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Market Update 3/20/20

Coronavirus update 5 - FAQ

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

A great deal has changed since last Thursday night when I penned a note to you all, and in some ways nothing has changed. Markets are still depressed, and there is still a great deal of unknown in both the capital markets and economic forecasts. There is also still a great deal of anxiety surrounding the true long term impact of the coronavirus. Without a doubt, if you want to find negative sentiment out there, it is wildly accessible on the home page of just about every major news website. Panic sells and the distributors of nightly news and daily columns are open for business. Hopefully in this uncertain time I can offer you a more measured read as I intend to change up the pace of our previous letters with a question and answer session covering some of the most frequent discussion points we are having with our clients and friends in the past days.

The conversation will continue below and please read at your leisure but surely I would be remiss without a few words of positivity to counteract the doom and gloom the media is offering.

While general indexes have continued to experience wild volatility, including a particularly awful Monday of this week, we are starting to see some green shoots in stocks and coronavirus data. First, the bottoming process is one that generally takes many months to conclude after such a violent fall and if this time is the same or different remains to be seen. In every time however, we usually see indiscriminate selling (all stock sectors going down as one) conclude, and then a measured period of discriminate buying and selling (unrelated sectors start to perform differently) takes hold as we bottom out the downtrend. In other words, airlines which should continue to stay under pressure in this environment start to behave differently than grocery stores which have had record amounts of product flying off shelves. Two weeks ago they were both going down equally. Today they are not. This is a small but positive divergence and critical to the bottoming process.

On the medical front, if you watched the coronavirus task force update from this afternoon you witnessed firsthand that the battle for better outcomes for those unfortunate enough to be infected with the virus has taken a small turn for the better. There is a drug called Chloroquine, originally discovered in 1934 to treat Malaria, which has been found to not only mitigate in many patients the worst respiratory symptoms of COVID-19 but in the large majority of cases in the clinical trial, have helped the virus to completely disappear from the patient after a week of treatment. In the task force meeting today, the FDA announced the approval of clinical trials in the United States. This will take time to initiate these trials in the United States to ensure efficacy but make no mistake that this is positive news. Slowing the spread will continue to be warranted but if in the coming weeks and months scientist are able to demonstrate a treatment plan that substantially improves the mortality rate of the virus I think it will go a long way to calm our worst fears. Time will tell.

On to the frequently asked questions. We hope this list may cover a question or two that you may have considered but not asked. Also since I tend to be long winded (you may have noticed), nothing below is required reading please skip around if topics don’t interest or apply to you.

1. Should I go to cash until this has passed?

I have addressed this a few times in previous letters but for the most nervous folks out there this question is likely still top of mind. Understand first that no one has a crystal ball and candidly, anyone you may see speaking in absolutes on TV is either reckless or trying to make a name for themselves. That said, previous market downturns, while all different, have a similar rhythm to them. Our ownexperience along with studying years of previous downturns tell us that the time for defensive measures in diversified portfolios has passed and quickly at that. The average peak to trough downturn in a bear market is 518 days. You read that right, normally these downturns play out over years. This period took just 22 days and left very little time to thoughtfully consider protective measures.

So now that we are here I think it prudent to further consider some history. This is the 17th bear market since the great depression started in 1929. The average total downturn from the peak in all of those cases was 38.2% and if you throw out the great depression years the average is 32.5%. As of this writing the big indexes are down from the all-time highs around 30%. In my experience, successful investors remove emotion to focus on data, trends and probabilities. The probabilities are saying that we are closer to the bottom of the trend and furthermore, if we do see lower levels, which is entirely possible, that it will be temporary. Also, what many don’t consider is that raising cash in long term investments is only beneficial when that money is reinvested at lower levels which frankly rarely happens. I wish we had a dollar for every time we’ve heard the phrase “I’ll reinvest when markets calm down.” Folks, when markets “calm down” they will be at much higher levels and you will have done more harm than good.

There are small caveats to the general commentary above of course but rather than list out every scenario I’d rather just plead that you give us a call and we can discuss your individual situation if this is concerning you.

2. How much should I have in an emergency fund?

For the average person I suggest around 3-6 months of fixed living expenses. Think of bills that must get paid no matter what. If you are in a duel household with two incomes, in a salaried profession or one very unlikely to have an interruption in income you should be comfortable at the shorter end of that range. If you are single, have multiple children or are in a profession where you could see a significant disruption in income then you should be at the higher end of the range. This advice is not just during times like these but at all times.

3. Should I stop contributing to my 401k?

You notice I am addressing this question after the emergency fund. The only reason that you should consider stopping your 401k contribution right now is if you feel light in the emergency fund department. The greatest returns you will ever earn in your retirement account are likely to occur with the dollars that you add in the coming months. The adage is buy low and sell high. This is your opportunity to buy low and you should take advantage of it.

4. Will we go into a recession?

Two weeks ago the answer to this question was maybe. As of today the answer is we are probably already in one. Remember that recessions are lagging events and we only know we’ve been in one by looking in the rearview mirror. The economic conditions were fantastic coming into 2020 with GDP that was expected to be above 3% in the first quarter, wage inflation present and high levels of employment across all sectors. If anything, that is good news in that the economy was on sure footing going into this period of uncertainty. The reality is, with so much business interruption and temporary measures being considered for many Americans, we are seeing significant economic disruption. Additionally, unemployment new applications are likely to spike next week.

5. How long would a recession last?

Economists are rushing to answer this question as we speak, but the truth is that until we know how long the disruption from the coronavirus will be, it’s anyone’s guess. The most likely case, in my opinion, is that we see a mild downturn in GDP for the first quarter as January and Februarys strong data was already in the books. The second quarter is more challenging to discount as we have no idea if we will be back to business as usual by May or June. If we follow what China and South Korea were able to do in slowing the pace of infection, then we could be returning to normalcy sooner and that would be a very good thing. Regardless I think it prudent to plan for the second quarter of 2020 to be one of the deepest contractions we have seen in some time. That is the bad news. The good news is that due to the transient nature of the virus (hopefully) we will enter the summer months with low interest rates, low oil prices, pent up demand and a great deal of stimulus money which should lead to a very positive third and fourth quarter. In short, no one knows, but if I had to guess the recession will be deep but very short and we’ll be on the road to recovery very quickly. Think a U shaped recovery, not an L.

6. How do we know when the market will bottom?

The cagey answer is when you feel the worst. The technical answer is when we see a number of indicators start to show a divergence from the current trend as I mentioned above. For instance, spreads in investment grade and high yielding bonds will come down and the VIX or fear index in stocks will fall from its currently elevated levels. Stock indexes will start to mark higher highs and lower lows and the breadth of the market (number of stocks participating) will grow high above average levels. The common sense answer is that I think it’s reasonable to say that markets won’t complete the bottoming process until we start to get clarity on what the actual outbreak in the US will be and how long our economy is on hold. This picture should start to come together in the coming weeks. With that said, everyone should remember that capital markets are forward looking and leading indicators. The news doesn’t have to be all positive for the markets to recover. Instead news just needs to stop getting worse. The market will take off long before the economic recovery takes hold.

7. Should I be buying stocks right now?

This is a tricky question as in the short term, it is certainly possible that stocks could continue to go down as economic conditions worsen. In reality though, as long as you have a reasonable time horizon, there has never been a time in history where buying high quality company stocks at a 30% discount has been a bad idea. The best investors in the world right now are considering the investments to make in the coming days that will profit in the coming years. We are doing the same.

8. How long should it take markets to recover?

Every single recovery is different. The average recovery of post great recession bear markets I referenced above took about 25 months. The garden variety bear markets (markets down 20-40%) only took 14. In the bear market of 80-82 it only took 3 months to repair the 27% decline. In the great recession of 2008-2009 it took 49 months. When I analyze the data, however, I believe there is a real trend that market turmoil found quickly also tend to resolve quicker than average. It may all depend on the economic conditions we find ourselves in post the virus. If we are on reasonable footing and gov’t stimulus has done its job to hold things together during the spring, then I think it is likely that we experience a speedy recovery in capital markets. The main point on this question I would like to leave you with is that every single bear market this country has experienced ended in a recovery to new highs. Every single one.

9. Should I rebalance my 401k?

The answer is yes. This is a great way to take advantage of stock allocations in your portfolio. If you hold an asset allocation fund like a target date or a risk targeted investment this is already being done for you. If you control your own investments it may be something that you have to do. For our private client accounts we have held off on rebalancing as of yet because of where we are in the cycle but it will absolutely be a move we take. Rebalancing automatically executes the buy low sell high theory of investing. It may seem counterintuitive but you’ll happy you did it in the long run.

10. How will the government pay all the money back?

The Federal Reserve, Department of the Treasury and Congress are all doing their part to buy the economy time for the virus to pass. Some of these measures involve a temporary use of Gov’t funds that will be paid back or retired, but many of the measures being pushed through Congress will involve permanent distribution of funds. For instance, it looks like Congress will be sending out direct checks to American citizens most in need to stabilize families over the next couple of months. This money gets added to national debt as we currently run a budget deficit at the federal level. I could write 20 pages on how this plays out over time. The reality is debts true burden is in the interest payment as a percentage of the total budget. With historically low interest levels the gov’t has the opportunity to essentially refinance the debt each and every day, which they are doing and while not offsetting the spending, mitigating it to some degree. I think this is a large issue for us to tackle in the future but we think of it currently as an issue for the future.

11. How is our group doing through all of this?

I have been professionally advising clients for over 17 years (other members of our team much longer.) Some of the conversations we have had with clients over the past weeks has been humbling. Our group cares deeply about every single one of you and your families. I personally don’t believe you can be in this profession if that sentiment isn’t in your blood. That said, we have received many calls over the last few weeks asking how we are holding up. Again, appreciative and humbled.

So thank you for asking. We are doing well. If you are in the profession of money management and financial planning you expect these moments of uncertainty and fear to occur. We are human like everyone else so candidly, we fight back against overreaction and panic just like you. However, much like a veteran quarterback and in the spirit of Tom Brady coming to the Buccaneers (2020 is so strange,) experience and wisdom allows us to stay calm while others panic. In short, the team is doing well and trust in that we’ll be looking out for you day by day as we move through this year.


Market Update 3/13/20

Coronavirus update 4

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

I am writing this in the late hours of the evening after having coped with the events, trades and calls of the day. Hopefully we are able to get a speedy thumbs up from the compliance folks and this letter is reaching you on Friday morning.

Candidly, it’s hard to consider the broad scope of what we have experienced as a nation and as investors in the last few days. It feels as if we are being showered with minute by minute headlines of travel bans, celebrity coronavirus stories and cancelled sporting events. Hopefully none of you are paying as close attention to all of this as we are because if you are I suspect you are overwhelmed and stressed. In these times of high stress we thought it appropriate to offer some guidance based upon our collective experience in over a century of stewarding client money.

First things first. I sincerely encourage you to consider one concrete fact about our current state of affairs that may have escaped you. This will pass. We as a country and as an investing community have survived and thrived in the aftermath of many events from world wars to financial crises. Every one of those moments, whether it 9/11 or the Cuban missile crisis feels uniquely scary but ultimate yield a similar emotion, which is fear. Furthermore, we have found over time that investor fear tends to reside not on the issue itself (though this coronavirus is scary) but in the fear of the unknown. The unknown result or outcome of the issue is often the most paralyzing because as human beings we tend to consider the worst possible case scenario as more likely than it actually is. If you don’t believe me, consider a late night visit to Web MD prior to a doctor appointment that offers as a result of your symptoms as allergies, the flu or cancer. My guess is you wouldn’t stay up that night worried about having the flu.

So with that said, I encourage you to consider with me what is possible and what is likely in the coming months with regard to what the World Health Organization has now called a pandemic and most specifically how it is likely to continue to affect the capital markets.

To start lets discuss what is normal as the market experience downtrends each year. Starting each year we are likely to see a peak to trough downside of 13% or so at some point. Every few years we experience a correction that challenges the bear market downtrend of 20%. The last being in the 4th quarter of 2018. Finally, less frequent but still common is a bear market associated with a recession that generally yields a downturn closer to 30% or more in stocks. As we stand today we have passed, quite quickly, the average correction and what constitutes a bear market downturn of 20%.

With the broader indexes down at time of this writing close to 28%, markets are pricing in the absolute likelihood (though it remains to be seen) of a meaningful economic recession as the result of Covid-19 spread and the plunge in global oil prices thanks to the recent moves by Saudi Arabia and Russia. Compounding our concern with the size of the move is the speed at which we arrived here, with multiple days this week ranking among the worst performance days in market history. To be specific the markets moved from enjoying all-time highs riding the tailwinds of recent trade deals with China, Canada and Mexico to where we are today in just 16 days.

While the size of the move we have experienced is not quite unprecedented, it is without question about as bad as it gets.

Also, with potential to make matters a bit worse and as you hopefully read in our piece from last week, we have likely not seen the height of panic as numerous medical professionals in our network tell us we are likely to see dramatically higher new cases of infections in the United States over the coming weeks. As a reminder, this will come with a small silver lining in that mortality rates of the virus will likely come down as more cases in our country are reported but as we saw today based upon the Tom Hanks admission and NBA season suspension, the general public is still coming to grips with gravity of the outbreak.

So where does this leave us? As you can read in the attached document from many of our experts at Raymond James, including our chief investment strategist Larry Adam, the market has already priced in a shallow recession. While it is possible that we could experience a more meaningful recession, the current information suggests the likely economic disruption of the coming months is priced into the market already at these levels.

This brings me back to what is likely and what is possible. What is likely is that the market has already seen much of the downside that we are going to see. The positive headlines in the coming weeks to support this will be a plenty and will involve accommodation in monetary policy by the Federal Reserve and other central banks as well as multiple stimulus packages currently working their way through Congress. In the long term we need to see more clarity on exactly how many cases are in the United States, the pace of community spread and steps our Healthcare industry is taking to mitigate the spread of the virus and in treatment for the sick.

The possibility that we could see further downside in markets certainly exists as we will likely see continued economic disruption through cancelations of hospitality, transportation and retail. As stated, we most certainly will have scary headlines that could create more general panic and volatility. This will no doubt be a battle of positive and negative news generating hope and fear as the virus and its economic effects play out in real time.

At this moment, among all the noise, we find it most appropriate for every single investor to consider their risk tolerance, time horizon and financial plan. Young investors should be drooling at the opportunity to buy worthy investments all of a sudden on sale and seasoned investors should be ensuring that their allocation is appropriately balanced to defend against more downside but also poised to participate in the recovery.

While no one has a crystal ball and this unique period of time is quite scary, by admission, history suggests that patience is rewarded and panic is punished after a market experience like we just had. The largest downturns in history required time to reconcile as we believe this one will also. We as a country and as investors will move past this period together and we will, as we do now with many of the past events burned into our memory, think back to the panic caused by the coronavirus, how scary it felt, how the market reacted and how the market recovered.

As always, we invite any questions or concerns you have during this time. I am supremely confident that this uncomfortable period of uncertainty will pass with time. In the meantime stay patient and please let us know how we can help you.

Any opinions are those of Sean Kelly and St Pete Wealth Management Group and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Keep in mind that individuals cannot invest directly in any index. Past performance does not guarantee future result. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as "The Dow" is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. This is not a recommendation to purchase or sell the stocks of the companies mentioned.


Market Update 3/3/20

Coronavirus update 3

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

Information and values are moving at record speed in the last number of trading sessions in both the bond and stock market. Last week capped off one of the worst performance weeks we’ve seen in broader equity markets, while yesterday represented the largest single day point gain in the S&P and the DOW. Not to be outdone, today the 10 year treasury bond hit it’s all time low yield under 1% on the tail of a 50 bps surprise cut in the Federal Reserve rate. This rate cut initially generated follow through on the positive trend in the equity market but unfortunately that faded as Fed chairman Powell took to the stage to discuss the reasoning which centrally focused on the negative impact the Coronavirus was likely to cause on the US economy. The last number of days have been anything but dull to be sure.

It is important to remember in these times that while uncomfortable, elevated volatility has been rather common place during market inflection points since the beginning of this long term uptrend which started in 2009. This officially is the sixth time that we have seen a market correction of this magnitude since the start of this secular bull with the most recent downside swings occurring in 2016, 2017 and 2018. If you read no further than this please remember that while every pullback is different, they are similar in that they are common. Over the last 30 years we have averaged a pullback of around 13% per year from peak to trough†. Some years have been less and some certainly more but as we have harped on many times in our updates, it is impossible to generate sustainable long term upside trends without corrections and in some cases shallow bear markets mixed in. The need for a correction due to our overbought condition earlier this year was addressed in our previous update. Now that we have achieved a technical correction, our next major course of action is to determine the length and depth to which the current downtrend will sustain. For that, we have included a few bullet points below that we think are relevant summarized into good and not so good categories for ease of reference. Some points are being widely discussed publicly and others are important points, in our opinion, being under appreciated by the national media.


THE GOOD

1. Generally under reported nationwide, the active infections globally of the coronavirus (most specifically in China) have actually been falling the last couple of weeks. When you sum the global numbers of total recoveries of 48,190 as of this writing with total fatalities which are currently 3,131 you arrive at previous infections of 51,131. When applied to total confirmed of 92,315 the result is 40,994 current active infections. On Feb 17th active infections were above 57,000 and on Friday of last week they were around 45,000. The global trend has been receding which means generally that recoveries have been far exceeding new documented cases (although unfortunately there are a few hundred fatalities in that calculation as well.)

2. China has been the main net positive contributor to that math as they had very few new cases reported over the weekend. Moreover, we are starting to see multiple indications that manufacturing activity is returning to the country very quickly. Just today one of the largest supply chain partners of Apple in China, Foxconn, stated today that they expect to be back to full operational capacity in weeks to come.

3. The global health security index scores the US as the highest rated country in the world with regard to early detection and reporting for epidemics and prevention of emergence or release of pathogens. US also scored second only to the UK in rapid response to and mitigation of the spread of an epidemic. These categories promote the US, according to the recent study, as the most prepared country in the world to identify, prevent and treat outbreaks like the coronavirus. Three countries that fell well out of the top tier in this study were China, Italy and Iran which as of this writing are the three countries with the highest mortality rate from the virus.


THE NOT SO GOOD

1. In the United States new infections are likely to rise dramatically very soon. After consulting with many healthcare experts and our own healthcare analyst teams, it seems that a common theme is emerging and it is not a good one. Due to the likely communal spread of the coronavirus and the availability of on demand testing for the virus which is only becoming available in many regions as of yesterday, the number of cases is likely to expand at a rate similar to previous jumps in South Korea and Italy. As of this writing there are only 108 total infections in the United States, many of which are accounted for by quarantined evacuees or recent travelers to infected areas. We are told that it is highly likely this number rises into the thousands in the coming days and months. We are also told that the silver lining of this increase is that globally the mortality rate of the virus is likely to go down with more cases in the US. As previously stated, countries like the United States are likely to experience a mortality rate similar to that of South Korea (a top tier Health Security index country) which has a mortality rate to date of 0.5%. For comparison purposes, that is a number very similar to the flu we battle in the US each year.

