"Helping You Navigate the Course to Financial Freedom"
  February 2016
Reading the Tea Leaves

"As January goes, so goes the year." At least that is the case according to the old adage made popular by the Stock Trader's Almanac.  This phenomenon is also known as the "January Barometer."  It simply means that January's market's performance, as measured by the S&P 500 Index, is a harbinger of how the market will do for the year.
Yet according to Morningstar.com, the S&P 500 posted 6 negative January returns since 2007, but had full year negative returns in only 2 (2008 and 2015).
Table 1: Key Index Returns
Jan 2016
2015 Full Year %
3-year* %
Dow Jones Industrial Average
NASDAQ Composite
S&P 500 Index
Russell 2000 Index
MSCI World ex-USA**
MSCI Emerging Markets**
Source: Wall Street Journal, MSCI.com
MTD returns - December 31, 2015-January 29, 2016
Annual Returns - December 31, 2014-January 1, 2016
The indicator actually does a much better job of predicting winners than losers, because markets are biased toward the upside.
For example, CNBC notes the S&P 500 Index has risen in 23 out of 35 Januarys since 1979. Over the next 11 months, the market subsequently rose in 19 of those 23 years-meaning a positive January has successfully predicted a winning February through December 83% of the time.
But in the years when January lost ground, there was only a 33% success rate in predicting a losing year.
You can always find interesting but useless correlations - the fact of the matter is that historically stocks rise over the long term.
There are plenty of reasons why markets go up or markets go down year by year. So I don't believe that January necessarily sets the full year tone.
In This Issue

2016 Tax Tips Redux

Due to the celebration of Emancipation Day in Washington D.C. on April 15th, taxpayers nationwide will have until Monday, April 18th to file their returns.  And because April 18th is Patriots' Day in Maine and Massachusetts, taxpayers there have until April 19th to file!

Form 1099's will be mailed beginning January 31 for non-mutual fund holding accounts.  Mailings will be phased based on account holdings - all 1099's should be mailed by March 17th.

Cost basis information can be found on your December 2015 statements.  Call us with any questions.

Over the longer term, it's all about corporate profits, which are heavily influenced by the economy. In the shorter term, markets key off all kinds of variables. Long story short-what happens by year end 2016 may make January look like a distant memory.
January's poor start
That said, there is no shortage of reasons why the year began on a sour note.
For starters, economic growth moderated at the end of the year.
Gross domestic product (GDP), the largest measure of economic activity, slowed from an annual rate of 2.0% in the third quarter to 0.7% in Q4, per preliminary data from the U.S. Bureau of Economic Analysis.
In turn, that has forced analysts to cut back on their forecasts for S&P 500 profit growth (Thomson Reuters).
Yet, a sizable chunk of the weakness has to do with the near collapse in profits in the energy sector, which factors into overall corporate profits.
For consumers, it has been a windfall at the gas pump. But the beleaguered energy sector has been a net negative for the economy, creating steep cutbacks in oil and gas projects, which have in turn roiled manufacturing.
In addition, the strong dollar continues to create headwinds for sales at U.S. firms that do a big chunk of business overseas. While a strong dollar is a gift for Americans vacationing in a foreign land, it works against revenues of homegrown firms because sales in local currencies must be translated back into a stronger dollar.
Then there are worries about China, oil prices, recession fears, woes in manufacturing, rising yields in junk bonds (mostly but not limited to energy and the mining sectors), the Federal Reserve, political uncertainty, and even stock sales by sovereign wealth funds.
What I sense when the market corrects
Many of us are painfully aware of the financial crisis of 2008.
While the wounds have healed, the scars remain, and we have a propensity to keep nervously glancing back in the rearview mirror.
But that's just human nature.
While I'm in the camp that believes a recession should be (barely!) avoided this year, we probably haven't seen the end to the volatility-both upside and downside.  A slight increase in our cash allocation may be warranted, especially for those in or near retirement, to tide us over until the economic outlook becomes clearer.  In addition, I believe emerging and international markets will continue to lag the US economically for some time.  However, for those with a higher risk tolerance and time on their side, the market slide may create opportunities to add to positions for the long term.
That said, it's a fool's game to try and time the markets.  As I've stated many times, the best approach is a well-diversified portfolio that takes into consideration your own financial needs and personal risk tolerance.  Yes, the long-term approach requires discipline, but it has historically been the best path to reach one's financial goals.
I look forward to speaking with you about your own financial situation.

