KF UPdate – Taxes, IRAs, & Market Thoughts

4 Minute Read

Good afternoon and Happy Spring!  A beautiful few days in the forecast in upstate New York, golf courses are starting to open, and Syracuse came out with a great performance and win in the opening round of the NCAA tournament!  Things are certainly looking up after a long and challenging year for all of us.

I wanted to touch on a few items in terms of annual IRA contributions, updates to tax filing, and some of my thoughts around the markets.  I hope you find this information helpful, and as always, if you have any questions please do not hesitate to contact our office.

Tax & IRA Updates:

  • The 2020 tax filing deadline has been extended to May 17th, 2021. 
  • This also includes the deadline for IRA contributions for 2020.  You can contribute up to $6,000 to an IRA if under the age of 50; $7,000 if over the age of 50.  If you wish to still make a 2020 IRA contribution, please contact the office and we will coordinate that for you.
  • The first $10,200 of unemployment benefits received in 2020 is not federally taxable if your Adjusted Gross Income is under $150,000. 
    • If you have already filed your taxes, the IRS has issued guidance to not amend just yet, they are going to try and issue refunds.
  • Recovery Rebate Credit – The stimulus checks that went out last year for $1,200 and then $600 were based off of 2018 or 2019 income.  If you did not receive stimulus checks because your income was too high for those years, but your 2020 income was under those thresholds, you can receive a refundable tax credit when you file your 2020 taxes for the amounts of the stimulus you didn’t receive.
  • Another round of stimulus checks started going out this past week.  To see if/when you will receive your payment, you can use the following link to check the IRS website:

Get My Payment

  • The child tax credit was increased from $2,000 to $3,600 for each child under the age of 6, and $3,000 for those ages 6 to 17.  They are still working through the details of how that money is going to be delivered to eligible parents, so stay tuned on this front.

Market Thoughts:
After a strong start to the year, markets have cooled off recently as bond yields have spiked; more on that later. 

The S&P 500 is up around 4.5% on the year, US Value companies have outpaced US Growth companies year to date in a reversal of what we saw in 2020, and Small US companies have outpaced them both.  Diversification and rebalancing continue to be an important staple our ongoing portfolio management process.

Currently, the metric I am most closely following is inflation and bond yields.  As the economy continues to recover, and as these tax credits/stimulus get to consumers, inflation and higher bond yields could follow.  What does this mean for investments?

Longer duration bonds could go down, we are positioning client portfolios by keeping our durations shorter in maturity.  As an example, TLT (we do not hold this fund in client accounts), a 20+ year treasury bond fund is down over 14% year to date.  

Growth company values can decline.  A key calculation in determining the value of a growth oriented company is closely tied to yields.  If yields go up, valuations go down and vice versa.  The Russell 1000 Growth index is up 1.19% for the year while the Russell 1000 Value index is up over 11%.

Cash savings could lose purchasing power.  With bank yields low, any significant pickup of inflation will hurt those with significant cash savings as purchasing power would decline.  If you have significant cash savings, consider opening an investment account with monthly contributions to take advantage of dollar cost averaging and help protect against rising inflation.

As I always advise, there is no way to predict how the markets will perform over short periods of time.  Who would have thought the S&P 500 would be up over 18% in 2020 in the face of a global pandemic and contentious election season. 

We could see a strong economic recovery and record GDP numbers, and a flat market in 2021, there is just no way of really telling.  Diversification, quality investments, and ongoing rebalancing (especially during times of market weakness) continue to be an excellent way to grow capital over longer periods of time.

If you have any questions at all, please do not hesitate to contact the office.  If you would like to schedule a meeting, you can use the blue button below which is directly linked to my calendar.  Have a great Spring!