2. Finding a market bottom during a correction is often long and uncertain. The normal process for making a bottom in equity markets goes from initial correction, to throw back rally which fails, to low retest or an undercut of the previous low and then finally a successful retest. This process can play out over days as it did during the initial Brexit vote or months as it did in the fourth quarter of 2018. Given the backdrop of uncertainty in economic growth due to the coronavirus, we suspect this process will look more like 2018 than the aforementioned V shaped recovery of Brexit. Either way, the coming days will likely be full of fits and starts and therefore patience is warranted.


Summarizing the above points, in some ways the data we are seeing is constructive and in some ways, certainly the likely increase in US infections, the data will get worse. We maintain, that from an investment perspective the long term risk to stocks is a prolonged downturn in the economy. The FED made what is likely to be a first step in mitigating those negative factors today by easing monetary policy. The short term risk to stocks, as illustrated by another volatile day today, is that the coming months are uncertain and international earnings are likely to be down as a result of diminished activity in places like China. Lastly, we are very confident in our domestic ability to manage outbreaks such as this and if past is prologue, the coronavirus will likely be added to the many previous outbreaks that have come and gone over the years. For a reminder, in just the past 20 years the international community has addressed SARS, Avian (bird) Flu, H1N1 (Swine Flu), Dengue Fever, Cholera, MERS, Ebola, Measles and Zika. In all of the cases, some form of panic ensued and in all of those cases the equity markets were higher 6 months and 1 year later. Past performance is not a guarantee of future results but I like our chances to manage the coronavirus in a similar fashion and return our attention to the core fundamentals economic growth and global prosperity. We sincerely hope every has a wonderful remainder of the week and please reach out to us with any questions or concerns. We are here for you and look forward to speaking with you soon.


Sean Kelly
Senior Vice President, Wealth Management
Managing Director
Recognized by:
FORBES' LIST OF BEST-IN-STATE WEALTH ADVISORS
&
ON WALL STREET'S 40 TOP ADVISORS UNDER 40

We received good news recently that we thought you would like to hear about.

Sean Kelly has been named to the 2020 edition of the Forbes list of Best-In-State Wealth Advisors. The list recognizes top financial advisors across the U.S.

This year’s Best-In-State Wealth Advisors list spotlights over 4,000 top-performing advisors across the country who were nominated by their firms – and then researched, interviewed and assigned a ranking within their respective states. The Forbes ranking of Best-In-State Wealth

Advisors, developed by SHOOK Research, is based on an algorithm of qualitative criteria, mostly gained through telephone and in-person due diligence interviews, and quantitative data.

Additionally, OnWallStreet recently included Sean on its annual list of the top 40 advisors under the age of 40. Published in January, this prestigious listing features advisors from all walks of life, from small suburban towns to big cities. We are happy to say that Sean ranked 19 overall in this year’s list.

Advisors are selected by OnWallStreet based on a variety of factors including assets under management, revenue generated, the overall quality of the advisor’s practice and, of course, age. If you would like to learn more, feel free to view the online articles for OnWallStreet here.

This achievement would not have been possible without your continued trust and support. We hope you will join us in celebrating. Milestones like this serve to reinforce our belief that putting our clients – you – first is still the best, and the only way to do business.

As always, please contact us if you have any questions or would just like to discuss your portfolio.

Data provided by SHOOK™ Research, LLC. Data as of 6/30/19. Source: Forbes.com (January, 2020). The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research, is based on an algorithm of qualitative criteria and quantitative data. Those advisors who are considered have a minimum of seven years of experience, and the algorithm weighs factors like revenue trends, AUM, compliance records, industry experience and those who encompass best practices in their practices and approach to working with clients. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Out of approximately 32,000 advisors nominated by their firms, 4,000 received the award. This ranking is not indicative of an advisor's future performance, is not an endorsement, and may not be representative of an individual client's experience. Neither Raymond James nor any of its financial advisors or RIA firms pay a fee in exchange for this award/rating. Raymond James is not affiliated with Forbes or Shook Research, LLC. For more information: www.SHOOKresearch.com.Each year On Wall Street ranks the highest-producing advisers in wealth management who are under 40. Over 500 candidates were considered and 40 were chosen to receive the award. Finalists had to be no older than 39 as of Dec. 31, 2019 and be employed at the wirehouses, regional broker-dealers or boutique wealth management firms. Trailing 12-month production as of 9/30/19 is then used to compile the ranking. AUM may also be taken into account. The ranking may not be representative of any one client's experience, is not an endorsement, and is not indicative of advisor's future performance. Neither Raymond James nor any of its Financial Advisors pay a fee in exchange for this award/rating. On Wall Street is not affiliated with Raymond James.


Market Update 2/25/20

Coronavirus update 2

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

Well that certainly escalated quickly. Yesterday we experienced another leg of a long needed correction to our overbought condition in equity prices due to a fantastic 2019. This now brings the S&P 500 6.1% down from its all-time high. While days like yesterday are uncomfortable it is important to remember that global stock markets, under normal circumstances, tend to have a two steps forward one step back rhythm. With that in mind, you probably noticed we have taken many more steps forward over the past year than back. We tend to refer to this as an overbought condition, and when markets are overbought they are obviously ripe for a quick retracement of the previous rally that took them ahead of trend.

The catalyst this time around seems to be the ever evolving Coronavirus outbreak (officially SARS-Cov-2) which saw a spike in report infections this weekend into Italy and South Korea. If SARS sounds familiar it is because there have been multiple previous outbreaks in the past couple of decades which similarly caused panic. Candidly, this outbreak has seen a higher number of infections than the previous rounds but to the positive has had similar mortality rates. Also to the positive, the number of related deaths continue to be concentrated in Hubei mainland China which accounts for approximately 95% of the global death toll. We do acknowledge that no death is taken or reported without our sympathies to the families.

As you can read in the attached document the fear driving the current correction appears to be in evaluating the economic impact of the disruption of supply chains and day to day activity of consumers in those areas affect most. The likely global economic disruption comes with good news and bad however, which the market is currently discounting. The good news, as likely with previous global health concerns (SARS, MERS, Ebola, Swine Flu, etc.) is that the issue will be transitory and unlikely to provide a lasting effect on economies and markets. The bad is simply that it is quite difficult to estimate what the global disruption will be, how long it will last, and how much of an effect planned monetary and fiscal policy stimulus will have in mitigating the disruption. You probably picked up that the last sentence sounds a lot like uncertainty, and if you have read our missives before you know that risk markets are no fan of uncertainty. Hence the correction.

For more information we have included a brief summary of data from many of our economic experts and analysts to further analyze the global concern and likely effect on stock and bond prices. Please read at your leisure, and call us with questions.

In the meantime, we are monitoring the situation closely and will provide updates as the situation develops.

What the SECURE Act Means for Your Retirement

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

On December 20th, 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act became law. As the name implies, this law intends to make it easier for Americans to save for retirement. Though this may sound simple enough, as with most laws, the reality is far more complex. The SECURE Act includes changes that affect everyone from beneficiaries of retirement accounts to those with student loans, but the SECURE Act is most likely to affect those either approaching retirement or recently retired. Your unique financial situation will dictate exactly how the SECURE Act will impact you and your retirement plan, but there are a few key changes that everyone should take note of when planning for retirement.

Increase in Required Minimum Distribution Age

An important consideration for many when planning for retirement is the Required Minimum Distribution (RMD), which is the amount you’re required to take out of tax-deferred retirement savings accounts such as traditional IRAs, 401(k)s, 403(b)s, and 457s. The SECURE Act increases the age at which you must begin taking RMDs from 70 ½ to 72. There are a few reasons why an increased RMD age can help save for retirement, including giving your portfolio more time to grow, offering more time to roll your money into a Roth IRA (which does not have RMDs), and minimizing your tax burden by decreasing taxable income. Though this change begins in 2020, it is not retroactive, meaning that if you turned 70 ½ prior to 2020, you must still take RMDs. Only those who turn 70 ½ beginning in 2020, may choose to wait to take RMDs until turning 72.

Increase in Age for IRA Contributions

RMDs are not the only area where the SECURE Act increased ages relating to retirement accounts. Before the passage of the SECURE Act, you could not make contributions to a traditional IRA after turning 70 ½. The SECURE Act has raised that age to 72, as long as you have earned income. This gives people more time to increase their retirement savings. Like the updates to RMDs, this change is not retroactive, meaning you still cannot make contributions to a traditional IRA for the 2019 tax year if you are over 70 ½.

Elimination of Stretch IRAs

The elimination of what was known as a stretch IRA may impact the financial planning of many individuals. This allowed beneficiaries of IRAs to “stretch” the RMDs throughout their lifetime. Now, those who inherit an IRA, 401(k), or other defined benefit plan, must take all distributions within ten years of inheriting the account. Certain groups are exempt from the changes including spouses, people with disabilities, and those within ten years of the age of the account holder. Those who are minors will not be affected immediately, but once the minor reaches the age of majority, he or she then has ten years to take the distributions.

The SECURE Act does not affect those who have already inherited IRAs. The changes will affect only those who inherit applicable retirement accounts from account holders who pass away after January 1, 2020. If you are an account holder, you may want to review the beneficiaries of your accounts, and potentially update your estate plan.

More Options for Part-Time Workers

The SECURE Act increases the number of workers eligible for retirement savings plans. Previously, employees weren’t always eligible to participate in their company’s 401(k) plan if they worked less than 1,000 hours annually (an average of about 19 hours a week). The SECURE Act still requires companies with a 401(k) plan to offer the plan to those who work 1,000 hours or more in one year, but the law also expands eligibility to those who have worked 500 hours annually for three consecutive years.

Incentives to Help Small Business Owners

The SECURE Act incentivizes small business owners to start retirement accounts through a tax credit. Small businesses, defined as businesses with less than 100 employees, are eligible for up to $5,000 in tax credits. For every non-highly compensated employee who is eligible to participate in the retirement account, there is a $250 credit. Companies would be eligible for the credits over a three-year period beginning in 2020. The tax credit applies to SEP IRAs, SIMPLE IRAs, and profit-sharing plans, as well as 401(k)s.

The SECURE Act also encourages small business owners to offer retirement savings plans by making it more appealing to participate in multiple employer plans (MEPs). MEPs allow companies to offer high-quality retirement savings plans at low cost to the employer. But many employers were hesitant to join due to the “one bad apple” rule, which stated that all employers in a plan would deal with the tax consequences if one employer did not satisfy the tax qualification rules. The SECURE Act removes the “one bad apple” rule, making MEPs far more appealing to small business owners.

Education Expenses

Those who are approaching retirement and have children in college or other higher education programs may be impacted by the SECURE Act’s changes to rules surrounding education expenses. Funds from a 529 plan can now be used to cover student loans up to $10,000 per child. The SECURE Act also allows funds from a 529 plan to be put towards some apprenticeship programs and allows those earning stipends, such as those in graduate school or working on a post-doc, to count that money as compensation for the purposes of contributing to a traditional IRA.

Contact us if you have questions about how the SECURE Act may affect your unique financial situation and plans for retirement.

What the SECURE Act Means for Your Retirement

Sources

https://www.forbes.com/sites/nextavenue/2020/12/31/6-ways-the-secure-act-may-impact-your-retirement/#1786156f672a

https://www.fidelity.com/learning-center/personal-finance/retirement/understanding-the-secure-Act-and-retirement

https://www.forbes.com/sites/davidkudla/2020/01/10/four-major-highlights-of-the-secure-act/#6d66cf2576b1

The information contained here does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. The opinions expressed here are those of the author and not necessarily Raymond James. Opinions are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. This material is being provided for information purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as financial advisors, we do not render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. This material was created by The Oechsli Institute, an independent third party that is not affiliated with Raymond James.


Market Update 1/28/20

Concern for coronavirus contributes to market volatility

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

Increasing concern for the seriousness of a coronavirus in China has rattled global equity markets.

Referred to as the Wuhan coronavirus for the Chinese city where it is thought to have originated, the respiratory illness has already taken a harsh toll in China. More than 80 people have died and thousands of cases have been confirmed, according to multiple news reports, although the majority of cases remain unreported, Raymond James Healthcare Policy Analyst Chris Meekins said.

While a small number of cases have been reported in the United States, the U.S. government is the global leader in infectious disease response. Through the Strategic National Stockpile, the United States has millions of masks and other critical items to mount a response, if needed.

While the primary concern is for the people whose lives are affected by this virus and containing its spread, the effects of the accompanying market drop may be troubling for you, as well. The drop represents the first notable pullback for major domestic equity indices this year.

It’s important to remember that, historically, epidemics have led to increased short-term volatility – the avian flu in 1997, SARS in 2003, swine flu in 2009 and Ebola in 2014, for example – but did little to derail the long-term outlook for the market, according to Michael Gibbs, managing director of Equity Portfolio & Technical Strategy.

Travel restrictions and quarantines are in place for parts of China, and much of the disruption caused by the Wuhan coronavirus has occurred in areas of the market related to travel. That includes airlines – China is offering to refund domestic flights and train tickets nationwide – casinos, cruise companies and retail. Oil prices fell as the outbreak sparked concerns about the country’s energy demand, according to Chief Investment Officer Larry Adam.

While volatility is likely to continue to weigh on these sectors in the near term until the virus is contained, overall, we remain constructive in our 2020 outlook. Moreover, some consolidation in the near term may present opportunities to accumulate favored sectors.

We’ll continue to monitor data as it comes in and share any new developments with you.

As always, please reach out to us with any questions you may have. Thank you for your trust in us.

Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc., and are subject to change. Past performance is not an indication of future results and there is no assurance that any of the forecasts mentioned will occur. The process of rebalancing may result in tax consequences. Economic and market conditions are subject to change. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The Purchasing Managers Index (PMI) is a measure of the prevailing direction of economic trends in manufacturing. An investment cannot be made in these indexes. International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. The performance noted does not include fees or charges, which would reduce an investor's returns. Asset allocation and diversification do not guarantee a profit nor protect against a loss. Debt securities are subject to credit risk. A downgrade in an issuer’s credit rating or other adverse news about an issuer can reduce the market value of that issuer’s securities. When interest rates rise, the market value of these bonds will decline, and vice versa. U.S. Treasury securities are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. Material prepared by Raymond James for use by its advisors.


How to Make Your 2020 Resolutions Stick

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

Making a New Year’s resolution is the first step to creating better habits. But making a New Year’s resolution and keeping a New Year’s resolution are not always the same thing. If you’re like most people, New Year’s resolutions are often long forgotten by mid-February, if not sooner. But it doesn’t have to be that way. By incorporating the following tips, you can keep this year’s resolution going strong throughout 2020.

Choose Just One

This first tip is simple but key; only pick one resolution. It’s easy to get caught up in the excitement of a fresh start but attempting to overhaul every aspect of your life often backfires. You’ll likely feel overwhelmed, and as soon as one resolution hits a roadblock, it’s easy to give up on everything. Pick the area of your life where improvement is most important to you right now. And don’t worry - this doesn’t mean you’re giving up on other areas. In reality, when you improve one area of your life, it often ripples out to impact other areas. For example, if your New Year’s resolution is paying off debt, you may stop eating out as much, and instead start cooking healthier meals at home.

Pick a Specific Goal

Part of the problem with many New Year’s resolutions is that they’re vague. If your goal is to “save money”, did you accomplish your goal if you saved $10? A vague resolution fails to keep you accountable. It also doesn’t have an end goal, which can keep you from feeling accomplished. No matter how much you save, you may feel like you could have done more and therefore didn’t achieve your goal. Instead of “saving money”, resolve to have $5,000 in a savings account by the end of the year. Instead of “running”, pick a specific race to sign up for and resolve to run it. These concrete goals give you something specific to work towards. They can also give you a sense of accomplishment when you’ve achieved them.

Make a Plan, Not a Wish

Antoine de Saint-Exupéry said that “a goal without a plan is just a wish.” This is especially true for New Year’s resolutions. Once you have one, specific goal to work towards, you’ll need to create a plan. If you want to have enough saved for a down payment on a home, how much do you need to save from each paycheck? If you want to run a race, how long will you need to train? How many times will you need to run each week and how long will each run need to be? Think of each of these steps as mini-goals. With each mini-goal you accomplish, take a moment to appreciate the work you’ve chosen to put in and how this small step has gotten you a little bit closer to your end goal.

Have Realistic Expectations

This is often one of the hardest parts of setting a New Year’s resolution, because it requires accepting where you are now. If you haven’t run in years, running a marathon in March isn’t very realistic. However, if you used to run regularly, you may find it hard to accept you’re not in the same shape you once were. Keep in mind that having a more realistic resolution this year, such as running a 5K, doesn’t mean you can’t also run a marathon in the future. You’re simply wise enough to know that for where you are now, a 5k is the better option. Accepting where you are now isn’t always easy, but it gives you a much better chance of moving forward than denying your current reality.

Set Yourself up for Success

One of the biggest reasons New Year’s resolutions fail is an overreliance on willpower. Willpower may get you through a day, or even a week, but long-term change requires creating new habits. It’s likely that you’ve attempted to improve this area of your life before. Honestly ask yourself why it didn’t work last time and what habits you can incorporate this time to create a different result. Let’s say your resolution is to finally pay off your student debt. You’ve tried before, but you never seemed to have any extra money at the end of the month to put towards your debt. In this case, the solution may be as simple as creating a budget, deciding how much you can afford to put towards your debt each month, and putting that amount towards your debt as soon as you’re paid, instead of waiting until the end of the month. Figuring out which strategies work for you and making them habits may take a bit of trial and error, but you’ll have a much better chance of success. If a strategy didn’t work before, it’s unlikely that doing the exact same thing this time will have different results.

Remember Why You Started

Finally, keep in mind why you’ve chosen your New Year’s resolution. This can help you appreciate the progress you make, instead of throwing in the towel as soon as things become difficult. Perhaps you want to build an emergency fund so that you and your spouse can have more financial stability and less stress. If your car breaks down and you have an expensive bill, you may not make your savings goal that month. But that doesn’t mean you need to give up. Think about the progress you’ve made and accept that life happens. Even with the best possible planning, unexpected events will throw a wrench in your plans. But remember why you started and always keep in mind that progress does not require perfection.

If your resolution requires getting in better financial shape, you don’t have to do it alone. Consider working with a financial advisor to help you create a financial plan tailored specifically to you and your financial needs.

How to Make Your 2020 Resolutions Stick

Sources

https://www.verywellmind.com/how-to-keep-your-new-years-resolutions-2795719

https://psychcentral.com/lib/10-sure-ways-to-keep-your-new-years-resolutions/

https://www.forbes.com/sites/erikaandersen/2018/01/28/four-simple-steps-to-keeping-your-new-years-resolutions/#1f59a6a034d3

https://www.forbes.com/sites/megangorman/2018/12/31/how-to-keep-your-financial-resolutions-in-the-new-year/#5c79e51b73e6

The opinions expressed here are those of the author and not necessarily Raymond James. Opinions are as of this date and are subject to change without notice. This material was created by The Oechsli Institute, an independent third party that is not affiliated with Raymond James.