Leslie Beck, CFP(r), MBA

Avoid Costly Mistakes on Student Aid Applications
It's financial aid application season, and millions of families will be struggling with these applications over the next few months.  Making a mistake on the application can be costly in both time and money - it can take weeks for the federal government to process a corrected application, and inaccurate information can cost you hundreds or thousands of dollars in potential aid.
Here are a few tips to help reduce the chance of mistakes.
1)   Know the difference between the two major Financial Aid applications, and which you need to complete.  The FAFSA (the Free Application for Federal Student Aid) is used to determine eligibility for federal and state grants and loans.  This is a "must" application for any student.
The CSS/Financial Aid PROFILE is a creation of the College Board, and is used by many of the most prestigious colleges to determine how they will allocate their OWN monies (endowments, etc.) to attract and retain students.  The PROFILE is much more thorough - for these schools you'll have to fill out both applications.
2)   Do your homework BEFORE sitting down to fill out the aid application.  For example, while the PROFILE asks parents to list ALL assets, including the value of your primary residence and retirement accounts, the FAFSA does NOT count your home and any retirement assets (401k, IRA, etc.) - so don't include them when calculating your net worth for the FAFSA.  Seek professional guidance if you're unsure.  But be aware that there are few last minute financial "tricks" that will actually make a difference in your aid calculation, especially for schools requiring the PROFILE.
3)   Know the application deadlines.  The FAFSA deadline is typically June 30, with the application available on January 1.  However, beginning with the 2017-2018 school year, the FAFSA can now be filed as early as October 1 2016 for students beginning school in September 2017.  Many states have their own filing deadlines to qualify for state aid.  The FAFSA website will help you determine the required deadline based on your home state and specific school application.
4)   Know the rules for who should be filling out the aid application.  For the FAFSA, in the case of separation or divorce, only the parent with whom the child has lived for the MAJORITY of the last 12 months is required to report.  This can matter when, for instance, separated parents have wide differences in income or assets.  In the case of unmarried parents who live together (assuming they are both the legal parents), each must share their information on the FAFSA.
5)   Schools can differ dramatically in their scholarship policies, depending on the size of their endowment and their student body make-up.  Note that many of the top-rated schools do NOT give merit-based aid - they expect all their students to be exceptional.   Investigate beforehand how generous you can expect a school to be, and be realistic about how much aid you can expect.
6)   The first offer you get is not necessarily the final offer.  According to Lynn O'Shaughnessy, a nationally recognized financial aid expert,  many schools (except for the most elite) are open to negotiation regarding their financial aid offers.  That said, be specific about any additional aid you might need, and be prepared to document why.
Equally important, make sure you understand the details of your offer.  How much is actually grant (not to be re-paid) money?  How much consists of loans, and what kind of loans are they (deferred federal are best; private loans are worst).  Is there a work study component?
In sum, it pays to do your homework before applying for financial aid.

Securities and advisory services offered through The Strategic Financial Alliance, Inc. (SFA), Member FINRA, SIPC. Supervising office at 678-954-4000. Financial planning offered by Compass Wealth Management LLC. Leslie Beck and Martin Siesta are registered representatives and investment advisor representatives of SFA, which is otherwise unaffiliated with Compass Wealth Management. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Please note that individual situations can vary.  Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.  For more information visit www.compasswealthmanagement.net