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                    [post_date] => 2022-05-17 08:36:27
                    [post_date_gmt] => 2022-05-17 13:36:27
                    [post_content] => By Craig Lemoine, Director of Consumer Investment Research











 

Suppose last year you went grocery shopping and filled your cart with $100 worth of items. This year, you went to the same store and bought the same items – this time, the bill rang up at $107.50.  

The difference of $7.50 represents an increase in average consumer goods and services. Divided by the original period ($100), it illustrates a 7.5% inflation rate.  

Inflation is the loss in purchasing power due to the increase in costs of goods and services in an economy. The Federal Reserve’s long term inflation target is 2%, allowing for some years of lower consumer inflation and some years of higher inflation. When inflation surges, the Federal Reserve has tools to help cool off the economy, including raising interest rates and selling treasury notes. Both tools are intended to raise the cost of borrowing, causing businesses and local governments to spend less, effectively turning a release valve on inflation pressure. 

Inflation is a lagging indicator. Traditionally, inflation lags real gross domestic product growth and economic recoveries. When America reaches full employment, wages rise higher. Higher wages coupled with greater spending power traditionally push prices upward. Historically, inflation has followed our economy returning to health.  

In the United States, inflation is measured through the Consumer Price Index. The CPI measures the difference in what we pay for goods and services over time and is reported monthly.  

The CPI is weighted based on an average urban household, which may be different than inflation experienced by a particular person. For example, a retiree may consume more medical care and less education than an average family, creating a unique inflation rate for that family. CPI provides a reference point for inflation but is not absolute across all consumers.  

Inflation leads to a reduction in spending power over time. If 20 years ago an apple cost 50 cents, the same piece of fruit would cost $1.32 today.  
Different Types of Inflation
Inflation takes many different forms, some more potentially devastating than others.  

 	
Transitory Inflation is temporary inflation, caused by a spike, bottleneck or rush on a commodity or consumer good. Transitory inflation may be the result of political pressure and global conflict, which will resolve as the conflict ends or supply chains reemerge.  
 	
Hyperinflation is a worst-case inflation scenario. Hyperinflation is a product of loss of confidence in a country’s central currency. In the 1920s, Germany experienced a 30,000% monthly inflation rate, as the world devalued the German Mark.  
 	
Stagflation occurs when prolonged price growth exceeds real GDP growth. Stagflation is challenging because traditional tools to fight inflation – such as increasing the discount rate – lead to higher unemployment. The United States saw a period of stagflation in the late 1970s.  


 	
Deflation occurs when prices drop. Price drops may be the result of a recession, where demand falls consistently over time. Deflation tends to occur by sector and is often transitory.  
 	
Creeping inflation is a term generally used to describe prices increasing 0-3% annually. Consumers may not notice these price increases that often keep up with wage growth.  
 	
Walking inflation is a term generally used to describe prices increasing 3-10% annually. Consumers may hoard inelastic goods, raising prices further. A combination of rationing, monetary and fiscal policy may be needed to combat walking inflation.  
 	
Core inflation measures the rise in prices except for food and energy. Food and energy tend to be more volatile and removing those elements from an inflation calculation provides a steadier growth rate.  

Tips to Beat Inflation  
Inflation is particularly troubling when prices rise higher and faster than wages. When rent, food and transportation costs exceed wage growth, inflation becomes painful.   

 	
Consider your investments. Historically, precious metals, commodities, large-company “blue chip” stocks, I-bonds and real estate investment trusts (REITs) securities have held their value better than riskier assets during higher inflationary periods. Bond values tend to fall when interest rates rise, though their yields increase. Talking with an investment adviser will help you develop a portfolio that considers inflationary pressure in line with your financial goals.  


 	
Review your budget and personal spending. Inflation gives families a great opportunity to sit down and talk about budgets. Are there streaming or subscription services you no longer use? Can you change your ratio between groceries, takeout and meal kits? Shave off ancillary costs where you can.  


 	
Get strategic with your emergency fund. Financial planners tend to recommend keeping three to six months in savings to help protect from unemployment or other unforeseen costs. This can be tricky when the average interest paid on savings accounts remains less than 1.0%. i As you skim down your budget, you should be able to recalculate your emergency fund. Also consider laddering CDs or I-Bonds for a portion of your emergency fund. Talk with your financial adviser about building a custom plan for your emergency fund.  


 	
Revisit your financial goals. Meet with a financial planner to talk about college savings, your retirement or other long-term goals. Cost shocks may create a need to adjust your savings and spending goals.  

Inflation is disruptive to even the best laid plans. It is the true enemy of retirement planning and requires thoughtful strategies and a well-rounded portfolio. Meeting with an experienced financial professional can help you develop a plan to keep your goals on track. 

Schedule a strategy session with a member of our team to start the conversation. 

Craig is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Craig is in no way related to Cetera Advisor Networks LLC or its registered representatives.
                    [post_title] => What to Do About Inflation’s Impact on Your Finances
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                    [post_date] => 2022-05-09 08:49:18
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                    [post_content] => By Matt Lewis, Vice President, Insurance 

Just because we express a desire to do something, doesn’t mean we’ll do it.  

Take insurance as an example. The 2021 Insurance Barometer Study from LIMRA noted that concern for life insurance rose faster than concern for any other categories where consumers expressed financial concern. Also, more people expressed that they intend to buy life insurance because of the pandemic.  

However, LIMRA also reports that only 52% of the population is insured, down 2 points year over year. That means roughly half of the U.S. population is uninsured. And if we dig deeper into that 52%, we might find that much of that insurance is group-owned versus individually owned. Digging even further, many of those people who are insured are actually underinsured.  

Some reasons for this could be that people have misconceptions about life insurance, like how expensive it is. People overestimate the cost of life insurance. LIMRA reports that people oftentimes estimate life insurance is triple its actual cost and as such they might avoid it. But that shouldn’t be the case as life insurance is a valuable tool to protect you and your loved ones. It can also be used as a retirement and college planning vehicle.  

In this article, we’ll go over the value of life insurance and when you should purchase or update existing policies.  
Looking at Your Life Insurance Program
A professional can help you determine whether you need term or permanent life insurance. People who overestimate the cost of insurance might be more comfortable with a less-expensive term policy. Coverage is likely needed, and it’s better to have coverage at a lesser rate with term than no coverage at all.  When you look at your life insurance program, the things that should guide it are life events. There are a handful of major life events where you should consider getting a policy or updating one if you already have it.  

Major life events include getting married, having or adopting a child, becoming a stay-at-home parent, getting a divorce, getting a new job, starting a business or becoming self-employed, buying a house, caring for aging parents, sending kids to college and entering retirement. Depending on when those events happen, you could also walk through the age discussion.  
A Deeper Dive into Common Life Events 
Let’s take a deeper dive into the three common life events. 
Buying a Home 
Your home is one of the biggest assets you’ll ever purchase, and it takes a long time to pay for it. A 30-year mortgage is still a very common way to purchase a home, and insurance provides the leverage to ensure your family stays in the home.  

You bought your home for a reason – it’s likely in the neighborhood you wanted, the school system you wanted your kids to attend – and you don’t want to run the risk of having that family harmony disrupted.  

You want to make sure that if something happens to you, your family can stay in the home, stay in the same neighborhood, stay in the same school and that your spouse stays close to any support system they’ve built near their house. That’s why you protect that asset and ensure there’s an infusion of dollars when you need it the most. 

Any time you take on a new mortgage, you want to ensure your surviving spouse can pay for the house when you’re not there.  
Having Kids
When you have kids, you need to evaluate your insurance coverage. 

When you’re young and just getting started, you might think your spouse or partner can handle things on their own, so you don't give life insurance much consideration. But when you have kids, you’ve added an extra element.  

Whether it’s one child or multiple, your financial obligation goes up. You have to think about things like paying for childcare, ongoing expenses associated with raising kids and saving for college.  
New Job or Promotion 
When you get a new job or a promotion, you’ll likely have a higher income. When your income increases, oftentimes your social economic landscape might change. You might have more debt obligation from buying a bigger house, and you have more income to protect.  

Families get accustomed to lifestyles based, on income and as incomes increase, those lifestyles will potentially change along with them. You want to make sure your coverage is compensatory to your higher income. 
 
Insurance as Part of College and Retirement Planning
Life insurance policies can also be used as additional retirement savings vehicles. Unlike a qualified retirement plan – where the government tells you how much to put in, how much to take out and when to take it out – with a properly funded life insurance policy, you can put in as much as you want based on the policy, and there is no limit as to when you can take it out. For example, nobody will stipulate that you have to take it out at age 72½.  

In comparing saving this way to a Roth IRA, the income stream could be income-tax free if it’s structured properly. The plan would pay a death benefit to beneficiaries if it wasn't used as a retirement savings vehicle, as initially intended. 

If you have kids, you can use certain policies as part of an approach to saving for college. If your child is already 15, it might be too late to incorporate this strategy as you won’t have enough time to plan for the cash value to “cook.” But if you do have the time, a professional can help you structure a policy as part of your college planning strategy.  

If you’re a parent funding college, you could use a life insurance policy’s cash value dollars tax-free to pay for a portion of college – maybe room, board or books. It’s best to have this be part of a broader strategy that includes other elements, like 529 plans. 

For example, for our two kids in college, we used 529 plans for the bulk of our planning, but as a reserve, we have a permanent life insurance policy that has cash value set aside. So if we don’t have enough, we could use this as a secondary source of college funding. 
 
Are You Underinsured?
Oftentimes people don’t take into account all their needs and compare those with the coverage you have. You might be going off what your colleagues or friends are doing, or you might be going off what you see or hear on TV ads. 

Professional help and a formal needs analysis would be ideal, but to get a quick gauge on whether you have enough coverage, look at four elements:  

 	
Debt obligations. First look at your debt obligations, including your mortgage and short-term loans (like car loans).  


 	
Your age. For example, if you are in your early 40s and want to retire in your 60s, you might need to plan to replace 20 years of your income to protect your family should something happen to you.  
 	
Kids. Do you have kids that you need to pay for childcare or college costs should something happen to you? 
 	
Whether you have reserves. Do you have some cash to fall back on? If not, you might need more coverage.  

Rely on a Professional for a Custom Solution 

Identifying your basics needs is a solid place to start. And while many resources are out there, particularly online, nothing replaces working with a professional. A professional can analyze your needs, consider taxes and other complexities, tell you whether you are under- or over-insured and give you an unbiased opinion. 

Your financial and insurance professionals exist to tailor your insurance solutions to your needs. Reach out today for guidance. 

 

*Matt Lewis is a non-producing registered representative of Cetera.
                    [post_title] => Do I Need Life Insurance? How to Choose Life Insurance Coverage and When to Reassess Your Needs
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                    [post_content] => Ryan Yamada, CFP®, Senior Wealth Planner 

It was late one afternoon when I received the call from a retired client.  