Don’t Miss These 6 Year-End Financial Planning Opportunities

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

Are your finances ready for the end of the year? December brings many deadlines and lists; there are gifts to buy, holidays to plan, and vacations to organize. While financial planning should occur year-round, it often becomes top of mind as the year draws to a close. Even though the holiday season is a busy time, it’s important to take care of financial matters now to save you time and money in the long run. Addressing the following 6 opportunities can help you start 2020 on the right financial foot.

1. Check Your Tax Withholding

In order to avoid a large tax bill or even a penalty for underpaying, you may need to review your tax withholding for the year. This is especially relevant since the IRS changed the tax withholding tables in 2018. Though withholding issues can affect anyone, they are most likely to affect those with less predictable incomes, such as business owners or salespeople who work on commission. If this applies to you, the income estimates you made earlier in the year may not be accurate. In the last months of the year, you can use the IRS’s withholding estimator to help ensure that no major tax issues come up in April. 

2. Consider Year End Gifting 

Gifting allows you to give up to $15,000 per person, per year to an individual (usually a child or grandchild) without any tax consequences. For larger estates, gifting can minimize the amount of the estate subject to estate taxes. Though the estate tax now applies only to assets above $11.4 million, the limit is set to revert to $5 million in 2026 unless Congress extends it. The gifting limit also applies to contributions made to 529 plans. 

3. Plan Charitable Contributions

The 2017 Tax Cuts and Jobs Act has changed how many people approach their charitable gifting. The increased standard deduction means fewer people benefit from itemizing deductions. With these changes have come some new strategies for handling charitable gifting. According to a recent study by Psychological Science, the happiness of giving a gift actually outlasts the happiness of receiving gifts. If you’re looking to donate to charity this year, you’ll need to make your donation by December 31st in order to receive a donation receipt for this year.

4. Take Your Required Minimum Distribution

If you’re over 70 ½ and have a traditional IRA, the IRS requires that you take a distribution of a certain amount each year, also known as the Required Minimum Distribution (RMD). The amount of the RMD will vary and is based on multiple factors, including your age and the value of your IRA at the end of the previous year. If you don’t take your RMD by year end, you’ll end up with a penalty. If you don’t need the funds, consider making a Qualified Charitable Distribution (QCD). A QCD, also known as a charitable IRA rollover, turns your RMD into a charitable gift. You won’t pay taxes on a QCD, but you also can’t get a tax deduction. 

5. Consider Refinancing Loans

The trade war and the Federal Reserve’s rate cuts mean you may be able to receive a lower interest rate if you choose to refinance. If you’re considering refinancing your mortgage or student loans, doing so before the end of the year may help you get a lower interest rate, which can save you money. But, there are a few things to consider to make sure you’re actually saving money. Before refinancing a mortgage, consider how close you are to paying off the loan. The ratio of principal to interest in the monthly payment of a mortgage varies. Over time, the percentage of the monthly payment that goes towards interest will decrease and the percentage that goes towards the principal will increase. This means that refinancing a mortgage rarely makes sense if you’ve already repaid the majority of the mortgage. For student loans, refinancing may mean a shorter loan period and losing options that come with federal loans, such as loan deferment. 

6. Use Your Flexible Spending Account (FSA)

It’s important to review how much you have remaining in your FSA, since some or all of the funds in an employer sponsored FSA may not roll over to the next year. For a medical FSA, at the start of the year, you make an assumption about how much you’ll need for the year. Many people choose to overestimate, which may leave them with extra funds in the account at the end of the year. It depends on the plan, but most plans only allow you to roll over $500. If you have more than $500, you may want to buy any medicine or make any medical appointments prior to the end of the year. Dependent care FSAs typically don’t allow any rollover, though this is often less of an issue, since you can often plan childcare costs more accurately ahead of time. You can also save yourself some time, and potentially some money, by noting your current year’s FSA surplus or deficit and taking that into account for the next year. 

The end of the year is a busy time. Prioritize your financial needs to help save money, avoid penalties, and start off the New Year with your finances in the best possible shape. For further advice on year-end financial planning opportunities, contact us today.

Don't Miss These 6 Year-End Financial Planning Opportunities

Sources

https://www.morganstanley.com/articles/fall-planning-for-your-finances

https://www.kiplinger.com/article/retirement/T064-C032-S014-year-end-checklist-to-beat-financial-deadlines.html

https://www.bnymellonwealth.com/articles/strategy/take-advantage-of-year-end-planning-opportunities.jsp

https://www.georgewealthgroup.com/article/2471-year-end-financial-planning-checklist

https://www.forbes.com/sites/kristinmckenna/2019/09/25/its-time-for-year-end-financial-planning/#24105d507783

https://www.psychologicalscience.org/news/releases/the-joy-of-giving.html

The information contained here does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. The opinions expressed here are those of the author and not necessarily Raymond James. Opinions are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. This material is being provided for information purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as financial advisors, we do not render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. This material was created by The Oechsli Institute, an independent third party that is not affiliated with Raymond James.


College Savings Plans: Breaking Down the Complexities

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

The increasing cost of higher education saddles many young adults with massive amounts of student debt. This student debt makes it harder to balance other important financial obligations such as buying a home, having a wedding, or starting a family. Young adults who graduate with less student debt have more flexibility and financial opportunities later in life. By planning ahead, family and loved ones can help set up their children or grandchildren for success by minimizing or even eliminating the need for student loans. For those working to cover some or all of a child’s higher education expenses, it’s important to make the most of every dollar saved. That’s why it’s critical to pick the right college savings plan and take advantage of all opportunities to minimize the cost of college.

A College Savings Plan May Help

A college savings plan may be helpful for two reasons. First, it can help prioritize saving up for the expenses of higher education. Many families have other financial goals they’re working towards and having a specific account set aside for college can help make it clear which funds are being allocated for college. Secondly, college savings plans help you make the most of your money. A general savings account may not offer a return on investment, and a brokerage account may not provide the same advantages as a college savings plan. Although any savings account is better than no savings account, an account specific to college expenses can provide more benefits to help you make the most of the money saved.

3 Types of College Savings Plans

There are three main types of college savings plans in the United States. The right plan for you depends on a variety of factors, including your income level, the level of investment flexibility you’re looking for, and the level of responsibility you’re comfortable giving to the child.

529 Plan

This is one of the most popular college savings plans, and for good reason. Each state offers its own 529 plan, but most of them offer major tax advantages compared to a standard savings or brokerage account. Most states offer tax breaks on contributions, and then the earnings on the account grow tax free. The withdrawals are also tax free, as long as they’re for education expenses.  Another benefit of a 529 plan is that you have the option to change the beneficiary—this way if one child ends up not using the funds, another child could become the beneficiary. 

Education Savings Account (ESA)

Another popular college savings plan is an Education Savings Plan (ESA). With an ESA, you can contribute $2,000 after-tax per child every year, and the earnings grow tax free. ESAs have a variety of investment options, which means more investment flexibility than some other college savings plans.

UTMA or UGMA

A Uniform Transfer to Minors Act (UTMA) or Uniform Gift to Minors Act (UGMA) is another popular college savings option. The biggest differentiator between these accounts and other college savings accounts is that the money from a UTMA/UGMA doesn’t have to go towards college expenses. These accounts are in the child’s name, and the child gains full control of the account when they turn either 18 or 21. Once the account is turned over to the child, they are not required to spend the money on education expenses. In some instances, this may prove advantageous, but it also leaves a lot of room for abuse by the child. For example, if the child decided to use the money to buy a car instead of paying tuition, he or she would be able to do so.

Beyond Savings Accounts

College savings accounts can be incredibly helpful, but there are also other ways to help minimize the cost of college. 

Scholarships

A plethora of college scholarship options exist. Even if a child doesn’t qualify for a full-ride academic or athletic scholarship, there are plenty of other options available. Smaller scholarships are often overlooked, which means there’s often less competition. Smaller scholarships won’t cover the whole cost of college, but a few of them can quickly add up.

AP Classes

Not only do AP classes help students prepare for college coursework, but they can also help lower college expenses. AP classes are taught at the student’s high school but function like a college class. Students who pass can receive college credit for taking the class. Starting school with college credits allows them to take fewer classes, and therefore, spend less money and even potentially graduate a semester early.

Discussing College Expenses 

Before your child goes to college, it’s important to discuss the financial implications of college, especially if your child will be taking out student loans. In our day and age, a college degree is often required in many professional fields and worth the cost. Be sure to discuss questions like:

  • When will they need to start making payments?
  • How will interest affect the total amount of their student loans?

College also comes with many expenses beyond tuition—textbooks, living expenses, transportation, etc. Talking to your child beforehand about how these expenses will be covered can help minimize stress later on. The more you can save and prepare now, the more you can ease the financial burden on your child.

Additionally, we recommend that you work with a financial advisor to discuss the complexities of the college savings plans available to you. Financial advisors can look at your overall financial plan to make sure you’re making the most of every hard-earned dollar saved. Contact us to see how we can help.

College Savings Plans: Breaking Down the Complexities

Sources

https://investor.vanguard.com/college-savings-plans/which-account

https://www.forbes.com/sites/johnwasik/2017/10/09/the-5-best-college-savings-plans/#14efc02730df

https://www.daveramsey.com/blog/saving-for-college-is-easier-than-you-think

Investing involves risk and you may incur a profit or loss regardless of strategy selected.
Investors should consider, before investing, whether the investor's or the designated beneficiary's home state offers any tax or other benefits that are only available for investment in such state's 529 college savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors.
As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state.
This material was prepared by The Oechsli Institute, an independent third party, for financial advisor use. Raymond James is not affiliated with The Oechsli Institute.
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.


Be Prepared: 7 Estate Planning Tips

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

No financial plan is complete without an estate plan. Estate planning covers all aspects of your life, from creating your will to planning medical decisions. Due to the complex and emotional nature of estate planning, many people avoid creating or updating their estate plan. Though this is understandable, estate planning is an important part of your financial plan. More importantly, it gives you the peace of mind knowing your loved ones will be taken care of and your wishes followed. The following seven tips can help you address your needs when drawing up your estate plan.

1. Evaluate Your Priorities

First things first, consider your priorities. It may be succession planning for your small business, making sure your spouse can live out the remainder of their days comfortably, or preserving family wealth over generations. You may also have multiple priorities that you’ll need to balance. Taking stock of your priorities upfront can help simplify the process. As decisions arise, you can make decisions that are in line with your goals and priorities.

2. Create or Update Your Will

A will is not the sole piece of your estate plan, but it is one of the most important. If you don’t have a valid will, the laws of intestacy apply. This means your assets will go through probate and be distributed according to state legislation. This process eliminates your ability to control the distribution of your assets. Further, the process is more costly and time-consuming, which will require your loved ones to spend more time and money settling your estate.

Over time, your priorities and wishes are likely to evolve, and your will should evolve with them. Any major life changes, such as marriage, divorce, the birth of a child, the birth of a grandchild, etc. should result in an update to your will. It’s also wise to periodically review and update your will to reflect any changes to your assets.

3. Include a Living Will

Estate planning is about more than transferring assets to loved ones after you’re gone. It’s also about preparing for any unexpected events that may happen in your lifetime. A living will designates a health care/mental power of attorney. It also clarifies your wishes in the case of life support or other medical procedures.

4. Designate the Right People

Estate planning involves designating individuals for many different roles: power of attorney, executor, trustees, etc. These roles come with a lot of responsibility, so consider your designations carefully.

One of the most important roles is your power of attorney. This person has the power to handle personal matters, covering everything from opening your mail to filing your tax returns. The executor of your will also plays a large role in handling your estate. This person is responsible for “executing” the transfer of assets as specified in your will. If you choose to set up any trusts, you’ll also need to designate trustees for them. Finally, if you have minors, you’ll need to designate someone to care for them.

Ensure everyone you designate is someone you can rely on and consider appointing two people for every position. Ideally, at least one of these individuals will be younger than you and live nearby.

5. Transfer Assets

When it comes to transferring assets, you have many options. The key goals are avoiding probate and minimizing the tax burden on your estate. Trusts and joint ownership are two great options to consider.

Trusts

There are two main types of trusts: 1. testamentary trusts, which are established after your death, and 2. inter vivos trusts, which are established during your lifetime. The appropriate trust depends upon the specific goal of your trust. If your children are minors and don’t have trusts, your property will be held by the government until they reach the age of majority.

Joint Ownership

Joint ownership may be a more convenient way to pass assets, such as accounts or property, on to an inheritor, but it can come with some unexpected complications. Work with a professional to ensure there are no unintended tax or probate implications.

6. Assess Your Taxes

Proper estate planning can help minimize some of the tax burden. The more you can take advantage of tax strategies in your estate plan, the more you’ll be able to leave to your loved ones. Preparing now allows you to take full advantage of any and all appropriate tax-saving strategies.

The recent “Tax Cuts and Jobs Act” may have an effect on your estate plan. At the federal level, up to $11.18 million of an individual’s estate is exempt from federal taxation, and $23.35 million for couples. You may have to pay estate or inheritance taxes, depending on the state you live in. Review this list of states to see what level of assets are excluded from your estate tax: https://www.nerdwallet.com/blog/taxes/which-states-have-estate-inheritance-taxes/

7. Talk with Loved Ones

Finally, once you’ve created your estate plan, it’s a good idea to have a conversation with your loved ones. This should include everything from logistics, such as where you keep important documents, to the type of funeral you would like. Having these conversations ahead of time can help prepare your loved ones and provide you with reassurance.

Creating an estate plan is about caring for your loved ones and making sure your assets are distributed correctly. Keeping the above tips in mind can help simplify the process. For further assistance, please contact our office.

Sources

https://www.nerdwallet.com/blog/investing/estate-planning-basics-7-step-checklist/

https://www.thesimpledollar.com/personal-finance-101-the-basics-of-estate-planning/

https://www.investopedia.com/articles/pf/07/estate_plan_checklist.asp

https://estate.findlaw.com/planning-an-estate/understanding-intestacy-if-you-die-without-an-estate-plan.html

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.


5 Financial Wellness Tips for the Sandwich Generation

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

Are you in the ‘Sandwich Generation’? If you have the responsibility of simultaneously raising kids and looking after your aging parents, then this article is for you. We know you have an extremely challenging lifestyle that requires a lot of resilience and patience, so this article will provide tips on how to better manage your day-to-day responsibilities.

Forty-seven percent of American adults are in the Sandwich generation, and that number is expected to rise as Baby Boomers age. Americans live until 78 years old on average, so the amount of adults sandwiched between their parents and kids continues to grow.

One of the major responsibilities you may face is taking over your parents’ financial well-being. This can take a toll on your own finances, as well as your emotional health. To help you better understand how you can manage this load, we’ve compiled some helpful tips and advice to better manage your money, your parents’ finances, and the stress associated with it.

1. Tackle Stress Efficiently

It’s completely normal to feel like there isn’t enough time in the day to handle all your personal and financial responsibilities. Tackling your stress is critical to ensuring you and your family are looked after. It’s important to remember to take care of yourself first in order to properly provide for the rest of your family. Here are a few things you can do to help with your stress levels:

  1. Make a list of important tasks and also the tasks that can wait. This can help you prioritize what you need to do.
  2. Make sure you are getting enough sleep.
  3. Exercise more.
  4. Make time to socialize with friends and other family members.

2. Don’t Feel Guilty

If you take the time to meet your personal and professional needs, you can stay fresh and energized to keep providing care for your loved ones. Feeling like you could’ve done more is natural, but prioritizing your time for personal and family needs will help enhance your physical and mental capacity. Whether it’s taking a walk in the park or reading a good book, make time to do things that are important to you outside of your family.

3. Gather and Organize All Financial Documents

In order to formulate the best financial plan for you and your loved ones, collect everyone’s financial documents to help start the process of proper financial accounting. Having your parents share their financial accounts with you can help ensure all their bills and taxes are up to date. This can be a tough situation, but it’s important to remind your parents that you are only trying to do what’s best for them.

4. Don’t Forget Your Parents’ Role

Although you are responsible for your parent’s money, remember that it still belongs to them. If they are still in good mental health, collaborating with them on financial decisions can help ease the burden you face. They’ve managed their own money for most of their lives and deserve some involvement in the decision-making process.

5. Ask for Professional Help

Managing another person’s wealth is not an easy thing to handle. Working with a financial professional can help you with all aspects of your life, including retirement planning, education planning for your kids, and investing. Financial professionals can help you prepare the necessary documents for your parents and avoid costly mistakes.

Managing the finances and wellbeing of both your children and parents can be stressful and challenging, but the tips above can help you stay on track with your health and financial goals. Contact us today to see how we can further assist you in navigating these challenges.

5 Financial Wellness Tips for the Sandwich Generation

Sources

https://www.cnbc.com/2019/07/09/us-life-expectancy-has-been-declining-heres-why.html

https://www.seniorliving.org/caregiving/sandwich-generation/

Caregiver.org (2009) – https://www.caregiver.org/caregiving

https://www.huffingtonpost.ca/andrea-love/surviving-sandwich-generation_b_9151744.html

https://health.usnews.com/health-care/patient-advice/articles/2018-08-10/coping-with-stress- when-youre-in-the-sandwich-generation


Market Update 8/15/19

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

The Chinese word Lingchi loosely translates into the lingering death. This concept, a form of torture used in the Chinese imperial age, outlawed over 100 years ago (Thank God) also became known as death by a thousand cuts. That phrase, I assume you have heard before. Today we commonly reference this figure of speech as a failure caused by many small problems. Unfortunately, I fear that is where we rest today. With many small and some not so small problems ushering in new concerns about the short term investment environment. Our goal here is to update on this growing concern and provide some guidance of where our head is at regarding risk, global growth, trade, monetary policy, etc. To do that we have some opinions below directly from our own research group as well as an attachment issued last night which includes commentary from Raymond James Chief Investment Officer, Chief Strategist, Chief Economist, head of Fixed Income, and more. Please enjoy their comments and ours at your leisure.

But first, for those that don’t have the patience for long reads, here is the summary.

Equity markets have moved up dramatically in value in the last few years. You’ve probably noticed. While we are still very constructive of the economic and corporate fundamentals in the United States, we are genuinely concerned that lingering international issues could spoil this good thing we have going. While not forgone, it is becoming more possible that declining global growth and its impact on our own economy could impact stock market returns in the short and medium term. Please call us to discuss.

If you are still with me, you are probably wondering what I am talking about. Let’s start with the big items.