Best,
Clint

KF Update – Gamestop Craziness

3 Minute Read

While the price swings in GameStop are getting the headlines, that is just the tip of the iceberg of one of the most incredible stories, and incredible weeks in Wall Street history.  When AOC and Don Trump Jr. are on the same side of an issue, it has to be quite the story!  Let’s dive into what we just witnessed this past week:

What is GameStop?
A brick-and-mortar retail store that sells video games, has been trending towards bankruptcy, and traded at around $20 per share to start the year 2021.

What happened this week?
The price per share skyrocketed to as much as $468 yesterday and is currently trading around the $330s.

Why did the price go up so dramatically?
A group of day traders who had been sharing their trading strategies on the social media platform Reddit, jumped into the stock and then the power of the internet took over.  The news of the buying of GameStop, along with several other distressed companies spread, and day traders around the country piled in, sending their stock prices soaring.

Sounds great for those traders, what’s the controversy?
While it was great for these day traders, some big time Wall Street hedge funds were crushed.  These hedge funds had been betting against GameStop along with several other distressed companies through a trading strategy called “Short Selling.”  If the stock price goes down, the hedge funds make money, but if it goes up, they lose money.  The higher the share price goes, the more the hedge funds lose; in essence, there is no limit on the losses if the stock price keeps rising.

At least one hedge fund, Melvin Capital needed emergency cash infusions.  Worse yet, the trading strategy of “Short Selling,” when it goes really wrong, the hedge funds actually have to turn around and buy the stock at these elevated prices.  This is called a Short Squeeze and is contributing to the dramatic price increases in these stocks.

Disclosure: Kane Financial does not engage in short selling, investing in hedge funds, or any other exotic trading strategies.  We stick to the boring (yet effective) long-term buy & hold strategy using low cost index funds, a strong tilt towards quality and value, diversification, and ongoing rebalancing.

What is Robinhood and where does it fall into this story?
Robinhood is a trading app that you can download onto your phone, and trade using many of the same sophisticated strategies that Wall Street firms can use.  This app has helped to democratize trading and make markets available to anybody for no cost to the user.  This is primarily the way that these Reddit users and day traders around the country access markets and trade these stocks.

So it sounds like a bunch of day traders outsmarted the Wall Street professionals, great story right?
Not so fast, mysteriously, yesterday morning Robinhood suspended trading on GameStop and these other distressed companies that the day traders were piling into.  They only allowed these stocks to be sold, but not purchased.  This in turn sent their stock prices tumbling, and is being speculated, helped the hedge funds stop the bleeding and get out of their short positions.  Trading today resumed and went back to normal.  Many of these day traders were furious.

Why would Robinhood do this, infuriate their clientele and help out Wall Street billionaires?
The million, or in this case, billion-dollar question.  The CEO of Robinhood came out and claimed it was due to Net Capital Requirements, liquidity levels that brokerages must keep in case of market stresses and/or panices.

Others are speculating that Wall Street’s elite leaned on their power/influence to get Robinhood (and several other trading platforms) to change the rules in the middle of the night to tank these stocks and save themselves. 

Is what Robinhood did criminal and market manipulation?
This is where congress and the SEC are getting involved, stay tuned.

Bigger Picture
There was a tear in the matrix, you could say.  Regular investors think the rules of the investing game changed right in front of their eyes to help Wall Street’s elite class. 

Ironically, I think Bitcoin and decentralized finance fits into this discussion as well (another article coming soon).  Bitcoin is a decentralized currency that is not controlled by one person, government, or corporation.  It’s owned and controlled by its users, and that is one of the many reasons for its popularity.  Bitcoin is part of a larger movement of decentralized finance, where third party intermediaries (those that wield the power/influence reference above), are eliminated and transactions occur directly between the parties involved.

I think we could see a dramatic shift in finance over this next decade (for the better), and what happened this week is an important part of that story.

If you have any questions at all, or would like to schedule a meeting you can do so utilizing the button below or simply calling our office.  Have a great weekend!

Best,
Clint

KF Update – Year End Planning

4 Minute Read

Good morning,

I hope this email finds you and your families well, and you had a wonderful Thanksgiving.

