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When To “Buy Low”

The beginning of the year is typically full of hope. We make New Year’s resolutions, and it may take a few months for our enthusiasm (and vigilance) to wane. There’s also the “January Effect,” when the stock market generally gets a performance boost thanks to tax harvesting in December and subsequent reinvestments. But even that phenomenon tends to fade.1

When it comes to investing in the stock market, we recommend a strategic approach. First, you want to consider your big picture — which includes how you ultimately want to use accumulated assets (e.g., college tuition, retirement) and when you’ll need them. You also want to make sure you don’t take on too much risk, so that requires a strategic asset allocation across a diverse group of investments. Finally, one of the basic tenets of stock investing is to buy low and sell high. We can help you with all of these tactics.

We expect 2021 to be an interesting year. Assuming wide distribution of COVID-19 vaccines and successful containment of the virus, the economy should get back on track. But as we saw in 2020, even the coronavirus didn’t have a long-term impact on the stock market.

With that said, Merrill Lynch sees a broad market uptrend in 2021. In equities, the money manager sees upside in cyclical sectors (e.g., financials, materials, industrials), U.S. small-cap value stocks and emerging markets — which are supported by the continued downtrend in the U.S. dollar.2 Bear in mind that while some of these investments pose higher risk, they also follow the tenet of buying low and selling high. The key is to find stocks that are currently selling at low prices but have the potential to rise given (1) the current economic environment, (2) market trends and (3) individual company fundamentals.

Buying low and selling high involves monitoring and due diligence, but it’s not quite the same as market timing. In fact, the best time for some to engage in a buy-sell strategy is during periodic portfolio rebalancing. Rebalancing is important because if one asset class outperforms others, your portfolio allocation may drift out of range from what’s appropriate for your risk tolerance. By selling off “winners” and reinvesting those gains, not only do you rebalance to your original strategy, but you have ready cash to “buy low” and reposition your money for further growth.3

When rebalancing, if prices seem too high to reinvest, don’t be hesitant to hold cash for a short time. Investment legend Warren Buffett maintained a highly liquid allocation over the past year, but he did so in preparation to pounce on good buying opportunities when they surfaced.4

On the other hand, there are times when buying low may not be advisable. For example, airline stocks continue to struggle despite congressional relief. Industry experts predict that revenues are unlikely to return to pre-pandemic levels for several years.5

Note that stocks tend to rise on positive news, especially if that news shows some promise of economic growth. A good example of this is when, on Jan. 19, Treasury Secretary nominee Janet Yellen advised Congress to “act big” with regard to increased coronavirus stimulus relief. Following her remarks, the Dow Jones Industrial Average rebounded from a recent losing streak and both the S&P 500 and the Nasdaq made significant gains.6

Content prepared by Kara Stefan Communications.

1 Eric Reed. The Street. Jan. 17, 2021. “January Effect: What Is It and Why Does It Occur?” https://www.thestreet.com/investing/what-is-the-january-effect. Accessed Jan. 20, 2021.

2 Merrill Lynch. January 2021. “Weak Periods May Be Buying Opportunities.” https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/Viewpoint_January_2021_Merrill.pdf. Accessed Jan. 20, 2021.

3 Sachin Nagarajan. Morningstar. Jan. 15, 2021. “A Responsible Version of Market-Timing.” https://www.morningstar.com/articles/1017362/a-responsible-version-of-market-timing. Accessed Jan. 20, 2021.

4 Theron Mohamed. Business Insider. Jan. 18, 2021. “Warren Buffett advised NFL linesman Ndamukong Suh to be ready to buy when bargains appear.” https://markets.businessinsider.com/news/stocks/warren-buffett-advises-ndamukong-suh-be-ready-buy-bargains-2021-1-1029977459. Accessed Jan. 20, 2021.

5 Alan Farley. Investopedia. Dec. 22, 2020. “Wrong Time to Buy Airline Stocks.” https://www.investopedia.com/wrong-time-to-buy-airline-stocks-5093391. Accessed Jan. 20, 2021.

6 Joseph Woelfel. The Street. Jan. 19, 2021. “Stocks End Higher as Yellen Tells Congress to ‘Act Big’ on Stimulus.” https://www.thestreet.com/markets/stock-market-dow-jones-industrial-average-banks-yellen-011921. Accessed Jan. 20, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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The Pros and Cons of Corporate America’s Remote Work Trend

Post-pandemic, will everyone go back to the office like nothing ever happened? Will lost jobs be recovered? Or is remote work and skeleton staffing a trend here to stay?

