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                    [post_date] => 2022-08-04 08:27:06
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                    [post_content] => By Ryan Yamada, Senior Wealth Planner 

 

When putting away for retirement, we often dream about all the things we’ll be able to do with that money – traveling, going out to eat, maybe trying new hobbies. 

 Of course, there are always the everyday household expenses to account for in your post-retirement budget. But one budget line that doesn’t always get enough attention? Health care.  

If you think your health care costs will be similar to what you paid in your pre-retirement years, think again. Fidelity’s annual study found that the average 65-year-old couple retiring in 2022 will need $315,000 saved to cover their health care expenses throughout retirement.1 It’s a number that just keeps rising, too. This estimate is up $15,000 from last year’s study. Oh, and it doesn’t account for things like over-the-counter medications, dental care or long-term care costs. 

 In other words, health care may be the single biggest purchase you make in retirement. 

Whether your retirement is still years away or you’re already retired, there are things you can do now that may help you pay for this major expense. Let’s dig into some ideas. 
Ways to Start Planning Early for Retirement Health Care Costs
Let’s start with the obvious: savings plans. Purpose-specific accounts, such as health savings accounts (HSAs), often have built-in tax incentives that can make them a worthwhile option. In some cases, HSAs can offer a triple tax-advantage –  tax deductions for contributions, tax deferral during the accumulation period and tax-free distributions for qualified health-related expenses. Be sure to check what HSA deductions are available in your state before you jump in.2 

Another option is adding insurance coverage that can help pay for some of the more significant health events. Before going down this path, it’s important to ask yourself what you’re trying to protect against. Here are two of the more standard coverage options that people can choose from. 

 	
Critical illness coverage. Standalone critical illness policies can provide lump-sum or itemized benefits for things like cancer, heart attacks or strokes. Additionally, some life insurance policies have optional riders that can be added to help cover for these conditions or events. 


 	
Extended care or long-term care coverage. Insuring for an extended care event or for long-term care can be done in a number of ways, including standalone policies and policy riders on life insurance or annuity contracts. With insurance companies making regular changes to these policies and how benefits are paid out, it's important to work with a local, independent insurance advisor who can help you find the best options for your situation.

Finally, certain retirement accounts like Roth IRAs and 401(k)s may also have features that allow penalty-free withdrawals for medical expenses. However, depending on how contributions were treated, distributions may still be taxed on the way out.  
What to Do When You’re Nearing Retirement
As you prepare to leave the workforce, it's important to get a handle on all of your expenses – that includes what health insurance options are available to you. Are you eligible for Medicare or do you need to buy coverage in the marketplace? (Hint: Take a look at your most recent paystub and consider your employer's health care subsidy. It might surprise you!) When do you need to sign up for Medicare so you won’t miss out on your open enrollment window and incur penalties?

Additionally, have you thought about any procedures you might want to have done while employed? Planning out these expenses could be a great way to reduce costs post-retirement.  

If you’re retiring before 65, you probably won’t be eligible for Medicare yet, so you’ll want to figure out how to get coverage in the meantime. Some early retirees are lucky enough to be covered under their previous employer. Others may find part-time employers who will help to subsidize the cost. Other options may include health sharing or co-op plans, self-insuring or even moving abroad. 

 As you approach Medicare open enrollment, you can start working with a trusted and independent Medicare expert. Be sure to choose someone who's familiar with the plans in your state. If you’re a “snow bird,” be sure to ask them about each of the states you plan to reside in, as coverage needs can change from state to state. 

Once you’re enrolled in Medicare, you should decide whether to sign up for a Supplement or Medicare Advantage plan or purchase dental, vision or long-term care coverage. Be sure to look at how all these plans work together to determine your maximum out-of-pocket costs. Then, you can build those costs into your retirement income plan.  
Preparing for the Unknown
Now that you’ve retired, you can only hope that all your careful preparations will meet your needs. But the one constant in life is unpredictability. If a time comes when you need more money than you’ve put away or something arises that you’re not covered for, there are additional strategies to consider. 

First, don’t panic. Then, call your financial advisor. They’ll be able to provide professional guidance based on your own specific situation. If you don’t already have an advisor, we can help you find one in your area. 

 

1 “How to plan for rising health care costs,” Fidelity. May 25, 2002. https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs

2 The Finance Buff, “California and New Jersey HSA Tax Return Special Considerations.” December 4, 2018. https://thefinancebuff.com/california-new-jersey-hsa-tax-return.html#:~:text=Because%20the%20state%20of%20California%20does%20not%20recognize,gross%20pay%20for%20calculating%20the%20federal%20tax%20withholdings.

 
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                    [post_date] => 2022-08-02 10:06:37
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                    [post_content] => By Jamie Hopkins, Managing Director, Wealth Services 

Sonu Varghese, Director, Investment Platforms; and Ryan Detrick, Chief Market Strategist, contributed to this report. 

 

Senate Democrats have reached a general agreement on a bill to address climate change, taxes, health care, inflation and the deficit, according to a White House statement.  

This agreement came as a surprise to many after the Build Back Better Act of 2021 was unable to gain enough traction in the Senate. But after months of negotiations, Senate Democrats have released a text of the bill, 725 pages, outlining the new spending and tax revenue provisions.   

The bill is not yet finalized, though it appears lawmakers are motivated to take action before the midterm elections. And because Democrats plan to pass the bill through budget reconciliation, it can avoid a filibuster and pass in the Senate with a simple majority.  

The Senate plans to address the bill next week before the Senate breaks. The bill would then need to pass through the House before it lands on President Joe Biden’s desk for a signature. 

The major provisions of this bill include:  

 	
Installing a 15% minimum corporate tax revenue for certain large firms 
 	
Medicare and prescription drug reform 
 	
Spending to increase IRS enforcement and efficiency to enable more audits of companies and high-income individuals and to cut back on fraud 
 	
Closing the carried interest loophole  


 	
Lowering drug and health care costs through expansion of the Affordable Care Act 
 	
Expansion of Medicare Part D Low Income Subsidies 
 	
Tax credits for electric cars and other energy investments 
 	
Investments into clean and renewable energy and environmental issues 

Though the bill’s official moniker is the Inflation Reduction Act of 2022, how much the bill will directly impact inflation today or in the long run is up for debate.  

There are areas of the bill that may help with inflation. For example, the drug pricing provisions are very deflationary – especially for the PCE price index (the Fed's preferred indicator), since medical costs are a big part of that. 

In addition, tax increases tend to be deflationary, since they pull money out of the private sector. This also applies to the IRS funding, which provides extra money for increasing compliance, (i.e., raising tax revenue). 

On the other end, the spending provisions could be inflationary. If the energy- and climate-related policies raise investment, then that's a productivity boost. That said, the transition from fossil fuels to more carbon-neutral fuels could be rough and inflationary. One item not addressed in the bill is reform to speed up permitting for energy infrastructure, since it can't be passed through budget reconciliation. It's expected to be addressed in separate legislation in the fall. 

The budget impact of this bill is expected to raise tax revenue and decrease the deficit over the next 10 years by about $300 billion.  

It is just as important to talk about what the bill doesn’t do. According to the White House and Senate Democrats, this bill will not raise taxes on any Americans making less than $400,000 a year. Additionally, the bill does not include any expanded child tax credits, capital gains rate hikes, free college or paid leave provisions that were found in the Build Back Better Act.  

This bill would represent a revenue increase for the government, potentially reduce the deficit and make significant investments into health care costs and energy sectors. Remember, this is not a final bill and could still see changes or roadblocks ahead. 

  

 Jamie Hopkins is not affiliated with Cetera Advisor Networks, LLC
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                    [post_date] => 2022-07-27 10:48:37
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                    [post_content] => By Scott Kubie, Senior Investment Strategist 

 

The first half of the year proved challenging for even the most hardened of investors. High inflation. Continual losses in the S&P 500. Bear market. Fed rate hikes. It all added up to the third most volatile market in 25 years.   And while the economy isn’t going to just turn on a dime and recover overnight, there is hope for a better second half of the year. Read on to see what we anticipate could happen over the coming quarter.  
S&P 500 Earnings Are Likely to Moderate
Based on what we’re seeing so far, we anticipate that S&P 500 earnings could climb 10% this year. While this might not match the astonishing 50% rebound we saw last year, the moderation in growth shouldn’t be taken as bad news.  

After all, last year’s growth benefited from easy comparisons to quarters heavily affected by the COVID-19 pandemic. This year, the comparisons are far tougher. Not only was the economy more open last year, but those quarters benefited from consumers making up for low spending in 2020 and from large amounts of government aid.  

Two sectors that could skew earnings are energy and retail, primarily due to inflation and supply chain concerns. Earnings-per-share may be pushed higher if energy stocks report big gains due to higher prices, but short-term earnings shocks upward aren’t as valuable as margin or sales growth that can be sustained for long periods. And supply chain issues may continue causing headaches for the big box retailers. We’ll be watching both of these areas closely. 
Valuations Could Move to a More Normal Range 
The decline in the equity market pushed valuations down to levels in line with the period between 2015 and 2020. The difference is that interest rates are much higher today – and that tends to push fair price-to-earnings values lower.  

While uncertainty is a bigger challenge to markets, valuations could rise if other factors move in the right direction. 
Q3 2022’s Five Big Risks
Each quarter, we identify five big risks we think will affect markets. Here’s what we see as potential challenges to look out for in the third quarter of 2022: 

 	
Inflation: Will the effects of low interest rates, excessive fiscal stimulus and supply constraints make the inflation surge too strong to be controlled? The populace seems very worried about inflation. 
 	
Recession: Will the Federal Reserve raise rates too high and push the economy into a recession?  
 	
Virus variants: Will virus mutations undo the economic recovery? Many people have arrived at their new normal. Some are still taking their last steps to a new normal. A more powerful COVID variant could undo some of those gains. 
 	
Russia: Putin’s decision to invade Ukraine provided a stark reminder of a world filled with people of ambition and a desire for power. Escalation remains the biggest market risk, followed by collateral damage to the European economy.  
 	
Investor behavior: Will the return of risk scare people out of the market? Markets rose more than 10% annually during the Cold War even amid the strife and uncertainty of the free world’s conflict with Communism. History offers encouragement to stay invested.  