With the dust mostly settled around the election (except for an incredibly close local house seat), I thought we could shift focus to some year end planning items that could be helpful for clients to consider.

One popular planning tool that is available to clients is something called a Roth Conversion.  This means converting pre-tax money (within an IRA or 401k) to Roth.  The tax on the conversion would be paid now, but all Roth money including earnings is completely tax free going forward.  

Why would somebody do this, or why would it make sense?  If you are in a lower tax bracket now, which many retirees are, it could make sense to lock in these lower tax rates now.  Additionally, pre-tax monies are required to be distributed starting at age 72 (RMDs) to the tune of 4-5% per year to start.  At that point, you have less control over which tax bracket those distributions fall into.

We have our federal income tax brackets for 2020 below which is a tiered system.  If you are Married Filing Jointly (MFJ), your first $19,750 of income is taxed at 10%, between $19,750 to $80,250 at 12%, and then income above $80,250 jumps up to 22%!

For example, let’s say your taxable income for 2020 will be $70,000.  It might make sense to convert $10,250 from pre-tax to Roth, and “Fill Up The Bracket.”  This strategy can be done each year leading up to age 72, as a way to take more control over how your pre-tax monies are taxed.  This could be especially beneficial if you believe taxes will increase in the future.

Additionally, if an IRA balance is large, those Required Minimum Distributions (RMDs) could put you into IRMAA surcharge range shown below.  These are additional premiums retirees would have to pay to Medicare if their income is high in retirement.

One of our newest pieces of financial planning software allows us to do a comprehensive tax analysis for clients, including modeling different scenarios and tax planning tips.  Please contact the office if you would like us to provide you with a comprehensive tax analysis.  As with all of our financial planning tools, there is no additional costs, all included in our service offering to clients.

Here is a list of other considerations for year end planning:

  • Save your charitable donation receipts, you can deduct $300 as an above the line deduction for 2020.
  • Required Minimum Distributions (RMDs) were suspended in 2020, but will be reinstated for 2021.  If you had recently turned 72 or will in 2021, it could be beneficial to start planning for those distributions.  You can take them monthly, quarterly, lump sum, etc.
  • If gifting money, the annual exclusion is $15,000 per year, tax free.
  • Reviewing your investment allocations to ensure they still align with goals, time horizon, and risk tolerance.
  • Can you give yourself a “Raise for Retirement” in 2021, increasing contributions to IRAs and/or company sponsored retirement plans.
  • Review of estate planning documents and beneficiary designations to ensure they are up to date.
  • Are you eligible to contribute to an HSA, and if so, can you max those out for 2020?
  • If you have recently had a child, does staring a 529 make sense, and more importantly, do you have adequate life insurance coverage?
  • Qualified Charitable Distributions – If you will be taking RMDs in 2021, you can direct part of the distribution to a qualified charity.  Why do this?  Because unless you itemize, and very few people can, charitable contributions cannot be deducted from taxable income.  By sending money from your pre-tax IRA directly to your qualified charity of choice, your charitable donation can lower your taxable income.

The year 2020 has been difficult for all of us, to say the least.  Looking at the glass half full, we have some of the most amazing medical professionals and scientists in the world, working tirelessly on new treatments, the vaccine itself, and its distribution.  We are encouraged by the resiliency of the American people and the small businesses who are adapting to a new normal, and the bounce back in equity markets from one of the swiftest, most dramatic declines in its history.  While we have no idea what 2021 will hold, we are encouraged by these developments.

If you have any questions at all, or would like to schedule a meeting you can do so utilizing the button below or simply calling our office.  We wish you and your families a wonderful, safe, and healthy holiday season and look forward to a new year!

Best,
Clint

KF Update – Markets and Inflation Thoughts Continued

5 Minute Read

Good morning, I hope this email finds you well and you had a nice summer.  I wanted to send along some of our continued thoughts around the markets and inflation.  If you have any questions, please do not hesitate to contact our office.

