Market Commentary The Pelican Bay Group 2Q 2017 The Pelican Bay Group at Morgan Stanley 1250 Pittsford Victor Rd. Building 200, Suite 350 Pittsford, NY 14534 522 Fifth Avenue, 11 th Floor New York, NY 10036 1550 Market Street Suite 600 Denver, CO 80202 1801 North Military Trail Suite 300 Boca Raton, FL 33431 303 N. Oregon St. Mills Building, 9 th Floor El Paso, TX 79901 We ve never have had QE like this before, we ve never had unwinding like this before. Obviously that should say something about the risk that might mean. Because we ve never lived with it before. When [the unwind] happens of size or substance, it could be a little more disruptive than people think. We act like we know exactly how it s going to happen and we don t. (Jamie Dimon at theeuroplace finance conference in Paris, 7/11/2017; italics added.) At the last Federal Reserve Bank press conference, Janet Yellen indicated the Fed s intent to start unwinding the balance sheet from years of quantitative easing relatively soon. Since that time, Wall Street has been unusually quiet about forecasting how this will all play out. However, what Jamie Dimon said is about all that is needed to explain why this is so. To paraphrase, we have never done this before and, therefore, we have no idea what to expect, which is very similar to when Janet Yellen herself said Our understanding of the forces driving long-run trends in interest rates is nevertheless limited and thus all predictions in this area are highly uncertain, ("The Federal Reserve's monetary policy toolkit." speech at annual Jackson Hole conference, 8/26/16). The Fed has no shortage of bright minds and computer simulations to narrow down the likely outcomes, but the fact remains, they/we still don t know how it plays out. The reason this is so difficult to predict is illustrated in the chart below comparing total government spending and sources of financing (J.P. Morgan). Visit our website: http://www.morganstanleyfa.com/pelicanbaygroup Contact us please call: (800) 736-4608 Portfolio Management Team The Pelican Bay Group assists high net worth individuals and institutional clients in meeting their financial objectives by offering customized portfolio management strategies. The Pelican Bay Group, a team of Morgan Stanley s, has four experienced portfolio managers covering an array of disciplines and offering a variety of strategies designed to optimize risk to help meet their clients investment objectives. These investment styles are offered as fully discretionary strategies with a comprehensive fee based on the asset value being managed. The team currently manages over $2 billion in client assets. We are all familiar with the issues the disparity between spending and income presents: Does Washington reform entitlements (which are now over 50 percent of spending), what happens to the net interest expense if rates rise and will taxation at the personal and corporate level ever be addressed? Unfortunately, with the government seemingly in perpetual gridlock and consumer sentiment healthy but not exuberant, the Fed needs to be the leader rather than the follower in shaping US economic policy. Backwards we know, but that is reality.
To engineer a smooth landing, Fed policy changes need to thread the needle by correctly predicting the reaction of the consumer/investor to issues related to taxation and capital markets. They must also correctly gauge how (or if) the government will address the issues of entitlements and revenues in light of the QE (quantitative easing) unwind. If done correctly, we ll have a smooth landing; conversely, the Fed could unwind quantitative easing too quickly or too slowly. If they unwind too quickly, we risk a spike in rates, which would increase the deficit and the debt and we would guess cause investors to flee bonds, which would reinforce a downward spiral, ultimately, stifling economic growth. If they move too slowly, financial speculation continues to run through the system and inflation picks up dramatically. While growth overall probably expands, Wall Street most likely benefits while Main Street suffers. Market bubbles could form and systemic risks rise. The Fed has already been forced to act first, and they may be forced to act last. Absent any help from Washington, the only way to correct a policy error would have to come from the Fed itself; meaning, they would need to reverse course. If the Fed launches what they hope will be a predictable glide path so as not to upset markets, what happens if events put pressure on the glide path? For example, what would happen if rates begin to rise in part because of the then wellknown pressure caused by the Fed selling into the market? Would the Fed change the path and, if so, would that create a confidence issue among market participants? In our opinion, it is generally not optimal to state your future strategy in advance because events can throw a wrench in the gears. The alternative would be some kind of monthly announcement, but we can t imagine waiting every thirty days around the news ticker, given what would be the new fascination around that number. Is it any wonder that there is not a lot of research with specifics on how this plays out? There are simply too many moving parts for anyone to make a credible prediction. Investing for the future of the auto industry: autonomous mobility Stephen Stribling, CPM The century-old automotive business model is facing an unprecedented technological disruption. As the auto industry continues to embrace autonomous, shared and electric mobility, it is fast becoming the face of innovation and investors are taking notice. On average, current vehicles are used for about an hour each day, yet account for almost half of the world s oil demand and approximately 3,500 deaths worldwide. With statistics such as these, it is no wonder that companies are creating new ways to improve consumer experience, sustainability and public safety. From an investment standpoint, it s important to remember that investing in the autonomous auto industry comes with