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Message from the President: January 2017

by AOG Wealth Management

I hope each of you enjoyed the holidays with your friends and family. All of our staff took vacation time over the last month, both around the house, and some travel. Sheila and I spent time with family and friends. Our son is on schedule to graduate in May from the University Of Virginia School Of Law. He completed an Honor’s Fellowship with the Securities and Exchange Commission Department of Corporate Finance last summer, and is interviewing with them now for a permanent position. Joe asked to move home next summer while he studies for the bar exam, and we are really looking forward to having him around the house for a few months.

As I prepared to write this 2017 article, I reviewed the 2016 version. I was correct in projecting slow but steady economic growth and modest gains in the market. In particular, I was correct about increasing volatility as we neared the election. I did not predict a Trump victory and “Trump Bump”. For 2017, I believe that the Trump rally will slow as he moves from election mode to governing. The transition team and House and Senate Republicans have announced ambitious plans for the repeal and replacement of ObamaCare, a major tax reform package that may include bringing billions of dollars held overseas by US companies back home, and possibly coupling that one time “tax holiday” with a major infrastructure bill. Whether they can achieve that or not, business are clearly expecting lower taxes, reduced (unnecessary?) regulatory oversight, and reduced health care costs. Although various capital models predict a high single digit, low double digit potential return on equities, we agree but expect increasing volatility, particularly in the second half of the year.

Last year I predicted a few incremental rate hikes, but said I wouldn’t be surprised if rates stayed flat. After only the second rate hike in a decade, and based on comments from various Federal Reserve Open Market Committee Members, I think the pendulum will finally swing this year with multiple rate hikes. On July 8, 2016, the 10 year treasury showed a yield of 1.37%, and I think that may well be the low inflection point for the next decade. We still favor floating rate debt over fixed rate debt in all of our portfolio models, and hope that investors are not too roiled if they maintain significant holdings in long term fixed rate bond mutual funds.

As predicted last year, US energy production costs did plummet, but have begun to recover. In 2016, we did find investment opportunities to purchase distressed assets, in addition to our regular energy investments. With the most recent tenuous agreement by OPEC to limit production, oil prices have climbed back into the mid $50s per barrel and natural gas prices the mid $3s per MCF. We expect continued incremental increases in energy prices, especially if worldwide growth actually moves above 2%.

At AOG, we have continued to refine our procedures to enhance our client experience. We have continued to review our real estate offerings, and moved to smaller funds that can be more nimble as we progress into later “innings” of this real estate cycle. We have also expanded on our new tax planning strategy that is even more effective than our oil & gas drilling programs. Although we limited it in 2015 and 2016 to clients with incomes in excess of $400k, we are reviewing it with some of our CPA partners for potential Roth IRA conversions. If you are interested in a specific analysis for your portfolio, please contact your tax professional and Jim Ortlip for a customized review.


Securities offered through TD Ameritrade Institutional Services located at 5010 Wateridge Vista Dr., San Diego, California 92121-5775. Investment advisory services offered through AOG Wealth Management, Inc. AOG Wealth Management, Inc. is neither an affiliate nor subsidiary of TD Ameritrade Institutional Services.

Category: Company Updates, Wealth Management