What is the latest on inflation?
Year over year inflation fell slightly in August from 8.5% to 8.3%, while expectations were for a drop to 8.1% due to lower energy prices.  While energy prices were lower, other parts of the Consumer Price Index, namely housing, outpaced expectations.  Here are the year over year numbers over the past 12 months: 

September 2020 – September 2021 – 5.39%
October 2020 – October 2021 – 6.22%
November 2020 – November 2021 – 6.81%
December 2020 – December 2021 – 7.04%
January 2021 – January 2022 – 7.48%
February 2021 – February 2022 – 7.87%
March 2021 – March 2022 – 8.5%
April 2021 – April 2022 – 8.3%
May 2021 – May 2022 – 8.6%
June 2021 – June 2022 – 9.1%
July 2021 – July 2022 – 8.5%
August 2021 – August 2022 – 8.3%

Source: US Bureau of Labor Statistics

How has the market been performing?
On the day of the August inflation reading last week, most major indexes fell by over 2%, and have been up and down since.  Even with the most recent downturn, the S&P 500 is flat over the past 4 months, and down just over 17% year to date. 

Long-term, the stock market has still been an excellent way to grow capital. 

Here is the performance of the S&P 500 over the past 10 Years:

Here is the performance of the S&P 500 over the past 25 Years:

Source: Kwanti

How long could this downturn last?
Markets are unpredictable so there is no way of telling, but until inflation shows signs of easing, we will most likely continue to experience this volatility. 

While we sometimes think “We do not have time to recover our losses,” historically markets have bounced back much quicker than anticipated.  The 2008-09 financial crisis, one of the worst in world history, took just 49 months (Yellowish Bar Below) for the S&P 500 to recover all of its losses.  Less severe recessions have recovered much quicker:

Source: LPL Research and CFRA Factset

Are there any positives to the markets and economy?
Absolutely: 

  1. Bond yields are rising, providing more income within client portfolios.  The 10-year treasury yield is currently over 3.5%.
  2. Corporations are flush with cash.  In your typical recession, companies turn to layoffs to help offset a drop in demand.  With an ultra competitive job market, corporations may use that cash to avoid significant layoffs and retain as many workers as possible.
  3. Higher US interest rates are leading to a stronger dollar, helping to make imports cheaper to purchase.  As a net importer of goods, this is a positive for the US.
  4. Moving away from the easy monetary policies of the last 13 years could set up our economy and markets for good things longer term.
  5. Stocks are trading at more attractive valuations. Here is the historic Price to Earnings Ratio of the S&P 500:


Source: https://www.multpl.com/s-p-500-pe-ratio

In Summary:
Tomorrow the Fed is expected to raise interest rates by another 0.75%.  It’s important to remember that the markets are leading economic indicators meaning this raise has already been priced into valuations.  In fact, the markets have already been pricing in the next raise as well, another reason it’s so difficult to predict when the markets will turn the corner.  In my experience, it’s usually during the worst of the economic news.

We will continue to rebalance client portfolios as opportunities arise, perform tax loss harvesting where it makes sense, and communicate to clients on a regular basis.

While these downturns can be unnerving, they typically lead to a more healthy economy by weeding out excess, poor monetary policies, and speculation.  Brighter days are ahead for those of us who continue to focus on that long-term perspective.

We hope you find this information helpful, and again, please do not hesitate to contact the office with any questions.

Best,
Clint & Renee

KF Update – Markets, Inflation, & Perspective

3 Minute Read

Good morning, I hope this email finds you well and you had a nice holiday.  I wanted to send along some of our continued thoughts around the markets and inflation.

In times of a declining stock market, we sometimes wonder or lose perspective as to why we are even investing in the stock market in the first place.  In past articles we have emphasized the importance of focusing on the long-term, trying to drown out the noise, and not making any major changes such as selling out of the market.  In this article we want to illustrate why we invest in markets; maintaining the purchasing power of our money and long-term growth of capital.