A recent survey of company leaders revealed that eight in 10 plan to allow employees to work outside the office at least part time going forward. Nearly half (47%) say they’re going to permit employees to work from home full time. In a separate confirmation of this trend, 78% of CEOs agree that remote collaboration is here to stay.1

However, pre-COVID-19, many industries and companies had been reluctant to change to remote staffing models, citing challenges in managing a remote workforce, among other concerns.2 Certainly, there are pros and cons to allowing full-time personnel to work from home. However, it seems it took a pandemic to catapult this phenomenon into a feasible platform.

So here we are. As inconvenient as working from home may be for some, work seems to be getting done. What does this mean for shareholders of companies affected by a remote workforce? It all depends on which types of companies we’re talking about. On the one hand, the need for less office space, supplies and equipment offers cost-cutting measures that can improve profit margins. To wit, companies such as Google, Facebook and Twitter have announced they will continue some version of a long-term or permanent work-from-home staffing model in the future.3

On the other hand, businesses that support the normal work-a-day office environment are experiencing a decline in revenues. We’re talking about downtown coffee shops, cafes, dry cleaners, shoe repair shops, gyms, food carts, florists and pharmacies. Some of the “mom-and-pop shops” may have already gone out of business. Commercial real estate has taken a hit. 4

Looking forward, it may be worth evaluating your investment portfolio to help ensure you have a diversified mix of companies that can profit from remote work staffing, or at least should not be significantly hurt by it. Remember that we are always available to conduct a portfolio review and advise you on ways to adjust to suit your circumstances.

An interesting twist to the remote work model is that it could be a boon for rural America. Small cities and towns have been hard-hit by automation and the offshoring of jobs, plus they tend to recover more slowly from economic downturns. The rising trend for remote workers offers a way to populate and infuse more wealth into rural areas of the country.5

Content prepared by Kara Stefan Communications.

1 Emily Courtney. FlexJobs. Dec. 21, 2020. “Remote Work Statistics: Navigating the New Normal.” https://www.flexjobs.com/blog/post/remote-work-statistics/. Accessed Jan. 11, 2021.

2 Nigel Davies. Forbes. March 10, 2020. “This Is Why Employers Are Still Denying Your Remote Working Requests.” https://www.forbes.com/sites/nigeldavies/2020/03/10/this-is-why-employers-are-still-denying-your-remote-working-requests/?sh=1b5031e26bcd. Accessed Jan. 25, 2021.

3 Derek Thompson. The Atlantic. Aug 6, 2020. “The Workforce Is About to Change Dramatically.” https://www.theatlantic.com/ideas/archive/2020/08/just-small-shift-remote-work-could-change-everything/614980/. Accessed Jan. 11, 2021.

4 Steve LeVine. Marker. Sept. 1, 2020. “Remote Work Is Killing the Hidden Trillion-Dollar Office Economy.” https://marker.medium.com/remote-work-is-killing-the-hidden-trillion-dollar-office-economy-5800af06b007. Accessed Jan. 11, 2021.

5 Alex Wittenberg. Bloomberg. July 23, 2020. “The Economics of Remote Work.” https://www.bloomberg.com/news/articles/2020-07-23/the-effect-of-remote-work-on-america-s-economy. Accessed Jan. 11, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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How To Help Maximize Social Security Benefits

There are good reasons to delay starting Social Security benefits, but there are also good reasons to begin them early. It really does depend on your circumstances.

If you claim earlier than your full retirement age (FRA), your benefit will be permanently reduced. The age to qualify for the full Social Security benefit varies by birth date, not only for beneficiaries, but also for surviving spouses who rely on the primary earner’s benefit:1

  • For people born between 1943 and 1954, FRA is age 66.
  • For people born between 1955 and 1959, FRA ranges from 66 and 2 months to 66 and 10 months.
  • For people born in 1960 and later, FRA starts at 67.
  • For surviving spouses born between 1945 and 1956, FRA is age 66.
  • For surviving spouses born from 1957 to 1961, FRA ranges from 66 and 2 months to 66 and 10 months.
  • For surviving spouses born in 1962 and later, FRA is 67.