Are We Due for an Upswing?
Only time will tell if we’ve hit bottom yet. But from our view, the signs are pointing to the beginnings of a recovery. Markets have already gone down, and much of the bad news is reflected in prices. Inflation, big rate hikes and Russian aggression can get worse, but they aren’t going to be new problems in this cycle. Inflation seems to be moderating, and some data points driving inflation are dropping. Energy prices recently fell. Unfilled positions are starting to decline. And other data show some slowing inflation pressure.   

Historically speaking, we’re in the worst year for markets in the four-year presidential cycle. The “honeymoon period” with a new administration is wearing off, which often leads to uncertainty. And there has been extra uncertainty this year – with more people mistakenly conflating their investments with their political views. As we get closer to November, uncertainty should begin to wane.  

And what about talk of recession? The jobs data indicate it’s unlikely this year. The future may be more challenging, but we aren’t there yet. Regardless of the short-term economic trend, it’s rational to have faith in a system that has worked so well for long-term investors.  

 

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

The views stated are not necessarily the opinion of Cetera Advisor Networks and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.  Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Past performance does not guarantee future results.
                    [post_title] => Quarterly Market Outlook: What Lies Ahead for the Third Quarter of 2022?
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                    [post_date] => 2022-07-19 14:47:37
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                    [post_content] => By Craig Lemoine, Director of Consumer Investment Research









At their most basic level, executive compensation plans are designed to attract, retain and motivate top talent and leadership. But truly successful plans are designed to be much more than providing a high salary to a key employee – they support the business’s philosophies, values, and mission. 

During times of change, these plans can help establish smooth transitions and provide a scaffolding of reliability. They can reinforce corporate dedication to transparency and strong economic, social and corporate pillars for employees and organizational stakeholders to follow.  
The four elements of effective executive compensation plans 
Executive compensation plans require knitting together four quadrants to form a total compensation and benefit strategy: direct compensation and benefits, short-term (annual) bonuses and incentives, longer-term bonuses and incentives, and special retirement plans. 

Organizational structure, size, fundamental economic cycles and industry norms dictate the magnitude and offering of each quadrant.  




Direct Compensation & Benefits


Short-Term (Quarterly/Annual) Bonuses and Incentives




Longer-Term Bonuses and Incentives


Nonqualified Defined Contribution and Split Dollar Life Insurance Plans




 Let’s take a closer look at each of these quadrants. 
Direct Compensation and Benefits  
These generally start with a strong salary and benefits. Salaries are typically determined  by an executive compensation committee and take into consideration industry salary  comparisons, annual revenue and sales growth. In addition to a base salary executives  receive benefits that go far and above those offered to non-key employees. Employee  benefits, such as health insurance or group life insurance, generally provide tax  deductions to the employer. Executive benefits are designed to differentiate between  classes of employees and lose some of their tax deductibility and shine.  

Executive benefits can include company-provided vehicles, housing stipends, extensive moving expenses, access to a corporate jet, country club memberships, sporting-event seating, executive dining, and supplemental disability, life, healthcare and wellness plans. These benefits can be critical in stakeholder management and building financial success.  
Short-Term (Quarterly/Annual) Bonuses and Incentives  
These incentives can help align executive behavior with organizational goals and  performance. Short-term cash bonuses can be tied to shareholder goals – such as share  price, revenue or profit metrics – and/or organizational values. Cash compensation is  also tied to ESG measures, employee retention, community involvement or other  mission-driven metrics. Attractive short-term incentives can nudge behavior and help an  executive drive more than financial performance.  
Longer-Term Bonuses and Incentives  
Often given in the form of stock bonus plans, these incentives prioritize retention while  aligning behavior with long-term organizational and shareholder objectives. These  plans are generally stock based with vesting restrictions rewarding organizational  financial health and time spent with an organization. Two popular long-term stock  bonus strategies are incentive stock options (ISOs) and restricted stock units (RSUs).  

ISOs are frequently offered to executives of public or soon-to-go-public private companies. An ISO allows the executive to purchase stock at the granted option price. ISOs are statutory and must be exercised within ten years of the grant date. ISOs offer a favorable tax effect to executives who hold the ISO for at least one year before exercising, then hold the underlying shares an additional twelve-months. ISOs frequently have three-year vesting schedules, meaning if an executive leaves an organization before ISOs vest, they lose the options. Similar to some other forms of executive compensation, the employer may not receive a tax deduction on ISOs. ISOs may vest upon death or disability.  

 Assume Camille is the CFO at Zippy Drone Company. She was hired January 1, 2020 and  granted 1,000 Incentive Stock Options at $10 per share. The options have a three-year  cliff-vesting period, meaning Camille will be able to exercise these and buy 1,000 shares  of Zippy at $10 per share on or after January 1, 2023.  

If on January 2, 2023 Zippy Drone Company shares are priced at $100 a share, Camille can exercise the ISOs and purchase the shares for $10,000. As long as Camille holds this $100,000 position for one year, she can then sell the entire position as a long-term capital gain and take advantage of more favorable tax rates. If Camille leaves prior to the option vesting date she forfeits this portion of her compensation. Exercising the ISO may trigger an Alternative Minimum Tax event.  

ISOs have become less popular in the last decade, as companies must book them as  expenses the year they are issued. As an alternative, many businesses have started  offering RSUs instead.  

RSUs grant an executive shares of stock, with either a cliff- or a grated-vesting schedule. With a cliff-vesting schedule RSUs are available to sell after they are vested. Executives do not receive dividends or voting rights on RSU shares until they vest, and RSUs are forfeited if the executive leaves an organization prior to being vested. RSUs may vest on death or disability.  

 Assume Bianca is the CEO of Zippy Drone Company. She was hired January 1st of 2020  and granted 1,000 RSUs at $10 per share. These RSUs have a four-year grated vesting  schedule, with 25% of RSUs vesting each year. Bianca will receive 250 shares every year.  She must include the market value of these shares as income as they are delivered to  her. Once delivered she is free to hold or sell the shares.  

 Organizations make additional grants of ISOs and RSUs. In our earlier example Camille  may receive an additional 1,000 ISO grants annually, Bianca annual RSU awards.  Additional grants and awards keep executives targeting long-term performance goals  and encourage retention.  
Nonqualified Defined Contribution Plans and Split Dollar Life Insurance  
These provide the ability to thoughtfully prepare for an executive’s eventual retirement or departure from the company. Deferred compensation plans can benefit both the employer and highly paid employee by deferring income into future years.  

Some traditional qualified retirement plans, such as 401(k) Plans and SIMPLE IRAs, allow employees to defer wages into tax favored accounts. These accounts work well for most employees, but all have limitations that might make them fall short for highly paid executives. In 2022 the most an employee can defer into a 401(k) plan is $20,500 ($27,000 if an employee is 50 or older). A SIMPLE plan allows a $14,000 deferral ($17,000 if an employee is 50 or older). But when an executive earns close to a million dollars annually, setting $20,500 aside annually falls short.  

Nonqualified Deferred Compensation Plans (NQDCP) are formal agreements allowing an executive to defer a much larger portion of their salary to a future date. An NQDCP can defer salary and cash bonuses giving an executive great flexibility in retirement savings. An NQDCP must be in writing, specifying the amount paid, payment schedule and triggering events (such as a retirement age) that will distribute plan assets. Nonqualified compensation plans offer similar savings vehicles to 401k plans (employer stock, mutual fund options, stock and bond options and fixed accounts). Distributions are taxable to the employee, much like a 401(k) plan. However these plans do carry some additional risks.  

Plan assets are considered general assets of the employer and are subject to creditor risk. Accounting requirements can be onerous and funds cannot be used for non-triggering events. Additionally, the employer can customize the plan and limit the plan offering to specific classes of employees rather than all employees.  

 Assume Nellie is the CMO of Zippy Drone Company. Her base pay is $600,000 annually. Nellie defers $20,000 into the Zippy 401(k) plan but is worried about her future retirement. Assuming Zippy has a Nonqualified Deferred Compensation Plan Nellie could Contribute another $200,000 into that plan. Both plans can have similar retirement funding options. Zippy Drone Company benefits  

Lastly, executive compensation plans may include split-dollar life insurance. Split-dollar life insurance is a way for an executive to receive life insurance coverage leveraging employer dollars and premium payments. Employers are able to offer up to $50,000 of group life insurance to all employees and deduct the premiums. Executives looking for additional cash-value insurance protection and growth can benefit from split dollar plans. Split dollar life insurance takes two forms:  

 	
Economic Benefit Arrangement. With an economic benefit arrangement the employer owns the policy, pays the premium but allows the executive to appoint a beneficiary who would receive a death benefit if the executive died prematurely. The executive will have an income tax liability to the extent of the death benefit, and may be able to borrow against the cash value of the policy based on the nature of the agreement.  


 	
Loan Agreement. In a loan agreement split dollar plan the employee owns the policy and employer pays the premiums in the form of loans to the employee. The employee provides a collateralized interest back to the employer to recover loan proceeds. In the event of death or retirement the employee owns the policy and employer is reimbursed.  

 Alexis is the CCO of Zippy Drone Company. She has entered into a loan agreement split dollar life insurance policy with Zippy Drone. Zippy Drone pays $50,000 in annual whole life insurance premiums to BIG insurance company on a $1,000,000 death benefit policy. After ten years of working at Zippy, assume the cash value of the life insurance policy has grown to $600,000. Alexis departs Zippy and pays back the loan ($500,000), plus any accrued interest, using a loan against the insurance policy. This arrangement allows Alexis to depart with a million-dollar life insurance policy with some cash value. 
 
Get Professional Advice on Executive Compensation Plans 
Taken together, these financial tools allow organizations to build executive compensation plans that can attract, retain and reward high value employees. Compensation can be tied to performance, values and deferred to encourage retention. 

Have questions? Your financial advisor is here to help – whether you are the employer or the employee.  Talk to your advisor today, or contact us if you are looking for a professional advisor in your area. 

 

 The hypothetical investment results are for illustrative purposes only and should not be deemed a representation of past or future results. Actual investment results may be more or less than those shown. This does not represent any specific product [and/or service].

 Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty.
                    [post_title] => Culture From the Top Down: Executive Compensation Plans Explained
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                    [post_content] => By Craig Lemoine, Director of Consumer Investment Research 









We speak a secret language in financial planning. So much of our world is filled with abbreviations surrounding insurance and investment products, processes, education and accomplishments. 

I could say “Tammy, a CLU and ChFC®, reviewed a DIA against a SPIA with a COLA to maximize his client’s Monte Carlo success rate.” Translating from the secret language of financial planning, the sentence would read “Tammy specializes in insurance. She reviewed two types of annuity contracts often used for retirement and helped determine which one is the best fit for her client.”  

I could also be fairly sure that Tammy is a licensed insurance agent and that she has access to sophisticated software tools and may or may not engage in financial planning. I would need more information before being able to discern if Tammy is a fiduciary and as such, would be required to act in her client’s best interest. 

Quite a bit of discovery from one sentence filled with planner-speak!   

Financial service professionals like Tammy climb a competence stairway to work with clients. What do you need to know about that stairway? 

In this blog, we’ll break down industry jargon, share what various credentials indicate and explain why the financial services industry is so regulated. 
Registration Standards for Financial Advisors
The first step in the competency stairway is regulatory compliance. 

The financial service profession is regulated at the federal or state level, and professionals who sell products or provide financial advice to clients for a fee are required to meet minimum required regulatory standards. 

If a financial service professional represents an insurance company, they must be legally appointed by that company as an agent. Before being appointed, that professional will have to pass one or more state insurance exams, agree to a code of ethics, and maintain their license annually through continuing education. The insurance company they work with must register in states where it does business and meet statutory requirements.  

The securities industry weaves the Financial Industry Regulatory Authority (FINRA) and state securities commissioners into a regulatory quilt, also requiring stockbrokers and their registered agents to pass registration exams and complete annual compliance training. Investment adviser representatives (IARs) who charge clients fees are also required to take their licensing exams, among many other legal requirements.  

Registration exams are required to talk to a customer or client. They may be challenging at the time but are the bare minimum of competence. They are the first step on the road to becoming a professional.  
Professional Certifications for Financial Advisors
Professional certifications and degrees, or the letters that come after a name, represent additional steps an advisor has taken on their professional journey.  

Letters behind an advisor’s name can be delineated into three categories: conferred degree abbreviations, broad financial planning designations and niche or specialized designations. 

Others, unfortunately, are false signals and are backed by questionable rigor and merit. 
Conferred Degrees
Conferred degrees are generally issued by accredited educational institutions. Degree quality varies; an MBA from Yale was hopefully more in-depth than one from an online university with few admission requirements and an unknown reputation. 

Ask financial planners about their degrees, where they are from, what they are in and when they earned the degree. 

Degrees do not require continuing education and rarely any ongoing ethical commitment. Knowledge earned in school fades over time, even for the best of us. In the financial planning profession, graduate degrees are generally listed behind a name, while undergraduate degrees tend to be omitted.  

Common degrees used in financial planning include: 

MBA – Master of Business Administration. An MBA prepares students for general success in business, running established or start-up enterprises. MBAs may be focused on leadership or entrepreneurism. 

MSFS – A Master of Science in Financial Services. An MSFS is a graduate degree more focused than an MBA and may target specific elements of financial services. Most MSFS programs will contain financial planning classes within their curriculums. 

Ph.D. – Doctor of Philosophy is a graduate degree awarded in the sciences, branches of economics and social or behavioral areas. Someone with a Ph.D. degree is trained to research and has a deep knowledge of a specific discipline.   

DBA – Doctor of Business Administration is a graduate degree awarded by a business college. A DBA is trained in research and has a deep knowledge of business entities and practices.  

JD/Esquire –  Juris Doctor (JD) is awarded by a law school, esquire is an honorific used to signify someone has passed a state bar exam. Attorneys play a critical role in the financial planning process, particularly in estate planning. They can draft wills, trusts and legal documents as well as represent clients during life transitions.  

LLM – Master of Laws, is a graduate qualification in the field of law. In financial services, you might encounter an LLM in tax or estate planning.  
Broad Based Financial Planning Designations
Broad financial planning designations are different than degrees. Designations generally require experience, fulfilling courses, examination or some measure of competence, an ethical pledge and continuing education. Three broad financial planning designations include:  

CFP® - CERTIFIED FINANCIAL PLANNER™. Using the CFP® designation behind your name requires three years of experience, taking courses in financial planning, investments, risk management, estate planning, retirement planning, education planning and psychology. Candidates must pass a capstone class, comprehensive exam and agree to a rigorous code of ethics pledging to act as a fiduciary when engaging in the financial planning process. The CFP® designation was first issued in the 1970s and is recognized today as an industry standard in financial planning certifications. A CFP® professional is required to earn an undergraduate degree and take 40 hours of continuing education every two years, a portion of which must be in ethics. The CFP® designation is administered by the CFP®, Board and CFP® professionals who break their ethical obligations are subject to sanctions and public discipline.i  

ChFC® – Chartered Financial Consultant. Using the ChFC® designation requires three years of experience and completing a rigorous combination of courses in financial planning, including an advanced investment course, income tax classes, planning for families with special needs and solving applied case studies. Candidates must pass a capstone class but are not required to complete a comprehensive exam or pledge to act as a fiduciary. ChFC® professionals must agree to act according to a code of ethics and maintain recertification on an annual basis. The ChFC® designation is administered through The American College of Financial Services.ii 

PFS – Personal Financial Specialist. Only a Certified Public Accountant (CPA) can hold a PFS designation. The PFS requires an accountant to earn 75 to 105 hours of financial service focused education across 12 disciplines and pass corresponding exams.iii The PFS is administered through the ACIPA, requires an unrevoked CPA permit ongoing and 20 hours of annual continuing education.  

CPA – Certified Public Accountant. While not a general financial planning designation in a traditional sense, CPAs are required to take college-level accounting courses, often earn a degree and pass a rigorous four-part comprehensive exam. CPA professionals often focus on auditing, tax or accounting functions.   
Specialized Financial Planning Designations
Specialized financial planning designations are as plentiful as stars in the sky. Some shine bright, others are new and bold and a sad few twinkle and grow dim. 

This summary considers designations by topic frequently used by financial advisers and omits those used in the property-casualty, insurance operations and underwriting.iv  There are hundreds of specialized designations. This list includes some of the better-known industry designations but is not intended to be comprehensive.  
Retirement
CRPC® – Chartered Retirement Planning Counselor™. The CRPC is a designation for experienced advisers who are focused on retirement planning needs for individuals. The CRPC sets a focus on pre- and post-retirement income needs and contains some investment and estate content. The CRPC is managed by The College for Financial Planning.v  

RICP® – Retirement Income Certified Planner™ is a three-course program in retirement planning offered by The American College of Financial Services. The RICP was developed by over 45 retirement and academic professionals. A RICP® professional has training in identifying retirement risks, sources of retirement income and managing retirement income.vi 

RMA® - Retirement Management Adviser™ is a comprehensive retirement planning designation offered through the Investments & Wealth Institute. The RMA is a strong program teaching advisers to take an in-depth look at retirement and teaches strategies through a client’s retirement story. 

CSA – Certified Senior Adviser is a designation that can be earned over a three-day class. This designation was discussed in the financial media as an example of a less rigorous retirement designation when compared to alternatives.vii  
Life Insurance
CLU – Chartered Life Underwriter™ is one of the oldest financial service designations, first being granted in 1928. The CLU is a comprehensive insurance designation requiring certificates to study multiple insurance lines and take a deep dive into life insurance. The CLU® remains robust and helps distinguish an insurance professional. The CLU® is managed by The American College of Financial Services. 

LUTCF® - The Life Underwriter Training Council Fellow is a designation for new insurance agents. A three-course designation, the LUTCF® covers the basics of risk management. The LUTCF® is managed jointly by the College of Financial Planning and the National Association of Insurance and Financial Advisers (NAIFA).viii 
Investments and Wealth Management
CFA® – Chartered Financial Analyst™ is a premier designation in managing wealth. The CFA® designation requires years of study, passing multiple difficult examinations and is well respected among investment and wealth management professionals. The CFA® is a global designation overseen by the CFA® institute.ix  

CIMA® – The Certified Investment Analyst™ designation is a practical investment management designation and portfolio construction designation held by investment consultants. The CIMA® is commonly held by client-facing investment advisers and contains strong portfolio theory and behavioral finance elements. The CIMA® is overseen by the Investments & Wealth Institute.x 
Other Specialized Designations 
EA® – An Enrolled Agent is a federally authorized tax practitioner who can assist and represent a client’s tax return. There are multiple study programs to become an enrolled agent, but they all lead to a common outcome. Enrolled Agents have a strong understanding of our tax-code and how financial planning strategies can complement unique tax situations.  

EAP® – The Accredited Estate Planner designation is held by financial service professionals who have a deep understanding of the estate planning process. The AEP® is administered by the national association of estate planners and councils and requires extensive education in estate and financial planning.  

When evaluating a financial planner, consider designations as additional steps up the competency ladder. Financial service designations are not required to give advice or sell insurance. They are optionally sought out by advisers who are furthering their scope of knowledge to better help their clients. 

After becoming Registered financial professionals generally pursue a generalist certification (CFP®, ChFC® or PFS®) and then move into more focused designations. 

If your adviser has a designation that is not on this list, ask them about it. Do a quick Google search. There are hundreds of quality designations in the financial service world, and most of them showcase competency and professionalism.  

 

Craig Lemoine is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Craig Lemoine is in no way related to Cetera Advisor Networks LLC or its registered representatives.
                    [post_title] => What Do Financial Adviser Designations Mean? What are the Letters after a Name?
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            [post_content] => By Ryan Yamada, Senior Wealth Planner 

 

When putting away for retirement, we often dream about all the things we’ll be able to do with that money – traveling, going out to eat, maybe trying new hobbies. 

 Of course, there are always the everyday household expenses to account for in your post-retirement budget. But one budget line that doesn’t always get enough attention? Health care.  