Inflation
Over time as prices increase, the purchasing power of dollars decreases.  One of the important reasons we invest in the stock market is to keep up with those price increases over time.  Below is an illustration of the increase in the cost of living going back to 1980, 1990, 2000, and then today along with the returns of the Dow Jones and S&P 500.

*Cost of living data and index information was taken from the website http://www.thepeoplehistory.com,  Seek Publishing’s ‘Remember When’ ,www.macrotrends.net, fred.stlouisfed.org, http://www.statista.org, http://www.tasteofhome.com, and http://www.southernliving.com.  

Illustration of Investing at a Stock Market Peak 15 Years Ago
In another example, let’s look back to the financial crisis of 2008.  Let’s say you invested at the peak of the market, the worst possible time, September of 2007.  The Dow Jones at that time was at 13,895 and is currently over 31,000.  Investing at the worst possible time 15 years ago, and going through 3 market downturns, a portfolio still could have appreciated over 130%!!

*Source Kwanti

The Dow Jones ultimately fell to as low as 6,547, so buying into the stock market anytime during the downturn could have been advantageous and increased the long-term growth of a portfolio.

Taking Advantage of a Stock Market Downturn
There are several ways we can take advantage of a downturn in markets, they include:

Rebalancing.  This is part of our role as investment manager on client accounts,  rebalancing client accounts and buying into lower stock prices to help take advantage of market downturns.  We are also reinvesting all dividends within client accounts to take advantage of lower stock prices.  

Roth Conversions.  With lower stock prices, you could consider converting Pre-tax dollars to Roth and paying taxes on the lower values.  When the markets eventually rebound, the growth of those dollars in the Roth account are completely tax free forever.

Increase your Stock Positions.  If you can tolerate moving more to stocks at a time like this, over the long-term it could help the growth of your portfolio and the change does not have to be extreme.  For example, if your portfolio is 50% stocks and 50% bonds, you could consider moving to 60% stocks and 40% bonds.

If you would like to increase your allocation to stocks, or would like a Roth Conversion analysis, please contact the office as we can help with either of those.  We hope you find this information helpful, and again, please do not hesitate to contact the office with any questions.

Best,
Clint, Renee, and Abby

KF Update – Markets, Inflation, & Business Updates

5 Minute Read

Good morning, I hope this email finds you well and you had a nice weekend.  I wanted to send along some of my continued thoughts around the markets, inflation, and some business updates within our practice.

The Markets – What exactly is going on?
Most major US indexes (Russell, Dow, S&P 500, Nasdaq) are either in bear market territory or approaching it.  A bear market is a 20% or more drop from its high.  Since 1980 we have had 9 bear markets with an average decline of 28%, and an average length of 236 days.  Since 1980 we have had 10 bull markets (upward market trend) with an average return of 99%, and average length of 852 days.  Please see the below graphic from Vanguard:

As stressful as these downturns can be, it’s important that we continue to keep that long-term perspective, understanding we are going to need to be patient and ride out these downturns to ultimately reach our investing goals for years to come. 

The importance of staying invested through all markets, up, down and sideways cannot be understated.  Here is another excellent graphic showing the effect of missing just a handful of the best days in the market:

Inflation
Inflation remains persistent but the latest year over year numbers did come down a bit, here is a summary of increases in the Consumer Price Index (CPI) over the past year:

May 2020 – May 2021 – 4.99%
June 2020 – June 2021 – 5.39%
July 2020 – July 2021 – 5.37%
August 2020 – August 2021 – 5.25%
September 2020 – September 2021 – 5.39%
October 2020 – October 2021 – 6.22%
November 2020 – November 2021 – 6.81%
December 2020 – December 2021 – 7.04%
January 2021 – January 2022 – 7.48%
February 2021 – February 2022 – 7.87%
March 2021 – March 2022 – 8.5%
April 2021 – April 2022 – 8.3%

Source: US Bureau of Labor Statistics

We are closely watching these numbers, if the 8.5% turns out to be ‘Peak Inflation’ and we see a steady decline in the year over year numbers, we could see some stability in the markets and more clarity from the Fed on their monetary polices going forward.  If inflation jumps up past 8.5%, we could see additional volatility in markets.