Why would you claim earlier than FRA if your benefit will be reduced? One reason to start them early is if you want to retire early and need Social Security benefits to help cover your expenses. Or, if you want your investments to have a longer time to grow, you may want to begin benefits so you don’t have to draw from your retirement accounts — at least not until you have to take required minimum distributions (RMDs) at age 72.2 Taxable brokerage accounts can continue growing without distributions.

However, delaying benefits can have some advantages as well. The main one is that if you wait until FRA, you’ll receive a higher monthly payout by avoiding the permanent reduction in benefits before what would have been your full retirement age. And if you delay beyond FRA, your permanent benefit allows collection credits ranging from 5.5% to 8% (depending on your birth year) up to age 70.3 This may be a good option if you continue working through your 60s and/or have plenty of retirement assets you can start tapping for income when you retire. Also, bear in mind that the longer you wait, the higher the benefit will be for a surviving spouse who will rely on your benefit. The same applies if you have children who would be eligible for benefits.

Obviously, deciding when to start drawing benefits can be a big decision — one that should be determined based on your personal factors, such as your age, income, ability/desire to work, your spouse’s income, your health, your assets, possibly whether or not your mortgage is paid and even the lifestyle you want to enjoy during retirement. We can help you evaluate your entire financial picture to help you make this decision. Feel free to contact one of our experienced advisors.

There are a few more things you should know about spousal benefits. For example, a spouse can receive 50% of the higher-earning spouse’s Social Security benefit or the benefit based on her own work history — whichever is higher. A spouse can apply for benefits based on the primary earner’s work history only after the primary has already claimed benefits. Be aware that spousal benefits are available only after the couple has been married for at least one year. When a couple divorces, the ex-spouse can apply for benefits if the marriage lasted 10 or more years and once they have been divorced for at least two years.4

Here are a few other tidbits:5

  • In 2021, the average Social Security beneficiary will collect [CM1] $1,543, according to the Social Security Administration.
  • In 2021, the maximum benefit anyone can receive is $3,895, which includes delayed retirement credits up to age 70.
  • For self-employed people who must pay both the individual and employer Social Security (FICA) tax, the maximum tax in 2021 is $17,707.20.

Content prepared by Kara Stefan Communications.

1 Liz Weston. The Los Angeles Times. Jan. 6, 2021. “For Social Security benefits, playing a waiting game really pays off.” https://www.latimes.com/business/story/2021-01-06/social-security-benefits-waiting-pays-off. Accessed Jan 6, 2021.

2 Christy Bieber. DailyJournal. Jan. 6, 2021. “3 Great Reasons to Take Social Security Benefits at 62.” https://dailyjournalonline.com/business/investment/personal-finance/3-great-reasons-to-take-social-security-benefits-at-62/article_2a84328d-4d06-5f4e-9a4d-37b3b7fd8c3c.html. Accessed Jan 6, 2021.

3 Justin Kuepper. Dividend.com. Dec. 11, 2020. “How to Make the Most of Your Social Security Benefits.” https://www.dividend.com/retirement-channel/making-the-most-of-your-social-security-benefits/. Accessed Jan 6, 2021.

4 Rachel Hartman. US News & World Report. March 11, 2020. “How to Maximize Social Security With Spousal Benefits.” https://money.usnews.com/money/retirement/social-security/articles/how-to-maximize-social-security-with-spousal-benefits. Accessed Jan 6, 2021.

5 Maurie Backman. Mooresville Tribune. Jan. 6, 2021. “5 Essential Social Security Numbers You Need to Know in 2021.” https://mooresvilletribune.com/business/investment/personal-finance/5-essential-social-security-numbers-you-need-to-know-in-2021/article_3d757b8d-d266-537d-89d8-dbeaf3607108.html. Accessed Jan 6, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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 [CM1]Note: I changed this to “beneficiary will collect” because the way it was changed had it saying, “benefit will be collect …” and that doesn’t sound right.