“I hate to bother you, but would you transfer another $6,000 into our checking account? I’m afraid we’ve blown our budget again.” 

A tinge of guilt rang in her voice.  

“I don’t know how this keeps happening. We filled out our budget worksheet just like you asked and were really meticulous about tracking our expenses. But now that every day is Saturday, things just keep coming up!” 

This wasn’t the first time I had received a request like this. In fact, these types of incoming calls were becoming more and more routine from clients who recently transitioned into retirement.  

After urging her not to worry and promising that we’d fulfill her request within the day, I sat back in my chair. Why were our clients not sticking to their budgets? After all, weren’t they the ones who painstakingly wrote every expense down to the penny and then vowed to adhere? 

Clearly something was not working. 

In the years that followed, I took a hard look at redeveloping my approach to budgeting in retirement – one that has since been beneficial to many client conversations. But to understand what works, we also must understand the traditional way retirement budgeting is often done and the limitations to this approach.  
Fixed, Discretionary and One-Time Expenses in Retirement
The first step of creating a retirement budget is to list all expected expense and then sort them into one of three categories: 

 	
Fixed expenses are typically the non-negotiables of your budget. Do you have a mortgage? What does your average electric bill look like? Do you plan on paying for health insurance before Medicare starts? Listing out these expenses can be helpful in determining the minimum level of income you’ll need; it may also lend a hand in choosing your retirement income strategy.  


 	
Discretionary expenses are what make retirement fun. Are you looking forward to spending quality time with your grandkids during the summers? Do you enjoy working on DIY projects around the house? Discretionary items are distinct in that, should situations warrant, they could be minimized or altogether cut. What’s discretionary to one person may be fixed for another, so if you find yourself unwilling to cut some of these expenses, go ahead and either sort them in order of priority or add an asterisk (*) next to those that are least negotiable.  

A note for those married or planning with a partner – don’t assume that you and your  partner will create identical lists. Carve out some free time in a nice, relaxed setting to  make your own lists and then compare. You might be surprised by what the other will  say is most important! 

 	
One-time or large purchases are those things that you’ve been saving for retirement. New countertops for the kitchen? How about that Alaskan cruise you’ve always talked about?  

Listing the method by which you’ll pay for these expenses is equally as important as listing the total dollar amount for each purchase.  
The Margin – Setting a Baseline
Many well-intentioned clients and their advisors have gone through this process only to find themselves off-target. Why was it that the most detailed Excel spreadsheets seemed to fall short, while others that were more loose-fitting hit their mark? After studying dozens of client situations, the answer came in the margin.  

Income – Savings - Actual Expenses = Margin 

Or stated another way: 

Income - Savings - Margin = Actual Expenses 

When my client who called had created their retirement budget, she was very good at listing out all of their fixed expenses. But their discretionary budget was hopeful, at best. Although they thought they had done a great job creating their budget, they had never actually lived on that amount. And they’re not alone!  

Sure, there are some people who are natural-born savers, but for the average person, our budget ends up being whatever is deposited into our checking accounts. Add on the occasional raise and the annual cost-of-living adjustments and it’s not hard to see that the budget was now 30-40% higher due to “lifestyle creep” spending that filled up the margin.  

Let's put some numbers to this. Prior to retirement, my clients earned about $150,000 (income), from which they contributed approximately $25,000 through their employer-sponsored plans (savings). At the end of each month, they put whatever monies were left into their joint account, which averaged approximately $750 per month (margin). My client had told me that she expected that they could live on $4,500 per month or $54,000 per year. But how did that actually match their current situation? 

In reality, the couple was spending more than $72,000 per year – 33% more than their projected budget of $54,000. When they both finally retired and began living off the $4,500 per month, they quickly found themselves with more “month” than they had money and subsequently began tapping into cash reserves. 

In addition, new home projects, higher utility usage and more frequent trips to their favorite restaurant downtown had increased their discretionary spending, further accelerating their portfolio distributions. 

Had we first investigated the margin rather than asking the client to itemize her projected expenses, we would have had a clearer idea of the actual cost of their current lifestyle. This approach prioritizes being realistic on what your current spending looks like before determining whether your sources of income can support your current lifestyle. 
Dress Rehearsal for Retirement
In an ideal world, everyone would retire with the same level of income as their final working years, or better. But quite often people must make sacrifices to give their finances the best shot at funding a 20-, 30- or 40-year time horizon. 

For clients who will likely need to reduce their spending in retirement, I recommend a dress rehearsal.  

No show on Broadway would go live without doing a dress rehearsal first, so why not see how your retirement budget performs before going live with retirement?  

To start, have your paycheck deposited into a separate account from that which you normally spend or withdraw money. Ideally, paychecks would be directed first into your savings account. Then, a recurring transfer deposits your budgeted amount into your checking. If you're able to customize the timing of your transfers, try to replicate the cadence of your current paychecks like on the 1st and 15th of every month. 

Did you end the month with excess cash? Or did you have more “month” than you had money? Over the course of a few months, you’ll be able to recognize your spending patterns. This information can help you adjust your retirement budget to ensure that it more closely matches your actual spending. 
Is Your Retirement Income Stream and Retirement Spending Sustainable?
Now that you’ve determined the cost of your current lifestyle relative to your fixed expenses and tested your budget during the dress rehearsal of your retirement, you can begin thinking of whether your sources of income can sustain this level of spending through a 20-, 30- or 40-year retirement. 

If you need help formulating your retirement budget or adjusting your plan, reach out to your advisor or schedule a consultation.  
                    [post_title] => Don’t Blow Your Budget! Tips to Create Your Retirement Spending Plan
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                    [post_content] => By Craig Lemoine, Director of Consumer Investment Research










Stocks, bonds and mutual funds have had a rocky start to the year. The S&P 500, a broad measure of the United States stock market, was down 4.6% over the first quarter. Mutual funds holding stocks and bonds have also lost value. These losses are jarring following an outstanding 2021, where the S&P 500 gained just under 30%.

Why the exhale? The balloon was blown up too quickly. Understanding why your IRA or 401(k) has suddenly lost value requires taking a step into the past.

 	
Persistent Inflation – A combination of COVID-caused supply chain issues, low unemployment, wage increases and global political uncertainty is clobbering inflation. Rising prices for food (6.3% the last 12 months ending December 2021), energy (29.3%) and all other items (5.5%) have taken their toll on budgets. Recent unemployment numbers are 3.6%, lower than pre-COVID levels. Fewer Americans searching for jobs, coupled with pandemic driven child-care hurdles, have pushed wages higher. Higher wages couple with higher input prices (lumber, steel, commodities, energy), pressuring producers to raise prices. These prices ripple down the supply chain to stores nearby. Inflation has caused the market to pause and raised questions about sustainability and fundamental assumptions around growth.
 	
Are We Back to Work Yet? – The COVID-19 omicron variant threw a meaningful hurdle into America’s return to work. Plans to phase back in in-person workforces, employees finding a groove working from home, commuting and traveling were all affected. Sudden economic shifts for any reason add to volatility and, in this case, challenge recovery estimates from last year. Equities have stumbled as future revenue, business model and sales projections have been challenged.
 	
The Federal Reserve is Raising Interest Rates to Help Combat Inflation – The Federal Reserve is a governing body for the United States banking system. It has three primary goals: maximize employment, stabilize prices and moderate long-term interest rates. Prices have been anything but stable. The Federal Reserve is raising rates on money it lends to member banks, which will in turn raise rates companies and retail investors are charged when they borrow. Ratcheting up rates will slow down the economy and result in additional adjustments to profitability, revenue and business model expectations. These adjustments have pushed stock prices lower. 
 	
Bond Prices Fall When Interest Rates Rise – An economic concept called duration explains the relationship between interest rates and bond prices. Duration can be tricky – take an example of a car company borrowing money. The company plans on using the money to build a new manufacturing facility, and plans on paying it back over 10 years. The company could sell bonds, borrowing money from consumers and paying them back some type of interest every year. At the end of 10 years, the company would pay back the initial loans.

Presume the car company issued debt in 2020 in the form of bonds with a 4% interest rate. The car company will pay 4% on the debt and bondholders will receive a 4% yield.  Fast-forward a year to 2022. The car company needs to borrow additional money. Only in 2022, assume interest rates have risen across the economy and the car company must now pay a 5% interest rate on debt.

Rising rates will push the price of the older bonds down. Investors may have accepted a 4% yield in 2020, but now demand a 5% return. Bond prices will adjust accordingly and drop. In this example, a $1,000 4% bond with 10 years to maturity will drop in price to $920 as interests rise by 1%. Duration will cause bond portfolios to continue dropping as interest rates increase.

 	
Uncertainty Feeds Volatility – Stock and bond markets thrive on knowing what will come next. Predictable stability helps companies forecast, make strategic decisions and execute business plans. Stability helps predict future revenue and income, which provides a framework for equity prices. Uncertainty constantly challenges this framework and casts a deeper shadow on assets with risk. More volatile assets, such as bitcoin and tech stocks, have been subject to steeper losses than their more predictable contemporaries.

What do we do from here? Do not panic. Whether you are young or approaching retirement, continue saving for the future. You will be able to buy slightly more stocks, bonds or mutual fund shares with each contribution to your retirement plan than you did when prices were higher. And when you check your retirement balance, remember that historically, stock and bond markets ebb and flow over time.

If you are in retirement, revisit your expenses. Begin the journey of discerning expenses that are fixed, such as rent or insurance premiums, and those you have more control over, such as going out to eat or travel. Inflation hits retirees and those living on fixed incomes the hardest.

Now is a great time to meet with a financial adviser to talk about your portfolio, goals, asset allocation and spending pressure. Financial advisers can provide objective, customized advice to ensure your portfolio is built to fit your goals. No one has a crystal ball, but meeting with a skilled and prudent financial professional can help you create and reevaluate a financial plan in a volatile time. 

 

Return References: 

S&P 500

December 31st 2021 4,766

January 27, 2022 4,349

The views stated are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.  Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Past performance does not guarantee future results.

Investing in mutual funds is subject to risk and loss of principal.  There is no assurance or certainty that any investment strategy will be successful in meeting its objectives.

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                    [post_title] => Five Reasons Your IRA is Deflating, and What to Do About It
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                    [post_content] => by Jamie P. Hopkins, ESQ., CFP®, LLM, CLU®, ChFC®, RICP® 

Regardless of how far off you are from retirement, there’s one main goal your planning should be working toward: saving enough so that you don’t outlive your money. 

But there’s no exact science for figuring out exactly how much money you’ll need to accomplish that goal. The reality is there is no magic retirement savings number, it depends on your circumstances. That’s why a good retirement plan will be prepared for the certainty of today, as well as the uncertainty of tomorrow.  

I often compare retirement planning to trying to hit a moving target in the wind.  