1. For the first time since June 2007 the 10 year treasury yield fell below 2 year treasury yield (known as an inversion.) Historically this happens about 12-18 months prior to a recession. Technically an inversion happens for 1 of 2 reasons. First, that the short end of the curve is lifted aggressively by the Federal Reserve to control inflation. Second, the long end of the curve, which is primarily controlled by market forces, drops as uncertainty around economic activity causes an overwhelming amount of money to flow into long term bonds. This supply/demand imbalance causes bond prices to go up and yields to go down. You can make a case that both reasons are in play here, although the Federal Reserve is trying to clean up the mess they made by overtightening at the end of the last year. More on the Fed later. As for the second reason, we suspect the culprit who has been buying up longer treasuries are world central banks (BOJ, BOE, ECB) who are trying to manufacture growth by continuing to extend uber low borrowing rates. This combined with our own Federal Reserve having halted the selling off of it’s 3 trillion dollar balance sheet has created a real imbalance in the short term. In the historical precedent, this is unusual. That brings us to item number 2.

2. Why are central banks driving rates down? Let’s look at some specifics from a few other major countries in the world. As you can see below, many countries throughout Europe and Asia are struggling to generate economic growth and create inflation. Hence, you actually see their sovereign debt markets are yielding negative rates in some cases as they have been actively trying to jumpstart their economies. Taking this a step further you notice that some of the leading indicators such as manufacturing PMI (a preview of manufacturing activity in each country) is showing negative as any number under 50 represents contraction. Generally, slowing growth, low inflation, negative rates, weak leading indicators all add up to pressure on countries and central banks to provide relief in the form of even more accommodative monetary policy.

 

Q2 GDP

Inflation

Interest Rate

Manufacturing PMI

United States

2.10%

1.80%

1.59%

50.4

Eurozone

0.20%

1.10%

-

46.5

China

1.60%

2.80%

3.03%

49.9

Japan

0.40%

0.70%

-0.23%

49.4

Germany

-0.10%

1.70%

-0.68%

43.2

United Kingdom

-0.20%

2.1%

0.42%

48

Source: Trading Economics *Data as of 8/15/2019

3. This brings us to our own Federal Reserve, the source of monetary policy in the United States. For the first time since the great recession, the Federal Reserve just decreased the target Fed funds rate down to 2.25 from 2.50. We suspect that trend to continue in the coming months as we have stated in our previous updates. Traditionally, accommodative monetary policy is a useful tool in encouraging economic activity and indirectly can lift risk assets. So this item can be seen as a positive but unfortunately, two narratives exist in the court of public opinion regarding a rate cut. The first, we’ve addressed, lower rates are good for the economy as long as it doesn’t cause inflation. The second, unfortunately, is you only need to cut rates in times of economic weakness and there, friends, is the rub. Now there is historical precedent for a Fed Funds rate cut having extended an economic cycle, as frankly we think this one will do but we have to acknowledge the downside to that message as well. That is that conditions in the US are not as rosy as they were this time last year.

4. China Currency. It felt like forever ago but it was only last week that worldwide markets were sent reeling when China price fixed the midpoint of their currency to a level not seen in some time. In layman’s terms, when it was announced that the US intended to extend tariffs to the remaining 300 billion of goods exported to the US, China responded in kind by manipulating the Yuan (allegedly) to make their goods cheaper to purchase. This all but nullifying the price increase to the end consumer and essentially defeating the point of the tariff’s which are to discourage consumption of those goods. Now the loser in that scenario are actually Chinese businesses and workers as less money is taken in on a relative basis for the product. This may seem illogical but is in line with our ongoing opinion that China is much more concerned about maintaining global market share than they are margins at the moment. Regardless, China actively manipulating its currency as a retaliatory measure is an unwelcome step and clearly worldwide markets voted as such with a pretty meaningful sell off last week.

5. Global Trade. Maybe the biggest concern of all and probably an underlying element to the issues mentioned above is that global trade growth on a year over year basis has ground to a halt. We can argue the merits of the trade war in another forum but the US objective of punishing China for unfair trade practices by impacting exports and their economy seem to have been successful. China recently posted their worst GDP quarter in 27 years, their worst manufacturing quarter in 17 years and 2018 was the worst year for their equity markets in 10. The trade war is clearly taking its toll and generally, things are not going well in China. Again, this effect was intended. What was unintended is that some other countries, many in the Eurozone, have seen their industrial production impacted as a casualty of war. Below see worldwide trade volume growth. The year over year growth has dropped from about 5% in late 17 to just .3% updated through May.


*Source: Factset, J.P. Morgan Asset Management

6. Everything else. From unrest in Hong Kong, to Iran, to oil prices, to US politics. There just seems to be a never ending stream of headlines recently overshadowing what should be a decent backdrop for investing in the United States at least. None of these issues warrant a significant change in strategy by themselves but when coupled together, we have to respect the message that not all is right in the world.

So where does that leave us? First things first, it’s not all bad news. The S&P 500 is sitting just 5.8% off the all-time high of 3027 and also up over 13.7% for the year as of this writing. With all the headlines above you’d think we would be worse off already but that shows you that there are plenty of positives out there from corporate earnings to US consumer spending to current employment in the United States which are all continuing to make new highs. It’s not all bad news to be sure. Also, there are active things that can happen to assist in a reversal of many of these traditional negative indicators. For instance the Federal Reserve continuing to taper rates and a resolution in the US/China trade skirmish would alleviate much of the world’s uncertainty and assist in global growth returning to trend. For the record, we expect the Fed to do their part but trade, which seems to becoming ever more political, is the wildcard and at this point just unknowable.

For today though, we want to alert you that an inverted yield curve, trade data and global growth trends are presenting a new and likely difficult backdrop for investing through the coming months and potentially longer if we don’t see some progress on a few fronts. We will continue to monitor the situation but as always please contact us with questions and please do not make drastic moves without discussing with us first. Time heals all and the long term picture, as it has always been, is very positive with growing worldwide population and constant innovation occurring around the globe. Enjoy the rest of your week and we will update more soon. Also, please don’t forget to check out the attachment with commentary from senior Raymond James experts.


8 Simple Tips for Organizing Your Finances

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

Disorganized finances can make it difficult to plan and set your goals. Following a pattern of established management guidelines can help you stay on-top of your financial situation throughout the year. Whether you need to overhaul your budget, assess your credit standing, or get a better handle on your investments, stick to these 8 daily habits to make it easier to manage your financial life.

1. Trim Expenses

Many people have expenses for services they rarely use. Look at every withdrawal that is made from your financial accounts during the month. Is there a gym membership that you’re not using? Or could you change your cable subscription to a cheaper package? Is there anywhere else you could cut expenses? Sit down with your monthly spending report and see where you can and absolutely cannot cut costs.

The number of outflows you trim from your budget can be put into your retirement account or an emergency fund.

2. Consolidate Accounts

People often accumulate multiple financial accounts, which can increase the burden of managing them. It also creates more opportunities for cybercrime.

It’s difficult to figure out how well or how poorly your nest egg is performing if your retirement assets are spread across multiple accounts. Consolidating as many accounts as possible will make performance evaluation a simpler procedure.

3. Make a Filing System

Whether you store your important documents electronically or in hard-copy format, it’s important to safeguard and organize them. Have you ever asked yourself if you should continue holding onto your financial paperwork? A good rule of thumb is to remember three, seven, or forever.

Files needed to be kept for three years are documents such as household bills, credit card statements, or receipts for minor purchases. Documents that should be kept for seven years are things like bank statements, pay stubs, and tax returns. Receipts for major purchases, annual investment statements, insurance policies, retirement account statements and anything else of great importance should all be kept forever.

While only you can know what system works best for you to store these records, make sure to keep it simple, clean out your files once a year, and keep them all in one place for easy access.

4. Set Goals and Monitor Them

One of the key principles in money management is to establish goals for yourself and track your progress towards meeting those goals. For example, if your aspiration is to save a certain amount of money for retirement, then you can set monthly and annual savings targets or a goal for a specific account balance and regularly examine your progress towards these goals. If you’re not putting enough away every month, consider reducing expenses in other areas of your life. If your account balance doesn’t reach your target by the end of the year, perhaps you need to speak with a financial advisor about a different investment strategy.

5. Keep an Eye on Your Credit Report and Score

Your credit report impacts many areas of your financial life. It determines if you get approved for a credit card or obtain the best interest rate on a home mortgage. The higher your score, the more financial strength you will have. To increase your score, try to keep old accounts open, pay down credit cards to less than 30% utilization, and make your payments on time.

In the not-so-distant past, you had to pay to access your credit report and score. Thankfully, today both are available for free from a variety of sources. At AnnualCreditReport.com, you can download a free report once every twelve months from each of the three major bureaus.

6. Consider Using Financial Software

If you’re still using paper, pen, and a calculator to manage your finances, you may want to consider upgrading to financial software. Many software programs are able to do much of the work for you, and several of them are free. Some of the available tools include a budgeting goal tracker, a bill payment center, an investment tracker, and budget alerts. Some good apps include Honey, Mint, and iXpenseIt. These can all be used on your smartphone or desktop computer.

7. Set up Automatic Bill Pay and Savings

Missing a bill or late payments are usually met with a steep fee, and that’s money that could have gone to a better cause. To avoid this situation, set up automatic bill pay. Many online financial institutions provide this service, and oftentimes there is no charge.

It’s equally possible to set up recurring transfers to bank and brokerage accounts. You can pay yourself first each month, and by doing so, you will quickly build an emergency account and retirement savings.

8. Team up with a Financial Advisor

Sometimes the best way to find success is to bring a professional on board. Financial professionals are able to offer advice on a wide range of issues: retirement, estate planning, insurance, taxation, and more. With an expert guiding you down your financial path, you’ll be better able to make informed decisions that produce superior results.

The tips in this article are pretty simple and don’t require an exorbitant amount of expertise. By incorporating these changes into your regular money management routine, you may have less stress and more financial success. If you need help with any of these organizing tips, please feel free to reach out to us to see how we can help.

8 Simple Tips for Organizing Your Finances

Sources

https://theretirementsolution.com/6-steps-to-organizing-your-finances-in-2019/

https://www.mymoneycoach.ca/blog/6-steps-spring-cleaning-finances-organizing-your-finances.html

https://www.mfs.com/content/dam/mfs-enterprise/mfscom/heritageplanning/infosheets/hp_fborg_flye.pdf

Opinions expressed in the attached article are those of the author and are not necessarily those of Raymond James. This information, developed by the Oechsli Group, an independent third party, has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Matching contributions from your employer may be subject to a vesting schedule. Please consult with your financial advisor for more information. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.


Market Update 7/25/19
Interesting Headlines Coming

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

Independence Day may have come and gone but July still has some fireworks for us to witness as the month comes to a close. The events of significance quickly approaching include the advance report on 2nd quarter United States gross domestic product to be released this Friday and on Wednesday of next week, July 31st, the Federal Reserve will announce on Interest Rates. In our opinion, both the stock and bond market have priced in the likely scenarios prior to these upcoming announcements which presents potential (not certainty) for said fireworks.

The baseline market predictions are first, that the US economy meaningfully slowed in the 2nd quarter of 2019 relative to the 3.1% growth from 1st. For those who follow us more consistently you’ll recall that this is essentially in line with what we’ve been saying since the latter half of 2018. For review, we believe the US economy will slow with monetary policy tightening from previous years and as we experience some impact of the new US trade policy. That said, underlying organic growth in the economy should not stall but continue at a more moderate pace in the back half of 2019 as the US consumer and corporations remain in decent shape.

Secondly, a noteworthy gap has developed this spring concerning capital market expectations for Fed interest rates and what Federal Reserve chairman Jerome Powell has delivered in previous committee reports so far this year. Many sources have reported that pricing in the futures market implies a high probability of a decrease in the Federal Reserve baseline interest rate (the main tool of the Fed in monetary policy,) not an increase as was inferred from the Federal Reserve’s own projected dot plot. We evaluate that there is some cause for the Federal Reserve to institute an “insurance cut” in rates to address some recent tepid inflation data, manufacturing weakness and potentially as an offset to the impact of continued trade uncertainty with China. To be clear, at the moment, we agree with the market that a small cut is warranted and likely helpful to continue to elongate the economic cycle and stave off recessionary pressures.

With those points illustrated above, the major reason for penning this update today is clearly to inform you of some important announcements coming up, but more importantly to prepare you that if either one of the these announcements were to considerably differ from expectations we could see fireworks. If GDP were to slow more than previously thought, our opinion is that given the slowdown we’ve seen in some economic sectors, elevated downside volatility would be likely. If the Fed chooses to delay cutting rates as the market has priced in we would also likely see movement in both stocks and bonds. Clearly, if the resulting data from these meetings is in line or positive upside volatility is also possible.

With all said, we still see probability in the longer term uptrend in the economy and stock markets regardless of these next two decisions. As of yet, that opinion has not changed but we will continue to update you as we evaluate the variables. Thanks for reading and please do call us with any questions.

Lastly below, for those who truly enjoy reading the micro details of economic forecasting, we have attached a write up from this week from Brian Wesbury, chief economist with First Trust as he laid out where he predicts weakness and strength to likely come from in the advance report on GDP Friday. Thanks again and enjoy.

The opinions are those of the Financial Advisor and not necessarily those of Raymond James. The forgoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation.

Temporary Tepid Growth for Q2 To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 7/22/2019

This Friday, the government will release its initial estimate of real GDP growth in the second quarter, and the headline is likely to look soft. At present, we're projecting an initial report of growth at a 1.8% annual rate.

If our projection holds true, we're sure pessimistic analysts and investors will latch onto the slowdown from the 3.1% growth rate for the first quarter, implying that we're back to slower Plow Horse growth for good. They will argue nothing has substantially changed since Trump took office, despite tax cuts and deregulation.

It's true that an annualized growth rate of 1.8% would be the slowest pace since the first quarter of 2017. But, as we will explain below, growth in the second quarter was likely held down temporarily by businesses returning to a more sustainable pace of inventory accumulation following the rapid pace of inventory building in the second half of 2018 and first quarter of this year. Excluding inventories – focusing on what economists call final sales – we estimate that real GDP grew at a 3.1% annual rate in Q2.

We also like to follow what we call "core GDP," which is real growth in personal consumption, business investment, and home building, combined. Core GDP looks like it grew at a 4.1% annual rate in the second quarter, the fastest pace in a year. In other words, while the economy may not be booming like the mid-1980s or late-1990s, the underlying trend remains quite healthy, and certainly much better than the Plow Horse period from mid-2009 through early 2017.

Here's how we get to our 1.8% real growth forecast for Q2:

Consumption: Automakers say car and light truck sales grew at a 2.8% annual rate in Q2 while "real" (inflation-adjusted) retail sales outside the auto sector grew at a 3.9% rate. Combined with some less up-to-date figures on consumer spending on services, real personal consumption (goods and services combined) looks to have grown at a 4.0% annual rate, contributing 2.7 points to the real GDP growth rate (4.0 times the consumption share of GDP, which is 68%, equals 2.7).

Business Investment: Reports on durable goods shipments and construction suggest all three components of business investment – equipment, commercial construction, and intellectual property – rose in the first quarter. A combined growth rate of 5.1% adds 0.7 points to real GDP growth. (5.1 times the 14% business investment share of GDP equals 0.7).

Home Building: After five straight quarters of contraction, it looks like home building – a combination of new housing as well as improvements – increased at a 2.6% annual rate in Q2. Expect more gains in the quarters ahead as home builders are still constructing too few homes given population growth and the scrappage of older homes. In the meantime, a 2.6% pace translates into a boost of 0.1 point to real GDP growth. (2.6 times the 4% residential construction share of GDP equals 0.1).

Government: Looks like a relatively large 2.3% increase in real public-sector purchases in Q2, which would add 0.4 points to the real GDP growth rate. (2.3 times the government purchase share of GDP, which is 17%, equals 0.4).

Trade: Net exports' effect on GDP has been very volatile in the past year, probably because of companies front-running - and then living with - tariffs and (hopefully) temporary trade barriers. Net exports added 0.9 points to the GDP growth rate in Q1, but should subtract an almost equal 0.8 points in Q2.

Inventories: Inventories are a potential wild-card, because we are still waiting on data on what businesses did with their shelves and showrooms in June. We get a report on inventories on Thursday, the day before the GDP report arrives, which may change our final GDP forecast. In the meantime, it looks like the pace of inventory accumulation got back to more normal levels in Q2, which should temporarily subtract 1.3 points from real GDP growth.

Add it all up, and we get 1.8% annualized real GDP growth. Don't let this tepid headline number spoil your day; the trend remains strong where it matters most, and prospects are bright for the US economy.

The attached information was developed by First Trust, an independent third party. The opinions of Brian S. Wesbury, Robert Stein and Strider Elass are independent from and not necessarily those of RJFS or Raymond James. All investments are subject to risk. There is no guarantee that these statements, opinions, or forecasts provided in the attached article will prove to be correct. Individual investor's results will vary. Past performance does not guarantee future results. Forward looking data is subject to change at any time and there is no assurance that projections will be realized. Any information provided is for informational purposes only and does not constitute a recommendation.


Changing Jobs? Don’t Forget Your Retirement Account

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

People commonly make the mistake of leaving their old retirement accounts behind when they change jobs. While it’s perfectly legal to do this, there are advantages of taking your old retirement plan with you when you leave. An old account can be transferred to an IRA (Individual Retirement Account) or a new employer’s retirement plan. Here are five reasons why you should consider taking this route rather than leaving your old retirement account behind.

1. It’s Simply Easier

Having many financial accounts only makes it more difficult to manage them. It can increase stress, the number of login credentials, and the amount of paperwork that has to be tracked. Reducing the number of retirement accounts you have will make managing them easier. It’s common for people to tend to feel more organized when they have fewer accounts.

If multiple retirement accounts reside at multiple financial institutions, this situation will increase the level of difficulty in managing the accounts. Consolidating the accounts also reduces the number of institutions involved with managing your path to retirement.

2. It Saves Money

Having several retirement accounts at multiple companies also increases the cost of managing them. 401(k)s, 403(b)s, and 457 accounts frequently come with annual or quarterly fees. Additional charges can include record keeping, portfolio management, and wrap fees. Having two retirement accounts open can double the cost of ownership. Closing a single account could save $100 or more in a single year, depending on the fee structure of the specific plan.

Sometimes fees can be somewhat hidden from plan participants, so you may not even know the exact costs you’re paying to keep an old retirement account open. Most likely, they’ll be there if you look. If you’re unsure of the exact fee structure of your account, be sure to contact your plan sponsor and request a written disclosure on what the account charges you every year.

3. Asset Allocation Could Be Easier

An investment account typically has multiple assets, and over time, the prices of the assets can drift from original targets. If the value of stocks in an account has risen significantly, for example, while the bond portion has remained flat or even declined, the portfolio will be more aggressive than you originally intended. This is where rebalancing becomes necessary. It’s also important to consider rebalancing a portfolio if your risk tolerance changes.

It’s easier to evaluate asset allocation if you have one retirement account instead of several. A retirement plan from one sponsor may use a different brand of mutual funds than another sponsor uses, and this situation increases the complexity involved. The fewer retirement accounts you have, the easier it will be to help keep your nest egg on track and in line with proper asset class percentages.

4. It Does Away with Additional Logins

Most people have more passwords than they can keep up with, and checking your retirement account balance will be easier with fewer logins. It’s more difficult to figure out how well or how poorly your nest egg is performing if your retirement assets are spread across multiple accounts. Consolidating as many accounts as possible will make performance evaluation a simpler procedure.