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Global Recovery in a Post-Pandemic World

In 2020, the World Economic Forum published its annual Global Competitiveness Report, as usual. However, in light of the global pandemic, it put its long-standing Global Competitiveness Index rankings on hold. Instead, the report focused on priorities for recovery and revival instead of competition.1

Indeed, economic globalization over the past two decades, in many ways, seems to have made the world much smaller. The world seems to be more integrated, and some countries rely on each other for supply chain and production capabilities, geopolitical support and shared innovation and technologies.2

Moving past this latest pandemic, it would be beneficial to the world if countries worked together to ensure this virus, and others in the future, are more efficiently contained and do not impact the global economy in the manner in which COVID-19 has. The 2020 World Economic Forum report emphasized four main areas in need of transformation: the environment, human capital, financial markets and the innovation ecosystem.3

These four areas could apply to our own households as well. After all, some of us leaned on each other throughout the pandemic — neighbors shopping for neighbors, checking in on each other, making the extra effort to stay in touch with high-risk individuals to keep their spirits up. And while the country suffered through COVID, we simultaneously experienced the highest number of named storms on record, record levels of wildfires and the hottest day on record (129.9 F in Death Valley, California).4

Depending on circumstances, some people’s household finances have been transformed, leaving some with less income and others with more savings. We relied on and appreciated technology to keep us fed, clothed and connected with loved ones and colleagues. During this intervening time of recovery, we should not forget the lessons learned. Feel free to contact us if you are looking for ways to help protect your finances in the wake of future crises — whether global, national or household.

In other parts of the world, the new U.S. administration will likely foster a change in global relationships. The Biden presidency is expected to nurture relations with European countries and approach the China trade war with a more mutually beneficial exchange. Furthermore, as we return to more normal economic fundamentals in the new year, we could see a weaker U.S. dollar that may favor emerging markets in the short term.5

The day before Christmas, Great Britain ironed out its long-awaited deal with Europe to move forward with the separation known as Brexit. The new deal promises a rebalance of regulations and other challenges between the two continents, but it does not include any new tariffs or quotas.6 The split, which formally begins on Feb. 1, looks like it could make things more difficult for residents of the two regions when it comes to cross-border travel, attending universities, business dealings and job opportunities.7

Content prepared by Kara Stefan Communications.

 

1 Klaus Schwab and Saadia Zahidi. World Economic Forum. 2020. “How Countries are Performing on the Road to Recovery.” http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2020.pdf. Accessed Dec. 29, 2020.

2 Ibid.

3 Saadia Zahidi. World Economic Forum. Dec. 16, 2020. “This is how countries can rebuild competitive economies for people and planet.” https://www.weforum.org/agenda/2020/12/how-countries-can-rebuild-competitive-economies-for-people-and-planet/. Accessed Dec. 29, 2020.

4 EcoWatch. Dec. 23, 2020. “The Top 10 Extreme Weather and Climate Events of 2020.” https://www.ecowatch.com/extreme-weather-climate-2020-2649628910.html?rebelltitem=1#rebelltitem1. Accessed Dec. 29, 2020.

5 Robert Horrocks. AdvisorPerspectives. Dec. 14, 2020. “CIO Outlook: Tailwinds for Emerging Markets.” https://www.advisorperspectives.com/commentaries/2020/12/14/cio-outlook-tailwinds-for-emerging-markets. Accessed Dec. 29, 2020.

6 Bloomberg. Dec. 24, 2020. “In Bullet Points: The Key Terms of the Brexit Deal Analyzed.” https://www.bloomberg.com/news/articles/2020-12-24/in-bullet-points-the-key-terms-of-the-brexit-deal. Accessed Dec. 29, 2020.

7 Joe Mayes. Bloomberg | Quint. Dec. 28, 2020. “Not So Fast! What Brexit Means for Border Crossers.” https://www.bloombergquint.com/quicktakes/not-so-fast-what-brexit-means-for-border-crossers-quicktake. Accessed Dec. 29, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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2021 Outlook: Wealth Managers Weigh In

While challenges likely still lie ahead, there’s no denying we all weathered our fair share of storms in 2020. Now that the calendar has turned to a new year, we looked to wealth managers across the nation to find out what they’re expecting for 2021. As you’ll see, the answer often changes depending on where you look.