The target is our goals, our individual desires – what do you want to accomplish in retirement? The target is moving because we don’t know our life expectancy – so how can we know how long our money needs to last? And the wind is all the factors that might change on the way to and in retirement – say, the need for long-term care or legislative changes to Social Security. 

In this article, I’ll cover the main factors you need to consider as you approach retirement, as well as the steps you should be taking 10 years, five years and one year before you retire. 

 
Planning for Uncertainty 
Obviously, you can’t be prepared for every curveball that might come your way before and during retirement, but there are some “certain” uncertainties you can guard against. I like to call these the known unknowns.  

One of these uncertainties is legislative changes. Though major legislation doesn’t come out of Washington at the fastest rate, when it does happen, it can bring major changes to programs like Social Security and Medicare as well as to other areas of retirement planning. The reality is that laws will change and we have to understand that is a part of the legislative process. 

During the Trump administration, the Tax Cuts and Jobs Act and the SECURE Act brought major changes to tax planning, estate planning and more. And though it’s been stalled for months, we could soon see another push by the Biden administration to pass Build Back Better Act – though possibly under a different name and with different provisions than what we saw in 2021. And there’s still the possibility we could see the SECURE Act 2.0 before the end of the year, as it has passed in the House with a 414-5 vote in its favor and moved to the Senate. 

You also need to be aware of outside factors that can influence the markets. Just in the past couple of years, we’ve seen the COVID-19 pandemic and, more recently, Russia’s invasion of Ukraine lead to stock market volatility, inflation and supply chain issues. 

That’s why it’s important to have a solid retirement plan in place, so that you can withstand and adjust to these unexpected changes and events. 

 
Not Outliving Your Money 
When we think about the risks we face in retirement, our own longevity probably isn’t one that comes to mind. Though it’s not exactly right to call this a risk – who doesn’t want to live longer? – it can exacerbate other risks you might face in retirement. 

The longer you live, the more likely you are to face some kind of risk that could affect your retirement – say, rising inflation or a market downturn that would impact your savings. The longer our retirement is going to be, the bigger risk we have that inflation could reduce our purchasing power. 

And many people who make it through a long and successful retirement will still end up needing significant long-term care at some point, which can incur significant expenses. There are no easy and cheap ways to plan for long-term care, but there are some options to consider. 

You can keep savings in your own portfolio to cover these expenditures, or set aside assets or income from sources like Social Security, your home or a pension.
 Another option is insurance, either with a standalone policy or a hybrid life insurance/long-term care policy. 

[Read more: Yes, You Can Make a Solid Long-Term Care Plan. Here’s How and Why It’s Important] 

Whatever you choose to do, remember that Medicare isn’t really an option, since it wasn’t designed to cover long-term care – though Medicaid does in some circumstances. 

 
There’s No 'Magic Number’
If you knew you had just enough retirement savings to cover all your expenses through the end of your life but would have nothing left over, would you take that tradeoff? 

A lot of people likely would – you'd live very comfortably in retirement, though you’d have nothing to pass on to the next generations of your family. 

Despite this thought experiment, there’s no “magic number” to save for that accomplishes this. Even if you feel sure when you retire that you won’t outlive your money, not having enough saved isn’t a problem that becomes apparent until you’re well into retirement. That being said, you can use something like the 4% withdrawal rate to get a ballpark of what you might be able to spend in retirement and what you need to save.  

For example, let’s say you determine you need $60,000 a year in retirement, and five years from retirement you have $1 million saved
. Withdrawing 4% from that $1 million gives you $40,000 a year, adjusted for inflation, to spend for 30 years if you can maintain that level of savings until retirement. Now add in income from Social Security and other sources in retirement, and you’re likely close to your spending goal. 

Things won’t always work out that neatly, though. However, if you flip the 4% withdrawal rate on its head, it implies that you need to save 25x what you want to spend in retirement. So what can you do ahead of time to maximize your chances of success? Let’s take a look at steps you should take 10 years, five years and one year from retirement. 

 
10 Years from Retirement
You’ve likely been putting money in a retirement account like a 401(k) or IRA throughout your working life (do not feel bad if you have not been), but this is the point where you should begin getting more granular about retirement income planning. You need to shift your focus from accumulation and savings to spending, expenses, and what you can maintain through retirement. Your life has so far been about saving your income, now you need to start thinking about turning your savings into income. 

Start getting a clearer picture about what kind of spending you’re going to have in retirement and the lifestyle you want to live – are you planning a lot of travel, or do you want to buy a new home and relocate? 

Once you crunch the numbers, you may find you’re on track to achieve the spending level you want in retirement. Or you may find that you’re short of your goal. Either way, you can still get a lot done in this time period. People often overestimate what they can accomplish in one year, but underestimate what they can get done in 10 years. 

That makes this 10-years-out period the ideal time to focus on tax planning and reducing your tax bill in retirement. Taxes are likely to be one of your biggest expenses in retirement, so we want to minimize them as much as possible. 

One way to do this is by planning for Roth conversions early in retirement and in lower-income years when you start to scale down your work, which can reduce the amount of required minimum distributions from your retirement accounts. Qualified charitable distributions, bunching strategies and college education planning strategies are other tools at your disposal to lower your tax bill in retirement. 

You should also think about diversification of your taxes and taxable investments so that you have assets in after-tax accounts like a Roth IRA, to minimize the risk you face from future changes to tax rates.
 

But ten years before retirement you still have time to save and plan. Start thinking about savings, income, and how long you can work.  

[Read more: Tax Planning in Retirement: Strategies to Minimize Taxes When You Retire 

 
5 Years from Retirement
Once you’re five years out from retirement, you’ll be entering one of the riskiest periods of your retirement planning – lasting until five years into retirement. If you get bad market returns or your portfolio suffers a loss right before or just into retirement, you could have to take withdrawals from that portfolio early in retirement, which could deplete your funds sooner than expected. 

As such, a big decision as you near retirement is what is the right investable asset mix that you have in your retirement savings portfolio. Asset allocation, your mix of stocks, bonds, and fixed-income sources, play a crucial role in retirement. 

That makes five years from retirement a good time to do a retirement income needs analysis by figuring out what you’ll need to spend and what income you’ll have at your disposal. If you realize you might be short of your goals, there are steps you can take to try to mitigate that shortfall. 

One strategy is to take on more risk in your investment portfolio to try to bridge that income shortfall, though this carries obvious downsides. You could also look at replacing certain investments with other types that might carry a similar risk but provide better retirement income solutions. For instance, you could replace part of your bond portfolio with an annuity or some other fixed income source to move up the return. 

Another option could be to get more precise about where your income will come from in retirement. Some people engage in bucketing, a style of retirement income planning that aligns assets and income to timeframes. So you might set aside a bond ladder for the first five years of retirement and leave your market assets for use 10 years or more out in retirement.  

You could also consider boosting your savings by delaying retirement and working longer. Though delaying retirement might not sound very appealing, a little can go a long way with this strategy – working just one year longer can result in two to three years of retirement spending. 

If delaying retirement isn’t for you, other solutions include deferring Social Security to improve your inflation-adjusted income throughout retirement, downsizing your home, moving to a state with lower taxes or trimming back your retirement travel plans. 

 
1 Year from Retirement
Though your plan is mostly set in stone at this point, there’s still plenty you can do to solidify and refine it. However, there are also things to avoid so you don’t blow up your plan.  

With one year to go until retirement, now is the time to start executing rollovers and exchanges. The idea here is that it is time to simplify. If you’re moving properties, you’ll want to be sure that they’re properly titled, that they’re in the right place if they’re part of your estate plan and that you have the right beneficiaries designated. 

You also want to consider what impact your heirs and loved ones will face from a liquidity and tax standpoint when you pass away, and do the most efficient planning possible so that you leave them in a good place. Estate plans often change a bit once you retire. 

In addition to all your planning, this is also when you should start considering how you’ll phase into retirement. I often see people, once they retire, move or relocate but not find the satisfaction that they were looking for. With a year to go before retirement, you have some time to “test out” what your life will be like once you stop working and make adjustments if you find it’s not exactly what you expected. 

One way to blow up your retirement is to retire too soon, without a plan on where you will live, how you will spend your time, and where you will find meaning. The non-financial aspects of retirement, like enjoying life and spending time with family and friends, is just as important as the financial side. 

Once you’ve retired, there’s still some regular “maintenance” that needs to be done on your plan. This includes ensuring your estate documents are up to date, determining if you need a trust in place, making sure your beneficiary designations match current laws and reviewing your life insurance policy. 

[Read more: Knowing When to Update Your Estate Plan] 

 
Live By Design, Not By Default
Ultimately, retirement planning isn’t just about planning for a good life – it’s about planning for a good end of life. It’s also about the legacy you’ll leave behind, to your spouse, your children and your grandchildren. 

With proper planning, you can help ensure that once you’ve retired, you’ll be living life by design, not by default. Money shouldn’t dictate the kind of life you’ll live in retirement. Instead, you should have enough money to live the life you want. 

Make sure you're on the right path toward retirement by scheduling a visit with your financial professional. 

 

Converting from a traditional IRA to a Roth IRA is a taxable event.

Jamie is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Jamie is in no way related to Cetera Advisor Networks LLC or its registered representatives. Jamie is not registered with CWM, LLC as an investment advisor representative and does not provide product recommendations or investment advice.
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            [post_content] => By Craig Lemoine, Director of Consumer Investment Research











 

Suppose last year you went grocery shopping and filled your cart with $100 worth of items. This year, you went to the same store and bought the same items – this time, the bill rang up at $107.50.  

The difference of $7.50 represents an increase in average consumer goods and services. Divided by the original period ($100), it illustrates a 7.5% inflation rate.  

Inflation is the loss in purchasing power due to the increase in costs of goods and services in an economy. The Federal Reserve’s long term inflation target is 2%, allowing for some years of lower consumer inflation and some years of higher inflation. When inflation surges, the Federal Reserve has tools to help cool off the economy, including raising interest rates and selling treasury notes. Both tools are intended to raise the cost of borrowing, causing businesses and local governments to spend less, effectively turning a release valve on inflation pressure. 

Inflation is a lagging indicator. Traditionally, inflation lags real gross domestic product growth and economic recoveries. When America reaches full employment, wages rise higher. Higher wages coupled with greater spending power traditionally push prices upward. Historically, inflation has followed our economy returning to health.  

In the United States, inflation is measured through the Consumer Price Index. The CPI measures the difference in what we pay for goods and services over time and is reported monthly.  

The CPI is weighted based on an average urban household, which may be different than inflation experienced by a particular person. For example, a retiree may consume more medical care and less education than an average family, creating a unique inflation rate for that family. CPI provides a reference point for inflation but is not absolute across all consumers.  