5. It Saves Time and Reduces Stress

The more retirement accounts you have open, the more time it will take to rebalance them, monitor them, and keep up with all the paperwork. Moving multiple 401(k)s, 403(b)s, and 457 accounts into a single account could reduce the time required to manage your nest egg.

Disorganization is a common cause of financial stress, and maintaining too many retirement accounts can add to that burden. Consolidating your retirement accounts can help you feel more on top of your financial situation.

While leaving your old job behind may be a good thing, it’s important to bring your retirement account with you. We understand that managing multiple financial accounts is complex, so we’re happy to help if you need assistance. Please contact us directly if you have any questions.

Changing Jobs? Don’t Forget Your Retirement Account

Sources

https://moneywithapurpose.com/old-retirement-accounts/

https://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/articles/3-reasons-investors-shouldnt-leave-the-old-401-k-behind

https://money.usnews.com/investing/investing-101/articles/2018-05-16/5-reasons-to-consolidate-your-investing-accounts

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Opinions expressed in the attached article are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice.

This material was prepared by The Oechsli Institute, an independent third party, for financial advisor use.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. In addition to rolling over your 401(k) to an IRA, there are other options. Here is a brief look at all your options: Leave money in your former employer's plan, if permitted. Roll over the assets to your new employer's plan, if one is available and it is permitted. Rollover to an IRA, or cash out the account. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment decisions. Prior to making an investment decision, please consult with your financial advisor about your individual situation. No investment strategy can guarantee success, including diversification and asset allocation.. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability. Raymond James does not provide tax or legal advice. Please discuss these matters with the appropriate professional.


5 Tips for Managing a Sudden Financial Windfall

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

As a generation of Americans grows older, a considerable amount of their personal wealth is transferring to younger family members. In fact, over 60 trillion dollars is expected to change hands in the next 25 years.

You may acquire sudden wealth in other ways, such as the sale of a business or property, divorce settlements, winning the lottery, money from an insurance claim, or profits from investments. Regardless of how you receive your newfound money, it’s important to be prepared to handle it properly.

What is Sudden Wealth Syndrome?

Sudden Wealth Syndrome is described as a psychological condition that causes people to experience distress when they suddenly acquire a large sum of money. This could result in poor spending decisions, like shopping sprees, investing in questionable schemes, and sharing their wealth unwisely with friends and family members.

When you come by a financial windfall, it’s important to slow down and carefully consider your next move. Here are 5 tips for making sure your newfound wealth lasts for generations to come.

  1. Take Stock of Your Newfound Wealth

The first thing you should do is get a clear idea of what you have acquired. If you have little experience handling wealth, it may feel like you have all the money in the world. Remember that Americans are living longer lives, so it’s helpful to consider how much money you’ll need to live your desired lifestyle now and through your retirement.

It's also important to understand exactly how much you have overall. This includes unpaid taxes and outstanding debt. It’s important to realize that money, no matter how large the sum, is quickly depleted once you begin spending it. It's important to learn to live off the returns that you make out of investing your money, rather than spend your capital.

While it may seem like this sudden wealth is your cue to sit back and enjoy a life of luxury, it doesn't often work that way. Money is more than just a ticket to a better life. It requires work and responsibility to ensure that it lasts.

  1. Keep It a Secret

When you receive sudden wealth, it may be in your best interest to keep it a secret. Though sudden wealth can be great news for you and your family, being discreet can help avoid the pressure of giving your money to family, friends, or charities who may be seeking a piece of it.

If you choose to keep your sudden money private, it’s important to continue to do the things you enjoy. Those who come into sudden money can become overwhelmed, so make sure you carve out time for activities that can alleviate any stress.

  1. Create a Financial Plan

Talk to a financial professional about the kind of lifestyle you hope to have, the charities you are interested in, the friends and family members you hope to help, and the inheritance you hope to leave to your heirs one day. It's important that you gain a realistic idea of what exactly you can afford to do, while still having the money last you for a lifetime.

  1. Be Wary of Your Charitable Instincts

When you come by a great deal of money, you may want to give generously. Generosity is a commendable quality, but you don’t want to get too carried away.

Before making any decisions to help friends or family with money, get advice from a financial professional who can make sure that your ideas are sustainable. Far too many people have become bankrupt simply by being overly charitable or overspending.

  1. Find the Right Team of Professionals

When you begin to search for ways to invest or safeguard your money, you will come up against plenty of heavily promoted websites managed by questionable financial businesses. It's important to tell them apart from the true, reputable consultants. Review their certifications, speak with their references, and ask them the right questions.

If you receive referrals from friends, family or other financial consultants or your accountant, vet them for their professional qualifications and experience. Make sure that they have experience dealing with clients who have the kind of wealth that you do.

If you need help managing a sudden windfall, know that we are highly experienced with these situations and more than happy to help you navigate your newfound wealth. We can customize a financial strategy that will allow you to manage your finances properly by giving investment advice that will grow your savings and help your extra income last.

5 Tips for Managing a Sudden Financial Windfall

Resources:

https://www.moneycrashers.com/deal-manage-sudden-wealth-syndrome/

https://www.bankrate.com/personal-finance/what-to-do-after-receiving-windfall/

https://www.forbes.com/sites/forbesfinancecouncil/2017/05/25/twelve-smart-ways-to-invest-an-unexpected-windfall/#4c777ca26d5a

https://www.cnbc.com/2019/02/22/how-to-prepare-your-heirs-for-the-68-trillion-great-wealth-transfer.html

This material was prepared by The Oechsli Institute, an independent third party for financial advisor use. Any opinions are those of the author and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.


Market Update 5/6/19

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

The subdued volatility of the last few months are likely to be usurped (for you Game of Thrones fans) this week and potentially longer with a slew of geopolitical headlines dropping over the weekend. Global stability took a hit to be sure with issues arising out of the Gaza strip, North Korea, Venezuela and of course what seemingly is a large development in the US/China trade discussions which according to many insiders was all but a “done deal” last week. While no major shifts in policy seem to have occurred with regard to North Korea or Venezuela, we did witness the deployment of a Carrier battle group to the Persian Gulf yesterday in a move seemingly intended to calm the region. As far as the US/China development there are numerous issues in flux with the most visible being a reaffirmation of tariff increases on Chinese exports by Friday of this week. Plainly, this move appears to be in retaliation for some backtracking the Chinese trade delegation did on previous settle issues this past week. To note, we have seen the Trump administration successfully issue some heavy handed threats in the last days of previous negations to help push them across the finish line. Time will tell of course, if this attempt plays out similarly.

For a greater dive into the details of this market moving development we have attached a piece from our Washington Policy insider Ed Mills. Ed provides some specifics around what has changed in the negotiations over the last week and explores some possible outcomes. We found it very worth the read this morning.

As far as the impact to capital markets both today and likely into this week, we see this playing out as other instances of uncertainty inserted into a technically overbought market have. We have held the position for some time now that generally the market rally has been impressive but justified as economic conditions, jobs, corporate earnings, etc. have continued at a strong pace of growth into 2019. Simultaneously, concerns that dominated the fourth quarter like further monetary tightening out of the Federal Reserve have moved to the back burner. In all, these dynamics have spurred the 2019 rally that have brought broad equities back to all-time highs but also left us technically overbought in the interim. In other words, the markets typical rhythm is 2-3 steps forward for every 1 step back. Our current condition is one of 4 steps forward and therefore in need of a pause or a short term retracement. Whatever impact this week has we do believe that the current strength of our economy and corporations will overcome, in time, the geopolitical uncertainty of the day. This will likely keep the long term trend intact once the dust of this week’s gyrations settle. As usual we will continue to monitor the details and markets alike and keep you informed if major changes to what we have outlined occur. If you have questions please reach out and have a wonderful week.

Any opinions are those of Sean Kelly and not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not indicative of future results. Ð'dInternational investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility.


Exposing the Top 7 Social Security Myths

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

Did you know that 67 million people received Social Security benefits in 2017? Despite so many retirees relying on Social Security income, many don’t fully understand these benefits. Moreover, there are many misconceptions about the U.S. government’s pension scheme that aren’t quite accurate. Continue reading this article for a breakdown of the top 7 myths surrounding Social Security benefits.

Myth #1: Benefits Are Derived From Wages That You Earn Before Age 65

This is the most common Social Security myth. Your benefits are actually calculated using your highest 35 years of income. These 35 years do not need to be consecutive, nor do they need to take place before you reach 65. If you work past 65, Social Security will consider those years equally as much as the summer you spent working the pizza parlor at 16 years old.

One important point to make here is that if you don’t have 35 years of earnings, you’ll have some $0 periods factored into your Social Security benefits calculation. For some people, working beyond 65 will actually be advantageous.

Myth #2: The Earlier You Claim, the Better

It’s possible to begin receiving a check from Social Security at age 62, but this could reduce your monthly benefit amount by as much as 30%. Waiting until your full retirement age (FRA) will give you 100% of what’s yours.

Currently, the FRA is 66 or 67, depending on your birth date. The Social Security Administration (SSA) will give you an extra 8% every year you delay past the FRA up to 70. If you’re healthy enough and have a good job, delaying may be the better option.

Another point to keep in mind here is that the government’s yearly cost-of-living adjustment (COLA) is based in part on the benefit amount. Starting with a smaller check will result in a lower COLA benefit, further penalizing you for taking an early retirement.

Myth #3: Social Security Benefits Aren’t Taxable

If Social Security benefits are your only source of income, then they won't be taxed. If you have other income, say from dividends, retirement account distributions, etc., then your Social Security check could become taxable. The amount of the check that’s taxable in this situation could be as high as 85%, depending on how much you earn.

Myth #4: If I Get a Divorce, My Benefits Will Be Reduced

If you are at least 62 years old and were married for at least 10 years, then you can collect benefits based on your ex-spouse’s work record. This does not affect your ex-spouse's benefits, nor will they be notified that you filed.

It’s perfectly legal to claim benefits based on your own record or an ex‑spouse’s. Some people may find it advantageous to receive benefits based on an ex‑spouse’s history rather than their own, depending on which option would produce the larger benefit. Be aware, however, that if you remarry, the right to claim the spouse’s record evaporates.

Myth #5: It’s Not Possible to Recoup the Money You Contributed to the Program

This is a common belief, but it's not always true. The older you get, the more Social Security benefits you'll accrue. The Social Security Administration does not offer a break-even calculator, so there’s no method to determine an exact figure.

Myth #6: Once You Begin Receiving Social Security Benefits, You Can’t Stop Them

Depending on your situation, you may be able to make changes to your Social Security benefits. If necessary, you can start receiving Social Security benefits and then stop within the first 12 months. In this situation, you need to notify the SSA, withdraw your application, and repay the benefits you have received. You can file again later.

If the twelve months have passed and you haven’t reached full retirement age, there’s nothing you can do at this point. However, if you have reached FRA but are still less than 70 years old, you can put the brakes on. This is called a voluntary suspension.

If you elect to take this route, you will begin earning delayed retirement credits. These will allow you to get a bigger monthly check when you apply again in the future.

One caveat is in order here: if you do take a voluntary suspension, any spousal benefits would also end.

Myth #7: I Can’t Work Once I Begin Receiving Benefits

People often think they have to stop working once the government starts sending a check. This is not true. You can work while you receive Social Security retirement (or survivors) benefits.

Understanding Social Security and knowing when to take it isn’t a choice to take lightly. For most people, it’s one of the most valuable retirement assets they have. If you have any questions about maximizing your Social Security benefits please contact us.

Exposing the Top 7 Social Security Myths

Any opinions are those of the author and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.

This material was prepared by The Oechsli Institute, an independent third party, for financial advisor use.


5 Kid-Friendly Financial Literacy Tips

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

Who is teaching your kids or grandkids about money? They likely aren’t learning about it in school; only 17 states in the U.S. currently require students to take a personal finance course. Many parents avoid talking with their kids about money because of their own financial frustrations or regrets. If kids aren’t learning about money at home or school, then they are either left in the dark or will learn financial habits from their peers and the media.

Regardless of what is taught in schools, parents and guardians are still the primary educators when it comes to teaching children about earning, spending, and saving. April is Financial Literacy Month, making it a great time to teach your kids or grandkids about money. It's never too late for these critical lessons to begin!

Tip 1: Be a role-model.

At its core, teaching kids about money means modeling good behavior. Children start to closely observe their parents in infancy, and that scrutiny only increases as they age. Know that you don’t have to be a finance expert in order to teach them important lessons that will benefit them in the future. It just comes down to being a strong role model they can learn from.

Tip 2: Play money games.

Whether they are board games or digital platforms, playtime is not just about leisure. Some games teach kids about money, including old standards like Monopoly and many modern video or smart phone games. Playing these games as a family can reinforce the lessons you are already teaching your child.

Tip 3: Get your child involved in household finances.

Do not assume that your child is too young to learn about money; even the youngest children can grasp the basic concepts. If you want to teach kids about money, you need to give them hands-on experience. From trips to the grocery store or getting paid to complete chores, there are plenty of ways to get your children involved with day-to-day finances.

Tip 4: Encourage saving with a matching program.

A surprising number of adults do not take advantage of employer matched retirement plans. Why not give your kids a head start on this concept by setting up your own matching program? Lessons learned in childhood have direct impact on their financial well-being as adults, so offer to kick in a little extra for every dollar your child saves. Not only does this help them develop healthy habits and attitudes about money, but it can help set them up for future success.

Tip 5: Increase the complexity of the lessons over time.

For young children, lessons about money may be very simple, but older kids can handle additional complexity. Making your monetary lessons age-appropriate will enhance their effectiveness, so your kids can grow up to be financially savvy adults.

As your kids get older, they likely will have a basic understanding and appreciation for money. In order to deepen their financial literacy, it’s important to give them a little more independence. That could mean letting them work a part-time job during the summer, or letting them purchase necessities like clothing or a smartphone.

Teaching your kids about money may be one of the best investments you’ll make, and the principles you instill in them at a young age can last a lifetime.

5 Kid-Friendly Financial Literacy Tips

Resources:

https://www.investopedia.com/university/teaching-financial-literacy-kids/

https://www.creativewealthintl.org/raise-financially-intelligent-children/

https://www.thebalance.com/teaching-kids-financial-success-1289284

https://www.kiplinger.com/article/saving/T065-C032-S014-how-to-teach-your-children-about-money.html

https://www.daveramsey.com/blog/how-to-teach-kids-about-money

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of The Oechsli Institute, Jay Ferguson and Keith Hill and not necessarily those of Raymond James.

This material was prepared by The Oechsli Institute, an independent third party, for financial advisor use.


The 5 Phases of Pre-Retirement

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

Retirement is one of the most important life events you will experience, and getting it right takes wise planning. With a sound intellectual framework, and some assistance from a qualified professional, you can ensure that you are ready to retire when the day comes.

Retirement preparation can be broken down into five phases, with each phase having its own unique strategy. Regardless of which phase you currently fit into, make sure you have completed the tasks in the previous category before moving on to the next. Here are the key aspects to carry out during the five phases of retirement.

Phase 1: 30 Years Before Retirement

Many people skip this step because retirement seems so far away, and with bills, a mortgage, and kids, saving for this distant period of life seems less important. However, the first step is usually the most important in any strategy, and retirement planning is certainly no exception.

When you’re 30 years away from your planned commencement of retirement, you want to make sure you have some tax-advantaged accounts open and you’re contributing money to them annually. If your employer offers a company match, that’s a 100% return on your contributions. You’ll want to contribute the maximum to that account. An IRA will allow you to save even more every year; and it offers tax breaks like an employer’s plan.

Phase 2: 20 Years Before Retirement

When you get to your 20-year milestone, be sure to review your retirement accounts and verify that you’re saving enough each month. You’ll want to figure the amount you’ll need when retirement starts and then calculate how much you need to save each month to reach that level. A financial professional comes in handy here.

This phase is also a good time to start looking over other financial vehicles that could be of use during retirement. These include life insurance, disability insurance, and long-term care insurance.

Phase 3: 10 Years Before Retirement

When you get to this phase, it’s time to consider catch-up contributions. These are additional retirement account contributions the IRS allows (starting at age 50). As with regular contributions, catch-up funds receive special tax treatment.

With a qualified estate lawyer or financial planner, you should draw up an estate plan, which will include a last will and testament. To circumvent probate, you can open transfer-on-death brokerage accounts and payable-on-death bank accounts.

Phase three is also a good time to review your tax situation as it pertains to retirement planning. If you started saving money in the first stage with a traditional account, but now you’re making more money and you think you’ll continue making more money during retirement, you may want to consider switching to a Roth account, which allows for tax-free withdrawals.

Phase 4: 5 Years Before Retirement

In the fourth phase, you need to begin thinking about what you want out of retirement. It can help to create a list of your requirements and preferences. Requirements are “must-haves,” like monthly income for living comfortably. Preferences are aspirations that you would like to achieve, but are lower on the list of priorities. This might include major vacations, building education savings accounts for grandchildren, or moving to a warmer climate.

Phase 5: 1 Year Before Retirement

When you are 1 year from retirement, you’ll want to review your current plan and make sure everything is ready. Do you have health insurance? If you’re going to lose health insurance from your employer, you’ll need to make sure you have signed up for Medicare or have some other alternative.

Do you have enough savings in your retirement accounts? If not, consider delaying retirement for another year or two. While this may not be an ideal choice, it may be a way around an otherwise difficult problem.

On a personal level, what will you do with your time in retirement? Now is a good time to take a look at how you might expand on your hobbies, interests, recreation, and charitable endeavors.

From beginning to end, the tax, legal, and financial aspects of retirement planning are complicated for just about anyone. If you need any assistance along the way, please contact us to see how we can help.

4 Tips for When the Markets Get Rocky

Opinions expressed in the attached article are those of the author and are not necessarily those of Raymond James. This information, developed by the Oechsli Group, an independent third party, has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Matching contributions from your employer may be subject to a vesting schedule. Please consult with your financial advisor for more information. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.


4 Tips for When the Markets Get Rocky

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

Many investors are familiar with the emotional impact that often comes with market volatility. When stock markets swing in extreme directions or change suddenly, investors can feel anxious and make decisions based on emotion that can hurt their pocket. This is a natural reaction when the markets are volatile, especially when the future seems uncertain and negative news headlines are abundant.

Instead of panicking and immediately changing your investment strategy, it’s important to keep perspective and maintain your focus on the long-term, no matter how rocky the markets may become. When stock market volatility strikes, we recommend these five strategies to help you maintain smooth sailing.

  1. Don’t Panic and Maintain Your Original Investment Strategy
  2. Investing in the stock markets can produce a variety of emotions for any investor. When all you hear on the news is doom and gloom, the best thing you can do is work with your financial advisor and trust in the plan you created together. Also, remind yourself of investment statistics to keep emotions in check. For example, long-term investments produce solid returns over 20–30 year periods, despite experiencing market volatility during that time frame.

