I went Halloween shopping last week, but I didn’t see anything scarier than the chart below (and I bought zombie babies, people). The horizontal numbers on the right measure the drawdown of the S&P 500 year-to-date 2021, as graphically depicted by the yellow line. The horizontal numbers on the left show that nearly 90% of the indices’ members have already had at least a 10% correction year-to-date, as graphically depicted by the blue blob. The result is that it’s been a good year for you if you’ve held the S&P 500. However, because a substantial amount of the index’s underlying…
Insights & Advice
Retirement
You’re not as rich as you think you are
“If you have a tax preparer, you do not have a tax planner.” —James Pollard’s CPA “Tax preparation is focused on getting this year’s tax return prepared and to the IRS … it’s all about what happened this last year. Let’s get it done and move on … the contrast to that in tax planning is taking a forward-looking approach to saying, ‘what can we proactively do to make sure that we’re minimizing how much we have to pay to the IRS?’” —Steven Jarvis, CPA I recently listened to James Pollard’s “Advisor Coach” podcast with guest Steven Jarvis, CPA. Non-industry folks won’t recognize those…
How much does health care cost in retirement?!
Let’s not bury the lead. According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple aged 65 in 2021 may need approximately $300,000 saved (after tax) to cover healthcare expenses in their retirement. Fidelity has been tracking this data for years. I cover how retirees can prepare for this in my still-untitled second book. (It will probably be printed sometime in late 2021.) I devote considerable time to healthcare costs because it can change the way retirees prioritize spending in their golden years. If you have a $10 million portfolio, the cost of health care may not…
Are Inflation fears real or imagined?
If you have been grocery shopping lately, there is no question that prices and inflation are going higher. The same can be said for the price of a gallon of gas. But is it a transitory event, or are we at the beginning of an inflationary era not seen in decades? Clearly, commodity prices, which are usually the harbinger of future inflation, are soaring. Copper, oil, sugar, corn, steel, aluminum and lumber, as well as many other food and material prices, are hitting multi-year highs. But it is not just commodities that are seeing a price surge. Shipping costs are…
Stocks hit with possible tax hike
It was a losing week for stocks. Most of the blame can be pinned on a proposal by the Biden Administration to double the capital gains tax on investments. It is not official yet, but investors are counting on an announcement next week. Before you hit the sell button on all those huge capital gains you have accumulated over the last few years, know the facts. Right now, there aren’t any. What we do know is that Joe Biden ran his winning presidential campaign on increasing taxes on the rich and on corporations. He plans to do just that, so…
Will infrastructure spending boost clean energy stocks?
Renewable energy stocks were all the rage last year. This year, however, not so much, with clean energy funds taking hits of between 25-50%. Will President Biden’s proposed $3 trillion infrastructure bill breathe new life into this sector? President Biden ran on a platform that included the build out of an infrastructure plan that would “achieve net-zero emissions, economy-wide, by no later than 2050.” By the time of his November election last year, investors had bid up the clean energy sector, which includes everything from electric cars and clean water to solar and wind power, by over 200% in some…
CAPITAL IDEAS: What a year
“It was the best of times, it was the worst of times … it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.” — Charles Dickens The year 2020 was dreadful. Our neighbors, friends, and family lost jobs as the economy struggled with COVID-19. Tragically, some of us lost loved ones to the virus. I keep those losses in mind as I review the year for the stock market. My intention isn’t to spike the ball in celebration of how well the stock market performed. Instead, it…
Cross currents confuse investors
You would think that with a $1.9 trillion spending package, an increasing rate of coronavirus vaccinations, and a potential $3 trillion infrastructure package waiting in the wings, the market would be at record highs. The fact it is not should tell you something about the indecision plaguing investors. When good news fails to impress, it usually means stocks (or at least some stocks) are headed lower. That should come as little surprise to readers. I advised investors to raise cash last month in preparation for what I see as a buying opportunity this month. The challenge: when do you put…
Tech stocks rise from the dead
The large cap technology sector bounced back this week as bond yields fell. It is a see-saw market filled with several cross-currents. But if you want to know where stocks are going, keep your eyes focused on the U.S. Ten-Year Bond yield. In my last column, I explained how rising bond yields are like kryptonite to the continued performance of what I call “super tech stocks.” During the last two weeks, the NASDAQ 100, for example, experienced a 10%-plus down draft, as bond yields rose to 1.60% from 1.25%. Investors sold FANG stocks, and technology shares in new-era sectors, like…
CAPITAL IDEAS: Do you have excess savings?