Inflation leads to a reduction in spending power over time. If 20 years ago an apple cost 50 cents, the same piece of fruit would cost $1.32 today.  
Different Types of Inflation
Inflation takes many different forms, some more potentially devastating than others.  

 	
Transitory Inflation is temporary inflation, caused by a spike, bottleneck or rush on a commodity or consumer good. Transitory inflation may be the result of political pressure and global conflict, which will resolve as the conflict ends or supply chains reemerge.  
 	
Hyperinflation is a worst-case inflation scenario. Hyperinflation is a product of loss of confidence in a country’s central currency. In the 1920s, Germany experienced a 30,000% monthly inflation rate, as the world devalued the German Mark.  
 	
Stagflation occurs when prolonged price growth exceeds real GDP growth. Stagflation is challenging because traditional tools to fight inflation – such as increasing the discount rate – lead to higher unemployment. The United States saw a period of stagflation in the late 1970s.  


 	
Deflation occurs when prices drop. Price drops may be the result of a recession, where demand falls consistently over time. Deflation tends to occur by sector and is often transitory.  
 	
Creeping inflation is a term generally used to describe prices increasing 0-3% annually. Consumers may not notice these price increases that often keep up with wage growth.  
 	
Walking inflation is a term generally used to describe prices increasing 3-10% annually. Consumers may hoard inelastic goods, raising prices further. A combination of rationing, monetary and fiscal policy may be needed to combat walking inflation.  
 	
Core inflation measures the rise in prices except for food and energy. Food and energy tend to be more volatile and removing those elements from an inflation calculation provides a steadier growth rate.  

Tips to Beat Inflation  
Inflation is particularly troubling when prices rise higher and faster than wages. When rent, food and transportation costs exceed wage growth, inflation becomes painful.   

 	
Consider your investments. Historically, precious metals, commodities, large-company “blue chip” stocks, I-bonds and real estate investment trusts (REITs) securities have held their value better than riskier assets during higher inflationary periods. Bond values tend to fall when interest rates rise, though their yields increase. Talking with an investment adviser will help you develop a portfolio that considers inflationary pressure in line with your financial goals.  


 	
Review your budget and personal spending. Inflation gives families a great opportunity to sit down and talk about budgets. Are there streaming or subscription services you no longer use? Can you change your ratio between groceries, takeout and meal kits? Shave off ancillary costs where you can.  


 	
Get strategic with your emergency fund. Financial planners tend to recommend keeping three to six months in savings to help protect from unemployment or other unforeseen costs. This can be tricky when the average interest paid on savings accounts remains less than 1.0%. i As you skim down your budget, you should be able to recalculate your emergency fund. Also consider laddering CDs or I-Bonds for a portion of your emergency fund. Talk with your financial adviser about building a custom plan for your emergency fund.  


 	
Revisit your financial goals. Meet with a financial planner to talk about college savings, your retirement or other long-term goals. Cost shocks may create a need to adjust your savings and spending goals.  

Inflation is disruptive to even the best laid plans. It is the true enemy of retirement planning and requires thoughtful strategies and a well-rounded portfolio. Meeting with an experienced financial professional can help you develop a plan to keep your goals on track. 

Schedule a strategy session with a member of our team to start the conversation. 

Craig is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Craig is in no way related to Cetera Advisor Networks LLC or its registered representatives.
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                    [post_content] => Life insurance plans are designed to offer your family an infusion of income in the event of your death, so your loved ones won't have to worry about finances while they are grieving. But how do you know what type of policy to choose and if it will adequately cover your needs?

This resource helps you identify your insurance goals, offers basic guidance on how to pick the optimal policy and outlines when to work with your professional to update your coverage.

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                    [post_content] => Your retirement is the culmination of years of careful planning, and you don't want to fumble the ball when the end zone is in sight.

Download our checklist of key tasks to complete in the year leading up to your retirement to make sure you're prepared for this major life milestone.

Download the checklist today to get started.

 
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                    [post_content] => Health care costs in retirement aren't going anywhere. Naturally, as our bodies get older, it costs more to keep them running. And with U.S. health care spending expected to rise at a rate 1.1% faster than the annual GDP, this cost will come home to our pockets. Statistics like this make Medicare part of life for many Americans.

Let's look at the parts of this vital program and how it plays a part in your financial plan.

Download the checklist today to get started.

 
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                    [post_content] => Your plan shouldn't look the same when you’re 55 as it did when you were 35, and part of that is because you have ever-changing goals. So how do you know when it’s time to adjust your financial plan?

Use this checklist to evaluate your goals and decide when it's time to contact your advisor for an update.

Download the checklist today to get started.

 
                    [post_title] => When Shifting Goals Mean Shifting Plans
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                    [post_content] => Over the last year, we experienced an economic recovery from an ongoing global pandemic, new and pending legislation that affected taxes and retirement planning, and more.

So as you prepare to file your 2021 taxes, don't just pack a folder with receipts and important documents. Consider these changes, and look to take advantage of tax opportunities.

Download the checklist today to get started.

 
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            [post_content] => Life insurance plans are designed to offer your family an infusion of income in the event of your death, so your loved ones won't have to worry about finances while they are grieving. But how do you know what type of policy to choose and if it will adequately cover your needs?

This resource helps you identify your insurance goals, offers basic guidance on how to pick the optimal policy and outlines when to work with your professional to update your coverage.

Download the checklist today to get started.

 
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                    [post_content] => The S&P 500 continued its string of negative weeks, dropping 3% last week. It was the seventh straight weekly decline in the index of large-cap stocks. The S&P 500 temporarily fell more than 20% on Friday, but the market rallied and the index finished down 18.1% from its January all-time high.

Key Points for the Week 

 	
The S&P 500 declined for the seventh straight week and narrowly missed entering a bear market.
 	
Retail sales climbed 0.9% showing the consumer remains willing to buy items even as prices have increased.
 	
Retailers struggled with higher labor and shipping costs and uncertain supply chains. Earnings dropped while sales increased.

Poor earnings at big-box retailers caused much of the market decline. Wednesday’s slide of 4% was the result of a second straight day in which a major retailer announced earnings would miss expectations. Companies cited high labor costs, head counts, and shipping prices as reasons for the poor quarterly performance.

One factor companies didn’t cite was low sales. April retail sales confirmed the trend of improvement, rising 0.9%. Increased auto sales and more money spent on dining out contributed to strong monthly spending. While spending on goods and services is increasing, homebuyers seem to be slowing their purchases. Single-family housing starts fell 7.3% last month, and existing home sales fell 2.4%. Higher mortgage rates are a top reason for the decline.

Industrial production showed similar strength to retail sales, jumping 1.1% in April. Manufacturing climbed 0.8% and reached its highest level since 2008.

The MSCI ACWI dropped 1.1% as big-box retailers’ poor earnings didn’t hit global stocks as hard as they did U.S. stocks. Bonds helped cushion the decline. The Bloomberg U.S. Aggregate Bond Index rallied 0.6%. The PCE deflator, which measures inflation, and some key trade data are the top economic releases this week.

 



Figure 1



Figure 2

Stocks on Sale?

Market volatility continued to make things difficult for equity investors. Seven straight weeks of losses in the S&P 500 make this a tough market for many. The last market peak was on the second day of the year, more than four-and-a-half months ago. Compared to the decline in March 2020, this one is shallower but has lasted much longer. In 2020, stocks fell 34% in just more than a month. It was a much sharper downturn, but it didn’t require the same level of patience before it started moving higher.

The biggest reason for the slide was poor first-quarter results by big-box retailers, which earned that moniker for the box-like appearance of their stores. The weak results were caused by the challenges reverberating through our economy. Wages have climbed rapidly. Firms have hired extra workers at higher wages to meet demand. The supply challenges have been two-fold. Some items arrived late and missed their prime selling season, resulting in lost sales. Companies then began ordering goods further in advance to make sure they arrived on time. But sometimes they arrived too early, leaving the company with inventory and storage costs that cut into profitability.

The good news for retailers is the consumer remains well positioned to spend. April retail sales in the U.S. beat expectations and rose 0.9%. March sales growth was revised upward from 0.7% to 1.4%, confirming strong consumer demand. The biggest contributor to overall retail sales was auto sales, which is a good sign since automobile prices have increased rapidly. The industrial production report confirmed that auto manufacturing is back to levels seen prior to the COVID-19 crisis.

Sales at restaurants increased 2% in April month-over-month and are now up nearly 20% since last year. Inflation is driving the spike, but it’s also a sign that the food services industry is finally getting back to normal after several fits and starts caused by new COVID strains. At the same time, sales at grocery stores decreased slightly in April, another sign that Americans are getting more comfortable with going out to eat again.

These strong retail sales numbers certainly point to a very strong U.S. consumer. The increases are not just because Americans are buying the same amount of goods that are now more expensive. The real retail sales figure increased 0.6% last month and has gone up 1.6% in the past three months.

Because inflation is high at the same time the economy is slowing, the path to a market recovery has challenges on both sides. On one side is inflation. There is very little indication that consumer demand will decline soon, which means price pressures could continue. The other side is a recession, which may occur if interest rate hikes and other factors slow the economy too much. In between is the soft landing the Fed hopes to engineer.

When markets fall, many believe bad outcomes become more probable. Our view is the width of the path to success widens when markets go down because valuations are falling. As Figure 2 shows, the price investors pay for a dollar of earnings has declined to around the average level from 2015-2019. Compared to the heightened valuations caused by earnings declines from the pandemic, current valuations are lower. Lower valuations mean less optimism about how companies will fare in the future. When valuations drop, it means expectations are dropping as well, and that means pretty good numbers can become “good enough” and stocks can increase.

Will stocks avoid breaching the 20% threshold? By the time you read this, they may already have. Rather than get caught up in the negative sentiment created by the market falling another percent or two, focus on the fact that value is improving, and the seeds of the next market rally may have already been planted. That perspective can keep you invested and prepared to reap the rewards if stocks are on sale.

 
-
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

S&P 500 INDEX

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

MSCI ACWI INDEX

The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.

Bloomberg U.S. Aggregate Bond Index

The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.

https://www.usnews.com/news/business/articles/2022-05-18/explainer-why-is-wall-street-close-to-a-bear-market#:~:text=The%20most%20recent%20bear%20market,the%20shortest%20bear%20market%20ever

https://www.wsj.com/articles/target-earnings-squeezed-by-inflation-and-fuel-costs-11652869800?mod=mhp

https://www.cnbc.com/2022/05/17/stock-market-news-open-to-close.html

https://www.census.gov/retail/marts/www/marts_current.pdf

https://www.federalreserve.gov/releases/g17/current/g17.pdf

https://www.nar.realtor/newsroom/existing-home-sales-retract-2-4-in-april

https://www.census.gov/construction/nrs/pdf/newressales.pdf

Compliance Case #01379847
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                    [post_content] => Market volatility continues to make life challenging for investors. The S&P 500 declined for the sixth straight week, the longest streak since 2011. Six-week losing streaks used to be much more common. The S&P 500 declined at least six consecutive weeks six different times from 2000 to 2011.

