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Nathan Zeller

Weekly Insights 10/11/21 – 10/15/21

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Running Out of Time

At our recent TaxSmart™ Retirement Summit, Ed Slott shared a quote from legendary football coach Vince Lombardi – “We didn’t lose the game; we just ran out of time.” The point Ed was driving home was that retirement lasts a great deal of time for most people and therefore requires proper planning. This quote is also applicable to short-term investing, but in a different way – as an investor you can control the amount of time spent invested and decisions made, improving your chances for success. For those who are short-sighted, the volatility of the past few weeks might have a negative impact on investment results but those that maintained a long-term outlook were rewarded.

After closing Monday at its lowest point since mid-July, the S&P 500 rebounded and ended the week with a gain as concerns around the U.S. government defaulting on debt payments abated with an agreement being reached to extend the debt ceiling through early December. It is also worth noting that the intraday turnaround on Wednesday was the largest since February. There have been several events affecting the markets recently but one being attributed to the market pullback is the rise in yield of the U.S. Treasury 10-year bond. The rise is in anticipation of the Federal Reserve reducing, or “tapering”, its monthly bond buying program by the end of the year. Bond yields and prices have an inverse relationship so as bond yields rise, bond prices fall and vice-versa. In the past there has been a “flight to safety” during times of stock market volatility where investors move money into bonds, pushing prices higher and therefore bonds provided protection against market downturns. With yields rising and prices falling, that has not been the case over the past several weeks. This is a trend we expect to continue as interest rates move higher so we would caution you against using fixed income as portfolio protection and instead consider other alternatives to mitigate stock market risk.

Jobs, Jobs, Jobs

The economic releases during the first full week of any month are centered around employment, with special attention on the jobs numbers this month since last’s month’s numbers were much lower than expected. The number of new jobs created were again less than expectations, but still reflected continued growth in the labor market especially since the unemployment rate dropped considerably. Also, the data from the past two months was revised higher showing job creation was better than previously reported. We expect to see a continuation of job growth now that unemployment stimulus payments have ended and the number of job openings remains at an all-time high. Previously the Federal Reserve indicated it plans to taper its monthly bond buying program later this year as long as the September jobs report was “decent.” While this report was less than expected it was probably not bad enough to deter the Fed, assuming there is not a significant downside surprise in next month’s employment report.

Looking Ahead

Even though there was an agreement to extend the debt ceiling, the issue is not fully resolved and there will no doubt be further political wrangling in Congress. Not to mention ongoing debate about funding the government and the proposed spending bills. As we’ve said in the past, eventually we think these will all come to a resolution over the next couple of months but not without some partisan battles, resulting in further market volatility.

Updating and rebalancing your portfolio is necessary for managing investment risk, so we would advise you to contact us if you have not had a portfolio review recently or if the recent volatility is causing concern. If you do not have a strategy in place, we can help develop one unique to your specific situation. The time of a football game may be short but your time in retirement is long so be sure you have a complete plan in place.

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 10/4/21 – 10/8/21

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(Not So) Sweet Emotions

It is hard not to get emotional about money since your lifestyle depends upon it, especially for those nearing or currently retired, which is why emotions amplify when the stock market goes through gyrations. When the market moves up, the emotions are most likely happiness or euphoria, and depending upon the magnitude when the market moves down the emotions become worry or fear. However, if we do our jobs properly as your investment advisor, we have conveyed that stock market investments are meant to be long-term and therefore remove the short-term emotional swings, which consistently occur within the stock market.

Unfortunately, the major stock market indices closed out September with a monthly loss and the S&P 500 Index broke its seven-month winning streak. Even though the benchmark was lower for the month, it did manage a small gain for the quarter, making it six quarters in a row with positive returns. There were numerous market-moving events during the month, including a continued increase in coronavirus cases, concerns around the Federal Reserve tapering its bond buying program, persistent supply chain pressures, worries in China, and ongoing fiscal policy debate in Washington. While some of these issues might have a short-term impact on the market, they do not impact our longer-term views of the market. We still feel the economy is strong and bullish sentiment will prevail.

Economic Expansion

The economic releases of the past week pointed toward continued growth. Two key reports, Consumer Confidence and the Index of Consumer Sentiment confirmed consumer expectations remain strong. We follow these closely since they are an indication of expected consumer spending, which makes up about 70% of the GDP. Also positive, a preliminary reading of durable goods orders came in better than expected, which was surprising given the multitude of recent headlines regarding supply-chain issues.

The Fed’s preferred measure of inflation, Personal Consumption Expenditures (PCE), came in higher than expected and at the highest level since May 1991. This data coupled with Fed Chair Jerome Powell’s testimony before Congress last week where he acknowledged inflationary pressures remain elevated and more sustained that previously thought, leads us to believe the Fed may be prompted to act sooner than anticipated with an interest rate increase occurring as soon as the early part of next year. During his testimony, the Fed Chair also stated the Fed’s outlook for next year remains positive with growth rates above normal and continued reduction in unemployment.