risks; therefore, before making any decisions, those interested should conduct lengthy research, have a great deal of patience and a high risk tolerance. Those who possess those qualities should then consider opportunities beyond those at the forefront of the movement (major auto manufacturers, mobile taxi services, new electric car manufacturers) such as companies that manufacture the components necessary to the innovation. They should look below the surface to the suppliers such as the chip companies, sensor companies, optical companies, satellite companies, and ceramic material companies, just to name a few. Here are some other growth areas potential investors should keep an eye on: Chemicals: If the demand for electric vehicles increases, more battery-grade lithium will be needed. Lithium producers could benefit significantly from higher consumer adoption of electric vehicles. Electric Utilities: Electric energy will be in high demand as we shift from pump to plug-in charging. A transition to electric vehicles could be equal to one-third of total U.S. energy demand. Telecommunication Systems: An essential component of the autonomous ecosystem, the need telecom technology to connect vehicles to each other and to infrastructure will increase significantly. I fully believe that autonomous vehicles will be a common sight in the near future. Seeing how modes of transportation have transformed our lives over centuries from horses to trains to automobiles to planes, autonomous vehicles seem to be the next natural frontier. If this is the case, improvements and innovation could open the doors to new investment opportunities. The speed and extent of the move toward autonomous driving for now remains uncertain as it largely depends on external forces such as regulatory developments, the rate of consumer adoption and the competitive environment. However, while many of the benefits may take time to play out, it s always worth keeping our eyes on the future.
Weathering Divorce Shelley Ford Getting through a divorce can often be both emotionally and financially challenging for all parties involved. There are, however, some key concepts that may help you through this process. First, make sure to assemble a team of advisors that you feel comfortable with and have your best interests at heart. Often people find that having their own lawyer, accountant, financial advisor and personal counselor helps get them through the process and assures them that everything is done legally and properly. Next, it s important to educate yourself on the process. While you should rely on folks like your attorney to understand all the legal matters, you should also make sure that you, yourself, understand how things work at least insofar as the big picture is concerned. Educating yourself about some of the basics is key. For example, take time to educate yourself on the concepts behind marital vs. individual/non marital property. Make sure that part of your planning process includes long-term goals both for yourself and your children. It is easy to get caught up in the moment and to forget that decisions made today can affect everything from your kids college education to your own retirement. Educating yourself is easy to do, you just have to make sure you don t put your head in the sand or freeze while going through a divorce. Remember, you are either part of the process or you are a potential victim. Last, make sure to keep your options open. Consider this example, my client is the CFO of a publicly traded company and will be required to split half of the corporate stock with her spouse. She could sell the stock (which, unless done through a QDRO [qualified domestic relations order], could have negative tax consequences and be misinterpreted by the markets) or she could consider using a securities-based loan to raise the money needed for the settlement. Divorce is an emotional, legal and financial event. It is a time of many changes. For all these reasons, divorce is complicated. The good news is, it does eventually end and you will be in charge of your own finances and personal future. Required Minimum Distributions, What you need to Know Teresa Bustamante When it comes time to start withdrawing the money you've spent a lifetime accumulating in your retirement portfolio, you want to ensure that you make the right decisions. The IRS requires that you begin withdrawing funds from IRAs and Qualified Retirement Plans annually, depending on your age and the account type. These distributions are known as a Required Minimum Distribution, or RMD, and they must be taken from your retirement accounts (other than Roth IRAs for original account holders) by December 31 each year, starting in the year you turn age 70½. You may postpone withdrawing your first RMD until April 1 in the year after you turn age 70½, however, you will be required to take two distributions that year. One by April 1 for the prior year RMD, and the second by December 31 for the current year RMD. Generally, an RMD is determined using IRS Uniform Life Expectancy tables that take into consideration the account owner's and/or account beneficiary's age and marital status, as well as their account balance(s) as of December 31 of the year prior to the distribution year. The exact distribution amount changes from year to year. It is calculated by dividing an account's year-end value by the distribution period determined by the Internal Revenue Service (see table below). For instance, an account holder with a $100,000 traditional IRA at age 75 would need to withdraw $4,367 ($100,000/22.9), or 4.37 percent of the total balance. Uniform Lifetime Table for Required Minimum Distributions Age 70 75 80 85 90 95 100 105 27.4 22.9 18.7 14.8 11.4 8.6 6.3 4.5 This table shows required minimum distribution periods for tax-deferred accounts for unmarried owners, married owners whose spouses are not more than 10 years younger than the account owner and married owners whose spouses are not the sole beneficiaries of their accounts. Source: IRS Publication 590-B.
