Seattle Mayor's Future Idea Seems Light Years Behind
/Seattle Mayor Jenny Durkan might be putting the cart before the horse when it comes to her new traffic proposal.
In an effort to reduce traffic congestion and car gas emissions that pollute the air, Durkan proposed tolling drivers who use Seattle city streets. The tolls would be implemented sometime before her term ends in 2021, with the intent of promoting carpooling and public transportation. To my knowledge this would be the first U.S. city to impose such a toll.
If it were to happen I suspect it would anger people for a short time before drivers reluctantly accept the change, much like the toll that was installed on the 520 bridge connecting Seattle to Bellevue and the greater Eastside. Speaking for myself, I don't like the 520 toll and try to avoid it, but if I need to take the bridge and pay the toll so be it.
My issue with Durkan's proposal is twofold: It seems premature and it masks the bigger problem that public transportation and infrastructure in-and-around Seattle cannot keep up with the population growth. The light rail that runs north-south currently only connects from the University of Washington to SeaTac airport, spanning a whopping 16 miles. Plans are in place to extend it to Lynnwood by 2024 (adding 12 miles) and to Everett by 2036. By the time either of those projects are realized, innovation and transportation needs will have evolved. That assumes these projects actually finish on time, unlike the Highway 99-Viaduct tunnel that was supposed to open in Dec. 2015 but will be lucky if completed this year.
Forbes recently ranked Seattle as the 2nd-fastest growing city in the U.S., which is nothing new given the tech boom we have seen over the past 10 years. The population will continue to expand and I'm afraid adding tolls to the existing list of projects is not going to fix traffic congestion without other, major transportation ideas.
If you do not live near Seattle or have a need to drive into Seattle then this is irrelevant to you. It just happened to be one piece of local news that caught my attention, mostly because the proposal was not accompanied by new infrastructure ideas to expand roadways. I am all for protecting the environment but with this toll proposal it sure seems like the city is not seeing the forest through the trees.
In The Market...
The S&P 500 fell -1.4% this past week. Let's look under the hood:
(price data via stockcharts.com)
Stocks have fallen in three of the past four weeks, continuing to flirt with danger. Just when it looked like stocks might spark a rally on Thursday the market broadly reversed course Friday to finish negative on the week. Every stock sector finished in the red. Bonds rallied late in the week but mostly finished negative too.
Two things continue to concern me. First, the S&P 500 is still in danger of falling below its 200-day moving average. This could set off mass selling the longer this lingers. On Monday the S&P index did close below its 200-day average, which had not happened in nearly two years. By week's end stock prices recovered somewhat, but remain hovered just above that critical level.
The second thing that concerns me when looking at a longer weekly timeline is how the rising trend has been broken. This is illustrated by the pink line in the following chart of the S&P 500:
(created in stockcharts.com)
Notice how stock prices bounced the previous three times they approached or hit that trend line. This is more reason I suspect that it will be a bumpy ride in the weeks ahead. We like to see trends, positive or negative, because it increases the confidence in the direction of the market. We would obviously prefer a positive trend, but at least if it is a negative one then we can pivot and act more defensively.
How we are investing right now: In light of how choppy and potentially bearish the market has been, I believe we are properly balanced relative to your risk tolerance and our process. On Thursday we added long-term Treasury bonds to a number of portfolios, mostly more conservative ones. That contradicts my long-term prognosis that interest rates will rise and bond values will fall, but in the short-term I feel it is the best hedge right now to offset additional stock market losses should they occur.
For more aggressive accounts it is likely we will hedge by holding a cash position, though we may sell Preferred Stock in order to purchase Treasury Bonds. I would like to use our existing cash position to buy a Technology sector fund (XLK), but due to the broader market concerns cited above we have held off.
All in all, patience is key right now given that I suspect more day-to-day volatility in the coming weeks. I am happy to explain which approach we are taking for your account(s). Let me know.
In Our Portfolios...
In Financial Planning...
If you want to make an IRA contribution for 2017, you have 1 week left to do so. The contribution must be made before tax day (April 17th) or else it will be considered a 2018 contribution. The maximum you can contribute is $5,500 (or $6,500 if age 50 or older). That can all go toward one IRA or it can be split between multiple IRAs, but the cumulative total cannot exceed that limit.
A few things to consider:
- You may be prevented from making IRA contributions if your income was too high in 2017. There are multiple scenarios that could apply depending on your income, the type of contribution you want to make (tax-deferred vs. Roth) and whether you or your spouse already participate in a retirement plan through your employer. Contact me if you want the exact income limits to figure out whether you can contribute.
- If you plan to make contributions in the future, do not make them monthly. I realize the desire to have a recurring savings behavior, but if your income ends up prohibiting you from contributing for 2018 (or future years) then you inevitably have to remove those contributions from your IRA. It is not worth the headache. Wait until year-end, see where your income winds up for the prior year and then make a lump-sum contribution if possible.
- If you have the option of participating in your employer's plan, that is usually preferred over making IRA contributions because the contribution limits are much higher for 401k plans and Simple IRA plans (the most likely employer-provided options). You can invest up to $18,500 into a 401k plan and $12,500 into a Simple IRA plan.
What's New With Us?
It is a broken record by now, but if you received another welcome letter in the mail from TD Ameritrade or a letter referencing your account profile, just disregard. It's a long story but anything you receive from TD in that vein can be ignored. If you are unsure though, please ask.
If the weather holds up for a few days in a row I'm hoping to wash/clean our deck. If it's nice enough we might go down to Pike Place Market and (finally) ride the ferris wheel, which we have talked about doing for a while.
Enjoy your weekend,
Brian E Betz, CFP®
Principal