According to its latest 2021 economic outlook, UBS expects widescale availability of the COVID-19 vaccine will increase global output in 2021. The firm anticipates corporate earnings will return to pre-pandemic highs by the end of 2021 and recommends that investors diversify their portfolios by rebalancing out of U.S. large caps and global consumer staples and into global equities and cyclical stocks with catch-up potential.1

Merrill Lynch anticipates full recovery will take a bit longer. It doesn’t see a complete restoration of growth, innovation and stability until 2022. However, the firm predicts 2021 will see progress, particularly in industries that benefited from the pandemic. It also sees opportunities for sectors in which pent-up demand could soar, such as air travel and hospitality.2

Goldman Sachs has dubbed its projection for a V-shaped recovery the “Vaccine-Shaped Recovery,” reinforcing its outlook now that the vaccine is becoming available. The money manager anticipates economic activity will rebound by this summer, with a ramp-up in depressed sectors such as travel, accommodation and food services. Goldman projects the United States and Europe will end the year with a 2% jump in GDP, while most emerging economies will lag with a somewhat slower recovery.3

JP Morgan Asset Management also predicts a relatively fast rebound thanks to vaccine availability. It warns, however, that job recovery, GDP and inflation are more dependent on policies implemented by the Federal Reserve and the new presidential administration, so they may lag somewhat. Its analysts say U.S. equities already boast high valuations, so investors may find more growth opportunity in international stocks and alternative assets that offer both income and downside protection.4

Whether you’re bullish or bearish on the coming recovery, the U.S. economic prospects seem to look much better than they did six months ago. If you’d like a financial review to see if there are ways to better position your assets for the future, please give us a call.

Content prepared by Kara Stefan Communications.

1 UBS. 2020. “A Year of Renewal.” https://www.ubs.com/us/en/wealth-management/market-news/cio/insights-display-adp/global/en/wealth-management/chief-investment-office/market-insights/2021/year-ahead.html#livestream. Accessed Dec. 17, 2020.

2 Merrill Lynch. Dec. 17, 2020. “Outlook 2021: How to Prepare for the Year Ahead.” https://www.ml.com/articles/2021-market-outlook-portfolio-investments.html. Accessed Dec. 17, 2020.

3 Goldman Sachs. Nov. 7, 2020. “V(accine)-Shaped Recovery.” https://www.goldmansachs.com/insights/pages/gs-research/macro-outlook-2021/report.pdf. Accessed Dec. 17, 2020.

4 JP Morgan Asset Management. 2020. “The Investment Outlook for 2021.” https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/market-insights/investment-outlook-2021-us.pdf. Accessed Dec. 17, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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What Is “Stakeholder Capitalism”?

In its monthly Investment Insights publication, Merrill Lynch noted that while nationalism has been a strong trend throughout the past few years, globalism in the prior 30 years did much to reduce poverty worldwide. As trade agreements shifted many U.S. jobs and operations overseas, the average income of the lower 50% of global earners nearly double between 1980 and 2016. However, this came at a price, including the mass exodus of U.S. jobs and stagnant wages at the low-income scale.1 And yet, U.S. investors benefitted from higher corporate profit margins and subsequent higher stock prices.

In 2020, the COVID pandemic created yet another wealth imbalance. The combined net worth of American billionaires increased by 36% between mid-March and December, while nearly 50% of lower-income adults struggled to pay their bills during the same timeframe.2

Even the Federal Reserve contributed to this divide, albeit inadvertently. By pushing interest rates down and injecting more cash into the loan market, investor confidence received a boost and many transitioned their portfolio allocations to higher-risk, higher-performing investments, which in turn increased stock prices.3

Many factors contribute to stock market performance that are not necessarily tied to stronger company fundamentals. Perhaps in response to these recent market influences, there is an emerging trend in stock market investing. It’s not just about how well a stock performs, but how the company achieved that performance. Many wealth managers are seeing an economic shift toward “stakeholder capitalism,” basically a tighter focus on corporate enhancements that potentially benefit all stakeholders, including employees, customers and local communities, as well as shareholders.4

This approach represents a shift away from how company stocks have been evaluated in the past two decades, which often placed more emphasis on quarterly profits and less on five- to 10-year plans. Focusing on long-term results can help weather brief periods of volatility and disruption. Feel free to contact one of our advisors to discuss.

Last September, the World Economic Forum’s International Business Council released standardized Stakeholder Capitalism Metrics (SCM). This is a measure of how companies treat their workers, their communities and the environment. The goal is to monitor these metrics with the idea of directing more capital to companies that deliver both positive returns and high satisfaction among all stakeholders.

Content prepared by Kara Stefan Communications.

1 Merrill Lynch. September 2020. “Investment Insights.” https://mlaem.fs.ml.com/content/dam/ML/Articles/pdf/ML_The_Great_Shift_3235536_v10.pdf. Accessed Dec. 11, 2020.