Here are some important considerations for those entering the distribution phase of their investing lives. You may pick the IRA account(s) you withdraw from, however, qualified plan distributions must be taken from each plan If you have more than one of the same type of IRA accounts such as multiple traditional IRAs you either can take individual RMDs from each account or aggregate your total account values and withdraw this amount from one account. As long as your total aggregated RMD value is withdrawn, you will have satisfied the IRS requirement. If you own more than one type of account, such as an IRA and a qualified retirement plan account, you'll need to calculate your RMD for both types of accounts separately and take the proper amount from each account. Other Considerations: If you are still employed at age 70½, you may be able to defer taking RMDs from your qualified retirement plan until after you retire. You'll need to check with your employer to see if this rule applies to you. This rule does not apply to IRAs. The implications can be severe for failing to comply with RMD rules. If you fail to take your full RMD amount, the IRS may assess an excise tax of up to 50 percent on the amount that should have been withdrawn and you will be required to take the distribution including the IRS 50% penalty tax. Taxes are still due upon withdrawal. There may be a full or partial tax consequence for your distributions, depending on whether your traditional IRA was funded with nondeductible contributions. Note also that the amount you are required to withdraw may push you into a higher tax bracket. You can donate your RMDs to a qualified charity and benefit from incurring and adverse federal income tax consequences. If you are an IRA owner, you can contribute up to $100,000 of your IRA directly to qualified charities and have it count toward your RMD requirements. If you have an inherited IRA the qualified charitable donations are permissible as long as you are over age 70½. Please consult with your tax and/or legal advisor for additional rules around Qualified Charitable Distributions before making the decision to contribute through your IRA. Roth IRAs are exempt from RMD rules. If you own a Roth IRA, you are not required to take an RMD. Any distributions taken from a Roth IRA are not counted toward your RMD annual required amount. Also note that the RMD rules do apply to Roth 401(k)s. The designated beneficiary of an IRA is also subject to Required Minimum Distribution (RMD) rules when the IRA owner passes away. Failure to take the RMD may subject the beneficiary to an excise penalty tax of 50% of the amount that should have been distributed. Like many tax rules, those governing required minimum distributions can be complex. Don t wait until the end of the year to begin calculating your RMD and withdrawing funds. Please also consult with your tax advisor as to your particular situation. Additional information can be found in IRS Publication 590-B. The Answer Is Richard DiMarzo, CPM Now don t take it that I m speaking only to you. I m also speaking to myself. Each of us, client and advisor, based on my experience, quickly forgets to ask of each other the single most important question that should be asked when investing new dollars for current or future needs. And it s just as important to ask that same questions again about those dollars that are currently invested. What is the intention of the dollars being invested? Not to be confused with intent, which implies something stronger, intention implies a general desire or plan to accomplish something, a motive or better still a purpose. Purpose! There s the key. Is the purpose of dollars to be invested to fund a home purchase, to fund education, to fund retirement or Whether you re a potential client, an existing client or a financial advisor intention is the overriding issue. Intention creates the timeframe, the risk and the solution to the purpose of the dollar invested. If ignored unintended consequences might arise. Surprises, if beneficial are welcome, but those unwelcomed can prolong achieve the intention. Because intention is such an integral part of the process, it must be discussed on each new dollar invested, as well as about those already invested.