Looking Ahead

With the calendar turning to October, we expect market volatility to continue. Eyes will be on Congress as political wrangling continues around proposed spending bills, funding the government and raising the debt ceiling. It is the last item, raising the debt ceiling, that has the most potential to cause movements in the markets. Not raising the debt ceiling prohibits the federal government from making interest payments on its debts, which would push it into default. We view this as being extremely unlikely since it is in the best interests of both parties to avoid this scenario and come to an agreement, but in the meantime, this will weigh on the markets. Also on the radar will be any signs of action from the Fed, specifically clues about tapering the bond buying program and how this affects interest rates.

We remain watchful and focused on the issues affecting the market, which is vital during times of volatility and especially given recent events. If you have not had your portfolio reviewed recently, please call us to schedule ensuring your plan remains on track. Our priority is to position your investments in a manner where you are comfortable and you do not experience the emotional roller coaster often associated with being invested in the markets.

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 9/27/21 – 10/1/21

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That Escalated Quickly…

After the relatively quiet summer months, the expectation was that market activity would heat up and we would see increased volatility, as is traditionally the case when we transition from summer into fall. This past week exceeded those expectations as it was one of the most turbulent weeks we have seen in the markets in a while.

Last week began with the largest single day stock market sell-off since May, which was attributed to concerns regarding the liquidity of one of China’s largest property developers. The very leveraged Chinese real estate market remains fragile and there are worries it will spill over into the banking sector if the government does not intervene. However, banks in the U.S. have very little exposure to Chinese real estate so any financial damage overseas is not likely to affect the U.S. markets.

The middle of the week brought the highly anticipated Fed meeting. It came as no surprise that the Fed held interest rates steady, near zero, but it did hint that a rise could come sooner than previously anticipated with updated projections now showing a rate hike prior to the end of 2022. The Fed also signaled it plans on reducing (or “tapering”) the monthly bond purchases later this year and fully wrap up the program by the middle of 2022. These signals provided positive support for the markets since they indicated the Fed views the economy as moving past the pandemic recovery and gaining stable footing on its own.

Despite the fear that hit the markets early in the week, they rebounded quickly and were able to realize gains by the end of the week. The major market indices are still slightly negative for the month and the 7-month string of positive returns looks to be in jeopardy. If the markets can make modest gains this week then the winning streak will remain intact.

It’s the economy (stupid)…

We are not intending to offend anyone, but this statement made famous by James Carville during the 1992 presidential election, which is still quoted frequently, does come to mind. While the stock market does not always sync with the economy, there is little argument that a strong economy lends itself to a strong stock market and vice versa – a weak economy brings the markets down. Despite global events, the domestic economy remains on solid footing and is showing no signs of slowing down. The current economic expansion continues to drive robust corporate profits and earnings growth, which is why we are not overly concerned with events that impact markets on a short-term basis. We maintain our belief that the markets will continue to march higher over the months ahead. We also think inflation is not transitory, but rather a longer-term issue, which the Fed even acknowledged last week. A longer-term threat we do see facing the markets is the possibility of entering a period of stagflation, which is inflation without economic growth. As of now we place a low level of likelihood of that occurring since the economy continues to expand.

Looking Ahead

The real estate situation in China appears to be contained for now but other risks still abound in the market. The usual suspects from the past few months remain at play – extended stock valuations, spread of the delta variant of Covid, continued inflation, and potential changes in fiscal policy. Our thoughts are that stock valuations will normalize through earnings growth and the concerns over the impact of Covid will continue to diminish. In the short-term, legislative action, especially debate around raising the debt ceiling and the potential passage of massive spending bills, has the potential to cause further market volatility. And we continue to believe sustained inflation, while not always making daily market headlines, remains the largest threat to portfolios over longer times periods for the foreseeable future.

This past week has displayed the benefits of being patient and adhering to a long-term investment strategy during times of volatility. This is not only true on a daily and weekly basis, but also on a monthly and quarterly basis. Successful investing involves time and patience. Do not hesitate to contact us if you would like to review your portfolio or investment strategy.

