Broker Check

March 2018

McDaniel Knutson Night at Allen Fieldhouse

KU rocked the house at our 8th Annual McDaniel Knutson Night at Allen Fieldhouse! If you were there, you enjoyed KU beating ranked Oklahoma State 66 - 59.
Thank you to all who braved the weather, we hope you had as much fun as we did!

Market Commentary: Market Volatility is Back

Written February 16, 2018

What a difference a month makes. Just last month, I talked about the S&P 500’s parabolic rise in January: “Complacency has turned into a chase for returns. It is unsustainable. It increases the probability of a steeper correction in the coming months. Now don’t get me wrong - you cannot try to time corrections like these, and we strongly urge against it. There is a risk that once a real 10%+ correction occurs, panic selling by blindsided, unprepared investors could make that correction sharper than it would have been otherwise. This could also make corrections more frequent until the extreme volatility feeds into the next bear market.” - January 19, 2018, Market Commentary

I provided this graph of 2006-2008 to demonstrate how low periods of volatility can turn ugly pretty fast. Today I am not so much reminded of 2007, instead I’m thinking more of 2015.

You might recall the S&P 500 fell 11% in five days back in August 2015. That would be today’s equivalent of the Dow Jones Industrial Average falling over 2,900 points in one week. Less than three months later, the S&P was back to pre-pullback levels. After some sideways movement, the market did a retest of those lows in early 2016. Market pundits were pulling their hair out. The market then swiftly fell 13%. However, those who panicked and sold out of the market during that pullback would have felt good about their decision for a month or so before the market recovered over the next two months.

Take a good look at the graph I’ve provided. If an investor sold his stocks in January 2016, when would he have jumped back into the market? The last part of January looked promising, but the market fell even lower the next month. Following that February low were three skyrocketing days in which the market gained back 5%. Should he jump back into stocks after that? It is impossible to know without the gift of hindsight. This is the problem with timing the market – it is based on luck, not skill. This is the reason why we are so adamant about not trying to time pullbacks when we do not see risks of a recession.

Let’s look at where the market stands as I write this on February 16th.

After a stellar 2017, and an incredible January 2018, the S&P 500 gave up all gains (and then some) with a correction of 10% over a two week period. What made that correction look so ugly was the lack of volatility leading up to it. Since that low the S&P has bounced back quickly, regaining half of what it had lost, but we are not out of the woods yet.

What caused this correction was a mix of things, but the catalyst appears to be interest rates. Since former Chair of the Federal Reserve Janet Yellen has left and Jay Powell was sworn in as the new Chair, markets are anxious to see how aggressive he will be in pushing to raise rates. The ten year Treasury yield has risen pretty quickly to 2.90%, a level we have not seen since 2014. Investors are scared interest rates rising too far too fast will put the skids on the economic recovery. But how high is too high?

According to FactSet, it is 5%. If rates are below 5%, stocks tend to rise along with rates. As I write this, we are at 2.90%, nowhere near 5% yet. In my opinion, this is a normal correction in the midst of a still rising market and not the beginning of a bear market. It will probably retest those lows and might even go lower. However, it is a pullback for which we are probably overdue.

If you have been reading my commentaries, you should not be surprised. Remember what I said last month? “I am telling you this for a few reasons. One is a reality check. The low volatility we have seen in the market is not typical, and we should not expect it to continue. Another is to urge you to stay in your proper risk tolerance and not chase returns. Finally, it is to prepare you for what could lie ahead. While no one knows for sure, I would not be surprised to see a sharp, fast drop (or more than one) in the stock market in the coming months. I do not want you to be surprised, either.”

As I have said in previous commentaries, if we are not in a recessionary environment, pullbacks are not to be timed. They tend to last three to six months; they are sharp, and sometimes severe, but usually short-lived. Like earthquakes, pullbacks can happen suddenly, and by the time you know it is happening, there isn’t a lot you can do besides run to the nearest door jam or dive under a sturdy desk. Unlike buildings and roads demolished by natural disasters, the stock market can build itself back up pretty quickly. Most people are investors, not day-traders. The lesson is not to panic. This can lead to rash and often detrimental decisions. Stay the course. Remind yourself this is a blink of an eye relative to the decades you will be investing. Read a good book with a hot cup of coffee – or mug of hot chocolate. Whatever you do, resist the temptation to check your portfolio every fifteen minutes. Even though popular media outlets cover the stock market like it’s the Super Bowl, it is not that exciting. You pay us to worry for you, and we want to help.