As a current client it is your right to ask this overriding question; Is my intention being met? Or, in financial parlance, Is my goal being met? As a prospective client it is it your right to ask this overriding question; How will you best meet my intentions? Or, in financial parlance, How will you meet my goal within the context of my intentions and why is this in my best interest? Financial advisors, including this advisor, have the responsibility before answering any questions to ask, Has the intention of the money changed? If the intention has changed, it is the advisor s obligation to provide a different solution, which is in the best interest of the client s intention. If there s been no change, stay with the plan! Markets play with our minds and may create unintended consequences. Intentions remain constant unless changed. The question, What is the intention? is the overriding issue and dictates the solution. Planning for the Unexpected William VandenBrul For many of us, estate planning is something we know we should do but somehow manage to postpone until some indefinite tomorrow or, once having done a plan, put it away in a file for someone else to find. One common myth is that we don t need to think about estate planning when we re young. Legal stuff like wills and trusts is something to consider when we re older. The reality is tha though t no one likes to think about it, tragic and unexpected life events can happen at any time. Don t wait until it s too late to take action and protect yourself and those you care about. Another myth is that if you re single, no one is relying on you so you don t need to think about preparing a plan. In reality though, even if you don t have a significant other or children to provide for, you have belongings that you care about. If you are unable to make financial or health decisions for yourself, you ll still want your wishes to be carried out. Whatever your age, here are some questions to ask yourself when considering your estate plan are: 1. Do you have an up-to-date will? 2. Have you considered a trust? 3. Do you have durable powers of attorney for health care and financial matters? 4. Do you have enough life and disability insurance to protect yourself and your family? You never think that it will happen to you, yet all risks can have major emotional, financial and legal consequences. Acknowledging risks enables you to take steps to help mitigate their financial impact on you and your family. Some common risks include injury, illness, death, theft, fire, car accident, divorce. Potential consequences of these risks include inability to earn, losses, liability, lawsuits, cost of damages and emotional distress. Insurance coverage that can help mitigate these risks includes life, disability, long-term care, health, auto, homeowners, renters and liability. Estate planning is the process of organizing, analyzing and orchestrating both your financial and nonfinancial affairs to efficiently and effectively distribute your wealth prior to and following your death. By planning and making sure that you have the proper documents in place, you can better control what happens to you and your family. Goals of an estate plan include protecting your lifestyle, providing for family and others, controlling the distribution of assets, and minimizing estate taxes. Estate planning may sound like something to do when you are older, but you should have tools in place to protect yourself and your family at any age. You ve worked hard for what you have and deserve to have a say in what happens to it. Make sure that you are using the right tools to plan for you future. In the event of physical impairment, these tools will help provide for you and your family: 1. Living will 2. Durable power of attorney for health care and financial matters 3. Inventory of important information 4. Health and disability insurance 5. Long-term care protection In the event of your death, these tools will help provide for your family and others: life insurance, will, trusts and letters of instruction.
Implementing your estate plan will become the responsibility of the individuals and/or institutions that you name in several important documents. The key roles include the grantor, the executor, the trustee, the guardian and the beneficiary. Each of these serves a very specific function in helping to ensure that your wishes are carried out properly. Don t keep these a secret. The more that your family and heirs know about your estate plan, the better it will be when it comes time to distribute your wealth. I will discuss the various goals, tools, and roles in more detail in subsequent issues of this newsletter. Those who fail to plan, plan to fail. This is especially true when it comes to estate planning. Therefore, the first, and most critical, estate-planning mistake, is simply failing to plan. Business Transition: Plan Early, Communicate Often Jeanine Delgadillo According to the 2016 U.S. Family Business Survey conducted by PricewaterhouseCoopers, only about 43 percent of private businesses have done any exit planning whatsoever. Failure to execute a business transition plan may lead to multiple negative outcomes, including: 1. Breakdown of communication and trust within the family unit. 2. Inadequately prepared heirs. 3. Absence of a clear vision or mission to align family members. 