1st Quarter 2010 Commentary

Posted on Tuesday, April 20th, 2010

by James W. Heard, CFP®, President, Windham Brannon Financial Group, Inc.


The markets continued moving up significantly despite economic uncertainty and unprecedented political discord.  One can argue whether or not high unemployment and current government policies are reasonable backdrops for good markets, but the reality is that the market is communicating that things aren’t so bad, and in fact, they may be pretty good.   Most of our clients’ portfolios significantly outpaced market benchmarks for the last 12-months, making up much of the underperformance that occurred from September 2007 through March 2009.

Below are common market benchmarks with the most recent quarterly and 12-month returns ending March 31.

1Q 2010 Last 12 Months
90-Day US Treasury (T-Bills) 0.01% 0.16%
BarCap Interm US Govt/Cr (Bonds) 1.54% 6.92%
S&P 500 (US Large Cap) 5.39% 49.77%
Russell 2000 (US Small Cap) 8.85% 62.76%
MSCI EAFE (International) 0.87% 54.44%
US REITS (Real Estate) 9.90% 106.50%

March 2009 feels like a very different time than today, and in a way, it’s really hard to remember how emotionally difficult it was to be an investor then.  But metaphorically, I want you to lie down on the couch and try to remember what you were feeling and how you wanted to invest your money then.  Now, look at the table above and pick the index that is closest to how you wanted to invest your money during that difficult period.  It was probably Treasury Bills.  How did it do over the last 12 months?  It was up a whopping 16/100ths of 1%.

Now, think about how you DIDN’T want to invest your money.  Are you thinking real estate?  The returns, surprisingly (or not), are the best from the list above.

Here’s the bottom line message for all of us –

1) NEVER try to time markets based on perceptions of where we think markets are headed.  Human emotion is not well suited for investing, and those perceptions are already priced into the markets.  This is the most important lesson from the past three years.

2) Prudently manage risk based on personal goals and unique circumstances.  This is exactly why you hire us – to broadly diversify and allocate your investments in a way that increases your opportunity of reaching your personal and financial goals.  If investment risk is managed appropriately, the returns will come in time.

3) Stay the course.  There is always a distraction – something is doing badly.  Something you don’t own is doing great.  And like October 2007 – March 2009, sometimes everything you own does badly for a short time.  But your portfolio is built for the long-term and our strategy has stood the test of even this difficult period.


If the country stays on the current political and fiscal course, there will be long-term economic consequences.  We can debate whether the solution is more taxes or less government programs and services, but the hard choice will have to be made, and as a country, we will be making it over the next two election cycles.  If we defer it much longer, the capital markets will force us to make it much like it has for Greece.  I’m hopeful we won’t get to that point.

Unemployment is historically high, but it’s a lagging indicator and is likely to get better.  One caveat is that recent health and tax legislation may cause employers to delay hiring as long as possible since lower after-tax income may not be worth the financial risk of an additional hire.


Due to sun-setting tax regulation and new health care legislation, there will likely be a different estate and income tax landscape starting in 2011.  What that landscape will be is still uncertain, but whatever it is, it is likely to be more challenging than it is today.  As the tax picture becomes clearer, we may consider changes to your portfolio to minimize the tax impact to the extent we can.

What Do You Think?

Many of you have completed our online client satisfaction survey.  Thank you.  For those of you who haven’t, it’s still open at  www.AdvancedSurvey.com.  Simply enter the number 71310 to the right and take the 3 minute survey.

In almost all service areas, over 90% of our clients said they were either satisfied or very satisfied with our performance.  What’s interesting is that the satisfaction level was 93% for clients’ investment performance.  Given the difficult period that we just completed, I think this is a sign of our clients’ investment maturity and long-term focus, and we’re very appreciative of that.   While we are happy with those results, we will strive to improve in delivering even better wealth management services to you.  Stay tuned.

Best regards,

Windham Brannon Financial Group, Inc.

© 2010 Windham Brannon Financial Group. All rights reserved. Any use of information contained in this article, including reproduction, modification, distribution or republication, without the prior written consent of Windham Brannon Financial Group, is strictly prohibited.

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