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Portfolio Stress Test

Review Your Investments Before the Next Panic. Better to Act than React.

This time last year who would have thought that the price of oil would drop to today’s levels? Or that slowing growth in China would send shivers through the market?

Barely seven years after the financial crisis, it already feels like a distant memory—and rosier than it was. Test your own recollection of the bear market: Do you remember correctly that between October 2007 and March 2009, the U.S. stock market dropped in price by 57%?

Most investors build retirement portfolios with one goal in mind—to maximize returns. Does that take into account reality? Probably not. On the other hand, you need to understand the cost of being overly cautious also. Risk and returns frequently go hand-in-hand. If losses cannot be tolerated, then long-term return will be decreased along with risk levels, which will mean that retirement goals must be reassessed.

If you think stocks can’t fall by at least 50% again, you are wrong. If you think that you (or anybody else) can know exactly when that will happen, you must have a very reliable crystal ball!  And if you think you won’t overreact when it does, you had better test that belief now—before it is too late to find out you were kidding yourself.

The Federal Reserve annually examines large financial institutions to see how they would weather various significant financial stresses. The test simulates a crisis that includes a deep recession with a sharp rise in the unemployment rate, a drop in equity prices of nearly 50 %, and a decline in house prices to levels last seen in 2001.

How will you react to the next market crash? Look at your portfolio today, and then assume the market already declined by 40%. What would you have changed? This is similar to the stress test the Federal Reserve Bank performs on banks. If you had hindsight, what would you have changed? Think now about putting some of those changes in place before the next market decline.

If you have too much money riding on any one investment or strategy, set up a program to inch automatically out of it over time. How much is too much?  Any holding greater than 25% of the total portfolio is probably too much.

Consider your liquidity needs going out 24 months. Decide whether current cash levels are sufficient and what assets to sell if the need arises.

Better to act than react, especially at inopportune times.

If you would like to evaluate your portfolio, give Lineweaver Financial Group a call at 216.520.1711 to schedule a complimentary consultation.

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By Lineweaver Financial Group
January 07, 2020 Category: General

What a difference a year makes! A year ago, at this time the market was coming off a 20% correction in the fourth quarter reflecting prevailing headwinds of rising interest rate, escalating global trade tensions between the US and China, uncertainty on Brexit, and growing concerns of slowing global growth. Today conditions have calmed. Central banks around the world are dovish, including in the US, were the Fed moved to make mid-cycle adjustments in the midst of uncertainty and raised chances of extending the cycle. Likewise, around the world central banks seem accommodative with negative interest rates prevailing in several key countries around the globe. The US and China have apparently reached a Phase I trade deal and while the situation is tenuous and large structural hurdles remain in the areas of intellectual property, leaders of both countries seems to be more motivated to move toward more substantial agreements into 2020. With this backdrop, conditions appear favorable for economic

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By Lineweaver Financial Group
January 07, 2020 Category: General, Economic Commentary

Our reference to the classic Toots and the Maytals song comes as we see a de-escalation in trade tensions with China, diminishing risks of a no-deal Brexit and few signs that the record U.S. economic expansion is ending or reversing. Still, persistent trade uncertainty is denting business confidence and spending, particularly the longer-term risk of an unravelling of the global supply chain. Our take on the major investor themes for the weeks ahead: U.S. Equites: Sector Steering Defensive sectors have outperformed cyclicals this year against a backdrop of slowing growth and falling interest rates. However, we expect central bank easing could provide a floor for growth in the coming months. Among cyclicals, we remain constructive on technology, while we prefer less rate-sensitive sectors. Developed Markets: Winter of our discontent? Trade uncertainties and slowing growth have taken a toll on developed world stocks outside the United States. But not all DMs are created equal, and

Looking Forward and Giving Back

By Lineweaver Financial Group
January 06, 2020 Category: General

As most of you know, we have partnered with Harvest for Hunger since 2012, collecting food for the Cleveland Foodbank. Since partnering with Harvest for Hunger and the Cleveland Food bank in 2012, the food collected at our WealthWATCHSM programs, client appreciation, and other events has provided more than 43,000 meals. Thanks to all of our clients and friends who have helped us reach this amazing milestone. This year, we also had the unique opportunity to partner with Ben Curtis, the 2003 British Open Champion, and the Ben Curtis Foundation. Bens Foundation provides similar services to the food bank, but works exclusively with children in need in Kent, Ravenna, and Barberton. One in five children struggle with hunger, and Ben and his foundation are able to help more than 2,440 children in our own backyard. We also had the opportunity to partner with former Browns Coach Sam Rutigliano, and his Inner Circle Foundation. Coach Sams Foundation, a member of the International Literacy Association,

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