4. Failure by advisors to properly address taxation, governance and wealth preservation issues. Pathways to Success With success riding largely on a family s ability to communicate and clearly articulate a plan for the future, the following guidelines may help to ease the business transition process. Start planning early Begin the process years before the actual transition occurs. Some experts recommend building an exit/transition strategy into the initial business plan. As part of the planning process, business owners should create: Supporting structures, such as a family constitution and business bylaws, to familiarize all parties with the rules of governance. Fewer surprises mean fewer conflicts and discord down the road. A clear vision for the business that involves all family members, whether or not they are active in running the business. Visioning is an effective way to allow all stakeholders to share their personal goals for the business, which in turn helps create buy-in and minimize future conflicts. Prepare the next generation Identify the skills and leadership qualities the business may need in the future, and then prepare young family members to fulfill those roles. This will likely require sharing knowledge and providing educational opportunities. Manage conflicting priorities It is not uncommon for younger and older generations to have different, and conflicting, priorities for the business. Senior leaders may have concerns about whether the younger generation has what it takes to successfully run the business; anxiety about the next chapter of their lives (retirement, staying involved in some capacity); or worries about all children, including those not involved in the business, receiving a fair share of the family wealth. Members of the younger generation may be anxious about making their mark on the business by taking it in a new direction; investing in new technologies or processes that may improve the business but require a significant capital outlay; and involvement and potential micromanagement of day-to-day operations by the older generation.. It is important that families express their concerns openly, and it may help to engage a professional facilitator. When all parties feel they are being heard and respected, the sense of commitment to the business and the transition process is strengthened. Do You Know Who Your Beneficiaries Are? Marcia Bonnet
When was the last time you checked your beneficiary designations for your individual retirement account (IRA), employer retirement plan, annuity or life insurance policy? If you haven t examined it since the account was set up, you are not alone. Due to changing circumstances and shifting priorities, you may find that your named beneficiaries are no longer in keeping with your estate plan or wishes. If you have switched jobs, become a new parent, divorced or survived a spouse or a child, your current beneficiary designations may need to be updated. Consider the What If? In the heat and emotion of divorce proceedings, for example, the task of revising one s beneficiary designations can fall through the cracks. A court decree that ends a marriage also terminates the provisions of a will, but it does not automatically revise the beneficiary status of an employer-sponsored retirement account or an IRA. Some financial institutions, automatically cancel the designation of a spouse as the beneficiary of an IRA in the case of divorce, but not all do. For example, if an IRA owner remarries and has a new family, but fails to change the beneficiaries on the account, the original beneficiary may have a legal claim to the assets in the event of death. Also, keep in mind that the law requires that a spouse be the primary beneficiary of a 401(k) or a profit sharing account, unless he or she waives that right in writing. A waiver may make sense in a second marriage if the new spouse is already financially set and the children from the first marriage need the money. How to Stay Current To ensure that your beneficiary designations are current and up-to-date, consider the following steps: 1. Make a list of all accounts that have named beneficiaries. This may include 401(k) plans, 403(b) plans, 457 plans, IRAs, pension plans, life insurance policies, annuities and bank accounts. 2. Contact the plan administrator or financial institution that maintains or services your account to verify your current beneficiary designations. You may want to do this with the help of your tax advisor or estate-planning professional to ensure that these documents are in sync with other aspects of your estate plan. 3. Keep the list safe. Store it in a safe place with your other estate plan documents, such as your will, health care proxy and power of attorney, and make sure your designated executor has a copy. 4. Register for online access. If you do not already have online access to your accounts with beneficiary designations, consider registering so you can view and update your account information whenever you need to. 5. Consolidate. If you have changed jobs and left your assets in your former employers' plans, you may want to consider moving these assets into a rollover IRA. Consolidating multiple retirement plans into a single tax-advantaged account can make it easier to track your investment performance and streamline your records, including beneficiary designations. Naming beneficiaries and keeping them up-to-date is only one important aspect of estate planning. Let me work with you to make sure your entire estate plan addresses your current wishes and circumstances. Successful Boards Get the Big Things Right Jennifer Hartmann As a team of investment consultants and portfolio managers, we find ourselves providing advice to many different kinds of clients: A retired couple, a millennial, a middle age entrepreneur all are typical clients in need of guidance. Can I afford to retire? When can I retire? How much money are my children going to inherit and what happens then? How can I raise funds for my business? These are all frequently asked questions with solutions. We also provide advice to institutional clientsincluding investment committees of foundations, endowments, pension plans, and corporations. Starting with a healthy discussion of target return goals, time horizon, and attitudes about risk, investable assets are analyzed and advice is given on a range of solutions, potential outcomes and ways to best achieve the desired results. Institutional consulting has slightly different language, but the core discussion is often very similar. For both individuals and institutions, we have found the most successful investment relationships have common characteristics: clear communication, a willingness to engage, an investment plan arrived at through collaboration and consensus, regular review and monitoring for changes in circumstances.