Key Points for the Week 

 	
The S&P 500 declined for the sixth straight week.
 	
Consumer prices rose 0.3% last month. The annual inflation rate declined for the first time since 2021.
 	
Approximately 85% of S&P 500 companies have cited inflation as a factor on earnings calls.

The string of accelerating inflation was broken. The Consumer Price Index (CPI) increased 0.3% last month and has now risen 8.3% over the last 12 months. The 0.3% was a slowdown from recent data, and the annual rate declined 0.2% in the last month (Figure 1). Much of the slowing was attributed to gasoline prices, which fell but have since rebounded to record highs. Core inflation, which excludes food and energy, rose 0.6% as high rents and costlier airfares contributed to strong gains in inflation.

Inflation has been a hot topic on corporate earnings calls. Approximately 85% of S&P 500 companies have mentioned inflation on their quarterly calls with shareholders. S&P 500 earnings are expected to grow 9.1%. Companies are beating earnings by less than normal. With more than 90% of companies reporting, earnings are beating estimates by 4.9%, compared to a recent average of 8.9%. Consumer discretionary and communication services companies are missing earnings estimates most frequently, and those two sectors have underperformed the broader markets.

Last week, the S&P 500 sank 2.4% and narrowly missed breaking through the 20% threshold before rallying on Friday. The global MSCI ACWI declined 2.2%. The Bloomberg U.S. Aggregate Bond Index rallied 0.9%. U.S. retail sales data will be released this week and will indicate how consumers are responding to higher inflation.



Figure 1

 

Narrowly Missed a Bear Market

The S&P 500 narrowly missed a bear market on Thursday. The index of large-cap stocks finished 18.1% below its closing high on Jan. 3, 2022. At one point Thursday morning, the S&P 500 was 19.6% below its closing high before rallying on Thursday afternoon and then staging a strong rally on Friday.

The volatility would likely be easier to bear if it hadn’t been going on for a while. Last week’s decline was the sixth straight weekly decline. As noted above, the S&P 500 hasn’t had a six-week losing streak since 2011. However, the previous 11 years included six losing streaks of six weeks or longer. The longest streak occurred in 2001, when the S&P 500 declined eight consecutive weeks. The Federal Reserve was part of the issue then as well. Markets had expected a 0.75% cut in rates and the Fed cut rates just 0.5%.

There was some good news on inflation. Core CPI rose only 0.3%, which is the lowest increase since August 2021 (Figure 1). Even though monthly inflation dropped, monthly increases of 0.3% still translate into inflation between 3% and 4%, above the Fed’s target of 2%.

It is possible inflation may have reached a peak. It started accelerating in September 2021, meaning future reports will need fairly high readings to keep inflation at current levels. The Fed’s recent interest rate hikes have already made certain types of borrowing less attractive, reducing demand. Other factors are also pushing against inflation. The stock market decline means some people may not have as much money to spend or feel as confident about spending what they have. Government spending has slowed compared to extreme spending in response to COVID-19. The increased strength in the dollar is helping to reduce the cost of imports.

Energy prices remain the biggest risk to the thesis that inflation will start declining. Last month, gasoline prices dropped 6.1%, and that decline contributed to lower overall gains. Gasoline prices have subsequently rebounded to new highs, and core inflation, which excludes food and energy, remains strong. The core rate increased 0.6% in April. So, it is possible inflation may have peaked or is close to doing so, but that doesn’t change the fact that inflation pressures remain high.

As we noted in a special market update last week, some of the trends pressuring markets may be at inflection points. Inflation may be peaking, and employment has nearly recovered all of its COVID-led losses. The Fed has committed to moving toward a more normalized interest rate environment, and we are working through the second year of a presidency, which typically produces the weakest performance of the election cycle.

Challenges like this one are not new. Staying focused on your long-term goals during difficult times is an important part of harnessing the long-term gains in equity markets. While the rapid increase of inflation has been tough, so were periods like the 1987 market crash, the bursting of the dotcom bubble, and the global financial crisis. Yet, markets worked through those periods and moved on to new highs.

In fact, the longer you stay invested the less decisions matter about what types of stocks you invest in. In the short term, value stocks have been rebounding after a long period in which growth outperformed. Over the long term, sticking with stocks, regardless of style, makes a big difference. In the last 10 years, the S&P 500 has increased 13.7% per year. Large-cap value and growth stocks have both increased more than 10% per year over this period. Global stocks, represented by the MSCI ACWI, have climbed 9.2% per year. Bonds have generated positive returns. This performance didn’t come in periods of pure calm with a perfect economy. Inflation has been too low and too high. Both parties have held the presidency. We’ve faced a global pandemic and its aftereffects. In spite of all these challenges, markets have climbed higher.

There is no guarantee it will work out well this time, but we like our odds.

 

-
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

S&P 500 INDEX

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

MSCI ACWI INDEX

The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.

Bloomberg U.S. Aggregate Bond Index

The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.

https://dashboard.carsongroup.com/research/weekly-commentary/05-13-22-special-market-commentary/

https://money.cnn.com/2001/03/20/markets/markets_newyork/

https://www.barrons.com/articles/stock-bear-market-history-51652488484

https://www.foxbusiness.com/markets/national-average-gas-prices-new-record-high-445-per-gallon

https://fivethirtyeight.com/features/how-every-senator-and-governor-ranks-according-to-popularity-above-replacement/

https://www.bonus.com/election/midterms/

https://www.bls.gov/news.release/cpi.nr0.htm

https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_051322.pdf?hsCtaTracking=31d0f488-5c02-4193-b93b-f1708067f4fa%7Cb994622e-6b82-4c98-ad34-76c848088314

Compliance Case #01372051
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                    [post_content] => So far, 2022 is faring to have one of the worst ever starts for stock returns. Only 1932 and 1939 have proven to be more difficult through the first four calendar months. The reasons are numerous and front-of-mind for us all: an unexpected war in Ukraine, the lingering impacts of COVID-19, the highest inflation rates in 40 years, and the prospects for a contentious mid-term election right around the corner.

Given all that uncertainty, equity prices in 2022 have seen greater levels of volatility and have dropped into correction territory for the first time since the initial onset of the pandemic in early 2020.

But, this rising collection of market uncertainty comes in stark contrast to the continued relative strength of the U.S. economy, which remains buoyed by strong consumer spending, the healthiest job market in decades, and increased confidence for companies to invest in their business. So why is there such a difference between the good news around the U.S. economy and the pessimistic bearishness of the stock market?

The aggregate behavior of the market –  which is essentially the collective of millions and millions of investors  –  is not simple to assess. But the market’s DNA favors certain reactions to events that happen to unfold. It doesn’t wait for things to become definitively good or bad. Rather it focuses on the possibility of events making the future trend lean better or worse.

That’s why, despite an economy that is continuing to produce favorable outcomes, the market is focusing on uncertain events like rising geopolitical tensions or higher inflation as these trends appear worse than they were last year. For the market, uncertainty means worse. And worse means lower stock prices.

At Carson Partners, we believe that while risks certainly exist, the likely cause for most of this uncertainty is a result of inflection points that the market is having to assess. These inflection points are raising the blood pressure of the market, but we believe they will work themselves out over the near-term.  As a result, we remain cautiously optimistic on the prospects for continued strength in the U.S. economy and a likely recovery in stock prices over the second half of 2022.

So what are these inflection points and how might they unfold going forward?
Inflection Point 1: COVID-19 Shifts From a Pandemic to an Endemic
COVID has had an incalculable amount of destruction on this world. The loss of life.  The economic impact on businesses. The cancelled opportunities and memories with friends and families. It’s been a tough two years.

But what we are likely going through right now is the inflection point of COVID going from a pandemic (widespread, simultaneous uncontrolled infectious disease) to an endemic, where the virus may remain a significant health threat but it becomes more seasonal and predictable similar to other communicable diseases. And while this inflection point of a pandemic unfolds, right now we are living through the by-products that affect way more than just our health.

The reopening of the world post-pandemic is one of the major reasons that inflation is surging.  The combination of businesses trying to get back up to speed after being shuttered through the pandemic (picture a car that hasn’t started in a year trying to get going again), mixed with the pent-up demand of Americans ready to upgrade the house they’ve been confined to, go on a vacation, or get a new car, is creating an inbalance of supply and demand that is putting pressure on prices of everything from eggs to airfare to housing. And the result is the highest inflation rates in four decades.

Chart 1: Inflation at Multi-Decade High



Source: Bureau of Labor Statistics, Carson calculations

So many are focused on the level of inflation – understandable given the impact on our wallets – but it’s the reasons for it that often take a back seat. And while inflation is influenced by many facets, the primary elements stem from the by-product of living through a pandemic. For example, the trillions and trillions in fiscal stimulus (pandemic relief) was necessary to help struggling Americans. But its impact is felt in inflation today as so many used the extra relief to purchase (even hoard) goods, which drove prices higher.

Another example is the restarting and reopening of America post-pandemic that has so many feeling a sense of pent-up demand for services. This is showing up as delayed elective medical procedures that are now lined-up as far as the eye can see. It’s proper haircuts, the Friday nights at the favorite eatery, and that much needed vacation. And with it, more people are out and about, demanding services to an already fragile economy just gearing up from its pandemic hiatus.

But so much of this inflationary pressure appears to be transitory – the mix of pent-up demand and a business environment still reopening. Inflation doesn’t just happen. In this instance we are living through today, the root cause is the downstream and inflection point impacts of COVID.

But this pandemic-to-endemic inflection point is showing up in our economy and lives in far more examples than just inflation. It has also changed the labor force and the way talent works forever. The shift to more virtual, work-from-anywhere employment is here to stay. The good news is that this flexibility did more than just make work easier for many Americans. It also allowed businesses to rehire at the fastest rate coming out of a recession in recent memory.

Over the three prior recessions, it took at least six years for the employment-to-population ratio to revert back to pre-recession peaks. But this recovery is so much faster as it has almost fully recovered in just two years. This is good news for families as it means faster rehiring and less lingering unemployment. But it also means faster spending of paychecks, which results in more purchases before businesses can even ramp up supply chains to meet the demand. The result? Higher inflation.

Chart 2: Labor Markets Have Healed From COVID



In fact, to just keep up, businesses are opening new jobs at the fastest rate ever recorded. The result is 1.94 open jobs for every unemployed person – by far the most ever. Again, that is great for the worker who has more opportunities. But it also means that businesses are competing for employees, which drives wages up and results in inflation.

Again, this doesn’t just materialize out of thin air, it’s the result of the inflection point from pandemic to endemic.