If you think your health care costs will be similar to what you paid in your pre-retirement years, think again. Fidelity’s annual study found that the average 65-year-old couple retiring in 2022 will need $315,000 saved to cover their health care expenses throughout retirement.1 It’s a number that just keeps rising, too. This estimate is up $15,000 from last year’s study. Oh, and it doesn’t account for things like over-the-counter medications, dental care or long-term care costs. 

 In other words, health care may be the single biggest purchase you make in retirement. 

Whether your retirement is still years away or you’re already retired, there are things you can do now that may help you pay for this major expense. Let’s dig into some ideas. 
Ways to Start Planning Early for Retirement Health Care Costs
Let’s start with the obvious: savings plans. Purpose-specific accounts, such as health savings accounts (HSAs), often have built-in tax incentives that can make them a worthwhile option. In some cases, HSAs can offer a triple tax-advantage –  tax deductions for contributions, tax deferral during the accumulation period and tax-free distributions for qualified health-related expenses. Be sure to check what HSA deductions are available in your state before you jump in.2 

Another option is adding insurance coverage that can help pay for some of the more significant health events. Before going down this path, it’s important to ask yourself what you’re trying to protect against. Here are two of the more standard coverage options that people can choose from. 

 	
Critical illness coverage. Standalone critical illness policies can provide lump-sum or itemized benefits for things like cancer, heart attacks or strokes. Additionally, some life insurance policies have optional riders that can be added to help cover for these conditions or events. 


 	
Extended care or long-term care coverage. Insuring for an extended care event or for long-term care can be done in a number of ways, including standalone policies and policy riders on life insurance or annuity contracts. With insurance companies making regular changes to these policies and how benefits are paid out, it's important to work with a local, independent insurance advisor who can help you find the best options for your situation.

Finally, certain retirement accounts like Roth IRAs and 401(k)s may also have features that allow penalty-free withdrawals for medical expenses. However, depending on how contributions were treated, distributions may still be taxed on the way out.  
What to Do When You’re Nearing Retirement
As you prepare to leave the workforce, it's important to get a handle on all of your expenses – that includes what health insurance options are available to you. Are you eligible for Medicare or do you need to buy coverage in the marketplace? (Hint: Take a look at your most recent paystub and consider your employer's health care subsidy. It might surprise you!) When do you need to sign up for Medicare so you won’t miss out on your open enrollment window and incur penalties?

Additionally, have you thought about any procedures you might want to have done while employed? Planning out these expenses could be a great way to reduce costs post-retirement.  

If you’re retiring before 65, you probably won’t be eligible for Medicare yet, so you’ll want to figure out how to get coverage in the meantime. Some early retirees are lucky enough to be covered under their previous employer. Others may find part-time employers who will help to subsidize the cost. Other options may include health sharing or co-op plans, self-insuring or even moving abroad. 

 As you approach Medicare open enrollment, you can start working with a trusted and independent Medicare expert. Be sure to choose someone who's familiar with the plans in your state. If you’re a “snow bird,” be sure to ask them about each of the states you plan to reside in, as coverage needs can change from state to state. 

Once you’re enrolled in Medicare, you should decide whether to sign up for a Supplement or Medicare Advantage plan or purchase dental, vision or long-term care coverage. Be sure to look at how all these plans work together to determine your maximum out-of-pocket costs. Then, you can build those costs into your retirement income plan.  
Preparing for the Unknown
Now that you’ve retired, you can only hope that all your careful preparations will meet your needs. But the one constant in life is unpredictability. If a time comes when you need more money than you’ve put away or something arises that you’re not covered for, there are additional strategies to consider. 

First, don’t panic. Then, call your financial advisor. They’ll be able to provide professional guidance based on your own specific situation. If you don’t already have an advisor, we can help you find one in your area. 

 

1 “How to plan for rising health care costs,” Fidelity. May 25, 2002. https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs

2 The Finance Buff, “California and New Jersey HSA Tax Return Special Considerations.” December 4, 2018. https://thefinancebuff.com/california-new-jersey-hsa-tax-return.html#:~:text=Because%20the%20state%20of%20California%20does%20not%20recognize,gross%20pay%20for%20calculating%20the%20federal%20tax%20withholdings.

 
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                    [post_content] => Medicare can be a confusing topic for many. You can't simply sign up anytime you want – and your enrollment timeframe can depend on a variety of factors. To help you figure out when your eligibility begins, we have put together the following flowchart.

Download the checklist today to get started.

 
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                    [post_content] => Trillions of dollars will soon transfer from the Silent Generation and baby boomers to their adult children in what financial experts are calling “The Great Wealth Transfer.”

Are you one of the people expecting an inheritance in this historic transfer of wealth? Have you thought about the implications of receiving a tidy sum as a beneficiary?

Get ready and informed for your role as a beneficiary.

Download the checklist today to get started.

 
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                    [post_content] => The financial world is full of industry jargon and unfamiliar language that the average consumer may struggle to understand. This can be especially distressing during times of volatility, when we're all grappling for answers.

In this guide, we've broken down some of the most common phrases you might be hearing and reading to help you understand what's really being said.

Download the checklist today to get started.

 
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                    [post_content] => Gifting to your loved ones now or posthumously each carries their own positives and negatives as they relate to your estate plan, taxes, your goals and your legacy.

As you explore your options, refer to this guide. It offers a checklist, questions to ask your advisor and a conversation outline to help you communicate your wishes to your loved ones.

Download the checklist today to get started.

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

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

Download the checklist today to get started.

 
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            [post_content] => Medicare can be a confusing topic for many. You can't simply sign up anytime you want – and your enrollment timeframe can depend on a variety of factors. To help you figure out when your eligibility begins, we have put together the following flowchart.

Download the checklist today to get started.

 
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                    [post_date] => 2022-08-01 09:43:02
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                    [post_content] => Last week was a big one for monetary policy and economic data. The Federal Reserve raised interest rates 0.75%, with unanimous agreement that higher rates were required to bring inflation under control. In his press conference, Fed Chair Jerome Powell announced the Fed was becoming more data dependent. The market interpreted that statement to mean rate hikes would likely slow in the future, especially if inflation starts moving lower.

Key Points for the Week 

 	
The Federal Reserve raised rates 0.75% to a range of 2.25-2.50%.
 	
U.S. gross domestic product declined 0.9%, restrained by falling goods purchases and slower inventory growth.
 	
The S&P 500 gained 9.2% in July, its best month since COVID vaccine data was released in November 2020.

U.S. GDP shrank for the second consecutive quarter, contracting by 0.9%. Much of the economy remains strong, and services consumption continues to increase. Weakness in goods, inventories, housing, and government spending are contributing to signs the economy is slowing.

The Personal Consumption Expenditures (PCE) Price Index confirmed the earlier Consumer Price Index report that inflation remains a challenge. PCE was up 1.0% as fuel prices added to pricing pressure in other sectors. Core PCE, which excludes food and energy, rose 0.6%.

Markets welcomed the idea the Fed may slow interest rate hikes sooner than expected. The S&P 500 gained 4.3% last week to complete a 9.2% rally for the month. The global MSCI ACWI rebounded 3.3%. The Bloomberg Aggregate Bond Index jumped 0.6%.



Figure 1

Are We in a Recession?

Many investors seem to have learned that two quarters of declining GDP means the country is in a recession. Yet, this definition isn’t totally accurate. There are far more factors the National Bureau of Economic Research (NBER) uses to determine whether there is a recession, but for much of the public, the two-negative-quarters definition seems to have stuck.

Like most rules, two quarters of economic decline isn’t a terrible test for a recession. The NBER defines recession as, “…a significant decline in economic activity that is spread across the economy and lasts for more than a few months.” Two quarters of declining GDP is usually significant, affects the broad economy, and lasts for more than a few months.

Reality indicates recessions are more complicated. Figure 1 shows none of the last three recessions matches the popular definition of two consecutive quarters of GDP growth. The 2001 recession had two nonconsecutive quarters of growth. The Great Financial Crisis had multiple negative growth quarters but started with a down and then up quarter. The 2020 COVID crisis had two consecutive negative quarters only because the very short recession overlapped the first and second quarters.

Sometimes quarterly economic patterns create short-term irregularities. The first quarter’s 1.6% decline in GDP had several. Personal consumption and investment remained robust. Declining federal spending from the end of pandemic-related support and weak exports, partly related to Russia’s invasion of Ukraine, caused the initial data release to show the economy shrunk in the first quarter. Those factors fail the test of the decline being spread across the economy. From a broader perspective, the vast majority of the economy remained strong. In fact, it was too strong, and the Federal Reserve was forced to embark on a program of rapid rate increases to tame inflationary pressures.

The weakness in the second quarter was broader than the first. Goods spending dropped 1.1%. Residential investment fell 3.7%, in line with our expectations that higher interest rates would pressure housing demand. Government spending also continued to decline as pandemic-related programs continued to wind down. Each of these areas experienced abnormal growth during the pandemic. People sought out goods to make social distancing less painful. The demand for housing rose rapidly as some people left big cities and others sought to expand their homes. Government programs supporting people displaced by the pandemic are no longer as necessary. Inventories also stopped increasing as rapidly as in previous quarters, pulling growth lower. What is bouncing back is services consumption, which increased 1.0% in the second quarter. Exports also bounced back from the temporary weakness in the first quarter.

While we don’t believe the U.S. has entered a recession, we do see the economy has slowed. Some of this pullback is necessary, as excess demand and lack of supply have caused unacceptable levels of inflation. Those inflationary pressures are quite broad. Wages rose 1.6% last quarter and are 5.7% higher than a year earlier. Core PCE inflation rose 0.6% last month. In order for inflation to move toward 2.0% per year, wage pressures will need to drop.

The recession argument wasn’t the only item that interested markets. The Fed also indicated it is seeing some signs of economic slowing. According to Fed Chair Jerome Powell, the recent rate hike has raised rates to a “moderately restrictive level” and the Fed will be more data dependent. Markets took this statement to mean the Fed is willing to slow interest rate increases if inflation starts moving lower.

Whether the U.S. ultimately enters a recession or not is still to be seen. Risks are higher than normal, but a recession, in our view, is far from certain. The Fed would like to avoid a recession, but previous comments suggest it would be OK with “softish landing” in which the economy entered a shallow recession and then rebounded without the inflationary pressure. The broader point is the Fed recognizes its policy has tightened materially and it will adjust its future outlook and not keep raising rates and creating a far worse economic slowdown.