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 9/20/21 – 9/24/21

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Being Above Average

The transition from summer to fall entails children returning to school, which holds special meaning this year given the challenges with Covid over the past two school years. Overcoming these challenges has proven that the children of Minnesota are indeed above average as has been touted, which from our biased opinion has always been a factual statement. Speaking of averages, we are seeing aspects of the markets and economy that are also above average. Let’s begin with the stock market, specifically the S&P 500 since it is regarded as the most common benchmark used for overall market performance. Over the past three-, five-, and ten-year periods this index has provided average annual returns in the neighborhood of 16-17%, all better than the long-term average of 10%. Some might argue that the market will “revert to the mean” which can either occur via a market pullback or slowly over time with below average returns. Our thoughts are the latter is more likely than the former and we will see a steadily increasing market, albeit at a slower pace than what we’ve experienced over the past decade. Another strong possibility is the long-term average returns of the stock market trend higher given current easy monetary policy and technological advances driving further growth. As a side note, the strong market returns mentioned above include a period of time where economic activity came to a near standstill due to a pandemic which led to a short-lived bear market where stock prices dropped dramatically. This demonstrates the importance of staying the course and adhering to your investment strategy, especially during times of volatility.

Inflation (again) and the Consumer

In what may seem like a broken record, we again want to mention inflation but it is difficult not to since we continue to feel this has the potential to have a very large impact on retirement savings over the next few years. Headlines last week proclaimed the inflation situation was improving since the twelve-month change in the Consumer Price Index (CPI), which is a measure of the prices for consumer goods and services, was below consensus estimates. However, what the headlines overlooked is this change in the CPI level remains well above long-term averages and is at the highest rate since 2008. Core CPI, which removes food and energy since they tend to be somewhat volatile, is increasing at the highest rate in 30 years!

In some good news, retail sales figures for August were released last week and they showed a surprise increase versus an expected decrease caused by concerns about rising Covid cases. This indicates consumers are continuing to spend money and since consumer spending makes up about two-thirds of the U.S. GDP (Gross Domestic Product, which is the value of all goods and services produced within a country) this was a good sign for the economy and points toward continued growth.

Looking Ahead

Not surprisingly, September has been a somewhat volatile month with the major market indexes taking a breather from their upward trajectory and pulling back from their recent highs. This volatility is typical and not unexpected since historically September is the most challenging month of the year for the stock market. From a historical perspective the last three months of the year tend to be the strongest quarter for the markets. We hope this is the case again this year but with the strong performance year-to-date that may be difficult to achieve. But even if the market is flat or does not live up to historical expectations over the next three and a half months, we will still end the year with above average returns.

Our work of reviewing economic data and studying market themes so we can best position portfolios to protect against risks and profit from opportunities continues. We also endeavor to keep our clients informed of what is happening in the market and how it impacts your portfolio. We are not satisfied with being above average in this regard but rather strive to excel. Please let us know if we can be doing anything differently or if there is any other information you would like to see.

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 9/13/21 – 9/17/21

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Summertime Blues

A few weeks ago we were honored to have longtime sports personality Patrick Reusse join us for our monthly Lunch & Learn. Not only did he provide his thoughts on the Vikings upcoming season, but he also shared some stories including one of how the late Sid Hartman was able to track him down in a pasture in Prior Lake back in 1963 when a young Mr. Reusse thought he would skip work on a nice summer’s day. While many of us maybe have had thoughts of skipping work when the weather is nice, the financial markets do not take summer breaks but they often slow down. Fortunately, this year was a little different as the stock market did not show signs of slowing and continued its steady march upward. However, now that we are past Labor Day, which marks the unofficial end to summer, it seems some changes are beginning to occur.

The S&P 500 reached 53 new highs year-to-date through the end of August, which is the most ever through the first eight months of a year. September has gotten off to a rocky start with the markets being slightly more volatile and not continuously providing the gains we had become accustomed to (and spoiled with) over the past few months. Some of the culprits being blamed for this change in market activity include the withdrawal from Afghanistan, damage from Hurricane Ida, and continued concerns about Covid’s prolonged impact. While we are mindful of these events, we are more focused on those factors which we think will have longer term impacts including a potential slowdown in economic growth, changes in Fed policy and impending spending bills in Congress. As we have been anticipating for a while, a lot of market action could occur over the next month so we expect volatility to continue.

Inflation Continues

Last week’s major economic release was the Producer Price Index (PPI) which measures prices of goods at the producer level before they are passed along to the final consumers. An increase in PPI will most likely lead to an increase in consumer prices, as measured by the Consumer Price Index (CPI). The year-over-year change in the PPI is the highest since this measure began being kept in 2010 and the fact it has been accelerating over the past few months indicates inflationary pressures will continue to persist.

We currently view inflation as being a very substantial risk to long-term investor’s portfolios since it has potential to erode purchasing power, having an especially profound impact on retirement savers. This is why it is vital you have an income plan in place that takes into account inflation and invest in assets which benefit from higher prices.

Looking Ahead

On the economic front this week, we will receive further inflation figures with the Consumer Price Index (CPI) which will garner a great deal of attention in light of last week’s PPI data and fact that inflationary pressure no longer appears to be transitory from the pandemic. Also due to be released are retail sales numbers from August, which are expected to fall slightly due to concerns with the Delta variant and the anticipation of stimulus payments ending. Retail sales are a strong driver of the U.S. economy and an indicator of future spending so a significant surprise in either direction has the potential to move the markets.