Chart 3: Open Jobs Are Outnumbering Unemployed Workers



Source: Bureau of Labor Statistics, Carson calculations

The good news is that as this inflection point works its way through, the inflationary pressures will begin to subside. And there are signs that this is beginning to happen. In areas like durable goods – things like washing machines and lawnmowers – inflation appears to be rolling over.  Americans who spent so much time in a pandemic-lockdown upgraded home items. This resulted in inflationary pressures. But that cycle is likely to have peaked.

Chart 4: Goods Inflation Appears to Be Peaking



Source: Bureau of Labor Statistics, Carson calculations
Inflection Point 2: Policies Shift From a Tailwind to a Headwind
Another inflection point is the shift from accommodating aid from governments and agencies to a new environment of hawkish and tightening policy. In other words, the spiked punch at the economic recovery party is being replaced with black coffee. Fiscal spending, which was trillions in aid, has come to an end.  And now, monetary policy from the Federal Reserve is in its inflection point from the tailwind of near-zero interest rates to the perceived headwinds of tighter financial conditions.

Chart 5: The Fed’s Path to More a Normalized Rate Environment



Source: Federal Reserve, Carson calculations

The Fed has already raised rates two times this cycle and even elected for the rare 50-basis-point increase for the first time since May 2000. Rates have been near zero since 2008, outside of a quick rate rise in 2017–19.

It is not normal, nor even healthy, for a zero-interest rate policy in perpetuity for many reasons. A primary reason is that while rising rates will increase interest paid on debt, Americans in aggregate actually receive twice as much interest income as they paid out. As a result, rising interest rates to normal and healthy levels actually benefits the average American twice as much as it hurts them. For evidence, just look at that paltry level of interest you’re receiving from your bonds and your savings account.

But once again, it’s this shift in the inflection point of accommodating to more restrictive policies that has the market feeling uncertain. But as this uncertainty wanes through the playing out of this shift, markets should express their comfortability through lower volatility.
Inflection Point 3: The Four-Year Presidential Cycle Hits its Mid-Point
The endless swarm of political ads are coming. So is the rhetoric from both sides of the aisle that things are bad and need changing. This brings more than just ramped-up political tensions. This inflection point serves as a level of uncertainty for markets regarding the future path of policy and the make-up of decision-makers. As a result, the second of the four-year presidential cycle is usually the most volatile leading up to the mid-term elections.

Chart 6: The Mid-Term Year Is the Most Challenging of the Presidential Cycle



Data Source: Morningstar Direct, Carson calculations. Calculated using S&P 500 TR Index monthly returns from 2.1.1970 to 4.30.2022. Data are also adjusted for Nixon and Ford’s partial term.

Going back to 1970, the second year of the presidential cycle has been by far the least rewarding for equity investors – averaging 5.3%, which is nearly half or less than the other three years. In addition, the average intra-year pullback is higher, reflecting the increased level of uncertainty and volatility for the market. The good news, however, is that history shows the very best periods of equity returns have usually occurred after this mid-term election inflection point. In fact, starting with the fourth quarter of this year, the best three quarters on average of the four-year presidential cycle since 1970 have materialized as the inflection point of uncertainty dissipates.

Chart 7: Post Mid-Terms Have Been a Strong Seasonal Benefit to Stocks



Data Source: Morningstar Direct, Carson calculations. Calculated using S&P 500 TR Index monthly returns from 2.1.1970 to 4.30.2022. Data are also adjusted for Nixon and Ford’s partial term.

 
Conclusion
It’s important to note that market volatility is both commonplace and healthy, especially after the greater-than-100% rally in stocks following the pandemic lows just over two years ago. In fact, since 1980 every single year has seen a pullback in stock prices, with the average being around a 14% decline. And while market dislocations are never a pleasant experience, they have rewarded patient, long-term investors with attractive entry points. Of the 33 market corrections since 1980, 90% of them saw gains over the following year – averaging ~25%.

Our view remains that we are near or even past the peak of inflation and with a limited but swift series of interest rate hikes, the Fed can curb inflation further while creating a soft landing for the economy. Furthermore, the market is unsettled, having to deal with three or more simultaneous inflection points that are driving uncertainty and volatility. But as these shifts unfold through the rest of 2022, we expect equity markets to stabilize and reverse course.

We continue to stress that the best course of action is patience and sticking to your investment plan, which has incorporated anticipation of volatility like we’re facing today. If history has proved anything it’s that the market, like most things in life, is more fragile than we might expect in the face of uncertainty over the short run. But it’s far more resilient over the long run than we often give it credit for.

Evidence of this stands right before us given the realization of just how far we have come since the pandemic’s onslaught two years ago. Then, it was the inundation of cancellations – everything from shuttered workplaces to closed schools, cancelled graduations and public gatherings. But our optimism for the near-term future was never cancelled. Neither was our hope. The long-term prosperity of America remains, as do the attractive prospects for long-term investors that patiently benefitted from the market’s recovery and our nation’s healing.

Our future was never cancelled, and it certainly isn’t today. It has just ignited our resolve.

 

This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

 
                    [post_title] => Special Market Commentary: What's Stressing Out Stocks? These Market Inflection Points
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                    [post_content] => Market volatility surged last week, although the end result for the S&P 500 was a decline of only 0.2%. Central banks were the main culprits for the volatility. On Wednesday, the Federal Reserve announced it would raise rates 0.5% and clarified plans on how it will shrink its balance sheet. In the subsequent press conference, Fed Chair Jay Powell announced there are no plans for rate increases of 0.75% in a single meeting. Those comments contributed to a sharp rally in the S&P 500, which increased almost 3% on Wednesday.

Key Points for the Week 

 	
Stocks surged and sagged after interest rate hikes and comments from the U.S. and U.K. central banks produced far different market reactions.
 	
The U.S. economy produced 428,000 jobs in April, beating expectations and reassuring investors the economy remains relatively strong. Unemployment held steady at 3.6% and labor force participation dropped 0.2%.
 	
Demand for labor remains robust as job openings and quits set record highs in March.

Thursday produced the opposite reaction. The Bank of England increased its key short-term rate to 1% from 0.75%, the fourth straight increase of 0.25%. The increase was smaller than expected and reflected the BOE’s expectation that British economic growth will slow throughout the year and ultimately contract in the fourth quarter. The BOE forecast anemic growth in 2023. The BOE also forecast inflation to move above 10% and suggested little can be done about it. The dour forecast and expectation of an economic decline were the equivalent of a central bank throwing in the towel. The S&P 500 dropped 3.6% on Thursday in response.

The U.S. also released a series of key jobs reports last week. The big news is the economy produced 428,000 jobs, according to the establishment survey (Figure 1). That beat expectations and indicates the economy continues to reclaim jobs lost during the pandemic. Unemployment held steady at 3.6%. A 0.2% decline in labor force participation raised concerns the supply of labor won’t expand to meet demand and wages could accelerate, contributing to inflation. Last month, wages rose 0.3%, which is a decline from prior reports. Labor demand remains robust. The March Job Openings and Labor Turnover Survey (JOLTS) indicated 11.5 million jobs remain unfilled and 4.5 million people quit their jobs last month. Both measures were record highs and suggest the economy can weather some of the planned rate hikes.

Last week, the S&P 500 edged down 0.2%. The global MSCI ACWI slid 1.2% as European and Chinese stocks lagged. The Bloomberg U.S. Aggregate Bond Index declined 1.1% because long-term interest rates moved higher in response to the Fed scaling back rate hike expectations. The U.S. Consumer Price Index will be closely watched this week for signs of any change in inflation trends.

 



Figure 1

 

Bond Volatility

Many of us who watch markets on a daily basis felt pretty good after Fed Chair Jerome Powell wrapped up his press conference on Wednesday afternoon. The Fed did what was expected and raised interest rates 0.5%. It announced plans to shrink its balance sheet by $47.5 billion per month for three months and then double that amount thereafter.

The Federal Reserve is raising interest rates to try to slow inflation. Usually, the Fed moves 0.25% at a time, and this was the first 0.5% increase in 20 years. The faster-than-normal increase was designed to show the Fed is taking the inflation threat seriously.

Even though rates were moved higher, the Fed made reassuring comments that caused investors to send stock prices sharply higher:

 	
There are no plans to raise rates by 0.75% based on the current environment, which reduces the risk the Fed will raise rates too fast and push the economy into a recession.
 	
The Fed’s plan to reduce its balance sheet is faster than expected and was viewed positively as a way to reduce inflation without having to raise interest rates too quickly.
 	
Powell stated the Fed is looking to raise rates when inflation is controlled, rather than raise them past neutral and force a recession to remove inflationary pressures.
 	
The Fed remains confident it can engineer a “soft or softish landing,” meaning the economy would slow and avoid a severe recession.
 	
The vote was unanimous.

In short, Powell’s press conference showed a united Fed cares about its core objective, provided clarity on the direction of policy, and displayed conviction it will work.

The Bank of England’s announcement the next day lacked these characteristics. The BOE raised rates 0.25%, which means rates are now at 1%. That part was expected. But the comments of Governor Andrew Bailey and the monetary policy report indicated a much dourer outlook than expected. Governor Bailey expects inflation to rise to around 10% this year and the economy to slow and even contract in the fourth quarter. The BOE offered no concrete plans to shrink its balance sheets, putting that decision off to the early fall. Three members voted against the move, as they favored a 0.5% increase in rates.

That a central bank head would do the equivalent of throwing in the towel is hard to imagine. Central banks are often too optimistic of what they can accomplish. Yet, Governor Bailey essentially said England will be entering a year-plus period of stagflation and there is little they can do about it. The pessimistic outlook from the BOE helped precipitate a more than 3% decline in the S&P 500 on Thursday.

Both central bank heads face difficult circumstances. Russia’s invasion of Ukraine pushed oil prices higher and contributed to a surge in energy prices. China’s lockdowns mean supply chains won’t heal as quickly as they would otherwise. These supply shocks and the subsequent inflation are difficult for central banks. As Powell noted in his most recent press conference, the central banks’ tools are designed to reduce demand and don’t work as well against supply shocks.

They also have their own specific challenges. Powell left rates too low for too long, and excessive fiscal stimulus and the unknowns of a pandemic leave the Fed trying to balance the goal of catching up with current inflation reality while not choking off the recovery. Bailey’s challenges are even greater. Great Britain’s economy isn’t as strong as the U.S.’s. The pandemic was the second supply shock, as Brexit also unsettled supply chains. Britain also trades more with continental Europe, which is heavily affected by sanctions on Russian oil and uncertainty from Russia’s invasion of Ukraine.

When faced with so much uncertainty, investors should keep in mind things can and often do change. We expect rates to keep rising, but the Fed is “data-dependent.” If it looks like its actions are slowing the economy too much or, alternatively, not effective enough, it will change the pace of rate increases.