  3. Keep an Active Approach When It Comes to Risk Management
  4. Depending on age, personality, short-term, and long-term financial goals, each investor has their own risk tolerance. Whether you have a high or low risk tolerance, be sure to maintain an active approach. If you become uncomfortable with your strategy, risk tolerance assessment, or investment portfolio, discuss that with your financial advisor before making any rash decisions.

  5. Maintain a Diversified Portfolio
  6. Do you want to have a proven cushion that will protect you when markets take dramatic swings? Work with your financial advisor to create and maintain a diversified portfolio. A properly diversified portfolio should include a variety of large, mid, and small cap investments, both domestic and foreign. It should also have a variety of industries and investment styles.

  7. Don’t Rely on the Financial Media
  8. When emotions are running high, it is easy to get sucked into the financial media’s message of doom and gloom, with so-called “experts” inciting fear and panic. Remember, no one has a crystal ball when it comes to the future of the markets, and even scrutinizing past events cannot fully dictate the market’s future. Reach out to your financial advisor, calmly review your current strategy, and don’t focus too much on stock market news.

Traditionally, most financial advisors tell you to hold onto your investments when market volatility hits, rather than adjusting your strategy. Historically, investors who stay the course and disregard market volatility typically reap the returns later on. That said, each investor needs a personalized investment strategy, so it’s always best to discuss everything fully with a financial advisor.

If you’re concerned about recent volatility and have not heard from your current advisor, contact us to schedule a complimentary second opinion. We can review your current investment strategy, portfolio, risk tolerance, and Investment Policy Statement and decide if any changes are necessary. We’re here to help.

References:

Assessing Your Risk Tolerance

https://www.investor.gov/research-before-you-invest/research/assessing-your-risk-tolerance

5 Investing Do's and Don'ts To Deal With Stock Market Volatility

ByLynnette Khalfani-Cox - https://www.ebony.com/career-finance/5-investing-dos-and-donts-to-deal-with-stock-market-volatility/

¬¬¬4 Tips for When the Markets Get Rocky

Any opinions are those of Sean Kelly and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Diversification and asset allocation do not ensure a profit or protect against a loss.


Stop Procrastinating: 5 Financial Resolutions You Can Start Right Now

Ross D. Preville, WMS
Senior Vice President, Investments
Managing Director

Did you achieve your financial goals in 2018? If not, keep reading.

To achieve financial fitness this year, set strong financial resolutions that will help you get your money situation on track. While making your list of resolutions is pretty simple, sticking to your plan and achieving your goals is easier said than done.

Whether you want to invest, save more, or finally commit to a spending budget, here are our top 5 financial resolutions.

Resolution 1: Plan Your Financial Goals

The best way to stick to your financial resolutions is to start with a plan. When planning your financial goals for the year ahead, it’s important to take an honest and objective look at your financial situation and objectives. Do you plan to save more aggressively for retirement? Do you plan to spend more on travel? Do you want to give more to charity? You get the idea. Planning will give the confidence you need to achieve your financial goals.

If planning isn’t your strong suit, then don’t hesitate to enlist the help of an expert. Partnering with a trusted financial advisor can help relieve the stress that often comes from navigating the complexities of your finances.

Resolution 2: Create a Budget and Stick to It

Creating a budget is a great way to become more aware of your financial habits. Your budget should track your earnings after taxes, how much you spend, and how much you save. If you don’t know how much you’re spending, then consider downloading a smartphone app that does it for you, or create your own spreadsheet that allows you to track your spending for 30 days at a time.

With the popular 50/30/20 budgeting rule, 50% of your paycheck should go to necessities like housing, vehicle loans, student loans, utilities, and food. Next, 30% should go towards “wants.” “Wants” include clothing, leisure activities, entertainment, traveling, and dining out. The remaining 20% should be allocated towards your savings. Depending on your financial situation, this money can go into an emergency fund, retirement investments, 529 contributions, etc. You may want to consider changing the percentages depending on your age and progress you’ve made with various savings goals.

Resolution 3: Plan for Near Future, Big-Ticket Expenses

If you need to make a large purchase in the near future, be sure to include it in your short-term savings plan. Is your child heading towards college in a few years? Will you need to repair your roof or purchase a new car soon?

When you have a big-ticket item coming your way in the next few years, you will want to increase your savings and think of that money as “spent” or “untouchable.”

Resolution 4: Manage Your Debt

When it comes to taking on debt, it’s important to remember the difference between what you can borrow vs. what you should borrow. If you have credit card debt, set realistic goals and create a schedule to pay it back. If you can, try to keep your combined total monthly debt below 36% of your income (before taxes).

Resolution 5: Prepare for the Unexpected

Unexpected events like illness, job loss, natural disasters, etc. are a normal part of life and should always be factored into your financial plan. To adequately prepare for the unexpected, consider the following:

  • Create an emergency fund with enough money to keep you afloat for three to six months.
  • If you have a family, children, or other dependents, consider purchasing a life insurance policy.
  • Consider long-term disability insurance, as the odds of becoming disabled before retirement age currently hover around 27% according to the Social Security Administration.
  • Discuss the pros and cons of long-term care insurance and property casualty insurance with your financial advisor.

By planning for your future and setting strong financial resolutions, you can begin 2019 on the right foot and make progress towards reaching your financial goals. Take it one step at a time and, if you feel overwhelmed or realize you’d like the opinion of a professional, please contact us for a complimentary consultation.

Stop Procrastinating: 5 Financial Resolutions You Can Start Right Now

References:

1. 20 Financial New Year's Resolutions For 2019
https://money.usnews.com/money/personal-finance/saving-and-budgeting/slideshows/financial-new-years-resolutions

2. Three P's To Fulfilling Your Financial New Year's Resolutions
https://www.reviewjournal.com/news/three-ps-to-fulfilling-your-financial-new-years-resolutions/

3. New Year's Financial Resolutions: Get Your Finances in Shape For 2019
Schwab.com - https://www.schwab.com/resource-center/insights/content/new-years-financial-resolutions-get-your-finances-in-shape

4. Social Security Administration
https://ssa.gov

Any opinions are those of the author and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Life insurance and long term care insurance policies have exclusions and/or limitations. The cost and availability of life & long term care insurance depend on factors such as age, health and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life & long term care insurance. Policies commonly have mortality and expense charges. In addition if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Guarantees are based on the claims paying ability of the insurance company.


Market Update 1/10/19

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

We sincerely hope you have had a wonderful start to the New Year. As promised we want to continue to walk you through this very interesting time in the capital markets and with that we have included a few details to explain where we are in this cycle and what to expect moving forward. As always, any quantitative analysis or empirically based opinions rely on probabilities which can sometimes be misleading. So please, take with a grain of salt all opinions shared and understand that our goal is always to inform and empower you with information on what is likely to happen.

That said, what an interesting start to 2019. The selloff in risk assets that dominated much of the 4th quarter headlines hit its crescendo on Christmas Eve. This was rather unfortunate timing for all of us paying close attention. As we stated in our previous update though, the capital markets loudly began to battle back on the next open day, setting an all-time record point gain and hasn’t looked back since. As of this writing the S&P500 index has retraced around 40% of the decline or about 10% since Christmas Eve. Worth noting, the market breadth (the number of actual stocks advancing vs those declining) has impressed to levels only surpassed a couple of times in market history during this initial recovery. While this is a small sample size as reversals of this magnitude are exceptionally rare, the intermediate and longer term implications of such a swing has historically been very positive. Time will tell if this period is the same.

Equally constructive but less publicized are market metrics like the price of oil, high yield spreads and treasury bond yields which have all retreated from the panic levels that we saw in December. All to be taken additionally as encouraging regarding the likelihood of further downside beyond what we saw in December to risk assets in the coming months.

As stated previously, we opine that the cause of the October and December slides were due to a general recalibrating of valuations in preparation for predicted slower growth rates in both economic and stock specific fundamentals. The cause of this slower growth has been diagnosed repeatedly in our previous notes but for a quick review they include, the China trade skirmish, Fed policy, Investigations, et al. In our view, we have seen many of the worst fears being stoked in December subside in the past couple of weeks insinuating that while we are not out of woods, the pricing of worst case scenarios seems to be in the rearview mirror, at least temporarily. Which brings us to the point of today’s update.

We believe we are at somewhat of an impasse regarding the near term direction of the market and want to prepare you for a few possibilities. When you look at previous downside corrections similar to the one we are experiencing now it is not only common but more often the standard that we retest the previous lows before continuing the rally. For instance, the last major correction we entered in 2015 required an undercut low retest of the previous bottom which occurred 5.5 months later in early 2016. Similar results were seen in 2002 and 1962 (similar looking chart patterns and timing of the downside.) Conversely, the 2011 correction, which saw a similar quick downside due to the European Sovereign debt concerns, did not require a meaningful retest of the bottom to sustain a broad market rally higher. Historically, we are in a bit of no man’s land with multiple data points showing mixed results in the short term.

All things considered, our base case is that it is slightly more likely that we don’t test that full downside given the extreme negative sentiment and technical data present during the late December bottom. To support this we’ll need early economic data for 2019 to be constructive as we feel capital markets are still very sensitive to broad changes in sentiment. We will be watching the leading indicators for further signs of extreme weakness or concern and will update accordingly.

In the meantime, our suggestion for all is to keep expectations for a runaway rally to all new time highs somewhat in check in the first quarter of the year. Though it would be a welcome surprise, we believe it probable that we’ll need a fairly long runway to equally remediate the momentum disruption Q4 caused and get closure around a few headline topics like the Mueller investigation and China trade talks. Also earnings season is likely to be fairly volatile with regard to individual company growth estimates and bottom line net profit as companies like Apple hinted to in the 4th quarter. On the positive side of earnings though, we do suspect that equity prices have already priced in much of the expected bad news but undoubtedly there will be surprises on the up and the down.

In summary, patience and realistic expectations are the call for early 2019. Based on current data we still feel that the “no recession in 2019” case is intact and therefore believe we move to higher prices in risk assets over the course of the year, though we may experience some bumps to get there. We sincerely urge you to reach out to us if you have any questions or concerns regarding your accounts held with us or away. We appreciate your trust and wish you wonderful start to the New Year.

Any opinions are those of St. Pete Wealth Management Group and not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Expressions of opinion are as of this date and are subject to change without notice. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. The Bloomberg Commodity Index (BCOM) is a broadly diversified commodity price index distributed by Bloomberg Indexes. The BCOM tracks prices of futures contracts on physical commodities on the commodity markets. The index is designed to minimize concentration in any one commodity or sector.


Market Update 12/27/18

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

The frequency of the updates will be a little higher than usual given the unusual circumstances of the market trading we are experiencing this holiday season. Our goal here is to keep you informed with up to date opinions and resources to help you evaluate the risks and opportunities in the markets. We are committed to seeing you through this rough patch that will, as all rough patches do, pass.

You can officially mark the calendar that on December 26th, 2018 the Dow Jones Industrial Average logged the greatest all time point gain (+1,086) which was just under 5% to the upside. If you find it strange that the largest gain in market history would occur the day after Christmas, a historically light volume day as many professionals are still home on holiday break, we would agree with you. Yesterday, in our opinion, was as much about the drastically oversold conditions in equity markets as it was about any major change in sentiment, news or just about any other direction shaping variable. Almost more interesting was a record set in the S&P 500 which saw 504 of the 505 constituents of the index positive on the day. The previous record of 496 was August 11, 2011 (during the EU crisis.) Strange times indeed.

Now, before the champagne is uncorked and the bear market declared over there are a few points to be made that should give us pause. First, while yesterday was a monster point day, it did not rank in the top 20 percentage gains of all time (more important.) To make that list would have required a return around 7% or greater with the largest percentage gain ever coming in at +15.34% during the great depression. Wow. Second, a rally of this magnitude has not always been a great indicator of market bottoms as there were numerous +4% rally days in the early stages of the 2000 tech wreck, the 2008 financial crisis and the great depression. Not all bad news though, as the 1970, 1987, 1998 and 2009 market bottoms were put in with mega rally days at the market floor similar to yesterday. The point here is that while yesterday was a welcomed event, the long term implications are a bit murky.

That said, we would be remiss if we didn’t point out that our last market update specifically implied that we do not believe 2000 or 2008 are appropriate comparisons for our current market turmoil due to a number of factors, most importantly, the lack of probability of an imminent recession. Following up on that comment, the current NY FED recession probability indicator sits at 16% simply inferring a possibility, not a likelihood economic downturn on the horizon.

So where does this leave us now? From a technical standpoint, much of what we have seen in recent sessions makes very little sense to us. By some measures, like new 52 week lows, we’ve seen trends in financials and energy singling a worse environment than we have seen in decades, including the depth of the Financial Crisis where over 80 large institutions (Lehman Brothers, Wachovia, Washington Mutual, Merrill Lynch, etc.) closed their doors permanently, were acquired or bailed out. Again, if you are thinking that sounds strange, we agree with you. Extending beyond those two sectors, we are also seeing equally odd things in general equity markets that just don’t square with historical reference or the current underlying stock fundamentals or economic conditions. When market behavior and technical trends don’t square with the fundamentals more often than not it has been during transient periods that were rectified in due order. To support the case, we have attached a slide created by Michael Gibbs, senior portfolio and equity strategist at Raymond James, which uses Factset provided data to illuminate the difference between recessionary and non-recessionary bear markets.

Bear Markets Graph

To not overwhelm, we have only highlighted the non-recessionary data which in comparison occur less often and are frankly less predictable than fundamental driven downturns. Diagnosing the table, the worst experience using data post World War II was the 1987 bear, marked by program trading orders gone awry on October 19th (Black Monday.) The little known fact about 1987 was that equity markets were up over 40% that year prior to the downturn, with markets yielding a 20 P/E. Also rarely discussed is that 1987 actually had a positive calendar year return despite the bear market. The next worst performance period came in the 61-62 time frame. This period identified by some as the Kennedy Slide is often historically remembered by the Bay of Pigs invasion and in the later stages of 62, the Cuban Missile Crisis. The rest of instances on the table saw a downside quite similar to what we have seen already in both decline in prices and Price to earnings contraction though the speed at which we have seen the downturn is only rivaled by the 98 experience.

The inclusion of this data by no means should be taken as a perfect predictor future results. To be clear, it is not. This is simply meant to illustrate that bear markets occurring when economic downturns are not present, have historically been shallower and quicker to recover, 11 months on average, than the more fundamentally based brethren. At the moment, that is where we think we are.

It is with this in mind that we leave you with our last communication for the remainder of 2018. We will of course be available at our offices for the remaining trading days if you have and questions or concerns so please do not hesitate to reach out. In the meantime we wish you a happy New Year and we look forward to speaking with you in 2019.

Any opinions are those of St. Pete Wealth Management Group and not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Expressions of opinion are as of this date and are subject to change without notice. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. The Bloomberg Commodity Index (BCOM) is a broadly diversified commodity price index distributed by Bloomberg Indexes. The BCOM tracks prices of futures contracts on physical commodities on the commodity markets. The index is designed to minimize concentration in any one commodity or sector.


Market Update 12/20/18

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Wealth Management
Managing Director

So this is what a bear market feels like? It has been almost a decade since a major decline has occurred and probably a little overdue. We haven’t technically had a bear market since the great recession of 2008, though 2015-2016 was a stealth bear market of sorts and 2011-2012 correction was very close. Interestingly however, as of this writing, we are actually not in bear market status for the S&P 500 or the Dow as we haven’t crossed the 20% pull back. We have seen greater weakness though in small caps, international and emerging markets which have seen that 20% downside. That considered, currently we are sitting in the “significant correction” zone between 10-15% down from the previous highs so we thought it would be a good time to pen a little perspective to those who need a little more insight into the current state of things and our thoughts on what’s to come.

First and foremost we’d like to say that this happens. Corrections of 10% or more from previous highs happen almost every year on average (though we didn’t get one in 2017), and trending bear markets happen less often but are still part of the process of the capital markets. Common sense tells us that without risk there is no return and similarly without downside volatility in stocks there would be no equity risk premium (the extra return you get in risk assets over and above the safer investments like bonds.)

If we all concede that these times historically and sensibly happen, then a bear market in the S&P 500 happening once every 5 or 6 years and lasting on average a year or so before completely recovering to all-time highs shouldn’t be that scary, right? In reality, for many investors it is a scary thing, because a handful of the last 10 bear markets have included returns much worse than the average - the most recent being in 2008 and 2000. In each of these we saw indexes lose about half of their value before they reversed trend and their total length were longer than the averages at 517 days for the financial crisis and 929 days for the technology bear market which was unusually extended by September 11th. We concede that if this was the norm, giving into fearful emotions would be more warranted.

The catch is that it isn’t the norm and not every correction is a bear market and not every bear market is a catastrophe. It is with this mind that we’d like to give you our current read on the markets both good and bad for consideration.

If you spend more than 5 minutes online or watching the talking heads on the financial channels you know that this most recent correction is because of Federal Reserve tightening, trade wars gone awry, an inverting yield curve, etc. Those are the high points. The second layer of concern highlight lesser discussed issues like Brexit, peaking earnings and the Mueller investigation/Trump. Unlike many of these prophets searching for causation, we suspect that the recent moves in capital markets have a little bit to do with all of the above and everything to do with none of the above. In reality, our base opinion here is that we are experiencing a reasonable repricing/correction due to slowing growth estimates for 2019. Our opinion is that we will see slower growth but not negative growth (an important point) in GDP, sales and earnings of companies and consumer spending, etc.

When growth projections slow, markets reprice and start a new trend at the new pace of growth. It really doesn’t have to be more difficult than that. It is, however, more exciting and sells more airtime to attach all of these news headlines mentioned above to the up and down daily gyrations. When the cameras turn off, even they know it all comes down to growth. Faster growth of economic and stock specific fundamentals usually means faster growth rates in stocks. Slower means slower and negative tends be where the worst markets start (again, why we highlight the point that we don’t believe growth in stocks or economy is turning negative yet.) Now candidly, this period of time has more flare than usual corrections both on up days and down. We suspect this is due to the rise of algorithmic traders which can exacerbate the swings in volatility. Just in the last 30 days we’ve had a “death cross” in the S&P 500 (the 50 day moving average crossing below the 200 day) and also the best weekly performance the S&P has seen in over 6 years (up 6.5% the week after Thanksgiving.) We’ve had both failed rally attempts and incredible rally days. Needless to say, the computer traders have not been helping to calm the market volatility in the recent days.

So where does this all leave us? With some of the recent technical events (like the breaking of a triple bottom support level on the S&P500) we believe caution is key and that we likely have more to fall in the short term. No one has the crystal ball, but the probabilities say that a violation of the support we have built up over the last 40 days doesn’t happen lightly and usually comes with additional downside. The questions of how much further downside and could this be another 2008, are popular and the ones we’d like to address in this missive.

As far as 2008, 2000 or any other massive draw down you would like to use for comparison, the answer is not likely. Going back to the great depression, markets that have experienced massive downside retreat have had a combination of similar variables. They include a large recession, commodity spikes, an aggressive Federal Reserve and extreme valuations.