The S&P 500’s 9.2% increase last month indicates the market is moving that way as well.

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

S&P 500 INDEX

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

MSCI ACWI INDEX

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

BLOOMBERG  U.S. AGGREGATE BOND

The Bloomberg US Agg Total Return Value Unhedged, also known as “Bloomberg U.S. Aggregate Bond Index” formerly known as the “Barclays Capital U.S. Aggregate Bond Index”, and prior to that, “Lehman Aggregate Bond Index,” is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).

National Bureau of Economic Research. https://www.nber.org/research/business-cycle-dating

Bureau of Economic Analysis. 7/28/22. https://www.bea.gov/news/2022/gross-domestic-product-second-quarter-2022-advance-estimate

Bureau of Economic Analysis 6/29/22. https://www.bea.gov/news/2022/gross-domestic-product-third-estimate-gdp-industry-and-corporate-profits-revised-first

Bureau of Economic Analysis.7/29/22. https://www.bea.gov/news/2022/personal-income-and-outlays-june-2022

U.S. Department of Labor Statistics. 7/29/22. https://www.bls.gov/news.release/eci.nr0.htm

Federal Reserve. 07/27/22. https://www.federalreserve.gov/newsevents/pressreleases/monetary20220727a.htm

Federal Reserve. 07/27/22. https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220727.pdf

Compliance Case #01445642
                    [post_title] => Market Commentary: As Anticipated, Fed Announces Another 0.75% Rate Hike
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                    [post_date] => 2022-07-25 09:14:36
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                    [post_content] => Central banks are playing the leading role in today’s markets. Last week, the European Central Bank raised interest rates 0.5%, pulling the deposit facility rate to 0%. It is the first interest rate increase in 11 years and the first time the rate hasn’t been negative in eight years. Japan’s central bank took a different approach, leaving rates stable. The Japanese Consumer Price Index has only risen 2.3% in the last year. That is much higher than normal but close to the target of 2%.

Key Points for the Week 

 	
The European Central Bank joined the inflation fight, raising rates 0.5%. Japan left rates unchanged.
 	
The United Kingdom continues to lead all G7 countries with a 9.4% inflation rate.
 	
Housing starts fell 2% last month as higher interest rates pushed demand lower.

The U.K. is on the other end of the inflation spectrum. Inflation in Britain jumped 0.8% last month and is now 9.4% higher than one year ago. The Bank of England indicated a 0.50% hike is possible at the next meeting given that inflation has remained elevated despite a steady stream of 0.25% rate increases.

The domestic housing market is starting to respond to higher interest rates in the U.S. Housing starts fell 2%, the second straight monthly decline (Figure 1). The Federal Reserve is likely to reduce demand further by increasing interest rates 0.75% at its meeting this week.

Markets seem to have priced many of these events in already. The S&P 500 gained 2.6% last week. The global MSCI ACWI rebounded 3.2%. The Bloomberg Aggregate Bond Index rallied 0.7% as long-term rates declined despite the widely expected additional rate increases.

 

Figure 1

Nearly a Full Court Press

In basketball, a full court press is when the defense pressures the offense the entire length of the floor. Every player needs to exert significant effort for a press to be successful. If only three of the players are trying to press and the rest are not, the press will be broken fairly easily. Global central banks are engaging in their own version of the full court press against inflation as more central banks are joining the effort to reduce excess global demand. Until last week three major players hadn’t raised rates: the European Union, China, and Japan. We will examine each country as we look toward the Federal Reserve interest rate decision this week.

The European Central Bank surprised markets last week by raising interest rates 0.50% to 0%. The reason this is so surprising is it is the first time in 11 years that the ECB increased interest rates. In fact, this is the first time in eight years that the deposit rate in Europe is positive. The market expected the increase to be 0.25%, but June’s outsized inflation report at 8.6% caused the ECB to raise rates more aggressively.

Interestingly, the ECB didn’t provide any forward guidance on moves it may make later this year. It has signaled it will be data-dependent, meaning it will wait to see what the July inflation number looks like. One reason the ECB may be hesitant to raise rates too quickly is Europe’s inflation is being driven by supply issues, especially on energy due to the conflict in Russia. The European economy has weakened as the sanctions on Russia have slowed growth. Exacerbating the problem is weakness in the euro. The euro is as weak as it’s been in the past 20 years, which is making energy imports priced in U.S. dollars even more expensive. A 0.50% increase showed markets the ECB was serious, while the lack of future guidance reflects the weak European economy.

Japan’s central bank has been the lone holdout of major developed economies. The Bank of Japan announced last week that it would keep interest rates unchanged, with its short-term rates remaining at -0.1. This comes despite the weakest level for the yen versus the U.S. dollar since 1998. The fear from BOJ governors is that any increase in rates, even to stop the fall of the yen, would be too damaging to Japan’s economic recovery. The difference is Japan is experiencing much more muted inflation than the U.S. and Europe. The expectation in Japan is that core inflation will increase by only 2.3% over the next year.

China’s monetary policy has moved in the opposite direction from the rest of the world. The Chinese have actually cut rates and taken other steps to invigorate the economy. At first glance this doesn’t make much sense, as China is a big importer of energy. China’s situation is different because it will buy oil from Russia, likely at a lower price than what the rest of the world pays. It also continues to lock down cities and engage in strong forms of social distancing. By restricting activity, the Chinese are effectively pushing down demand for all sorts of goods and services, and those policies are likely doing more to slow their economy than a 0.50% rate hike.

We expect central banks to ratchet up the pressure more next week. The Fed is expected to raise rates 0.75% when its meeting concludes on Wednesday, matching June’s increase. Any other outcome would be surprising. Fed Chair Jerome Powell’s press conference after the meeting will be watched closely for future guidance. If rates move up 0.75%, the target rate will be 2.25-2.5%, which is above what the economy could sustain before COVID.

Our expectation is the broad number of nations tightening policy will start to reduce the effects of excess demand on inflation and remove some of the pressure from supply-constrained markets at the same time. The Fed moving rates past what many believe is neutral means short-term rates will be working to slow the economy. The ECB moving rates to 0% means the strange incentives encouraged by negative rates will disappear. Every rate hike helps to slow the economy, but the ECB hike last week and the expected Fed move this week are key events in the fight against inflation.

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

S&P 500 INDEX

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

MSCI ACWI INDEX

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

BLOOMBERG  U.S. AGGREGATE BOND

The Bloomberg US Agg Total Return Value Unhedged, also known as “Bloomberg U.S. Aggregate Bond Index” formerly known as the “Barclays Capital U.S. Aggregate Bond Index”, and prior to that, “Lehman Aggregate Bond Index,” is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).

Wall Street Journal. Megumi Fujikawa. 7/21/2022. https://www.wsj.com/articles/bank-of-japan-sees-inflation-hitting-2-3-this-fiscal-year-11658374450

Wall Street Journal. The Editorial Board. 7/21/2022. https://www.wsj.com/articles/the-ecb-raises-while-mario-draghi-falls-christine-lagarde-european-central-bank-interest-rates-italy-11658426371

Financial Times. Chris Giles. 7/20/2022. https://www.ft.com/content/e777a2d1-bc5c-4e01-8605-2be0682aad5e

US Census Bureau. 7/19/2022. https://www.census.gov/construction/nrc/pdf/newresconst.pdf

VOA. 7/06/2022. https://www.voanews.com/a/fresh-covid-19-outbreaks-put-millions-under-lockdown-in-china/6648113.html

CME Group. 07/24/2022. https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

Compliance Case #01439315
                    [post_title] => Market Commentary: European Central Bank Joins Fight Against Inflation, Raises Rates 0.5%
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                    [post_content] => The Consumer Price Index (CPI) leapt 1.3% in June, following a 1.0% increase in May. The measure of inflation has risen 9.1% in the last year and reached its highest level since 1981 (Figure 1). Energy prices have been the top contributor in the last 12 months, responsible for 3.0% of the 9.1% annual increase. Core CPI, which excludes food and energy, rose 0.7%. Its annual level continues to slide lower, dropping from 6.0% to 5.9%. Shelter costs rose sharply as rents and housing prices pushed them higher.

Key Points for the Week 

 	
The Consumer Price Index jumped 1.3% in June, beating expectations. Inflation has now increased 9.1% in the last year.
 	
Retail sales surged 1.0% as higher prices and strong employment helped retail demand stay robust in the face of higher inflation.
 	
Chinese GDP fell 2.6% in the second quarter. Lockdowns and a weaker property market caused the Chinese economy to shrink.

The U.S. consumer is holding up well despite the inflationary pressures. June retail sales rose 1.0% and are 8.4% higher over the last year. When adjusted for inflation, consumers are paying more for slightly fewer goods as inflation has risen faster than sales. In June, the 1.0% rise in sales lagged the 1.3% rise in inflation, and the 8.4% yearly sales gain trails the 9.1% inflation hike. For example, gasoline station sales surged 5.9% because gasoline prices were significantly higher.

Chinese GDP fell 2.6% last quarter as China’s approaches to COVID-19 restricted economic activity. The shutdowns were major contributors to retail sales falling in April and May and only partially rebounding in June. The risk of future lockdowns continues to loom large on Chinese growth and the global supply chain.

Markets were lower last week, although a rally on Friday after the retail sales report helped narrow weekly losses. The S&P 500 fell 0.9%. The global MSCI ACWI gave back 1.6%. The Bloomberg Aggregate Bond Index rallied 0.9%. The Job Openings and Labor Turnover Survey as well as second quarter earnings are the key data points likely to move markets this week.



Figure 1

Inflation Spirals Higher

U.S. inflation continued to run higher in June. A monthly increase of 1.3% added to already high inflation and pushed the yearly inflation rate to 9.1%. As we shared last week, pay increases have been most rapid for those with the least education and lowest-paying jobs. While these pay gains have helped, this group is also the most vulnerable to increases in inflation as they spend a higher percentage of their incomes on basic goods and have less spending flexibility than higher earners.

