diversify

Weekly Insights 10/25/21 – 10/29/21

October 23, 2021 by Josie Hodges

A Tale of Two Markets

A few weeks ago, investors were dealing with elevated volatility and downward pressure in the stock market. September went down as the worst month for the S&P 500 since March of last year when the pandemic descended upon the globe. Now, a few short weeks later, sentiment has turned positive and the markets have rebounded, once again trading at all-time highs. What changed during that time? Really not much…..

The market pullback a month ago was blamed on a rise in interest rates attributable to concerns about the Federal Reserve tapering their bond buying, fears of contagion from troubles in the Chinese real estate market, a growing number of coronavirus cases, political debate in Washington around the debt ceiling and spending proposals, and a rise in inflation. These issues remain, yet investors no longer seem concerned. Granted, the debt ceiling issue was temporarily resolved and there is progress around the spending proposals; however, all else remains the same. There was one trigger beginning in mid-October that helped push stock prices higher – earnings. Earnings reports began in earnest last week and in many cases exceeded expectations, reflecting continued growth in corporate profits.

We encourage investors to tune out the extraneous noise, which does not affect the stock market and instead look at what truly does matter – earnings and the overall health of the economy. In that regard, all appears to be fine and there is reason to believe the stock market is once again showing strength. Those investors who maintained a long-term view and were not caught up in short-term noise were rewarded for their patience. The stock market is up over 5.5% in the month of October.

Still Growing

Speaking of the economy, the focus remains on inflation with little doubt that inflation remains persistent and looks to continue into at least the foreseeable future. One of the worries currently garnering attention is a possible return to 1970’s style stagflation – inflation without growth. That time was also characterized by high unemployment, which is not the case today as unemployment is relatively low and continues to fall. Moderate inflation can be good for the economy if it is accompanied by growth. At this point, all indications are the economy is continuing to grow, but there are a few signs of slowing. The various measures of economic growth show very strong growth over the past several months due to the year-ago comparisons when the economy was re-opening. All indications reflect the economy remains on solid footing and if it is slowing, only from high levels.

Looking Ahead

The largest driver of the markets over the next week will likely be earnings announcements and we anticipate strong earnings to continue, which should help fuel further stock market gains. We also continue monitoring the infrastructure and spending bills in Congress, especially how the revenue will be raised to pay for each (i.e. taxes).

Many of the proposals for tax increases from Democratic Congressional leaders have been scaled downwards due to vocal opposition from within their own party. The size and scale of the original proposals reached well into the trillions of dollars to be funded by the American taxpayer. Regardless, even though the total price tags on these spending bills are decreasing they remain extraordinarily large and require funding, which could only be reasonably found in material and sweeping tax increases and/ or increasing the overall national debt.

If you are interested in discussing how taxes could impact your retirement and how we might reduce the effect Uncle Sam has on your hard-earned savings, please give us a call to schedule a planning session to review your individual situation.

Have a wonderful week!

Nathan Zeller, CFA, CFP®

Chief Investment Strategist

Secured Retirement

nzeller@securedretirements.com

Please contact us if you would like to review your individual financial plan or learn how the TaxSmart™ Retirement Program can help you.

info@securedretirements.com Office phone # (952) 460-3260

Weekly Insights 10/18/21 – 10/22/21

October 15, 2021 by Josie Hodges

Did that Really Just Happen?

Sometimes when things are moving along nicely, whether it is a ride in a car or on a boat, or even on a larger scale as you go through life, something occurs that really catches you by surprise. These events can be good or bad and the impacts can be relatively minor or quite significant. Often these occurrences happen so quickly you stop and ask yourself if that really took place. The stock market seemed to have done just that last week, fortunately in a positive way.

The markets began the week drifting lower in what appeared to be more of the same negative sentiment that we’ve experienced the past few weeks, but then something great happened on Thursday when the S&P 500 posted its largest single day gain since March. This momentum continued with further gains on Friday. The big move was attributed primarily to a strong start to the earnings season, but also the weekly jobless claims numbers continue to drift lower reflecting continuing strengthening in the labor market. It also helps that nationally we seem to be past the peak in the recent surge of coronavirus cases and a short-term agreement was made to raise the debt ceiling, averting a default by the federal government.

Higher and Higher

We’ve all experienced higher prices recently on the things we buy, so it was not a surprise that the inflation data released by the government last week showed inflationary pressures persist. The Consumer Price Index (CPI) rose by 5.4% compared to a year ago, remaining at a 13 year high and the fifth month in a row inflation came in at 5% or higher. This was driven primarily by higher energy prices and a surge in food prices, plus the largest increase in rent in 20 years. The Social Security Administration uses CPI data to adjust social-security payments and on a positive note announced last week the cost-of-living (COLA) increase for next year is 5.9%; the largest annual increase in about 40 years.

Also on the inflation front, the Producer Price Index (PPI) increased 8.6% on an annual basis, which is the highest reading since the early 1980s. The PPI measures the change in the price of goods sold by manufacturers and therefore is generally a leading indicator of consumer inflation. Of note in this report was that a few months ago the price increases were attributable to a few products, namely lumber and used vehicles, but now the increases are more broadly spread amongst additional goods and services. With inflation remaining persistent, many economists are no longer referring to it as being “transitory” but instead are now describing it as being “sticky.”