Many of our individual clients serve on boards of public or private companies or charities they are passionate about. The stakes have never been higher. Specifically, the level of fiduciary responsibility board members assume for decision-making. (For more details, see https://trust.guidestar.org/blog/2014/10/17/a-nonprofit-boards-fiduciary-responsibility/.) In our opinion, the most successful boards are those that get the big things right. In the spirit of a digestible market commentary, we ve broken down the big things into three broad categories. If you find yourself wanting specific information or research on issues you might be facing as a board member, let us know and we can help direct you to additional resources. Governance and People Governance is a word that can quickly make eyes glaze over. Governance actually defines some fascinating elements of human behavior and group dynamics. Governance is how leaders think, make decisions, develop strategy, persuade, develop future leaders, structure their board and execute initiatives. How they communicate with key stakeholders...with their staff...with their customers...with their marketplace...with their constituents...and even with each other (http://www.quantumgovernance.net/assets/1/6/core_responsibilities_of_a_board.pdf). How many people should be on an investment committee? In our experience, a workable size investment committee is between four and seven people of diverse backgrounds, experience and opinion. We have seen it first hand: group dynamics among like-minded people can lead to poor decision making. Wacky ideas become normalized and accepted. Dysfunctional groups can lead to poorly run meetings, ineffective decision-making and lack of investment success. (More research on this can be found at https://en.wikipedia.org/wiki/group_dynamics.) Policies and Objectives Successful boards have written policies and objectives. Work closely with investment committees of boards to craft their Investment Policy Statement. An investment policy statement (IPS) must address some specific definable topics. Time horizon, target return, permissible investments, target allocation, definition of responsibilities and authority are some of the big ones. (For more information, see Elements of an Individual IPS https://www.cfainstitute.org/learning/products/publications/ccb/pages/ccb.v2010.n12.1.aspx?wpid+alsoviewedproducts or Elements of an Institutional IPS http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2010.n13.1.) Boards should document and keep records of the decision making process. Given the rapidly changing regulatory landscape, meeting notes have heightened importance. The minutes become the diary and the shared history of the group. They often record disagreements, discussion and consensus. We often consult with investment committees over a number of years, all of the original committee members may have turned over, but our investment guidance remains constant. As members of the committee change, referring to past meeting notes helps provide groups with important information about the context in which decisions were made. Implementation and Evaluation Implementation describes the actions taken to put all the plans in place. It involves examining the role of each asset class, deciding to deploy active or passive management and deciding which managers to use. This is where the advice of an investment consultant can pay off. Evaluation includes monitoring how the implementation is doing: How have our investments performed? What level of risk are we assuming for our level of return? The answers to these questions lead to more: Has our spending exceeded our investment earnings? Will we have to cut back on spending? Given our level of success are we successfully attracting new donors and new board members? Peer comparisons can often be helpful in evaluating and answering the how are we doing? question ( http://nccs.urban.org/data-statistics/quick-facts-about-nonprofits). Almost all members of our team have and do serve on boards, committees or advisory groups. We are fortunate that our firm provides senior employees with training on how to be a good board member and the weight of those responsibilities.