If you missed seeing Patrick Reusse in our office and want to hear the stories he shared or his insights into the local sports teams, you can watch the replay on the Secured Retirement YouTube channel. Even with summer winding down and fall sports seasons starting, we remain focused on watching the markets and economy so we can best position portfolios and keep our clients informed.

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

Secured Retirements Insights 7/26-7/30

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What a difference a day makes

I grew up in South Dakota, where they have a saying, “If you don’t like the weather, stick around for 24 hours.”  It seems the same can be said about the stock market.  On Monday, the markets suffered the worst single-day losses of the year due to concerns about rising coronavirus cases from the spread of the Delta variant and the potential for restrictions being re-imposed.  Given the strong gains in the market already this year, many analysts (a.k.a. talking heads/fear mongers) have been sounding the alarm about a pull-back. Hence, there was worry Monday’s losses were the beginning of a longer-term downward trend.  Fortunately, these fears were soon quashed as the markets quickly recovered losses and went on to show gains by the end of the week.  Besides shrugging off concerns about coronavirus, the market was driven higher by strong earnings reports, especially from Dow components IBM, Coca-Cola, and Johnson and Johnson. 

Those who did not keep a daily eye on the market last week would have thought the market simply enjoyed a march upward.  Monday’s sell-off saw the S&P 500 experience a 2% single-day loss, but by Friday, the S&P 500 was higher by almost 2% compared to a week ago.  This is a great example of why investors should not be concerned with day-to-day, or even week-to-week, market gyrations but instead should stay focused on the longer term. 

Many people remain on edge regarding another round of coronavirus cases spreading, specifically the potential for restrictions being re-imposed.  My prediction is these concerns abate as time passes, especially as more people are vaccinated.  Also, it seems the majority of people in the U.S. and most developed countries have “COVID fatigue,” so any large-scale restrictions would be met with resistance and, in most cases, would not be politically popular.  Coronavirus will become less, and less of a factor on the market – similar to when you throw a rock in a lake, the first splash is the biggest but the farther away you get, the smaller the ripples. 

Housing

It was a relatively quiet week for economic releases, with the exception being housing data.  The National Association of Homebuilders (NAHB) Housing Market Index, Existing Home Sales, and the number of building permits all came in below expectations while Housing Starts were above expectations.  There is no doubt the housing market may be a little “over-heated” and due for a slow-down but should be more of a leveling-off versus a crash like we experienced in 2007/2008 since conditions are different this time, namely tighter lending standards, lower interest rates and a growing demographic of people looking to purchase a home.  The recent housing craze has been driven by an increase in demand since workers are not as geographically constrained due to the ability to work-from-home and supply-chain issues with raw materials due to COVID-related shutdowns.  The supply chain issues are being worked out with raw materials prices normalizing, but labor costs remain a concern. 

Looking Ahead

The next week will be busy on the earnings front with tech leaders Apple, Microsoft, Alphabet (Google), and Amazon set to report.  Any downside earnings surprise could have an adverse impact on the market, but that seems unlikely since all have historically provided strong, consistent earnings, which does not seem likely to change in the near term.  It is also a heavy week for key economic releases, including Durable Orders, Consumer Confidence, Gross Domestic Product (GDP), and Personal Consumption Expenditures (PCE), any of which have the potential to move the markets if there is a large variance from expectations.  PCE is the Federal Reserve’s primary measure of inflation, so there could be special attention paid to that number, not necessarily by the financial news outlets but more so by economists and analysts.  Speaking of the Fed, the Federal Open Market Committee (FOMC) meets on Tuesday and Wednesday, but we do not expect any surprises since they generally telegraph expectations well in advance.

That will bring us to the end of July. Historically, August has been a relatively quiet month in the markets, gearing up for what have traditionally been the more volatile months of September and October.  We will have to see if this year brings more of the same. 

Have a wonderful week!

Nathan Zeller, CFA, CFP®

Chief Investment Strategist

Secured Retirement

nzeller@securedretirements.com

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Danielle Christensen

Paraplanner

Danielle is dedicated to serving clients to achieve their retirement goals. As a Paraplanner, Danielle helps the advisors with the administrative side of preparing and documenting meetings. She is a graduate of the College of St. Benedict, with a degree in Business Administration and began working with Secured Retirement in May of 2023.

Danielle is a lifelong Minnesotan and currently resides in Farmington with her boyfriend and their senior rescue pittie/American Bulldog mix, Tukka.  In her free time, Danielle enjoys attending concerts and traveling. She is also an avid fan of the Minnesota Wild and loves to be at as many games as possible during the season!