, where stocks have tumbled dramatically over the past few months. Again, it may be counter-intuitive to buy a struggling sector and sell one that's done well. But the cardinal rule of investing is to sell high and buy low—and sector rebalancing can help us to do that.

Especially if you have not done rebalancing in some time, the beginning of the year is a good opportunity to meet with an advisor and make sure your investments are striking the right balance of risk and potential reward. Your future goals are riding on it. Please reach out to us if
you'd like to schedule a review of your portfolio.

With the year winding to a close, it's important to take specific steps in regard to your finances. Below are five actions that can help save you significant amounts of money and become more confident about reaching your financial goals.

1. Plan to avoid retirement-account withdrawals that will trigger taxes. Often, end-of-year distributions from IRAs and other retirement accounts will cause Social Security taxes to kick in. That's a scenario that's avoidable with a little planning. For example, if your annual combined income from Social Security, pension benefits, IRA distributions, etc. exceeds $32,000, then you'll owe taxes on your Social Security. Based on the level of your annual combined income, up to 85% of your Social Security proceeds in a given year may be subject to tax.

So if it's December and you're close to that tax threshold, you may want to adjust your plans. For instance, if you plan to withdraw money from your IRA for a new car, you might be better off taking out part of the total now and the rest next year.

2. Harvest tax losses. The end of the year can be a good time to pull the trigger and sell stocks that are down and no longer seem promising. Booking these losses gives you the equivalent of credits that you can use now or in the future to offset the tax consequences of capital gains. A very simple example: You just sold shares of stock A and stock B. Stock A was up 20% from when you bought it, which means you owe tax on the gain. However, stock B was down 20%. Having "harvested" the loss from stock B, you can use it to offset stock A's gain and eliminate the tax liability.

3. Revisit your magic number. If you've put together a retirement plan with a good advisor, you should know exactly how much money you'll need to retire on the date of your choice. Now is a good time to huddle with your advisor and make sure that the amount you're contributing to your retirement plan, and the rate at which it's grown, have you on track to retire when you want to. If your savings are growing ahead of schedule, you might be able to reduce your ongoing contribution amount. If you're behind schedule—or if you foresee weaker investment returns going forward, you may want to increase it.

4. Plan for RMDs. You'll need to start taking required minimum distributions (RMDs) from your IRA by April of the year after you turned 70 ½. If you withdraw less than your RMD, expect to be slapped with a 50% penalty tax on the difference. It's important to note that if you've inherited an IRA account, you may need to start paying RMDs right away even if you're under 70 ½. You should visit your accountant or financial advisor soon so that you understand your obligations.

5. Plan your charitable giving. It's the season for giving. But you always want to give to charity in ways that will be most beneficial to you from a tax standpoint. Your advisor can help you make sure that your gifts are tax deductible. He or she can help with timing as well: For instance, if you've taken a lot of tax writeoffs this year, you may want to wait until next year to make that large donation you've been planning.

I strongly advise that you take some time today to set up a meeting with a professional financial advisor. By reviewing your situation and helping you make smart decisions, they can help ensure your financial wellbeing in 2019 and beyond.

The stock and bond markets don't move up and down over time for no reason. When they advance or decline, you can be sure that unseen catalysts are at work: Think of the wind hitting the sail of a ship.

Catalysts can be short-term. When President Trump has taken swipes at tech companies, the sector has dipped, at least for short periods. A surprisingly good quarter of earnings can send a company's stock soaring.

More important for most investors, though, are long-term catalysts. A healthy economy like the current one is a powerful catalyst. It can create higher bond yields and push stocks consistently higher. The Federal Reserve raising interest rates in a slowing economy would typically be a negative catalyst; it's one reason that stocks have been volatile over the past few weeks.

So what kind of catalysts will shape the markets in the coming months? I believe they're likely to be positive ones. There's a strong possibility, in my view, that the U.S. and China will reach a trade agreement in the coming months, and that would undoubtedly drive the market higher. I also see stronger-than-expected corporate earnings for at least the next few of quarters, as the lower taxes save businesses money and consumers find they have more money to spend.

Our government will be divided as a result of the midterm elections, which makes it unlikely either party will be able to enact radical legislation capable of moving the market in one direction or the other.

There are risks to any outlook, including this one. There's a chance, for instance, that the Federal Reserve will raise interest rates too high, too fast, and touch off a recession. The trade war with China could worsen, creating more drag on both countries' economies. But right now the likelihood of positive catalysts outweighs the risks.

Of course, single catalysts don't often drive markets up or down on their own. A complex web of factors are always at work. This is why it's important to work with an experienced investment advisor. A good advisor can cut through the daily barrage of financial information to pinpoint catalysts and calculate the opportunities and risks they pose for different types of investments.

Now approaching my 20th year as a professional investor, I've navigated through recessions, rising and falling interest rates, wars and political shifts. There isn't a catalyst, positive or negative, that I haven't seen. And I believe that with a thoughtful approach, patient investors can make money in any environment. If you'd like to discuss the market and your investments, don't hesitate to get in touch.

The stock market just finished a wild week, punctuated by an 830-point drop in the Dow Jones Industrials average on Wednesday. Here's what you need to know.

The volatility was triggered largely by the Federal Reserve's ongoing interest-rate hikes. Investors fear that rising rates will hurt companies' earnings in a few different ways. When consumers with variable loans must pay more interest on the loans, they have less money to spend on new goods and services. That can translate into lower sales for companies that provide everything from cars to computers. Companies are impacted directly because higher interest rates make it more expensive for them to borrow money or refinance old debt. Revenue that would have dropped to their bottom-line profits instead must be diverted to pay that extra interest.

Rising rates are bad for bond investors too. That's because the issuance of new bonds at the higher rates decrease the value of the old, lower-interest bonds investors may already own. As those longer-term bonds fall in value, investors who sell their holdings before they mature will have to eat a loss. If for example you own 10-year bonds paying 5%, and rates go to 7%, you'll lose 10% of the market value of that investment unless, of course, you hold it to maturity.

Rising rates also dampen the value of real estate because as mortgage lenders charge higher and higher rates, fewer buyers can afford to borrow.

While this rising interest rate environment will be tricky, there will continue to be opportunities for investors. But buyers will have to be more selective: Buying a broad index mutual fund or ETF largely worked as stocks rose in tandem over the past decade or so.

Certain banks, for instance, may do well as rates rise; higher long-term interest rates equate to higher profit margins on loans. And with Republicans in control in Washington, banks are less heavily regulated, which could help profits.

Rising rates could also cause more companies to merge. Mergers generally create cost savings, which boosts profits and raises stock prices.

A word of caution: There are no gimmes in Markets like the current one. Skilled, stock pickers are needed to find the diamonds in the rough. You should work with an investment advisor who is not only knowledgeable but also experienced. Remember, it's been more than 10 years since the last cycle of Federal Reserve interest rate increases ended. The countless advisors who have entered the industry since then have zero knowledge of what it's like to navigate in an environment like this.

Please don't hesitate to contact us with questions about investing and the markets.