The U.S. Gross Domestic Product (GDP) has almost recovered from its pandemic loss. According to JP Morgan, the last GDP calculation was merely 1.3 percent less than its February 2020 peak. According to the Atlanta Fed’s GDPNow forecast, the U.S. economy will surpass its pre-COVID-19 peak this quarter. With the caveat that we’re only about two-thirds of the way through and anything can happen in a month (remember March 2020?), the Atlanta Fed’s model currently forecasts a 9.6 percent growth rate of GDP for the first quarter of 2021. Unfortunately, that sounds better than it is. The official unemployment rate of 6.3…
Tips for the 2021 Tax Season
Preparing for the 2021 Tax Season How a financial advisor can help you manage your taxes this year Reducing your tax burden can help you manage your wealth and free up money to meet your financial goals and build your legacy. But tax rules are complicated, and you may need help understanding all the methods you can use to minimize your tax burden. Your financial advisor is one resource you can tap to help you develop strategies that fit your plan and reduce your tax exposure in 2021. Here are four ways they may be able to help. Tax-deferred accounts…
Master Your Goals
Earlier this week, our CEO Allen Harris, pointed out we all have “woulda-coulda-shoulda” investment opportunities, but how can we minimize that? Ideas. Plans. Goals. We are almost halfway through the first quarter of 2021. Now is the time to think about your “financial fitness”. Where is it now? And where do you want it to be? These questions can seem a little overwhelming if you do not know where to begin. To help identify what your specific goals are, here’s a checklist to get the conversation going. Master-List-Of-Goals-2021
Creating a Successful Business Succession Plan
An exit strategy helps business owners ensure the long-term success of their company A good succession plan creates a blueprint for ownership transfer as you exit your business. It helps you prepare for your retirement, ensuring you have the income you need. And setting a well-conceived plan into motion protects the people around you, including your heirs, employees, and customers by laying the groundwork for a smooth transition. Yet, despite these important benefits, many privately owned businesses don’t have a succession plan, leaving the business vulnerable to unforeseen circumstances. For instance, if the business owner dies or becomes incapacitated, there…
Understanding Your Retirement Income Plan
Manage cash flow in retirement with multiple income streams When you retire, you get to bid farewell to the working world. That’s the good news. The bad news? You’ll no longer have a paycheck coming in from your employer. To address that, you’ll need to piece together a steady stream of income from different retirement sources, such as Social Security, retirement accounts, and annuities. Each of these sources of income has its own benefits and tax treatments. Here’s what you need to know about how they might fit into your retirement plan. Social Security Benefits Monthly Social Security benefits provide…
Oil’s comeback
Earlier this year, the price of West Texas Intermediate crude oil slumped into negative territory for the first time in history. Oil traded at a negative $37.63. Today, that same barrel of oil is changing hands at $47.48. What changed? More than any other sector, the coronavirus has had a devastating impact on the global oil and gas industry. Declining consumer demand in the first quarter of the year in combination with high levels of energy production threatened to exceed worldwide oil storage capacity. OPEC+, the oil cartel, took action on April 12, 2020 by cutting oil production by 9.7…
Few businesses sell
The goal for many business owners is to sell their company and retire with confidence. If that wasn’t a consideration of yours last year, it might be today. According to a Baker Tilly survey, as a result of the pandemic, 31 percent of business owners will accelerate their sale to a nonfamily buyer, and 24 percent will accelerate ownership to the next generation. Some readers probably won’t quickly sell their company, because they have failed to take the critical steps necessary to make it transferable. Selling isn’t enough — you need to attain maximum value first. Surveys by the Exit…