This is what I have been training and preparing you for, dear reader. We will keep a close eye on this pullback as it unfolds.

- Victoria Bogner, CFP®, CFA

Disclaimers and Notes
Securities offered through Cetera Advisor Networks LLC, member FINRA/SIPC. Investment Advisory Services offered through Cetera Advisor Networks LLC and McDaniel Knutson Financial Partners. Cetera is under separate ownership from any other named entity.

The views are those of Victoria Bogner and should not be construed as investment advice. All information is believed to be from reliable sources, however, we make no representation as to its completeness or accuracy and is not a complete summary or statement of all available data necessary for making an investment decision. Any information provided is for informational purposes only and does not constitute a recommendation. Economic and performance information is historical and not indicative of future results.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into accounts the effects of inflation and the fees and expenses associated with investing.

Have you met Anna?

We met Anna Keena in 2015. She was working as the City Clerk and HR Director for the City of Baldwin City and invited Victoria to speak with the employees about their retirement benefits. Fast forward to last spring when MKFP was looking for two people: one to take leadership of our marketing department and another to assist with special projects. In Anna, we were thrilled to discover a person who could fit both roles. She was ready for a job that offered a team approach with a company which respects values of faith and honesty along with room to grow.

I knew Anna and I were kindred spirits when I learned she rode her bike across Missouri on the Katy Trail. She also backpacked Philmont with her son, Jack, who is now an Eagle Scout. In fact, Anna was the only woman to volunteer for the grueling 14-day BoyScout trip. She has taken countless camping trips throughout the country, including her favorites; Big Sur, the Saguaro National Park, and the Olympic Valley in California.

Of course, we did not hire Anna for her hiking skills. She holds a Bachelor of Arts degree from MidAmerica Nazarene University; is a Certified Municipal Clerk, and a senior certified human resources professional (IPMA-SCP). Her responsibilities include producing our newsletter, promoting our social media presence, website development, parties, events, and special projects.

In 2010 Anna suffered a ruptured brain aneurysm which resulted in a hemorrhagic stroke. She says it is by the grace of God that she celebrates a near full recovery. It is a great story, which I touch upon because it describes the faith, courage, and determination of the people Anna seeks to surround herself with.

Along with her son, Jack, Anna has a daughter, Erin, and a granddaughter, Kennedy. She also has several siblings and numerous nieces and nephews. Her mom continues to motivate her to work hard and enjoy the life she believes she has been miraculously given here on earth while her dad sends his support from heaven.

We are excited for you to meet her at our events and around town. We are sure you will appreciate her as much as we do. Anna, welcome to the team. – Jude McDaniel

Catch a Break: Helping With the Cost of Survivorship

While many cancer-related foundations and organizations direct their attention to the very worth efforts of prevention, treatment, or research, the Lawrence Memorial Hospital Catch a Break fund focuses on the survivor. Catch a Break extends a hand to the survivor who lost their job, and/or drained their savings to help themselves or a family member. Catch a Break funds go directly to survivors and their families.

A cancer survivor myself, I know the strain placed upon families. My mother battled cancer for twelve years and was a recipient of Catch a Break. For that reason, I have joined the Catch a Break committee to give back to other families. Catch a Break serves to give a little relief. The cancer patient may apply, or referrals are accepted by social workers, medical professionals, or by friends and family members. It just takes a simple application to request support. I am proud to be a part of this organization. - Kara Gourley

Registered Branch: 2500 W 31 St. Ste B, Lawrence, KS 66047. (725) 841-4664.

Civil War Trust Park Day 2018

Black Jack Battlefield and Nature Park

Saturday, April 7 from 9 AM - 3 PM

163 E 2000 Road, Wellsville, Kansas 66092

We only have one planet to live on, and we believe we should be good stewards of her. In light of this, McDaniel Knutson has partnered with Green Wish Lawrence, we are also its primary sponsor. Green Wish collaborates with local environmental organizations such as Black Jack Battlefield.

Please join us for this year’s Civil War Trust Park Day, the annual event when thousands of volunteers come out and work for a day at Civil War, War of 1812, and American Revolution sites across the country.

The Robert Hall Pearson Historic Farmhouse is in Wellsville (three miles east of Baldwin City on U.S. Highway 56 and a quarter mile south on E 2000 Road). Please bring any yard tools you want. Make sure to wear work clothes and sturdy footwear. And bring work gloves if you have them. The work will begin at 9:00 a.m., but feel free to come and go as needed.