  • 2008 had 3 of 4 present. Obviously a recession being one. A commodity spike with $150 a barrel crude oil (currently $48.) The fed funds rate was raised to 5.5% prior to the market top to quell inflation emanating from a real estate bubble. All this on top of an important economic sector in real estate that was immensely mispriced and needed correcting.
  • 2000 had 2 of 4 present but the only one needing attention was extreme valuations with the S&P 500 coming over 24 times forward looking earnings (a generational high.)

Let’s compare those data points to today one by one.

First, let’s consider a recession. While we have mentioned slowing growth of 3% GDP in 2018 to somewhere in the normalized range of 2% in 2019, it would take 2 quarters of negative GDP growth to constitute a recession. Even the most recent recession predictors of the Federal Reserve and CNBC have the odds at less than 25% for 2019.

As for the commodity spike there is a short answer. No way. The most recent reading on Bloomberg’s Commodity Index which includes (agriculture, livestock, silver, natural gas, industrial metals, gold and crude oil) is oversold by almost one standard deviation. Not overbought and certainly none of the constituents are spiking.

The Federal Reserve tightening is the only category mentioned that deserves a half check as they have been tightening the federal funds rate which continued today up to 2.5%. The most recent minutes and forecast however, decreased their prediction for 2019 from 3 more raises to reach their “neutral rate” to 2. We do believe that the Federal Reserve mismanaging its messaging has added to the volatility over the number of weeks but it is a hard stretch to say that a 2.5% Fed rate is “aggressive” when the economy is growing at 3% and we are at full employment with average inflation readings.

Lastly, valuations. As of today, S&P 500 forward looking Price to earnings is around 14.5 times. This is lower than the 25 year average of 16.1 and nowhere near the 24 times in 2000. For reference we bottomed at about 10 times forward PE at the lows of the great recession in 2009. The stock market is not expensive at these levels.

Summarizing the above, the very nastiest times of equity market returns have been when some or all of these conditions exist and at the moment the data just doesn’t show us enough to consider the worst as likely. That said, we admit that the market conditions since October are confusing, not only to us but to many of the market strategists that we read daily. Today, Raymond James Chief Market Strategist, Jeffrey Saut admitted that this period is one of only a few in his 48 year career that leaves him a bit perplexed. He also stated that a rare market condition called a Dow Theory Sell Signal was achieved yesterday and that he not sure whether to trust that signal. We maintain though, what is likely is that we muddle through the coming months of headline news and slowing growth. Once enough consolidation has occurred we should resume a positive growth trend. We deal in probabilities, not absolutes, and most of the data tells us that the probability of this being of greater significance is low. As always, as information becomes available and if data shifts we will update accordingly.

Now some may be wondering what we think is prudent here with regard to asset allocation in retirement and general investment accounts. Know first that our preference would be a phone call to discuss these with you individually as time horizons and risk tolerance tend to vary. The high points for now though would be to remind you that downside moves in equities for those who have cash holdings or who are contributing to retirement accounts should be seen as buying opportunities that will benefit you in the long run. For those past the savings phase or within 3-5 years from retirement, the best advice would be a personal call to discuss if your allocation is appropriate.

Lastly, we think it important for perspective to remember a bit of history with regards to bear markets and recoveries. The 2008 financial crisis, which we are not in and believe we are nowhere near, yielded one of the worst investing environments of all time (surpassed only by the great depression.) During the recovery side a portfolio of 60% stocks and 40% bonds recovered all its losses and had portfolios back to even in about 18 months total. In investing, time cures most ills and sometimes patience is the best decision. We hope this has been helpful and please call if we can be of any assistance.

Have a happy holidays!

Any opinions are those of St. Pete Wealth Management Group and not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Expressions of opinion are as of this date and are subject to change without notice. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors. Investing in commodities is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. The Bloomberg Commodity Index (BCOM) is a broadly diversified commodity price index distributed by Bloomberg Indexes. The BCOM tracks prices of futures contracts on physical commodities on the commodity markets. The index is designed to minimize concentration in any one commodity or sector.


Don’t Miss These 7 End-of-Year Financial Planning Tips

Ross D. Preville, WMS
Senior Vice President, Investments

The end of the year is quickly closing in, and there is no better time than now to take inventory of your financial situation. Evaluating, budgeting, and planning your finances is not a static activity, but rather endeavors that need attention on a regular basis in order to be successful.

With a new year about to begin, consider the following year-end financial planning techniques in order to end strong and start your new year with your best foot forward:

  1. Evaluate this year’s financial plan progress: If you created a financial plan for this year, now is a great time to assess the goals you set to achieve. What did you accomplish for the year so far, and what goals can you complete in the time remaining? If there are long-term financial goals that you didn’t meet, consider moving them to next year’s financial plan if they are still relevant.

  2. Don’t Forget About your 401(k): Does your employer match your 401(k) plan contributions? If so, you don’t won’t want to miss out those helpful tax deductions. Also, you don’t want to miss contributing the maximum amount you can to your 401(k) and taking advantage of the ‘free money’ match from your employer. Because each company has different matching limits, be sure to check with HR as soon as possible.

  3. Use the Balance of Your Flexible Savings Account (FSA): If you have an FSA, then now is the time to check your unspent balance, as some plans have a policy that will cause you to lose your money at the end of the year if it isn’t spent. If you do have a balance, consider getting that checkup you have been putting off, treat yourself to a new pair of eyeglasses, visit a chiropractor or acupuncturist, or stock up on meds and travel/health items for an upcoming holiday vacation.

  4. Review Insurance Coverage: If you have life, health, disability, homeowners, or long-term care insurance, make some room in your schedule to review all of your policies. When it comes to your life insurance policy, evaluate any life events that have happened this past year that might warrant an increase in your policy amount.

  5. Review or Create Estate Planning Documents: Your wishes can change over time, and your will or other estate planning documents should reflect your current desires. Take time at the end of each year to review your trusts and wills; if you don’t have them yet, then don’t delay. Unexpected deaths can put a family’s finances in jeopardy if a will wasn’t left behind.

  6. Review Expenses: Many people are unsure of how much money they spend each month and what they are spending it on. If you keep receipts of where your money goes each month, review these items to discover how much of your money goes to each category (housing, food, transportation, clothing, recreation, etc.). This will give you an opportunity to fine-tune areas where you are frivolously spending. And, if you haven’t kept track of your monthly spending, the new year is a perfect time to begin this healthy and helpful habit!

  7. Have a Conversation with Your Tax Advisor: Before tax season hits early next year, take a few minutes to speak with your tax advisor about potential ways to save on your tax bill by taking action this year.

To achieve your financial goals, staying on top of financial planning is necessary and never-ending. The end of year is an ideal time to assess your current situation and determine what changes can help you better reach your goals next year.

Want to find other ways to fine-tune your financial plan? Contact us to see how we can help create a financial plan that will provide the highest level of financial stability and security you desire for your family.

Don't Miss These 7 End-of-Year Financial Planning Tips

References

End of Year Planning
https://www.moneytips.com/end-of-year-financial-planning

10 Quick Year-end Financial Planning Tips
Mark Avallone - https://www.forbes.com/sites/markavallone/2017/10/01/10-quick-year-end-financial-planning-tips/#3cf4a2203a59

Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Josh Sankes and not necessarily those of Raymond James. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members You should discuss any tax or legal matters with the appropriate professional.


3 Reasons Why Robots Won't Replace Financial Advisors

Ross D. Preville, WMS
Senior Vice President, Investments

Robo-advisors have been heralded as the “future of investing” by their fans, but can computer algorithms really replace human financial advisors?

Robo-advisors are less expensive than traditional advisors—but their low, up-front price comes with a loss in quality. Robo-advisors lack an irreplaceable human element, which prevents them from providing the essential qualities and services characteristic of traditional financial advisors. When you look more closely at the differences between the two, it seems obvious that robo-advisors could never truly replace human financial advisors.

How do robo-advisors work?

Robo-advisors are low-cost, digital platforms that use automated algorithms to provide investment advice. Investors fill out an online form detailing their current financial situation, monetary goals, and investing preferences. Then, the robo-advisor software analyzes the responses and dispenses investment advice.

A recent study by LendEDU found that Millennials, once believed to be the biggest proponents of robo-advisors, actually chose human advisors nearly two-to-one over automated investment services. Other findings from the study revealed that 52% of Millennials believed that robo-advisors are more likely to make mistakes, and nearly 70% thought a human advisor would get a better return on their investments.

Here are 3 reasons why human financial advisors provide more value than robo-advisors.

1. Money is an Emotional Matter

When you compare a robo-advisor to a human financial advisor, the key difference is a human advisor’s ability to offer emotional guidance. Meeting our clients face-to-face allows us to provide behavioral coaching and hand holding, helping clients develop positive budgeting and wealth management habits that lead to long-term financial security. When markets decline or experience an upset, we work with our clients to help them make rational financial decisions and overcome detrimental emotions or impulses.

2. Everyone has a Unique Financial Situation

Human financial advisors provide personalized counseling and guidance to help clients achieve long-term financial success. Automated online platforms are unable to match this level of personalization. Instead, robo-advisors rely solely on computerized algorithms to determine asset allocation. While traditional financial advisors may use similar strategies, we also rely on our professional history, as we have worked with a variety of clients with unique financial situations. Additionally, we may work with a team or have additional financial tools at our disposal to determine the best investment objectives for each client.

3. It’s About More Than Just Investments

Investment advice is just a small part of a complete financial plan. The most sophisticated robo-advisors may offer automatic portfolio rebalancing and tax-loss harvesting, but they don’t come close to providing the full range of services that human financial advisors offer. As people move through life, their priorities and financial goals evolve. Human financial advisors are able to create nuanced investment strategies that take into account changing life circumstances. We provide comprehensive financial planning that includes retirement, insurance, and estate planning services, the best exercise of stock options, cash flow monitoring, and more to help our clients achieve their financial aspirations.

While robo-advisors are gaining more capabilities and media attention, they aren’t close to replacing human financial advisors. Robo-advisors may be useful for beginner investors with limited assets, but they lack the full range of benefits that would let them serve as true replacements for traditional, human financial advisors. If your finances could benefit from a personal touch, please contact us for a complimentary consultation.

3 Reasons Why Robots Won't Replace Financial Advisors

Sources:

Brown, Mike. (2018, Aug. 23) Robo Advisors vs. Financial Advisors – Millennials Still Prefer Real-Life. [Blog post]. Retrieved from https://lendedu.com/blog/robo-advisors-vs-financial-advisors/

Rixse, Chad. (2018, Apr. 25) The 4 advantages of human vs. robo-advisors. [Blog post]. Retrieved from https://www.cnbc.com/2018/04/25/the-4-advantages-of-human-vs-robo-advisors.html

Wohlner, Roger. (2018) Is An Online Financial Advisor Right For You? [Blog post]. Retrieved from https://www.investopedia.com/articles/financial-advisors/121914/online-financial-advisor-right-you.asp

Investopedia. (2018) Robo-Advisor (Robo-Adviser). [Reference] Retrieved from https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp


Retirement Savings Tips: From Your 20s to Your 60s

Ross D. Preville, WMS
Senior Vice President, Investments

Financial planning is a lifelong endeavor, but people often seek out investment advice that doesn’t fit their current stage in life. When it comes to saving for retirement, most Americans invest and manage those savings for six decades or longer. It’s important to consider how your resources and risk tolerance change as you move though different life stages. Saving for your retirement looks very different at age 30 compared to age 60. As financial advisors, we strive to help our clients develop retirement savings plans that are appropriate to the changing circumstances they face at every age. Here are some areas that we consider when giving age-appropriate retirement advice.

Ideal Asset Allocation by Age In the past, investment experts advocated the “100 Rule,” which called for subtracting your age from 100 to determine how much of your assets should be invested in stocks. For example, this rule called for 25-year olds to hold 75% of assets in stocks or “riskier” investments and 25% in bonds, CDs, equities or other low-risk investments. Now this has been updated to the “110 or 120 Rule” because Americans are living longer, making it extremely important to generate enough money to last throughout retirement. While this rule is useful for general guidance, it’s important to look at your particular situation and develop a more nuanced investment mix that is more closely aligned with your retirement savings goals and risk comfort level.

In Your 20s: Balance Saving and Investing Your earning ability is at its lowest in your 20s, but the power of compound interest makes this decade the best time to invest. Many professionals recommend that people in their 20s invest a majority of their retirement savings in stocks rather than bonds or savings accounts. A 2016 investment analysis by NerdWallet found that a 25-year old with a $40,456 salary who invested 15% a year exclusively in the stock market would likely end up with as much as $3.3 million more than if they kept their money in savings accounts. Regardless of how you invest your retirement savings, you should strive to balance your approach with paying off outstanding debt (student loans, credit cards) and saving for an emergency fund.

In Your 30s: Invest Aggressively in Stocks Take full advantage of your employer’s contribution by investing 10 to 15% of your salary in your office retirement plan in your 30s. Investing in a home or rental property is a good idea, provided you will be able to keep the real estate for at least five years. When you compare long-term investment returns on stocks and bonds, stocks vastly outperform cash and bond investments over time. You have decades to potentially make up any temporary losses in the stock market, so invest as aggressively in equities as your risk comfort level allows.

In your 40s: Maximize Your Retirement Contributions

By the time you reach your 40s, you need to be saving as much as possible for your retirement. Now is the time to max out your retirement contributions by investing the full $18,000 allowed each year. Investing in a tax-advantaged Roth IRA in addition to your 401(k) or 403(b) will help boost your retirement savings. It’s the right time to start investing in some lower-risk bonds too, unless you have been neglecting your retirement savings plan. A financial advisor can help determine the ideal investment mix to achieve your savings goals while maintaining an acceptable risk level.

In Your 50s and 60s: Start Preparing for Retirement If you need to build emergency funds to meet unexpected medical expenses and other costs in retirement, mature investors are allowed to start making catch-up contributions to tax-free savings accounts in the year they turn 50. In 2018, you can save up to $24,500 in a 401(k) and up to $6,500 in an IRA each year.

When you are in your last decades of saving for retirement, it is time to start rebalancing your portfolio. Consider moving your funds into bonds and money markets. A financial advisor can help you compile a comprehensive financial profile, assessing all your funding sources to figure out your ideal investment mix to provide income throughout your retirement.

We suggest using the above recommendations as starting points to saving for retirement throughout the different life stages. However, regardless of age, everyone can benefit from a personalized retirement plan. As financial professionals, we are available to help you figure out the ideal asset allocation for your retirement savings plan at your stage of life. Please contact us for a complimentary consultation.

Retirement Savings Tips: From Your 20s to Your 60s

Sources:

Friedberg, B. (2018, May 21) Here’s How You Should Invest at Every Age. [Blog post]. Retrieved from https://www.thebalance.com/how-to-invest-at-every-age-4148023

Leary, E. (2007, November). Best Investing Moves at Every Age. [Blog post]. Retrieved from https://www.kiplinger.com/article/investing/T052-C000-S002-best-investing-moves-at-every-age.html

Kumok, Z. (2017, Jan. 7) Are Your Investments Right for Your Age?. [Blog post]. Retrieved from https://www.investopedia.com/articles/investing/090915/are-your-investments-right-your-age.asp

Frankel, M. (2017, May 28). Here's How to Determine Your Ideal Asset Allocation Strategy. [Blog post]. Retrieved from https://www.fool.com/retirement/2017/05/28/heres-how-to-determine-your-ideal-asset-allocation.aspx


There’s More to Retirement than Just Numbers

Marcia F. Person, CDFA™, WMS
Senior Vice President, Investments

Have you considered the emotional aspects of retirement and how to plan wisely? In today’s world, people are working well past the age of 65 before retiring. Some people who are in good health may not be ready to retire just yet because they like what they do, want to keep busy, or need the extra money.

If retirement isn’t in the cards just yet, it never hurts to begin preparing emotionally for the change that will occur in life when retirement does happen and a new phase of life begins. If retirement is knocking on your door, you may want to start preparing yourself emotionally for it now, because preparation goes beyond making sure you have enough income.

Dealing with Retirement

Retirement is an issue we all must face, but most of us don’t give significant thought as to how our life will change once we stop working. Because we often intermingle our identity with our work, we can be dealt quite a shock in determining “who we are” once we retire.

Instead of looking at this new phase of life with worry or fear, consider it a chance to explore hobbies and do things you have always dreamed about. We can learn how to better prepare for retirement emotionally by asking ourselves a few relevant questions about the subject, such as:

  • How do you plan to live when you retire? Do you prefer a house, condo or apartment?
  • Where do you want to live? Will it be near your children, or in another state? In the city, suburbs, or in a rural area? Do you prefer a warm or cool climate?
  • Are you married or have a significant other that you live with? If so, how do they feel about your answers to the questions?
  • How is your health and will you require assisted living?
  • How much of your money do you plan to spend during your retirement and do you want an allotment set aside for your children?

If you are married, retirement will be a big adjustment for you and your spouse. Each person may have a different idea of their “dream retirement.” In addition, spending more time together can also put stress on a relationship, as you will need to adjust to each other’s new schedule.

If you are single, it doesn’t hurt to begin thinking about how you will want to spend your new freedom. Also, you might want to consider moving near friends or family members, or into a senior community in order to foster relationships and stay active. With so many questions that need to be addressed for the season of life after retirement, considering all of these areas before you retire can help you psychologically adjust better to the change.

What Determines Your identity?

To properly prepare for retirement, it’s important to recognize that it is a major life transition that will impact you on an emotional level. It helps to prepare yourself emotionally by re-thinking your identity and your place in the world.

Your self-image is important, and many people identify strongly with what they do and the relationships they keep. You may identify as an executive of a large corporation, physician, an attorney, or a business owner. Those identifications can fall away the moment you retire, which makes room for new growth in your personal development.

According to retired counseling psychology professor, Nancy Schlossberg, there are different ways to approach retirement and finding one’s new identity. These approaches include:

  • Being a searcher: This is someone who looks into different activities and hobbies once they are retired, similar to how a high school graduate may try different things before settling on a college major. Searchers may seek out different volunteer opportunities, take on new projects, or try a new hobby.
  • Becoming an adventurer: People who fall into this category upon retirement typically seek out an entirely new adventure. For instance, an architect may become an artist, or a dentist may become a baker. This type of person considers retirement as a way to make an exciting change in life.
  • Being a continuer: Continuers take something they did as a career and adjust it to continue on through retirement. For example, a journalist might become an author or start a blog. In these roles, we maintain some form of our work-related identity but it manifests in a different way.
  • Becoming an easy glider or retreater: Other identities post-retirement include easy gliders, people who don’t have a set schedule and may do something different each day, or retreaters, those who stay at home ntil they decide what path they want to take next.

Purpose and Retirement

Having an emotionally healthy retirement means acknowledging that you are transitioning into a new lifestyle, with new friends, experiences, and most likely a new identity. Retirement requires patience, adjustments, and consideration into your new purpose in life.