If you find yourself wanting specific information or research on issues you might be facing as a board member, let us know and we can help direct you to additional resources. Finally, if you are considering joining a board, ask some questions first to make sure your time, energy and perhaps donation is well placed ( http://www.quantumgovernance.net/assets/1/6/questions_before_joining_a_board.pdf). Enjoy the summer! Who Is The Pelican Bay Group? Our team of financial professionals is national in scope with s stationed in strategic locations across the country. As part of Morgan Stanley, one of the world s most respected financial services firms, we offer access to extensive resources that can prove instrumental in helping you meet even your most complex financial challenges. Our team members include: Anthony M. Gallea Managing Director-Wealth Management Senior Portfolio Management Director Pittsford, NY Jennifer D. Hartmann, CIMA Managing Director-Wealth Management Senior Institutional Consultant Family Wealth Advisor New York, NY Stephen Stribling, CPM Executive Director-Wealth Management Senior Portfolio Management Director Denver, CO Teresa Bustamante Senior Vice President-Wealth Management Senior Investment Management Consultant ElPaso, TX Marcia Bonnet Associate Vice President Financial Planning Specialist Family Wealth Advisor Denver, CO Mark S. Ryan, CFP First Vice President-Wealth Management Portfolio Management Director Boca Raton, FL Richard J. DiMarzo, CPM Senior Vice President-Wealth Management Senior Portfolio Management Director Pittsford, NY Paul M. Hanrahan, CRPS Senior Vice President-Wealth Management Senior Portfolio Management Director Professional Alliance Group Director Pittsford, NY Shelley Ford Denver, CO Jeff Praino, CFP Certified Divorce Financial Analyst Financial Planning Specialist Pittsford, NY William VandenBrul Vice President-Wealth Management Wealth Advisor Pittsford, NY Jeanine Delgadillo Boca Raton, FL Cynthia Walker-Laroche Vice President-Wealth Management Boca Raton, FL This material is intended only for clients and prospective clients of the Portfolio Management program. It has been prepared solely for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument, or to participate in any trading strategy.
S&P 500 Index is an unmanaged, market value-weighted index of 500 stocks generally representative of the broad stock market. An investment cannot be made directly in a market index. The views expressed herein are those of the author and do not necessarily reflect the views of Morgan Stanley Wealth Management or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results. Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 11% of the total market capitalization of the Russell 3000 Index. An investment cannot be made directly in a market index. NASDAQ Composite Index is a market-value-weighted index of all NASDAQ domestic and non-u.s. based common stocks listed on NASDAQ stock market. An investment cannot be made directly in a market index. Technical analysis is the study of past price and volume trends of a security in an attempt to predict the security's future price and volume trends. Its limitations include but are not limited to: the lack of fundamental analysis of a security's financial condition, lack of analysis of macro-economic trend forecasts, the bias of the technician's view and that possibility that past participants were not entirely rational in their past purchases or sales of the security being analyzed. Investors using technical analysis should consider these limitations prior to making an investment decision. Dow Jones Industrial Average is a price-weighted index of the 30 blue-chip stocks and serves as a measure of the U.S. market, covering such diverse industries as financial services, technology, retail, entertainment and consumer goods. An investment cannot be made directly in a market index. Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. An investment cannot be made directly in a market index. Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 89% of the total market capitalization of the Russell 3000 Index. An investment cannot be made directly in a market index. Investing in commodities entails significant risks. Commodity prices may be affected by a variety of factors at any time, including but not limited to, (i) changes in supply and demand relationships, (ii) governmental programs and policies, (iii) national and international political and economic events, war and terrorist events, (iv) changes in interest and exchange rates, (v) trading activities in commodities and related contracts, (vi) pestilence, technological change and weather, and (vii) the price volatility of a commodity. In addition, the commodities markets are subject to temporary distortions or other disruptions due to various factors, including lack of liquidity, participation of speculators and government intervention. Bonds are subject to interest rate risk. When interest rates rise, bond prices fall; generally the longer a bond's maturity, the more sensitive it is to this risk. Bonds may also be subject to call risk, which is the risk that the issuer will redeem the debt at its option, fully or partially, before the scheduled maturity date. The market value of debt instruments may fluctuate, and proceeds from sales prior to maturity may be more or less than the amount originally invested or the maturity value due to changes in market conditions or changes in the credit quality of the issuer. Bonds are subject to the credit risk of the issuer. This is the risk that the issuer might be unable to make interest and/or principal payments on a timely basis. Bonds are also subject to reinvestment risk, which is the risk that principal and/or interest payments from a given investment may be reinvested at a lower interest rate. Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC ( Morgan Stanley ), its affiliates and Morgan Stanley s and private Wealth Advisors do not provide tax or legal advice and are not fiduciaries (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Morgan Stanley. Individuals are encouraged to consult with their tax and legal advisors regarding any potential tax and related consequences of any investments made under an IRA. Date of first use: 07/20/2017 CRC 1852250