Energy costs have contributed significantly to annual inflation. Although energy makes up only 7% of the basket of goods used to measure CPI, it has contributed 3.0% to the yearly inflation rate, accounting for nearly one-third of the increase. When combined with food and auto prices, the three categories contributed 56% of the inflation, yet make up only 28% of the basket. Any relief in these areas could help slow inflation.

The details of the report provided little positive news. A few travel categories reported lower prices, but those have still increased by more than the overall CPI average in the last year. A plethora of categories climbed more than 0.5%, suggesting inflation pressure continues to broaden.

Some relief on energy prices will help next month's report. Gasoline prices have declined for more than 30 straight days, after peaking in early June. Because the average price in June was above May’s average, gasoline pumped inflation higher in June. That should reverse in July. Some factors working in the opposite direction will make next month’s inflation a tougher comparison. Monthly inflation ebbed lower in the third quarter last year, and that means smaller monthly increases may still push the annual inflation rate higher than the already high 9.1%.

The Federal Reserve meeting in two weeks is the next big event in the ongoing fight to lower inflation. In its recent minutes and subsequent press appearances, Fed governors have gone out of their way to make up for being overly optimistic about inflation trends earlier. Since dropping “transitory” from its description of inflation late last year, the Fed has become more hawkish, meaning it has more will to raise rates. That hawkishness, combined with the big jump in CPI, has cemented expectations for at least a 0.75% increase in interest rates later this month. Some have begun to forecast an increase of 1.0%, matching the Canadian central bank’s recent hike.

A 1.0% increase seems a big step given the moves already made by the Fed and others. Even amid the high inflation, strong employment environment, and solid retail sales, there are signs the global economy is slowing. The International Monetary Fund (IMF) announced it will reduce its projections for economic growth for the second time in three months due to the ongoing war in Ukraine, higher inflation, and ongoing supply bottlenecks. Some Fed governors are counselling against raising rates too fast. Esther George, who leads the Federal Reserve Bank of Kansas City, worries, “…that a rapid pace of rate increases brings about the risk of tightening policy more quickly than the economy and markets can adjust.”

Interest rate hikes often slow the economy after a lag, as some economic momentum takes a while to reverse. The U.S. is not alone in raising rates. The U.K., South Korea, Canada, and Australia have all increased rates, which will help slow global activity. According to the IMF, 75 central banks have raised interest rates since July 2021.

Perhaps a useful analogy for the Fed’s current challenge is someone trying to train for a marathon after sitting on the couch for most of the pandemic and then postponing the start of the training program until long after the recommended start date. The erstwhile marathon runner will have to accelerate her training much more rapidly to get in good enough shape to finish the race. At the same time, the intense training regimen required increases the chance of injury. The Fed is in a similar situation. Having waited too long to start increasing rates, it finds itself having to walk a narrow path between pushing too hard and not pushing hard enough.

Based on the signals the Fed is giving, we expect it will increase rates 0.75%. That attempts to balance the goal of taking big steps to curtail inflation while still giving the economy and markets time to adjust to a higher rate environment.

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

S&P 500 INDEX

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

MSCI ACWI INDEX

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

NBC News. Laura Eagan. 07/17/2022. https://www.nbcnews.com/politics/gas-prices-are-falling-voters-say-arent-feeling-relief-rcna37680

IMF. Kristalina Georgieva. 07/13/2022. https://blogs.imf.org/2022/07/13/facing-a-darkening-economic-outlook-how-the-g20-can-respond/

Wall Street Journal. Nick Timaros. 07/17/2022. https://www.wsj.com/articles/fed-officials-preparing-to-lift-interest-rates-by-another-0-75-percentage-point-11658068201?mod=hp_lead_pos1

Wall Street Journal. Michael S. Derby. 07/11/2022. https://www.wsj.com/articles/feds-george-concerned-about-effect-of-aggressive-rate-rises-on-economy-11657554589?mod=article_inline

Cheddar News. Alex Vuocolo. 12/15/2021.0 https://cheddar.com/media/fed-chair-powell-drops-transitory-from-statement-speeds-up-taper#:~:text=Fed%20Chair%20Powell%20Drops%20'Transitory'%20From%20Statement%2C%20Speeds%20Up%20Taper,-Dec%2015%2C%202021&text=As%20prices%20for%20goods%20hit,in%20its%20latest%20policy%20statement

US Bureau of Labor Statistics. 07/13/2022. https://www.bls.gov/news.release/cpi.nr0.htm

US Census Bureau. 07/15/2022. https://www.census.gov/retail/marts/www/marts_current.pdf

CNBC. Evelyn Cheng. 07/14/2022. https://www.cnbc.com/2022/07/15/china-q2-gdp.html

Compliance Case # 01432458
                    [post_title] => Market Commentary: U.S. Consumers Still Strong Amid Inflation; Fed Remains Hawkish
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                    [post_content] => Positive jobs data supported the market last week. The U.S. establishment survey indicated 372,000 new jobs were created in June. The rally was broad-based as every sector added jobs last month except for the governmental sector. Health care, professional and business services, and leisure and hospitality marked the highest gains (Figure 1).

Key Points for the Week 

 	
The U.S. economy produced 372,000 new jobs last month as every non-governmental sector added jobs.


 	
Unemployment remained at 3.6%. The household survey indicated workers are no longer returning to the labor force even though more than 11 million jobs remain unfilled.
 	
Home equity lines and credit cards are becoming more common tools for managing cash flow as interest rates have increased and government aid programs have wound down.

The household survey indicated the number of people reentering the labor force is starting to slow. The participation rate dropped slightly last month and seems to have leveled out after steady increases through the post-pandemic recovery. This trend confirms our view that the pandemic caused some people to retire early or exit the labor force for other reasons. Unemployment remained at 3.6%, and average hourly earnings climbed 5.1%. Non-managerial workers’ wages are rising most rapidly. They are 12.6% higher than one year ago and rose 1.0% last month.

The Job Openings Labor Turnover Survey (JOLTS) indicates companies are pulling back unfilled job applications at a slow rate despite interest rate hikes designed to slow the economy. Job openings dropped 427,000 in May as declines in manufacturing and professional and business services eased demand. The Federal Reserve may have preferred further reductions in labor demand as an indication that inflation pressures are declining (Figure 2).

The S&P 500 recovered 2.0% last week, supported by the strong jobs data. The MSCI ACWI added 1.6%. Bonds reversed recent gains. The Bloomberg Aggregate Bond Index fell 0.9%. The Consumer Price Index leads a busy list of data releases this week as earnings season accelerates.



Figure 1



Figure 2

Job Growth, Participation, and Rates

Good news for workers makes it more likely the Federal Reserve will raise rates 0.75% at its meeting in late July. Last week, the government released three major job reports, and all three pointed to ongoing strength in the labor market. The June establishment report indicated the economy continues to produce a large number of jobs. The household survey shows the COVID-driven reassessment of life has cemented a reprioritization of work that has caused some to leave the labor force. The JOLTS data show openings are headed lower, but not fast enough for the Fed to slow its plan for higher rates.

Establishment Survey

Jobs growth was robust in June. Payroll data indicated the U.S. added 372,000 jobs, beating expectations by nearly 100,000. Previous months were revised lower by 74,000. Even counting the revisions, job growth was higher than expected. It has also been consistent the last four months, which all produced between 350,000 and 400,000 jobs. That means new job entrants are finding jobs relatively easily and more people are returning to positions. With the gains, 98% of the jobs lost in March and April of 2020 have now been recovered (Figure 1).

The underlying data showed broad labor market strength. Every major private sector industry added jobs, with health care and leisure and hospitality producing the most. Manufacturing added 29,000 jobs and now employs more people than before the pandemic. Government employment, which is often affected by educational hiring, was the only sector that lost jobs.

Household Survey

The household survey showed similar trends. Unemployment held steady at 3.6%. The household survey suggested employment and the labor force both shrunk. Fewer households working pushed the participation rate down to 62.2%, well short of the pre-crisis level of 63.4%. After a steady number of people rejoined the labor force as the economy reopened, the participation rate has stalled at about 1% below pre-pandemic highs.

JOLTS

The JOLTS report for May was also released last week. Job openings fell 427,000 to 11.3 million, which was 200,000 higher than expectations. Manufacturing and professional and business services declined 208,000 and 325,000, respectively. The ratio of job openings to unemployed workers declined to 1.89. The Fed would like to see excess demand for labor decline, and the large quantity of open positions suggests this isn’t happening very quickly (Figure 2).

The Fed

Minutes from its most recent meeting suggest the strong jobs data will support the hawkish Fed raising rates 0.75% later this month. The Fed is concerned about its credibility and looks intent on suppressing inflation quickly. In its minutes, the Fed noted, “many participants saying that a significant risk now facing the Committee was that elevated inflation could become entrenched if the public began to question the resolve of the Committee to adjust the stance of policy as warranted.”

About the only data point left that may cause the Fed to slow is the Consumer Price Index, which will be published this week. It is possible significantly smaller-than-expected price increases could cause the Fed to back off and only raise rates 0.5%.

Last week’s releases leave us better off than a week ago because the economy looks more capable of weathering increased rates without going into a recession. The Fed’s path to taming inflation while avoiding a recession is still narrow, just a little wider than it was before.

 

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

S&P 500 INDEX

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

Bloomberg U.S. Aggregate Bond Index

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

US Bureau of Labor Statistics, 7/8/2022. https://www.bls.gov/news.release/empsit.nr0.htm

US Bureau of Labor Statistics, 7/6/2022. https://www.bls.gov/news.release/jolts.nr0.htm

Federal Open Market Committee. 06/14/2022. https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20220615.pdf

Compliance Case # 01425380
                    [post_title] => Market Commentary: Robust Labor Market Growth Continues with Fed Poised for Another Rate Hike
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                    [post_content] => The Personal Consumption Expenditure (PCE) Price Index increased 0.6% in May, after rising only 0.2% in April. PCE inflation is an alternative inflation measure to the Consumer Price Index (CPI), which is released earlier. The two measures both show inflation to be very high, but the CPI indicates prices have risen 8.6% in the last year, while PCE inflation has increased only 6.3%. The biggest difference is the basket of goods that make up each measure. For example, PCE inflation includes a wider range of medical costs, which have not increased as much as energy prices. Energy comprises 7% of the CPI and just 4% of the PCE. The Fed has indicated it favors the PCE measure, modified to exclude food and energy. PCE ex food and energy increased just 0.3% as gasoline prices rose significantly in May.

