April 15th, Performance Reports & Long Term Trends

April 15th, Performance Reports & Long Term Trends

by daranstrom on Apr 3, 2019

April is an interesting month.  It's the first full month of spring.  It is also an interesting month for a couple of other reasons.  April 15th, is the due date for income tax filing, so for many, it tends to be a grumpy month.  Also, for investors, it is the beginning of the second quarter and they are receiving their performance reports from the first quarter.  Many will believe they have made or lost money the first quarter based on the numbers in the performance report.  If the report shows a decline from the previous report, they may also be grumpy.  Between taxes and performance reports, it can be a very grumpy month for some households.


I understand why April 15th can be stressful.  Years ago, it was for me also, mostly because I waited until the very last second to work on taxes.  That strategy did not work for tax filing any more than it did in college studying for a final. 


The last time I personally thought anyone made or lost money looking at a performance report was the late 1980's after the stock market crash of 1987.  Until October of 1987, the stock market, as measured by the S&P Index, had seen significant increase in market value during the course of the year.  However, on October 19th, the stock market declined -23% in one day.  There were economic reasons for this, but there were also failed investment strategies such as program trading and leveraging along with many investors making ill-informed emotional decisions.  For the record, even with the October decline, the S&P Index had a gain for the year and by the end of 1989, the market value of the Index exceeded its high in 1987 before the crash. 


Regarding taxes, the time to begin planning for April 15th 2020 is 2019.  Regarding performance reports, I would suggest it is important to be aware of current economic conditions, but more important to understand personal investment objectives, current asset allocation, theoretical volatility risk and theoretical expected return.  And finally, understand the only time anyone makes or loses money on any investment is when it is sold.


Rather than stressing about the tax due day or the results of a quarterly report I would suggest that time is better spent learning and thinking about potential long-term economic trends.   I am not a futurist, but some long-term economic trends which I believe may both affect future taxes and personal financial security are as follows:


  • Artificial Intelligence often called A-I.  A-I is not coming, it is here.  A two-year study from McKinsey Global Institute suggests that by 2030, intelligent agents and robots could eliminate as much as 30 percent of the world’s human labor. The Study suggests, depending upon various adoption scenarios, automation will displace between 400 and 800 million jobs globally by 2030.
  • Since 1970, the number of Natural Disasters worldwide has more than quadrupled to around 400 a year.   The cost of natural disasters has been increasing.  For the US, 2017 was a record year for the cost of economic disasters coming in at over $300 Billion.  2018 was about $90 billion. Every article I have reviewed project the economic impact of natural disasters to continue to increase.
  • In a recent report card on the condition of America’s Infrastructure, the American Society of Civil Engineers (ASCE) gave U.S. infrastructure a D+ or “poor” rating.  The report estimated cost improving America’s infrastructure to a grade of B by 2025 at $4.6 trillion of which only about 55 percent has been committed.
  • Student Debt in the US is about $1.3 Trillion Dollars and this does not include students who carry student related debt on credit cards.  Many of these students have never seen consistent good economic times beginning with the recession of 2000-2002 and followed by the Great Recession starting in 2008.  Paying this debt will mean these students, either individually or part of a family households, will be less able to buy new cars, their first house, appliances and other consumer goods, and perhaps most important, save and invest for the future. 
  • The per capital cost of Health Care in the US is about $10,000.  A recent Harvard University study indicates that this is the biggest cause of bankruptcy, representing about 62% of all personal bankruptcies are due to health care.  The interesting and sad part of this study shows that 78% of filers had some form of health insurance.


I may be wrong, but I believe how we as Nation address all of the above issues, some of which are inter-connected, will lead to either positive or negative long-term economic consequences.  They are challenges, but I would suggest with challenges come great potential.


Take some time to consider the above potential long-term trends and possibly consider others you may identify.  Do your own research using qualified independent sources. Finally, I suspect these are issues that many National politicians wish to avoid because they are complicated and often require difficult decisions.  Do not let them do so.  If I am correct, these possible long-trends may affect tax policy and personal financial security for years to come. 


*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.