Don’t forget to be flexible, realistic, and patient with yourself when setting retirement goals and determining your new lifestyle. Also, don’t forget to take your health and physical activity into account when emotionally planning for retirement; maintaining your health as long as possible will allow you to do all of the things you want when you retire.

Lastly, when thinking about retirement, we cannot forget the financial aspect. As financial professionals, we are here to help you gain financial confidence and reach your retirement goals as you take on this important life transition. Please contact us for a complimentary consultation.

There's More to Retirement than Just Numbers

References:
Emotional Side Of Retirement Planning
Barbara Shapiro- MSF- CFP- CMC- CDFA
https://www.kiplinger.com/article/retirement/T031-C032-S014-the-emotional-side-of-retirement-planning.html

Preparing Yourself Mentally For Retirement
Nanci Hellmich
https://www.usatoday.com/story/money/personalfinance/2013/10/22/preparing-mentally-retirement/2885187/


Top 5 Biases that Impact Investment Decisions

Ross D. Preville, WMS
Senior Vice President, Investments

As financial advisors, we use facts and logic to guide our clients through investment decisions, rather than emotion. Even the most perceptive investors, armed with years of market experience, can fall prey to mental biases that lead to poor investment decisions. While it’s impossible to completely eliminate mental biases, we help our clients identify and minimize common investment biases that can lead to costly investment mistakes.

What are the most common biases in investing?

Behavioral psychologists Daniel Kahneman and Amos Tversky first explained the biases that inhibit investors’ ability to make rational economic decisions. There are two main categories of investing biases: cognitive and emotional.

Cognitive investing biases involve information processing or memory errors, whereas emotional investing biases involve taking actions based on feelings rather than on facts. Let’s take a look at the 5 most common investment biases, along with remedies we use to minimize their impact on our clients.

1. Confirmation Bias

It is natural for investors to be drawn to information that supports their existing views and opinions. Confirmation bias leads investors to attach more emphasis to information that confirms their belief or supports the outcome they desire. This can have a negative effect by reducing diversification and causing investors to overlook signs that it is time to make adjustments.

How We Help Minimize the Effects: We provide our clients with up-to-date information gathered from a variety of reputable sources. Our investors are fully informed of the pros and cons of their desired investments, giving a more balanced view that leads to better decisions.

2. Overconfidence Bias

A common behavioral bias in investing is overconfidence, which causes investors to overestimate their judgement or the quality of their information. This can lead to “doubling down” on a losing investment instead of knowing when to cut losses, or under-reacting to important information about changing market conditions.

How We Help Minimize the Effects: We help our clients develop and stick to a solid investment plan and make adjustments that are based on actual market conditions.

3. Recency Bias

Investors who suffer from recency bias have a tendency to overvalue the most recent information over historical trends. For example, recency biases can threaten an investors’ financial well-being by spurring them into increased risk-taking after experiencing a favorable gain in their portfolio. It can also occur when the investor experiences an isolated loss and decides not to make any portfolio adjustments for fear of further loss.

How We Help Minimize the Effects: We help our clients focus on the long-term performance of their portfolios, by reviewing both historical and current performance.

4. Loss Aversion Bias

Research has shown that humans feel the pain of a loss approximately twice as much as they feel the pleasure of a similarly sized gain. This can lead investors to focus on their investment declines more than gains, and can lead to inaction that stagnates the growth of their portfolios.

How We Help Minimize the Effects: We help our clients accept that losing money is an inevitable part of investing. We work together to create a financial plan with predetermined exit strategies.

5. Anchoring Bias

Anchoring bias is the tendency to “anchor” on the first piece of information received rather than evaluating the market as new information develops. For example, when investors anchor their belief about the value of a stock at the initial trading price rather than the current market conditions, this can lead to unwise decisions that can damage their portfolio’s profitability.

How We Help Minimize the Effects: We help our clients to assess investments based on current market value.

Investing biases can lead people into making financial decisions for reasons other than factual market conditions, significantly diminishing their financial stability. That’s why we believe one of our main responsibilities as financial advisors is to help our clients avoid the cognitive and emotional biases that can lead to faulty investment decisions.

Top 5 Biases that Impact Investment Decisions

Sources:

Parker, Tim. (2018, May 3). Behavioral Bias: Cognitive Versus Emotional Bias in Investing [Blog post] Retrieved from https://www.investopedia.com/articles/investing/051613/behavioral-bias-cognitive-vs-emotional-bias-investing.asp

McKenna, Greg. (2014, Nov. 20) Trading Insider: 5 Cognitive Biases That Can Hold Traders Back [Blog post] retrieved from https://www.businessinsider.com.au/trading-insider-5-cognitive-biases-that-can-hold-traders-back-2014-11

Lazaroff, Peter (2016, April 1) 5 Biases that Hurt Investor Returns [Blogpost] Retrieved from https://www.forbes.com/sites/peterlazaroff/2016/04/01/5-biases-that-hurt-investor-returns/

DesignHacks.co (2017, August). Cognitive Bias Codex [Infographic]. Retrieved from http://www.visualcapitalist.com/wp-content/uploads/2017/09/cognitive-bias-infographic.html


How the Right Advice Can Boost Financial Confidence

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Investments

What value does a financial advisor actually provide? This may surprise you, but the value of a quality financial advisor goes far beyond portfolio advice. It’s about guiding clients to develop sophisticated financial behaviors. With robo-advisors and consistent market volatility in the headlines, it’s important to realize the comprehensive advantages of working with a personal advisor – not a computer algorithm.

A recent study by Fidelity Investments discovered that working with a financial advisor can add up to 4%higher investment returns. In a similar study, Vanguard estimated that the quantitative value of a financial advisor is about 3% on a net basis (4% minus a 1% fee). Additionally, an advisor can give you confidence by boosting your financial confidence in the following areas:

1. Developing a workable financial plan
2. Serving as a behavioral coach
3. Creating a consistent investment strategy
4. Navigating retirement savings plans
5. Developing a tax-sensitive investment strategy

1. Developing a workable financial plan
Regardless of life stage, we work with families and individuals to develop plans that allow them to achieve several financial goals at once, such as paying off student loans, saving for a desired vacation, and building a reserve for emergency expenses. After examining a client’s income, expenses, and spending habits, we can set priorities, identify areas where expenses can be reduced, and develop a savings plan to achieve both short and long-term goals.

2. Serving as a Behavioral Coach
In a world where personal financial issues have become increasingly complex, we help clients figure out what’s true or false, what works, what matters, what is useful, and what can go wrong. Not many people have sufficient expertise to do that themselves—especially with an objective mindset. We provide support to clients so they stay on course in times of financial stress to help eliminate poor financial decisions. It’s easy for investors to fall victim to common cognitive biases that affect their decisions. Guiding clients to more responsible financial behaviors can help in a myriad of ways, such as realizing the benefits of long-term investments and enjoying the security and confidence that comes from having sufficient retirement funds.

3. Creating a consistent investment strategy
Numerous studies show that when investors manage their accounts themselves, they tend to overreact to market changes by trading too frequently. According to the 2016 Dalbar Quantitative Analysis of Investor Behavior Study, disciplined investors can see nearly double the returns on their investments over 20 years compared to those who try timing the market. With many clients, we guide them through selecting an appropriate mix of investments, rebalancing their investments as needed, and executing a consistent investment strategy that will keep them from making rash decisions.

4. Navigating retirement savings plans
A lack of retirement savings is a significant problem for many Americans due to longer lifespans, expensive medical care, and the rising cost of living. Without the guidance of a financial advisor, many Americans ignore the need for a solid retirement savings plan. Working with a financial advisor can help you determine the ideal time for retirement, the amount of savings needed to meet your retirement goals, and your ideal retirement age to guarantee income for life.

5. Developing a tax-sensitive investment strategy
While financial advice is often perceived as simply implementing an investment portfolio or dispensing financial guidance, that truly is just one slice of the pie. When it comes to the five financial areas above, you can’t get any better than having a personal advisor there to help you navigate the complexities of your financial situation.

Tax efficiency is a critical part of financial planning. We often give advice on issues such as tax-loss harvesting in brokerage and other taxable accounts, managing exposure on short-term capital gains, charitable giving, and more. While tax issues are not the main focus of our clients’ investment strategies, advice on how to manage, defer, and reduce tax exposure has the potential to improve returns by as much as 1% to 2% per year.

If you’re interested in learning more about how we can help you with your finances, please contact us for a complimentary consultation.

How the Right Advice Can Boost Financial Confidence

Sources:

Fidelity Investments. (2017, Dec. 14). The value of advice [Blog post]. Retrieved from https://www.fidelity.com/viewpoints/investing-ideas/financial-advisor-cost

Pfau, W. (2015, Jul 21) The Value of Financial Advice [Blog post] Retrieved from https://www.forbes.com/sites/wadepfau/2015/07/21/the-value-of-financial-advice/#71caf4ca1333

Douglass, M. (2017, Apr. 2). Yet another study shows that timing the market doesn't work [Blog post]. Retrieved from https://www.fool.com/investing/2017/04/02/yet-another-study-shows-that-timing-the-market-doe.aspx

Benjamin, J. (2014, Jan 27) Financial advisers can add 3 percentage points to client portfolios: Vanguard [Blog post]. Retrieved from http://www.investmentnews.com/article/20140127/FREE/140129915/financial-advisers-can-add-3-percentage-points-to-client-portfolios


4 Reasons Your Retirement Plan Might Fall Short

St. Pete Wealth Management Group

Ever find yourself daydreaming about retirement? Whether your dream retirement entails traveling the world, dedicating time to beloved hobbies, or helping your children and grandchildren, saving enough for retirement is critical to enjoying all of these endeavors. Everyone deserves the best retirement possible, but numerous planning mistakes can cause retirement plans to fall short.

According to recent studies, retirement savings look grim for many Americans for reasons such as living longer, expensive medical care, and the rising cost of living. One survey showed that 45% of all Americans have saved nothing for their retirement, including 40% of Baby Boomers. This trend continues with younger generations too, with a recent report from The National Institute on Retirement Security showing that 66% of Millennials haven’t saved a penny towards their retirement.

retirement blog

If you have started saving for retirement, you’re definitely ahead of the curve. However, you could still be engaging in some of the biggest retirement planning mistakes—without even realizing it. How can you save enough to thoroughly enjoy your ‘golden years,’ without hurting your finances in the meantime? Here are 4 retirement planning mistakes worth avoiding:

Mistake #1: Focusing on the Return Rate

If you have an investment that produces a high rate of return, it’s easy to get caught up in always pursuing that outcome. However, be wary of that type of bias, as it could negatively impact your future investments. Rather than chasing rates of returns, shift your focus to creating a diversified portfolio that spreads out investments through a variety of fund types. This might include balanced, index, equity, or global. Working with a financial advisor that helps you diversify your portfolio can help protect your retirement savings if/when the economy goes sideways. Plus, they’ll help you discover investments that match your retirement goals and risk tolerance.

Mistake #2: Retiring Too Early

Many of those saving for retirement aren’t saving as much as they need to continue their lifestyle during retirement. If that sounds like your situation, then possibly consider staying in the workforce a little longer and wait to take your Social Security benefits. This will allow you to save longer and also maximize your benefits if you don’t apply for them at age 62.

Additionally, Social Security data shows that around 33% of retirees live until 92 years old, and 75% of retirees apply for benefits as soon as they hit 62. With this in mind, pushing retirement back a bit could benefit you in the long-run.

With that said, pushing back retirement isn’t the best option for everyone. There are many reasons to retire as soon as you can, such as having health issues or other life circumstances that encourage early retirement. Whether you plan to retire early or need to retire later than expected, working with a financial advisor can help you determine the best way to prepare yourself for your specific retirement needs.

Mistake #3: Not Saving Consistently

One of the worst retirement mistakes to avoid is saving too little now and hoping you can ‘catch up’ in the future. The truth is, catching up rarely happens, and unexpected life circumstances can make catching up impossible in some cases.

According to the Center for Retirement Research at Boston College, the median retirement account balance for 55 to 64-year-olds was just over $110,000. If this money had to stretch over 20 to 25 years (which it likely will as people are living longer), it amounts to just over $400 per month to live on. We can see this is just not realistic in today’s world.

To save more, create a budget, cut out unnecessary spending, open a 401(k) through your employer or an individual retirement fund as a self-employed individual, and save extra money with each raise or bonus you receive from work. Working with a financial advisor is one way to shed light on other financial strategies to boost your retirement savings.

Mistake #4: Not Factoring Taxes into the Equation

Another common mistake made during retirement is forgetting about taxes and their effect on your savings. Tax deductions change for many people once in their in retirement, and some retirees end up paying more in taxes. Consider speaking with a financial professional about tax-free withdrawals from Roth IRAs or about timing withdrawals from accounts that will be taxed.

Want to avoid other retirement saving mistakes and create a personalized retirement plan? Contact us today for a complimentary consultation.

Sources

https://www.nirsonline.org/2018/02/new-research-finds-95-percent-of-millennials-not-saving-adequately-for-retirement/

https://www.fool.com/retirement/general/2016/01/26/20-retirement-stats-that-will-blow-you-away.aspx

https://money.usnews.com/money/retirement/articles/2016-01-28/5-retirement-planning-mistakes-and-how-to-fix-them

Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed web sites or their respective sponsors. Raymond James is not responsible for content of any web site or the collection or use of information regarding any web site’s users and/or members.


Preparing Your Children for Adulthood through Financial Literacy

St. Pete Wealth Management Group

As financial advisors, we learn a lot about clients’ short and long-term financial goals through many conversations and building relationships with them. We also often learn about their frustrations and regrets regarding past financial decisions. During these conversations about financial regrets, we often remind clients that it is important to remember that with time comes perspective and experience. So while they, as adults, may have regrets about past financial blunders, they can use their knowledge and experience to help their children steer clear of the same mistakes. With April being Financial Literacy Month, there is no better time to learn about the importance of teaching children about financial matters and helping them form good habits.

Are you hesitant to speak with your children about financial matters because of how you’ve handled past situations? Well, you aren’t alone. Many parents are reluctant to speak with their kids about finance but haven’t considered using their personal experiences as a lesson to teach their kids about financial consequences. While some parents think their child will learn financial literacy in school, only 17 states in America currently require students to take a personal finance course. If children aren’t learning about money from their parents and/or guardian, many children are left in the dark or could learn negative financial habits from their peers or media.

Broach the financial conversation with your children knowing you don’t have to be a financial genius in order to teach them helpful lessons for the future. Sometimes these conversations even help parents take better control of their own financial situation, in order to be a strong role model for their children.

Not sure which financial lessons are most important for your children to be aware of? Here are 4 to consider when you prepare to teach your son or daughter how to build a solid financial future:

1. Earning Money. One of the first experiences your child will have when it comes to financial matters is earning money. Whether you are offering a small stipend for jobs around the home or your child has a part-time job after school, earning money through physical or mental effort helps your child associate value to labor. In my case, we have two teenagers who are active in sports and train 4-5 times a week. It’s next to impossible for them take part-time jobs because they would have to give up the sport in which they truly love participating. So we have taught them that school is their job, and it’s up to them to do well in order to get the rewards they would otherwise be getting from a part-time job. Our 16 year old also has a car, and he is sometimes given the responsibility for driving his younger sister. We choose to pay him by transferring money to a debit card that we opened for him when he got his driver’s license. While this is safer than carrying cash, we have discovered that using a card vs. pulling out those dollar bills can have the negative effect of them not learning the real value of money.

2. The Importance of Budgeting. The topic of budgeting can be brought up at a relatively early age. Whether your child earns an allowance or is paid from a job outside of the home, discuss how he or she can create a budget with the earnings. Some parents require the income a child earns to be used for their discretionary spending - things like gas, going out with friends, or buying a new clothing item. Be sure to help your child create a system where a portion of his or her money will go into savings, an emergency fund, their car or phone payment, etc.

Budgeting helps children learn the value of money and gain a clearer picture of the time and effort involved in obtaining something of value or make a major purchase in the future.

3. Saving Money. It seems like such a simple topic yet saving money is often not discussed with younger generations. As young men and women between the ages of 17 and 25 make plans to move away from the family home, many are unprepared for the shock of monthly bills and being tied to contractual obligations, such as rent, phone, and monthly car payment contracts.

By having a firm grasp on saving money and budgeting ahead of time, your child can bypass “bill shock”, in addition to feelings of anxiety and confusion when he or she moves out of the home.

You can teach younger children about the topic of saving money through the use of a piggy bank, and older children through opening a savings accounts and setting up various goals.

4. The Difference of Needs vs. Wants. Because we live in a want-driven society, this is a crucial discussion to have with your child. We “need” food, shelter, clothing and security to survive - whereas our “want” is something we desire but do not depend on to live. Teach your child that “needs” should be built into their budget, whereas a splurge or extra money fund is what should be paying for the “wants” in life.

Of course, this can segue into a much broader discussion of why your child wants something - possibly because his or her friends have it, because they think it will make them more likeable, etc. There are many helpful conversations that can come from this topic that can benefit your children for years to come!

Take advantage of Financial Literacy Month and make a plan to start having regular discussions about money with your children. Teaching them while they’re young can help them build a strong and positive relationship with money, and instill in them the value of earning money, budgeting, saving, and setting up a secure future.

For more information on how to teach financial literacy to tweens, click here, and for teens, click here. Both links offer concepts and tasks that will help them develop the financial skills they need as they prepare for adulthood. If you would like more personalized financial guidance as you educate your kids about money, please contact us for a complimentary consultation.

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Announcements

Sean C. Kelly, CFA®, CFP®, CIMA®
Senior Vice President, Investments

St Pete Wealth Management Group has a great deal to be excited about, and we wanted to share the news with you.

We are proud to announce that our partner Sean Kelly has attained his Chartered Financial Analyst (CFA®) designation. The CFA® credential is recognized by many as the “gold standard” of the investment industry. Sean completed a rigorous 3 year curriculum which included three six-hour examinations offered only once per year. Candidates report dedicating in excess of 900 hours of study to become a CFA® charterholder and as such, it is recognized as one of the most challenging examinations in the world. Sean is now in an elite group of financial professionals around the world to hold the CFA® after having passed each level in his first try.

Please join us in welcoming Jason Wolgemuth - the newest member to our team. Jason has been in the home office of Raymond James for almost seven years. Born and raised in Daytona Beach, he moved to St. Pete in early 2001 and is happy to call it his home. Recently he received a Bachelor of Science in Finance from the University of South Florida and is currently working on his Master’s in Business Administration. Jason is married to Elizabeth, and they have two daughters ages 4 and 18 months. We are excited to have Jason join our team as a Client Service Associate.

And finally, we wish the best of luck to our longtime associate Kim Barber who has retired from Raymond James. After spending 28 years in the downtown St Pete branch (yes, she practically grew up here), Kim is pursuing her dream of becoming an event and party planner. I’m sure you will join us in wishing her the best in her pursuits.

We are constantly striving for ways to improve and provide more robust services and the highest level of support to you. We look forward to hearing from you and as always stand ready to assist in whatever way we can.

Sincerely,
Your Team at St. Pete Wealth Management Group

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