Key Points for the Week 

 	
Core PCE inflation, which excludes food and energy, rose 0.3%.
 	
Personal consumption rose 0.2% as higher spending on services overcame a decline in spending on goods.
 	
The S&P 500 fell 20% in the first half of the year — its worst first-half performance since 1970.

One trend likely to help the Fed reduce inflation is increased spending on services. Services spending rose 0.7% while goods spending dropped 0.7% last month. Services account for a larger share of the economy, so the net effect was a 0.2% increase in overall spending. Service inflation has been lower than goods inflation, and decreasing goods spending is likely to reduce price pressures on some items in short supply.

The S&P 500 declined 2.2% last week as markets became more concerned about the risks of recession in the coming year. The index of large-cap U.S. stocks fell 20% in the first half of the year. Global stocks matched the S&P 500’s decline. The MSCI ACWI sagged 2.2%. Because the concern was more about recession than inflation, bond prices increased. The Bloomberg Aggregate Bond Index added 0.4% last week and posted its second week of gains. The Department of Labor’s update on the U.S. employment situation leads the list of economic releases this week.



Figure 1



Figure 2

Five Reasons to Expect a Better Second Half

This year’s Fourth of July celebrations weren’t for the first-half market performance. The S&P 500, including dividends, declined 20% in the first six months of the year. The fall represented the worst first-half market performance since 1970. Emotionally, this market has taken its toll through a decline that started the second day of the year and accelerated in the second quarter. High inflation has been the biggest challenge, and every time we get gas, buy groceries, or check the market we are reminded of it.

The propensity in down markets is to expect current trends to continue. In difficult markets, it is also easier to focus on known negative factors that have proven to be challenging. Yet, as we enter the second half of the year, there are strong reasons to expect improvement. Here are five forces we believe will make the second half of the year more attractive than the first.

 	
Much of the bad news is already reflected in market prices.

The first half of 2022 contained a lot of bad news for markets, and prices fell in response. Inflation continued to increase, COVID shutdowns slowed the repair of supply lines, and Russia invaded Ukraine. In response to high inflation, the Federal Reserve pivoted and raised interest rates three times, once by 0.5% and once 0.75%. Europe reacted to Russia’s invasion of Ukraine by drastically reducing its purchases of Russian oil, contributing to slower economic growth and higher inflation. While those events had negative consequences, remember the market has already reacted to the news. With the S&P 500 20% lower than at the start of the year, it’s hard to argue that markets have ignored what has occurred.

 	
Inflation seems to be moderating.

The Fed’s favorite measure of inflation increased 0.3% for the fourth consecutive month. But the Personal Consumption Expenditures Price Deflator (PCE) ex Food and Energy has moderated in recent months. From October to January, core PCE increased approximately 0.5% per month. An increase of 0.3% is still too high. Multiplying it by 12 creates a simplified annual inflation rate of around 3.6%, which is well above the Fed’s target of 2%. But our view is the steps the Fed is taking are starting to work, and additional hikes will contribute to slower price increases in coming months.

 	
Political uncertainty is ebbing lower.

In the presidential election cycle, the second year of the administration is statistically the most challenging. Domestic political uncertainty has made this year even more so. House and Senate majorities are very narrow, and both houses of Congress could switch parties in November. The Supreme Court has been full of surprises, and the Jan. 6 commission has added to the mix. By the fourth quarter, and possibly even the third, polling data will provide some clarification on how midterm elections will turn out. The high inflation has also undercut any desire for a major spending initiative. Because the last support package seemed to feed inflation, avoiding high government spending should help reduce inflationary pressure.

 	
Much of the economy remains strong.

While the current bear market is the 11th since 1950, it is only the fourth to occur outside of a recession. Non-recessionary bear markets are usually shallower, averaging a 28% decline, compared to an average 39% decline for recessionary bear markets (Figure 2). This week, the government will release the Job Opening and Labor Turnover Survey (JOLTS) for May and the Employment Situation report for June. The ideal result is decent job creation while companies choose to pull back open positions to reduce the excess demand for labor.

 	
The system works.

Hopefully, as investors lit off fireworks celebrating our country's founding 246 years ago, they appreciated the resiliency of the American system. Investors who focus only on the short-term swings in inflation, political winds, and Fed policy should take note of the longer-term success of this republic and how people and equity markets have prospered. Even with two bear markets, inflation and a global pandemic, the S&P 500 is up double digits over the last 10 years.

The key is to find the right balance. This has been a tough year, and we will continue to monitor a wide range of near-term risks and how they affect markets. Because many of those risks are already reflected, at least partially, in current prices, the more impactful data points may be those showing how a system with a long record of success is recovering.

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

S&P 500 INDEX

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

Bloomberg U.S. Aggregate Bond Index

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

Bureau of Economic Analysis. 6/30/22.https://www.bea.gov/news/2022/personal-income-and-outlays-may-2022

Bureau of Labor Statistics 06/10/22 https://www.bls.gov/news.release/cpi.t01.htm

Federal Reserve https://www.federalreserve.gov/monetarypolicy/openmarket.htm

Compliance Case # 01420404
                    [post_title] => Market Commentary: Moderating Inflation, Ebbing Political Uncertainty Among Reasons for Hope in the Face of a Tough Market
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            [post_date] => 2022-08-01 09:43:02
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            [post_content] => Last week was a big one for monetary policy and economic data. The Federal Reserve raised interest rates 0.75%, with unanimous agreement that higher rates were required to bring inflation under control. In his press conference, Fed Chair Jerome Powell announced the Fed was becoming more data dependent. The market interpreted that statement to mean rate hikes would likely slow in the future, especially if inflation starts moving lower.

Key Points for the Week 

 	
The Federal Reserve raised rates 0.75% to a range of 2.25-2.50%.
 	
U.S. gross domestic product declined 0.9%, restrained by falling goods purchases and slower inventory growth.
 	
The S&P 500 gained 9.2% in July, its best month since COVID vaccine data was released in November 2020.

U.S. GDP shrank for the second consecutive quarter, contracting by 0.9%. Much of the economy remains strong, and services consumption continues to increase. Weakness in goods, inventories, housing, and government spending are contributing to signs the economy is slowing.

The Personal Consumption Expenditures (PCE) Price Index confirmed the earlier Consumer Price Index report that inflation remains a challenge. PCE was up 1.0% as fuel prices added to pricing pressure in other sectors. Core PCE, which excludes food and energy, rose 0.6%.

Markets welcomed the idea the Fed may slow interest rate hikes sooner than expected. The S&P 500 gained 4.3% last week to complete a 9.2% rally for the month. The global MSCI ACWI rebounded 3.3%. The Bloomberg Aggregate Bond Index jumped 0.6%.



Figure 1

Are We in a Recession?

Many investors seem to have learned that two quarters of declining GDP means the country is in a recession. Yet, this definition isn’t totally accurate. There are far more factors the National Bureau of Economic Research (NBER) uses to determine whether there is a recession, but for much of the public, the two-negative-quarters definition seems to have stuck.

Like most rules, two quarters of economic decline isn’t a terrible test for a recession. The NBER defines recession as, “…a significant decline in economic activity that is spread across the economy and lasts for more than a few months.” Two quarters of declining GDP is usually significant, affects the broad economy, and lasts for more than a few months.

Reality indicates recessions are more complicated. Figure 1 shows none of the last three recessions matches the popular definition of two consecutive quarters of GDP growth. The 2001 recession had two nonconsecutive quarters of growth. The Great Financial Crisis had multiple negative growth quarters but started with a down and then up quarter. The 2020 COVID crisis had two consecutive negative quarters only because the very short recession overlapped the first and second quarters.

Sometimes quarterly economic patterns create short-term irregularities. The first quarter’s 1.6% decline in GDP had several. Personal consumption and investment remained robust. Declining federal spending from the end of pandemic-related support and weak exports, partly related to Russia’s invasion of Ukraine, caused the initial data release to show the economy shrunk in the first quarter. Those factors fail the test of the decline being spread across the economy. From a broader perspective, the vast majority of the economy remained strong. In fact, it was too strong, and the Federal Reserve was forced to embark on a program of rapid rate increases to tame inflationary pressures.

The weakness in the second quarter was broader than the first. Goods spending dropped 1.1%. Residential investment fell 3.7%, in line with our expectations that higher interest rates would pressure housing demand. Government spending also continued to decline as pandemic-related programs continued to wind down. Each of these areas experienced abnormal growth during the pandemic. People sought out goods to make social distancing less painful. The demand for housing rose rapidly as some people left big cities and others sought to expand their homes. Government programs supporting people displaced by the pandemic are no longer as necessary. Inventories also stopped increasing as rapidly as in previous quarters, pulling growth lower. What is bouncing back is services consumption, which increased 1.0% in the second quarter. Exports also bounced back from the temporary weakness in the first quarter.

While we don’t believe the U.S. has entered a recession, we do see the economy has slowed. Some of this pullback is necessary, as excess demand and lack of supply have caused unacceptable levels of inflation. Those inflationary pressures are quite broad. Wages rose 1.6% last quarter and are 5.7% higher than a year earlier. Core PCE inflation rose 0.6% last month. In order for inflation to move toward 2.0% per year, wage pressures will need to drop.

The recession argument wasn’t the only item that interested markets. The Fed also indicated it is seeing some signs of economic slowing. According to Fed Chair Jerome Powell, the recent rate hike has raised rates to a “moderately restrictive level” and the Fed will be more data dependent. Markets took this statement to mean the Fed is willing to slow interest rate increases if inflation starts moving lower.

Whether the U.S. ultimately enters a recession or not is still to be seen. Risks are higher than normal, but a recession, in our view, is far from certain. The Fed would like to avoid a recession, but previous comments suggest it would be OK with “softish landing” in which the economy entered a shallow recession and then rebounded without the inflationary pressure. The broader point is the Fed recognizes its policy has tightened materially and it will adjust its future outlook and not keep raising rates and creating a far worse economic slowdown.

The S&P 500’s 9.2% increase last month indicates the market is moving that way as well.