Looking Ahead

Earnings season kicks off in earnest this week, which we anticipate will provide further tailwinds for the markets. Analysts are revising earnings estimates higher, albeit to a lesser extent than the previous two quarters. Congress continues to consider large spending bills, but the price tags on each seem to be coming down which is likely another factor for optimism in the markets. We continue to keep a close eye on interest rates, especially in light of the recent inflation reports. There seems to be a disconnect between bond yields and inflation, with low bond yields discounting that inflation will remain on a prolonged basis. We think inflation will continue and bond yields will edge higher. Since bond yields and bond prices have an inverse relationship, any move higher in yields would cause a drop in prices. Traditional fixed income may not provide the safety it has in the past so we would encourage you to consider other vehicles for providing income and diversification to your equity portfolio. We would be glad to discuss strategies with you to protect your portfolio from inflation while providing protection in the event of downturn in the stock market.

I will be sharing more insights and strategies during our monthly Lunch and Learn on October 25^th. You can join us in-person at our office here in St. Louis Park or watch online. See this week’s Secured Retirement Weekly Newsletter for more information and to sign-up.

Have a wonderful week!

Nathan Zeller, CFA, CFP®

Chief Investment Strategist

Secured Retirement

nzeller@securedretirements.com

Please contact us if you would like to review your individual financial plan or learn how the TaxSmart™ Retirement Program can help you.

info@securedretirements.com

Office phone # (952) 460-3260

Why Diversifying Your Income is Critical in Retirement!

May 1, 2019 by Joe Lucey

Here are some recent headlines from The Wall Street Journal, MarketWatch and Investment News that should get your attention …

“Medicare trust fund will be exhausted in 2026.”
“Social Security to Tap into Trust Fund for the First Time in 36 Years.”
“Stock Market Returns Over the Next Decade Will be Well Below Historical Norms.”
And “The Pension Hole for U.S. Cities and States is the Size of Germany’s Economy.”

Social security, Medicare, pensions, and stock market returns are all critical components of your retirement. But their financial stability is now in question. If you’re counting on any of these things to help support you, you have good reason to be concerned.

In a best-case scenario, this could have a serious impact on your lifestyle in retirement. In a worst-case scenario, it could force you back to work.

This underscores one very critical thing. You can’t rely on just one source of income in retirement. You must have a diversified number of income sources.

We will be covering why diversifying your income sources in retirement could help you avoid a financial disaster, as well as how to navigate the critical challenges ahead with Medicare and social security, your options to generate income today – no matter what’s happens next on Wall Street, and more.

Successful retirements are not built on assets, or the amount of money you’ve saved, they’re built on your ability to generate income in retirement. Stock markets go up and down, but your income is the backbone of your retirement game plan. You need a plan to make your money break a sweat.

Generating income is tougher today than ever before. Traditional “go-to” options for generating income are dead. Pensions are all but history. Although interest rates are on the rise, they are still historically low, meaning rates on CD’s and savings accounts are a joke. $500,000 in a one-year CD today will only fetch roughly $700 a month. And that’s before taxes! And it doesn’t look like these rates are going to significantly change anytime soon. Bond yields aren’t any better, and people still fear investing in a stock market that remains at near highs. Historically speaking, we are well overdue for a bear market.

According to a recent Kiplinger – From 1926-2017, bull markets lasted on average nine years. If that is the case, this bull market should be ending right about now, as it just turned 9 on March 9, 2018. Also, the typical bear market lasts 1.4 years, with an average cumulative loss of 41%. This mean trouble is on the horizon (just look at the recent volatility).

Show me someone who lives in constant fear of running out of money, and I’ll show you someone who doesn’t have a plan to generate income. It’s that simple. However, you can’t just have an income plan, you need a diversified income plan. It’s risky to rely on one source of income in retirement. The following are some potential sources of income, but this is where you should use your expertise to go over these topics in detail.

Dividend stocks – Most mature companies pay a recurring dividend to shareholders. In most cases, these dividends are paid quarterly to shareholders who owned the stock on the date of record. Typical yields for most dividend focused ETFs are 2-3%.

Investment grade corporate bond fund – has bond holdings from highly-rated companies in a proportion that is meant to mimic the indices they track.

Municipal bonds – debt obligations issued by states or other municipalities to fund projects. Some, but not all municipal bonds are exempt from federal tax for all investors and exempt from state tax if the investor lives in the state of the municipality issuing the bond.
REIT – Real estate investment trusts own a portfolio of real estate, the purchase of which is financed by debt and the issuance of securities to investors. A REIT can be public or private and open-end or closed-end.

Reverse mortgages – the bank pays you, you keep your home, and it remains part of your estate. Essentially, you are putting your home equity to work for you.

Commercial/residential/multi-unit real estate – Buying a rental property is a rather straightforward proposition, especially if you know the local market well that you’re investing in.

Annuities – insurance products that pay out over your lifetime, no matter how long you live. And these products have come a long way over the last few decades.

However, the specific strategies that will be used for you will be totally different than anyone else, because even a minor difference in your age, assets, risk tolerance, or life expectancy could trigger a major shift in strategy.

We’ve Moved! 6121 Excelsior Blvd. St. Louis Park, MN 55416

Want a Retirement Free From Financial Stress?
Book Your Free TaxSmart™ Financial Review Today.

We’ll review your finances and tell you what you can do immediately to get on the right track for retirement.

Download the Top 10 Mistakes That Increase Your Taxes

In this free report, you’ll learn…

Danielle Christensen

Paraplanner