A synopsis of recent market activity, a look ahead, and putting it all in perspective

What a difference a year makes. The first quarter of 2017 was a much smoother ride for most investors in comparison to the first quarter of 2016. In case your memory needs refreshing, the first quarter of 2016 saw the Dow bottoming at 15,660, down 10% from the end of 2015. To date, 2017 has been much kinder, with the Dow up 4.56% and the S&P 500 up 5.53% in the first quarter. Of course, no portfolio should ever be just in Large Cap US stocks, and some key asset classes such as bonds continued to deliver modest returns. The Barclay's US Aggregate Bond Index was up only 0.12% and the Barclay's Municipal Bond Index was up 0.50%. In March, the U.S. central bank raised the target range for the federal funds rate to 0.75 to 1 percent. This is the third time the Fed has raised interest rates in the last decade; the last time the U.S. central bank voted to raise interest rates was in December of last year. At a press conference following the decision, Federal Reserve Chairwoman Janet Yellen said, "Our decision to make another gradual reduction in the amount of policy accommodation reflects the economy's continued progress toward the employment and price-stability objectives assigned to us by law."

The question that remains to be answered is: Has the "Trump Effect" rally runs its course or does it still have room to grow? Our opinion on this is that for long-term investors, it really does not matter. Any attempts to try and rationalize or base investment decisions upon short-term expectations, historically proves to be an unwise decision.

The stock market is one of the best leading indicators and hopefully it is forecasting an improving investment climate and re-affirming a continuation of the long-term secular bull market that began in 2009. That being said, sometimes the market does get a little ahead of the fundamental value of the underlying securities, and we get a pull-back. It is extremely important to be fully diversified at all times within and across asset classes, and in many cases, have some hedges in place to help protect against short-term volatility. That is why we routinely re-balance client accounts - to take profit from those assets that have shown growth, while adding to those asset classes that have under-performed. It is an emotionless process which allows us in essence to buy low and sell high. Done consistently and over time, this disciplined approach works very well for long-term investors.

While it does not appear that a recession is in the near-term future, the stock market does not always get it right however, and recent stagnation has been driven by concern regarding the ability of the current administration to get through many of the agenda items that had caused the rally since the election. Key initiatives still on the block are:

• Health care reform

• Corporate tax cuts to 15%

• Capital gain rates cut to 15%

• Repatriation tax cut to 10%

• Major reduction in business regulations

• Major new fiscal spending programs: Infrastructure, (roads, bridges, airports)

• Military spending

Will the new administration be able to maneuver around the traditional gridlock of Washington and get things done or will they find themselves in a quagmire? That remains to be seen, and we remain cautious. Compromises will be needed and major new spending, if it passes the Republican Congress, could have very long lead times. What if a miscalculation sparks a trade war? As we saw in the 1930's, a breakdown in global trade can have profound consequences. The infamous Smoot-Hawley Tariff Act passed as the Great Depression was getting under way, created new barriers to imports. Unfortunately, it was met by retaliation, and the trade war that enveloped the world worsened the Depression. We do not envision this to be the case, but it bears watching.

As the old adage goes, "Bull Markets do not die of old age". Recessions and bear markets are all inevitable, just as are economic recoveries and the start of new bull markets. Trying to predict when any of these events will occur is a lesson in futility. What is important to remember is that as changes occur in your own personal situation, that we revisit your plan, and maintain a disciplined approach which has historically provided the greatest dividends.

Sincerely,

Brian Cohen, CCO; email: brian@landmarkwealthmgmt.com; phone: 631-923-2487

Chris Congema, CFP®; email: chris@landmarkwealthmgmt.com; phone: 631-923-2486

Joe Favorito, CFP®; email: jfavorito@landmarkwealthmgmt.com; phone: 631-930-5336

Direct office email: info@landmarkwealthmgmt.com

Direct phone: 631-923-2485

Landmark Wealth Management, LLC (www.landmarkwealthmgmt.com). The firm is located at 900 Walt Whitman Road, Suite 208 in Melville.

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This communication is from Brian Cohen, Chris Congema, CFP®, and Joe Favorito, CFP®, financial advisors at Landmark Wealth Management, LLC, a Securities and Exchange Commission Registered Investment Advisory firm. The information in this blog is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax, legal, or investment advice from an independent professional / financial advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.