Business Updates
We are really excited to announce we have started a summer internship program for 2022.  The way I was able to get my foot in the door in this industry was through an internship program in 2005, and I don’t know how else I would have gotten that chance. 

After several very impressive resumes and interviews, we hired Abigail Allen, a Finance major from SUNY Brockport.  Abigail grew up in West Winfield and will be entering her Senior year in the Fall, which will be spent studying abroad in Ireland!  We are really excited to have Abby on our team for the summer.

Final Thoughts
Again, we can empathize with all clients how stressful these downturns can be as we never like to see our accounts go down.  While it’s painful to go through, these downturns can set up our markets and economy for great things longer term.  Inflation is forcing us away from easy monetary policy, 0% interest rates, and the Fed stepping in at any market weakness and that is a good thing for markets long-term.  

We hope you find this information helpful, and again, please do not hesitate to contact the office with any questions.

Best,
Clint, Renee, and Abby

KF Update – Market Thoughts

4 Minute Read

Good morning, I hope this email finds you well and you are gearing up for Spring! I wanted to send along a brief email with some of my thoughts on the markets, the economy, and the Ukraine-Russia War.  If you have any questions, please do not hesitate to contact the office.

The Markets & Economy
Stocks have continued a volatile start to the year in the face of persistent inflation, higher energy prices, and now the conflict in Eastern Europe.  

The economy on the other hand is continuing to show strength, with last week’s jobs report coming in well above estimates.  Economists anticipated 400,000 new jobs added in February, and that number was actually 678,000, dropping the unemployment rate to 3.8%.  Unfortunately, solid economic news doesn’t equal ratings for most media platforms so this headline was quickly forgotten.

The Numbers
The S&P 500 is down roughly 12% since late December, while the Dow is hovering around a 10% decline.  When a major index drops from its high more than 10%, it’s considered a correction.  When an index falls 20% or more, it’s considered a bear market, which many times is accompanied by a recession.

On average, markets have a correction almost every year, while bear markets and recessions are more rare, and almost impossible to predict. 

For better context, here is a graph of the S&P 500 over the past 10 years:

Here is the last 25 years of the S&P 500

As you can see over many years, we have had corrections, bear markets, recessions, and the market continues to trend upwards and reward long-term investors.  As difficult as it can be to watch our investment accounts during these downturns, keeping that long-term perspective is one of the most important aspects of successful investing.

I’ve shared this next graphic several times, but it still rings true.  We understand that investing can be very much emotional, particularly in a 24 hour news cycle, social media world; it can be difficult to escape any sort of negative news.  That said, the most successful investors are able to set that emotion aside, tune out that noise, and simply ride out the ups and downs.

KF Portfolio Management
Client portfolios are positioned for rate increases and the possibility of elevated inflation for the foreseeable future.  We also do not own Emerging Market investments within client portfolios, and haven’t for several years.  Emerging Markets are those that invest in countries such as Russia, China, India, and Brazil.  For several years I have not felt comfortable investing client assets in those regions, and it turned out to be a good call as Russian stocks currently cannot be traded, and many Emerging Market Index Funds removed Russian companies after the escalation of the invasion on Ukraine. 

We may be rebalancing client portfolios in the coming weeks if there is more weakness in the equity markets, taking advantage of more attractive valuations.

The Ukraine – Russia War
First and foremost your heart goes out to the millions of people affected by this War.  It’s an awful human tragedy, and I couldn’t begin to understand what the Ukrainian people are going through.  I did a bit of research to try and better understand what exactly is going on, and I found this 9 minute video explaining the history behind the invasion.  This has been an ongoing situation for decades, and the invasion is the latest development.