In periods of uncertainty, investors should also be data-dependent. The Fed has a mandate of keeping inflation and employment at the right levels. Your financial plan may also have a mandate of providing future spending for you and others. Daily fluctuations, like those experienced last week, can be unnerving, but don’t let them force you into changes when your plan is doing just fine.

 

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This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

S&P 500 INDEX

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

MSCI ACWI INDEX

The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.

Bloomberg U.S. Aggregate Bond Index

The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.

https://www.federalreserve.gov/newsevents/pressreleases/monetary20220504a.htm

https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220504.pdf

https://www.bankofengland.co.uk/monetary-policy-report/2022/may-2022

https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2022/may-2022

https://www.wsj.com/articles/boe-raises-rates-for-fourth-successive-time-signals-future-caution-11651749057

https://www.bls.gov/news.release/empsit.nr0.htm

Compliance Case #01361431

 
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                    [post_content] => Market volatility continued last week as global markets tried to digest a slew of earnings reports and economic updates. Likely the biggest release was the U.S. GDP report for the first quarter, which showed the U.S. economy contracted by an annualized 1.4% over the first three months of the year. While the market initially responded positively, it was obvious by the end of the week that equity markets were nervous.

Key Points for the Week 

 	
Equities struggled and suffered a fourth consecutive week of losses, with growth fears and weak Q1 earnings providing the largest headwinds.
 	
The S&P 500 is now down 13.5% from its recent peak, with Friday’s close the lowest in 2022.
 	
GDP came in below expectations, but it was mostly driven by reduced inventories and weak exports.

Adding to the apprehension were earnings releases that forecasted lower profits than expected for future quarters.

Home prices for the Case-Shiller indexes remained elevated in February, not just in the largest markets but nationwide. Meanwhile, new home sales fell 8.6% in March as inventory remained low and mortgage rates continued their rise.

PCE inflation remains stubbornly high, with the headline figure up 6.6% year-over-year and 0.9% month-over-month. The core number fell slightly to 5.2% year-over-year. The market will be paying close attention to the Federal Reserve this week as it meets May 3-4.



 

Economic Report Card

On the surface, the first quarter U.S. GDP report looked disappointing. The market expected an increase of 1% annualized but was greeted with an annualized decline of 1.4% instead. This came after 2021 showed strong growth throughout the year and was capped with 6.9% growth in the fourth quarter.

So why was this report seen as relatively positive? Two factors were significant drags on growth, both of which tend to be volatile: change in private inventories and net exports. The change in private inventories is a quirky calculation. It was reported as -0.8% since last quarter, but inventories increased during the quarter. The reason it’s negative is inventories didn’t rise by as much as the previous quarter when they increased 5.3%. In other words, Q1 was being compared to a huge number from Q4 2021, which it couldn’t keep up with even though it was still positive.

On net exports, there was a large shift in the amount of goods exported to other countries. The reason for this is twofold. First, demand for goods and services around the world declined over the first quarter because of the conflict between Russia and Ukraine, so there was less demand by foreign consumers to buy U.S. goods. Second, the goods and services produced in the U.S. got more expensive for international buyers because the U.S. dollar strengthened in the first quarter. These two factors led to net exports declining by 1.2% annualized.

Other than those two components, the report was largely positive. U.S. consumption remains strong, with demand for durable goods and services showing large gains. The increase in durable goods is important because it shows the production of larger items, especially vehicles, is increasing. That should help some of the inflationary pressures that come from scarcity. Similarly, the increase in services demand is positive because it indicates some COVID-19 fears have faded, meaning people are more likely to go out and spend money on experiences rather than things.

Another strong aspect of the report was business investment, which increased 2.2% from last quarter. This means businesses are spending to increase their capacity through information technology, machinery, and building out intellectual property, which should help alleviate some supply chain issues and allow them to keep up with demand.

Overall, the report indicates the U.S. consumer is still strong and companies are doing what they can to keep up with demand while relying more heavily on imports.

Many are wondering whether we are heading into a recession. In any given year there is a 14% chance that a recession will occur. Given the conflict in Ukraine, the continued supply chain issues, inflationary pressures, and the fact that an interest-rate-hike cycle is beginning, the likelihood of recession is higher than average, around 20%-25%. However, what’s keeping a recession from being the base case, or most likely scenario, is strong demand in the U.S. While the headline number from the GDP report may have added to some anxiety, underlying strength is keeping the economy on solid footing.

-
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

S&P 500 INDEX

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

https://www.bea.gov/data/gdp/gross-domestic-product

https://insight.factset.com/sp-500-earnings-season-update-april-29-2022

https://www.wsj.com/articles/us-economy-gdp-growth-q1-11651108351

https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

https://www.spglobal.com/spdji/en/index-announcements/article/sp-corelogic-case-shiller-index-shows-annual-home-price-gains-increased-to-198-in-february/

https://www.bea.gov/data/personal-consumption-expenditures-price-index

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            [post_content] => The S&P 500 continued its string of negative weeks, dropping 3% last week. It was the seventh straight weekly decline in the index of large-cap stocks. The S&P 500 temporarily fell more than 20% on Friday, but the market rallied and the index finished down 18.1% from its January all-time high.

Key Points for the Week 

 	
The S&P 500 declined for the seventh straight week and narrowly missed entering a bear market.
 	
Retail sales climbed 0.9% showing the consumer remains willing to buy items even as prices have increased.
 	
Retailers struggled with higher labor and shipping costs and uncertain supply chains. Earnings dropped while sales increased.

Poor earnings at big-box retailers caused much of the market decline. Wednesday’s slide of 4% was the result of a second straight day in which a major retailer announced earnings would miss expectations. Companies cited high labor costs, head counts, and shipping prices as reasons for the poor quarterly performance.

One factor companies didn’t cite was low sales. April retail sales confirmed the trend of improvement, rising 0.9%. Increased auto sales and more money spent on dining out contributed to strong monthly spending. While spending on goods and services is increasing, homebuyers seem to be slowing their purchases. Single-family housing starts fell 7.3% last month, and existing home sales fell 2.4%. Higher mortgage rates are a top reason for the decline.

Industrial production showed similar strength to retail sales, jumping 1.1% in April. Manufacturing climbed 0.8% and reached its highest level since 2008.

The MSCI ACWI dropped 1.1% as big-box retailers’ poor earnings didn’t hit global stocks as hard as they did U.S. stocks. Bonds helped cushion the decline. The Bloomberg U.S. Aggregate Bond Index rallied 0.6%. The PCE deflator, which measures inflation, and some key trade data are the top economic releases this week.

 



Figure 1



Figure 2

Stocks on Sale?

Market volatility continued to make things difficult for equity investors. Seven straight weeks of losses in the S&P 500 make this a tough market for many. The last market peak was on the second day of the year, more than four-and-a-half months ago. Compared to the decline in March 2020, this one is shallower but has lasted much longer. In 2020, stocks fell 34% in just more than a month. It was a much sharper downturn, but it didn’t require the same level of patience before it started moving higher.

The biggest reason for the slide was poor first-quarter results by big-box retailers, which earned that moniker for the box-like appearance of their stores. The weak results were caused by the challenges reverberating through our economy. Wages have climbed rapidly. Firms have hired extra workers at higher wages to meet demand. The supply challenges have been two-fold. Some items arrived late and missed their prime selling season, resulting in lost sales. Companies then began ordering goods further in advance to make sure they arrived on time. But sometimes they arrived too early, leaving the company with inventory and storage costs that cut into profitability.

The good news for retailers is the consumer remains well positioned to spend. April retail sales in the U.S. beat expectations and rose 0.9%. March sales growth was revised upward from 0.7% to 1.4%, confirming strong consumer demand. The biggest contributor to overall retail sales was auto sales, which is a good sign since automobile prices have increased rapidly. The industrial production report confirmed that auto manufacturing is back to levels seen prior to the COVID-19 crisis.

Sales at restaurants increased 2% in April month-over-month and are now up nearly 20% since last year. Inflation is driving the spike, but it’s also a sign that the food services industry is finally getting back to normal after several fits and starts caused by new COVID strains. At the same time, sales at grocery stores decreased slightly in April, another sign that Americans are getting more comfortable with going out to eat again.

These strong retail sales numbers certainly point to a very strong U.S. consumer. The increases are not just because Americans are buying the same amount of goods that are now more expensive. The real retail sales figure increased 0.6% last month and has gone up 1.6% in the past three months.

Because inflation is high at the same time the economy is slowing, the path to a market recovery has challenges on both sides. On one side is inflation. There is very little indication that consumer demand will decline soon, which means price pressures could continue. The other side is a recession, which may occur if interest rate hikes and other factors slow the economy too much. In between is the soft landing the Fed hopes to engineer.

When markets fall, many believe bad outcomes become more probable. Our view is the width of the path to success widens when markets go down because valuations are falling. As Figure 2 shows, the price investors pay for a dollar of earnings has declined to around the average level from 2015-2019. Compared to the heightened valuations caused by earnings declines from the pandemic, current valuations are lower. Lower valuations mean less optimism about how companies will fare in the future. When valuations drop, it means expectations are dropping as well, and that means pretty good numbers can become “good enough” and stocks can increase.

Will stocks avoid breaching the 20% threshold? By the time you read this, they may already have. Rather than get caught up in the negative sentiment created by the market falling another percent or two, focus on the fact that value is improving, and the seeds of the next market rally may have already been planted. That perspective can keep you invested and prepared to reap the rewards if stocks are on sale.

 
-
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

S&P 500 INDEX

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

MSCI ACWI INDEX

The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.

Bloomberg U.S. Aggregate Bond Index

The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.

https://www.usnews.com/news/business/articles/2022-05-18/explainer-why-is-wall-street-close-to-a-bear-market#:~:text=The%20most%20recent%20bear%20market,the%20shortest%20bear%20market%20ever

https://www.wsj.com/articles/target-earnings-squeezed-by-inflation-and-fuel-costs-11652869800?mod=mhp

https://www.cnbc.com/2022/05/17/stock-market-news-open-to-close.html

https://www.census.gov/retail/marts/www/marts_current.pdf

https://www.federalreserve.gov/releases/g17/current/g17.pdf

https://www.nar.realtor/newsroom/existing-home-sales-retract-2-4-in-april

https://www.census.gov/construction/nrs/pdf/newressales.pdf

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                    [post_content] => Karn Couzens & Associates, Inc., a full-service financial planning and wealth management firm with offices in Farmington and Wallingford, Conn. announced today that it is joining Carson Wealth. The 10-person team is led by managing directors and wealth advisors, Robert A. Karn, JD, LLM, CFPⓇ and Jeffrey P. Couzens, CFPⓇ and has $800 million in assets under advisement.

“There were a lot of reasons why we chose to partner with Carson,” explains Robert Karn. “But one of the biggest reasons was the industry-leading technology available to us as Carson Wealth and what that will enable us to do for our clients. These tools will help streamline our clients’ digital experience, making it easier for them to visualize their financial plan, access their investments and communicate with our team.”