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

S&P 500 INDEX

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

MSCI ACWI INDEX

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

BLOOMBERG  U.S. AGGREGATE BOND

The Bloomberg US Agg Total Return Value Unhedged, also known as “Bloomberg U.S. Aggregate Bond Index” formerly known as the “Barclays Capital U.S. Aggregate Bond Index”, and prior to that, “Lehman Aggregate Bond Index,” is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).

National Bureau of Economic Research. https://www.nber.org/research/business-cycle-dating

Bureau of Economic Analysis. 7/28/22. https://www.bea.gov/news/2022/gross-domestic-product-second-quarter-2022-advance-estimate

Bureau of Economic Analysis 6/29/22. https://www.bea.gov/news/2022/gross-domestic-product-third-estimate-gdp-industry-and-corporate-profits-revised-first

Bureau of Economic Analysis.7/29/22. https://www.bea.gov/news/2022/personal-income-and-outlays-june-2022

U.S. Department of Labor Statistics. 7/29/22. https://www.bls.gov/news.release/eci.nr0.htm

Federal Reserve. 07/27/22. https://www.federalreserve.gov/newsevents/pressreleases/monetary20220727a.htm

Federal Reserve. 07/27/22. https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220727.pdf

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                    [post_content] => Carson Partners’ Scott Kubie shares key events we saw in the past quarter and how we think they’ll affect markets in the upcoming quarter. Contact us to speak with a financial advisor.


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                    [post_content] => Watch this webinar hosted by Carson’s Ryan Yamada, Senior Wealth Planner, and Tom Fridrich, Senior Wealth Planner, as they dive into RMDs.
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                    [post_content] => Watch this webinar hosted by Carson’s Matt Lewis, Vice President, Insurance, and Tom Fridich, Senior Wealth Planner, as they dive into leveraging life insurance as a financial planning tool.
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                    [post_content] => By Erin Wood, Senior Vice President, Financial Planning and Advanced Solutions

Just a few years ago, Rose retired with a decent-sized 401(k). With some careful budgeting and a part-time job, her retirement finances were on track. Rose was looking forward to traveling, reigniting her passion for photography and spending time with her son and her grandkids.

The pandemic changed everything. Her son contracted COVID-19 in the early days of the pandemic. His health deteriorated quickly and he died at only 35 years old. He didn’t have life insurance. A gig worker without a 401(k), he had very minimal retirement savings.

Rose’s grandchildren, ages 2 and 6, joined the more than 140,000 U.S. children under the age of 18 who lost their primary or secondary caregiver due to the pandemic from April 2020 through June 2021. That’s approximately one out of every 450 children under age 18 in the United States.

Rose’s ex-daughter-in-law battles drug addiction and had lost custody of the kids during the divorce, so Rose became the children’s primary caregiver. She quickly discovered that caring for young children as an older adult is more physically challenging than when she raised her son, so she made the difficult decision to leave her part-time job to have the energy to care for her active grandchildren. She wants to do everything for these kids who have lost so much — but it puts her financial security at risk.

Sadly, she is far from alone.

Read the full article
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                    [post_content] => By: Erin Wood, CFP®, CRPC®, FBS®, Senior Vice President, Financial Planning, Carson Group

 
Laura and Caroline are in their late 50s. Friends since meeting at a playgroup for their toddlers, both were in long-term, seemingly happy marriages. Laura married her high school sweetheart right after they graduated from college and worked as an RN while her husband attended medical school. When their first child was born, Laura decided to become a stay-at-home parent. She just celebrated sending her last child off to college and was looking forward to enjoying an empty nest with her husband.
Already established in her career as an accountant for a large insurance firm, Caroline married a bit later, at 33. Today, she’s a financial controller for the same firm. Her spouse owns his own landscaping business. Caroline is the high-wage earner in the family.
Unfortunately, both women are now surprised to be facing a “gray” divorce: a divorce involving couples in their 50s or older. Each will need to make some tough choices as they deal with the emotional devastation of unraveling a long-term marriage. Although my focus as a financial planner is to help my clients find their financial footing during and after divorce, I also encourage clients to build a strong network of family and friends as well as a therapist or clergy person to offer critical emotional support during this time.
Read full article on Kiplinger.com
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                    [post_date] => 2020-01-28 10:38:21
                    [post_date_gmt] => 2020-01-28 16:38:21
                    [post_content] => By Jamie Hopkins
Roth conversions can be a powerful tax and retirement planning technique. The idea behind most Roth conversions is to take money from an IRA and convert it to a Roth IRA. Essentially, you’re paying taxes today instead of paying taxes in the future.
The Tax Cut and Jobs Act lowered taxes for many Americans and with the SECURE Act Roth IRAs became even more powerful as an estate planning vehicle to minimize taxes, so it’s a convenient time to take advantage of Roth conversions. However, Roth conversions can come with some issues. Before you engage in one, be aware of these common problems as it can be hard to undo the transaction.
Conversions After 72
IRAs and Roth IRAs are both retirement accounts. It’s easy to assume Roth Conversions are best suited for retirement, too. However, waiting too long to do conversions can actually make the entire process more challenging.

If you own an IRA, it’s subject to required minimum distribution rules once you turn 72, as long as you had not already reached age 70.5 by the end of 2019. The government wants you to start withdrawing money from your IRA each year and pay taxes on the tax-deferred money. However, Roth IRAs aren’t subject to RMDs at age 72.

If you don’t need the money from your RMD to support your retirement spending, you might think, “I should convert this to a Roth IRA so it can stay in a tax-deferred account longer.” Unfortunately, that won’t work. You can’t roll over or convert RMDs for a given year. So, if you owe a RMD in 2020, you need to take it and you cannot convert it to a Roth IRA.

Despite the fact you can’t convert an RMD, it doesn’t mean you can’t do Roth conversions after age 72. However, you need to make sure you get your RMD out before you do a conversion. Your first distributions from an IRA after 72 will be treated as RMD money first. This means, if you want to convert $10,000 from your IRA, but you also owe an $8,000 RMD for the year, you need to take the full $8,000 out before you do a conversion.

Full article on Forbes

 
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice."
"Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty. Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
                    [post_title] => 3 Roth Conversion Traps To Avoid After The SECURE Act
                    [post_excerpt] => Roth conversions can be a powerful tax and retirement planning technique. The idea behind most Roth conversions is to take money from an IRA and convert it to a Roth IRA. Essentially, you’re paying taxes today instead of paying taxes in the future.
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                    [post_date] => 2019-12-06 10:26:33
                    [post_date_gmt] => 2019-12-06 16:26:33
                    [post_content] => By Jamie Hopkins

People plan on having a good day, a good year, a good retirement and a good life. But why stop there? Why not plan for a good end of life, too?

End of life or estate planning is about getting plans in place to manage risks at the end of your life and beyond. And while it might be uncomfortable to discuss or plan for the end, everyone knows that no one will live forever.

Estate planning and end of life planning are about taking control of your situation. Death and long-term care later in life might be hard to fathom right now, but we can’t put off planning out of fear of the unknown or because it’s unpleasant. Sometimes it takes a significant event like a health scare to shake us from our procrastination. Don’t wait for life to happen to you, though.

Full article on Kiplinger
                    [post_title] => 10 Common Estate Planning Mistakes (and How to Avoid Them)
                    [post_excerpt] => Estate planning and end of life planning are about taking control of your situation. Death and long-term care later in life might be hard to fathom right now, but we can’t put off planning out of fear of the unknown or because it’s unpleasant. Don’t wait for life to happen to you, though.
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                    [post_date] => 2019-11-11 16:27:38
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                    [post_content] => By Jamie Hopkins
Everyone’s heard the stories of celebrities who died without a proper estate plan in place. It’s been a hot topic in the last few years with Prince and Aretha Franklin serving as unfortunate faces of the phenomenon. But it’s not just freewheeling entertainers. Abraham Lincoln – a lawyer by trade – didn’t have one either, which leads me to say something you’ve probably never heard anyone say: don’t be like Abraham Lincoln.
Most people want to plan for a good life and a good retirement, so why not plan for a good end of life, too? Let’s look at four ways you can refine your estate plan, protect your assets and create a level of control and certainty for your loved ones.
1. Review Beneficiary Designations
Many accounts can pass to heirs and loved ones without having to go through the sometimes costly and time-consuming process of probate. For instance, life insurance contracts, 401(k)s and IRAs can be transferred through beneficiary designations – meaning you determine who you want to inherit your accounts after you die by filing out a beneficiary form. You can often name successors or backup beneficiaries, and even split up accounts by dollar amount or percentages between beneficiaries with these forms.

Full article on Forbes
                    [post_title] => 4 Ways To Improve Your Estate Plan
                    [post_excerpt] => Most people want to plan for a good life and a good retirement, so why not plan for a good end of life, too? Let’s look at four ways you can refine your estate plan, protect your assets and create a level of control and certainty for your loved ones.
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            [post_date] => 2022-05-26 08:18:44
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            [post_content] => By Erin Wood, Senior Vice President, Financial Planning and Advanced Solutions

Just a few years ago, Rose retired with a decent-sized 401(k). With some careful budgeting and a part-time job, her retirement finances were on track. Rose was looking forward to traveling, reigniting her passion for photography and spending time with her son and her grandkids.

The pandemic changed everything. Her son contracted COVID-19 in the early days of the pandemic. His health deteriorated quickly and he died at only 35 years old. He didn’t have life insurance. A gig worker without a 401(k), he had very minimal retirement savings.

Rose’s grandchildren, ages 2 and 6, joined the more than 140,000 U.S. children under the age of 18 who lost their primary or secondary caregiver due to the pandemic from April 2020 through June 2021. That’s approximately one out of every 450 children under age 18 in the United States.

Rose’s ex-daughter-in-law battles drug addiction and had lost custody of the kids during the divorce, so Rose became the children’s primary caregiver. She quickly discovered that caring for young children as an older adult is more physically challenging than when she raised her son, so she made the difficult decision to leave her part-time job to have the energy to care for her active grandchildren. She wants to do everything for these kids who have lost so much — but it puts her financial security at risk.

Sadly, she is far from alone.

Read the full article
            [post_title] => COVID’s Financial Toll Isn’t What You Think
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