As long-term investors, we’re not supposed to get too excited (or grim) about a single year or two.  But just this once, here goes: 
 
More than ever, it’s a pleasure to present performance results for your portfolio.  This past year treated investors well, very well.
 
The “cherry on top” arrived as US markets climbed to new highs with record-low volatility.  Your performance report shows your personal returns net the advisory fees detailed on a separate sheet.
 
For your possible interest, we also have enclosed the 2017 Annual Market Review an easy-to-skim summary of how various slices of the markets did.  It validates our approach of asset allocation, that is, maintaining long-term portfolios diversified across several asset classes, such as foreign and domestic stocks and bonds.
 
In 1984, when our firm started, U.S. markets represented almost two-thirds of the world’s total stock market capitalization.  Now the U.S. share is 52%.  But take heart, fellow American, it’s an expanding global pie.  
 
The U.S. and the other 95% of the human race go to work every day to provide products and services – “quicker, better, and cheaper” as they say in Silicon Valley – and, in some sectors, also producing social, political and environmental tensions.  Nonetheless, for instance, the former Communist country of Poland saw its stock market increase by 53% last year.  Among developed countries, Israel was a relative “laggard” with a mere 10% uptick (page 8). 

Virtually all performance numbers listed in the 2017 market review are positive over the past one, three, five, and 10 years.   In the absence of a negative sign, it’s possible to be lulled into ignoring normal volatility and inevitable major correction.

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Predicting shifts is a fool’s errand.  Nonetheless, the surprise election results of 2016 tested most who foreswear market timing. One achievement among our clients was that no one cashed out of the markets and went to the sidelines.
 
This past year validated keeping one’s politics and portfolio separate. So does investment research going back decades. In short, specific news does not spark major market moves.  Further, economic data might be responsible for only one-third of the market movement.
 
Given all this, economist John Kenneth Galbraith repeats from the grave: “The only function of economic forecasting is to make astrology look respectable.”  In other words, you and I are absolved of knowing how the markets will perform this year.
 
Looking ahead to 2018, we will continue to update our investment research as we serve clients, both with investment management and financial planning advice. Separately, we will communicate further regarding the many changes brought by the recent tax legislation that requires defining regulations now in the making at the IRS.
 
As always, we remain grateful to work with you and welcome your calls at any time.