Putin’s war on Ukraine, explained

In Summary
I do not know how long or what the end result of the War will be, when gas prices will come back under control, or when inflation will recede to more reasonable levels.  I do know that when these things happen, there will be several other headwinds both economically and politically that we will be dealing with and will always be dealing with as long term investors.

It’s not timing the market, but time in the market that leads to investing success.

We hope you find this information helpful, and again, please do not hesitate to contact the office with any questions.

Best,
Clint & Renee

KF Update – Market Thoughts

4 Minute Read

Good morning and Happy New Year!  We hope you all had a wonderful, healthy holiday with family and friends.

We wanted to share several brief thoughts around the markets and economy.  Hope you find this helpful.

What is going on in the markets?
The equity markets have been selling off over the past several weeks with the Nasdaq & Russell reaching correction territory as the Federal Reserve has changed course on its easy monetary policies.  A correction is when a major index (Nasdaq, Dow, Russell) drop 10% or more from its high.  Here are the numbers I calculated for the indexes from their peaks, which happened at different times throughout late last year:

Dow (US Value Focused Companies):  -4.75%
Nasdaq (US Technology Focused Companies): -11.32%
Russell (US Mid and Small Sized Companies): -17.17%
S&P 500 (US Large and Mid Sized Companies): -6.43%

Why are some indexes down more than others?
Interest Rate Expectations.  A rise in interest rates affects small, mid, and growth oriented companies more negatively than value oriented.  The valuation of those companies are much more reliant on future interest rate expectations as investors are generally paying for future profits.  Those future profits are less valuable with higher interest rates.

Why are interest rates going to rise?
The main tool to fight high inflation is to raise interest rates.  The Federal Reserve is planning for several interest rate hikes this year.  Additionally, they are downsizing their bond buying program in an effort to get the current inflation under control.

What does this mean for my investments?
Again, the short-term is always impossible to predict.  By almost all measures, stocks have been at frothy valuations for many months now; you could argue going back to late 2020.  That said, timing when to get in and out of the market is where investors can really hurt themselves. 

Let’s say you thought the market was over valued in December 2020, and you may have been correct and sold out.  You would have missed out on an incredible 2021 in the markets, an over 26% return from the S&P 500 alone!  Missing that kind of a year is devastating to a portfolio’s rate of return.

That said, I understand it’s difficult to just sit back and not do anything.  I feel like our human nature is to want to do something, change something when we see portfolios decrease during these times.  The best thing really is to just ride it out and focus on your long-term goals, which is why we are invested in the markets in the first place, long-term growth of our capital.

What are your thoughts on the markets, economy, and the sell off?
I am actually really encouraged, I know that sounds strange but let me explain!  Markets that simply go up and up are not healthy.  The Federal Reserve keeping interest rates near 0% and buying billions of bonds each month isn’t healthy for an economy long-term.

Valuations get too far away from reality, bubbles are created, and speculators are abound.  These sell offs provide opportunities for me as your investment advisor to add long-term positions to client portfolios at lower, more reasonable valuations.  

An end to easy monetary policies and higher than expected inflation means that our economy is strong enough to no longer need support from the Federal Reserve.  A rise in interest rates means that in a couple of years, retirees who typically have a higher allocation to bonds, may see more reasonable rates of return vs. the paltry 1-2% that bonds are currently paying.  

The markets may indeed continue to sell off, but for long-term investors, it presents a buying opportunity and encouraging signs for our economy.

Are you making any changes to my investments?
We added some inflation-protected bonds late last year, and bond maturities in client portfolios are short in anticipation of rising rates.  For non-retirement accounts, where applicable, we may do some tax loss harvesting. 

We will also be rebalancing client portfolios and taking advantage of any further weakness in the coming weeks.  Other than that, providing ongoing communication, keeping client portfolios high quality, diversified, and flexible is our main focus.

I hope you find this information helpful.  As always, any questions please do not hesitate to contact our office, and to schedule a review meeting simply click on the blue button below.

Best,
Clint & Renee