Robert Karn has been helping high-net-worth families and businesses discover and plan for their financial goals for nearly 40 years. Karn began his career in financial services when he and wealth advisor, Jim Couzens opened Karn Couzens & Associates in 1987.

Jeffrey Couzens joined Karn Couzens & Associates, Inc. in 1997, following in his father, Jim’s footsteps.

“Our goal has always been to deliver maximum value to our clients and provide them with a ‘best-in-class’ experience,” said Jeffrey Couzens. “Aligning with a trusted partner like Carson will allow us more time to foster true partnerships with our clients and help them live their best lives by developing plans to help them prioritize and achieve their financial goals.”

“Bob and Jeffrey have built a tremendous multigenerational family business, dedicated to serving the greater Hartford area,” said Ron Carson, founder and CEO of Carson Group. “As part of the Carson Wealth team, they have access to resources to secure their firm’s legacy and provide so much more for their clients – comprehensive financial planning, trust services, insurance solutions, tax strategy and a dedicated investment management team.”

“Carson’s extensive network gives us a succession plan that supports our existing team and reinforces the work we’re committed to doing for our clients,” added Karn. “We believe we are now even better positioned to look toward the future with renewed confidence.”

Karn Couzens & Associates, LLC, will be the 35th Carson Wealth branded office in the U.S.

Carson currently manages $20 billion in assets and serves more than 40,000 families through its advisory network, including 35 Carson Wealth offices. For more information, visit www.carsonwealth.com.
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                    [post_content] => By: Erin Wood, CFP®, CRPC®, FBS®, Senior Vice President, Financial Planning, Carson Group

 
Laura and Caroline are in their late 50s. Friends since meeting at a playgroup for their toddlers, both were in long-term, seemingly happy marriages. Laura married her high school sweetheart right after they graduated from college and worked as an RN while her husband attended medical school. When their first child was born, Laura decided to become a stay-at-home parent. She just celebrated sending her last child off to college and was looking forward to enjoying an empty nest with her husband.
Already established in her career as an accountant for a large insurance firm, Caroline married a bit later, at 33. Today, she’s a financial controller for the same firm. Her spouse owns his own landscaping business. Caroline is the high-wage earner in the family.
Unfortunately, both women are now surprised to be facing a “gray” divorce: a divorce involving couples in their 50s or older. Each will need to make some tough choices as they deal with the emotional devastation of unraveling a long-term marriage. Although my focus as a financial planner is to help my clients find their financial footing during and after divorce, I also encourage clients to build a strong network of family and friends as well as a therapist or clergy person to offer critical emotional support during this time.
Read full article on Kiplinger.com
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                    [post_content] => Carson Wealth in Napa, California, announced that wealth advisor, Tom Commander and senior planner, Tim McNamara are joining Kent Kuhlmann’s team and adding to the firm’s expanding footprint in Northern California.

The Carson Wealth team in Napa serves affluent families, business owners, executives and institutions in Napa, Sonoma, San Jose and surrounding areas. The firm currently manages more than $100 million in assets for families and businesses in 32 states.

“The decision to join Carson Wealth was an easy one,” said Tom Commander, wealth advisor. “This strategic move gives me the opportunity to provide clients with the support of Carson Wealth’s full roster of highly specialized professionals offering services ranging from estate planning, investment management and financial planning.”

Before joining Carson Wealth, Commander worked as an investment advisor with Jacobson Wealth Management.

Commander joined the financial services profession after serving 29 years in law enforcement with the Napa Sheriff’s Office. While working for Napa County, Commander served as a member of Napa County’s Deferred Compensation Board for 12 years. As a board member and chair, he discovered he had a passion and interest in the financial services industry and decided to pursue a career as a financial professional.

Commander holds a life, health and accident insurance license for the state of California.

Senior planner, Tim McNamara, a 30-year financial services veteran, will also be joining Carson Wealth. McNamara previously owned and operated his own consultancy practice and specialized in advising clients on estate, tax, business succession, charitable planning and real estate development needs.

“I have found that the needs of our ultra-high-net-worth investors are unique and require strategies tailored to their individual needs,” said McNamara. “Carson Wealth embraces a highly-customized approach and has invested heavily in systems that give clients the services they want. With this partnership, I now have access to industry-leading technology that will allow me to provide clients with planning solutions that are right for them.”

Carson currently manages more than $20 billion in assets and serves more than 40,000 families among its advisor network of 120 partner offices, including 35 Carson Wealth locations.
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                    [post_content] => Salt Lake City, Utah (Feb. 9, 2022) — Signal Wealth Advisors, a full-service financial planning and investment firm based in Salt Lake City, announced today that it is rebranding to Carson Wealth. The 14-person team, led by managing partners and wealth advisors Duane Toney CPA, PFS and Thom Hall CFP®, ChFC®, currently manages $250 million in assets.

Since joining Carson Partners in 2017, Signal Wealth has experienced tremendous growth and has been able to better serve its clients by having the backing of Carson’s industry-leading financial planning solutions.

“Carson’s industry-leading technology has helped streamline our clients’ digital experience, made it easier for them to visualize their financial plans, access their investments and communicate with our team,” said Duane Toney.

“By taking the next step to rebrand as a Carson Wealth office, we not only have an ownership interest in each other’s firms, but we are now better positioned to grow and add additional advisors to our team,” added Toney.

“By aligning ourselves with the Carson brand we have the peace of mind in our firm’s legacy,’ said Thom Hall. “We now have a strong succession plan in place for our clients and know they will continue to be cared for by our team for generations to come.”

"Additionally, Carson’s extensive network offers a robust succession solution that supports our existing team, anticipates client needs and reinforces the work we’re committed to doing for our clients. We believe we are now even better positioned to look toward the future with renewed confidence.”

Duane Toney started the business that later became Signal Wealth in 2002. Since then, Toney has helped affluent families, business owners, entrepreneurs and executives in the Salt Lake City area focus on investment management, tax minimization and wealth protection.

Thom Hall founded Thom K. Hall Financial Group in 2000 and combined forces with Signal Wealth in 2018. He has been advising clients on how to protect and manage wealth for over 25 years.

“Our decision to partner with Thom & Duane came from a mutual desire to serve their clients well, expand their resources and support and help them continue to grow,” said Ron Carson, CEO and founder of Carson Group. “We are proud to add them to our team and we look forward to growing our presence in Utah.”

As with other advisors who have affiliated and rebranded as Carson Wealth offices, Toney and Hall will maintain active majority ownership of the firm and will remain the strategic decision-makers for all business decisions and operations in the Salt Lake City office.

Carson currently manages $20 billion in assets and serves more than 40,000 families through its advisory network, including 35 Carson Wealth offices. For more information, visit www.carsonwealth.com.

 

About Carson Wealth

Founded in 1983, Carson Wealth is one of the fastest growing financial services firms in the country, serving clients through holistic financial planning, disciplined investment strategies and proactive, personal service.

Carson Wealth is headquartered in Omaha, Nebraska, with the mission to be the most trusted for financial advice.  For more information visit, www.carsonwealth.com.

Securities offered through Cetera Advisor Networks LLC, Member FINRA/SIPC. Investment advisory services offered through CWM, LLC an SEC Registered Investment Advisor. Cetera Advisor Networks is under separate ownership from any other named entity.

6955 S Union Park Center, Ste 250, Midvale, UT 84047

 
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                    [post_content] => OMAHA, Neb., February 7, 2022 - Carson Wealth has been recognized as a 2022 Best Places to Work for Financial Advisers by InvestmentNews.

Carson Wealth was chosen as one of this year’s top 75 based on employer and employee surveys delving into everything from company culture, benefits, career paths and more.

“We’ve continued to raise the baseline for our stakeholders and being named to this list for the fourth time is a huge achievement for our firm,” said Kelsey Ruwe, Chief of Staff at Carson Group. “2022 brings more opportunity to focus on internal engagement, and we thank InvestmentNews for shining a light on those in our profession who are going above and beyond.”

InvestmentNews partnered with Best Companies Group, an independent research firm specializing in identifying great places to work, to compile the survey and recognition program.

“In a year that’s seen so much turmoil in the workplace – from mask mandates and canceled office reopenings to The Great Resignation – InvestmentNews is proud to spotlight those firms with a proven record of investing in their most valuable resource: their employees,” said Paul Curcio, executive editor of InvestmentNews. “We applaud this year’s finalists and wish them all the best in 2022.”

To learn more about the InvestmentNews 2022 75 Best Places to Work for Financial Advisers, visit www.bestplacesforadvisers.com.

Carson currently manages $20 billion in assets and serves more than 40,000 families through its advisory network, including 30 Carson Wealth offices. For more information, visit www.carsonwealth.com.
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            [post_content] => Karn Couzens & Associates, Inc., a full-service financial planning and wealth management firm with offices in Farmington and Wallingford, Conn. announced today that it is joining Carson Wealth. The 10-person team is led by managing directors and wealth advisors, Robert A. Karn, JD, LLM, CFPⓇ and Jeffrey P. Couzens, CFPⓇ and has $800 million in assets under advisement.

“There were a lot of reasons why we chose to partner with Carson,” explains Robert Karn. “But one of the biggest reasons was the industry-leading technology available to us as Carson Wealth and what that will enable us to do for our clients. These tools will help streamline our clients’ digital experience, making it easier for them to visualize their financial plan, access their investments and communicate with our team.”

Robert Karn has been helping high-net-worth families and businesses discover and plan for their financial goals for nearly 40 years. Karn began his career in financial services when he and wealth advisor, Jim Couzens opened Karn Couzens & Associates in 1987.

Jeffrey Couzens joined Karn Couzens & Associates, Inc. in 1997, following in his father, Jim’s footsteps.

“Our goal has always been to deliver maximum value to our clients and provide them with a ‘best-in-class’ experience,” said Jeffrey Couzens. “Aligning with a trusted partner like Carson will allow us more time to foster true partnerships with our clients and help them live their best lives by developing plans to help them prioritize and achieve their financial goals.”

“Bob and Jeffrey have built a tremendous multigenerational family business, dedicated to serving the greater Hartford area,” said Ron Carson, founder and CEO of Carson Group. “As part of the Carson Wealth team, they have access to resources to secure their firm’s legacy and provide so much more for their clients – comprehensive financial planning, trust services, insurance solutions, tax strategy and a dedicated investment management team.”

“Carson’s extensive network gives us a succession plan that supports our existing team and reinforces the work we’re committed to doing for our clients,” added Karn. “We believe we are now even better positioned to look toward the future with renewed confidence.”

Karn Couzens & Associates, LLC, will be the 35th Carson Wealth branded office in the U.S.

Carson currently manages $20 billion in assets and serves more than 40,000 families through its advisory network, including 35 Carson Wealth offices. For more information, visit www.carsonwealth.com.
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