2 Juliana Kaplan. Business Insider. Dec. 12, 2020. “American billionaires’ net worths have grown to $4 trillion during the coronavirus pandemic.” https://www.businessinsider.com/billionaires-net-worths-have-grown-to-4-trillion-during-pandemic-2020-12. Accessed Dec. 12, 2020.

3 Sean Ross. Investopedia. Nov. 24, 2020. “How Quantitative Easing (QE) Affects the Stock Market.” https://www.investopedia.com/ask/answers/021015/how-does-quantitative-easing-us-affect-stock-market.asp. Accessed Dec. 11, 2020.

4 Doug Sundheim and Kate Starr. Harvard Business Review. Jan. 22, 2020. “Making Stakeholder Capitalism a Reality.” https://hbr.org/2020/01/making-stakeholder-capitalism-a-reality. Accessed Dec. 31, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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What’s Ahead for the Stock Market?

In November, the Dow experienced its best month since 1987, while the S&P 500 and Nasdaq indexes enjoyed their best month since April of this year.1

With the election behind us and a vaccine on the horizon, the stock market has plenty to celebrate. Many consumers used the pandemic period to shore up their savings, which bodes well for their prosperity in the coming year. There is a low chance of increased taxes or massive reforms given the divide in Congress, and while interest rates remain low, the home-buying market is poised to soar on renewed consumer confidence. All of these factors may be historically good news for investment markets.2

The stock market increases 82% of the time in the first year of new presidential terms,3 and the S&P 500 has averaged 11.7% returns in the first year of every presidential term since the end of World War II, regardless of party affiliation. Furthermore, the S&P 500 has averaged 15.6% returns with Democratic presidents compared 10% with Republican presidents. Industries like technology, health care, financials and industrials tend to thrive under a Democratic president.4

Despite jobs and economic growth taking a hit in 2020, that fortunately wasn’t reflected in the stock market. For more insight on how to plan for the coming year, feel free to reach out to one of our financial advisors for a review.

Content prepared by Kara Stefan Communications.

1 Matt Egan. CNN. Nov. 30, 2020. “Trump said the stock market would crash if Biden won. The Dow just had its best month since 1987.” https://www.cnn.com/2020/11/30/business/stock-market-dow-jones-trump-biden/index.html. Accessed Nov. 30, 2020.

2 Jeremy Siegel. Knowledge@Wharton. Nov. 21, 2020. “Jeremy Siegel: What’s Ahead for the Stock Market?” https://knowledge.wharton.upenn.edu/article/siegel-markets-economy/. Accessed Nov. 30, 2020.

3 Mark Hulbert. Marketwatch. Nov. 28, 2020. “Opinion: Here are your odds that stock prices will be higher at the end of 2021.” https://www.marketwatch.com/story/here-are-your-odds-that-stock-prices-will-be-higher-at-the-end-of-2021-2020-11-24?mod=MW_section_top_stories. Accessed Nov. 30, 2020.

4 Savita Subramanian. Merrill Lynch. Oct. 8, 2020. “The Markets and Presidential Elections.” https://www.ml.com/articles/market-volatility-presidential-elections.html#financial-research-and-insights. Accessed Nov. 30, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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The Effect of Debt on the Global Economy

The national debt is a measurement of how much the federal government owes creditors, most commonly depicted as a percentage of gross domestic product (GDP). A high debt-to-GDP ratio is considered viable when the economy is expanding, because that growth allows the government to generate higher tax revenues to help pay down the debt. However, it’s not good when the economy is in decline, which is the current status not only in the U.S., but in many countries throughout the world.1

For context, the stimulus efforts and tax cuts that allowed the U.S. to emerge from the Great Recession significantly increased the national public debt. In 2010, the debt ratio was 52% of GDP, but by the end of 2019, it had risen to 79%, the largest increase in any decade since the post-WWII 1940s.2 But now, according to the Congressional Budget Office, the U.S. debt ratio is estimated to reach 98% by the end of the year.3

Speaking of debt, how has your household fared in the wake of this year’s economic decline? Has your debt-to-income ratio increased substantially, or do you have it under control with plenty of income to cover your expenses? It can be a challenge to balance your need to pay off debt with your need to invest for the future. It’s a good idea to maintain a balance so you can continue reducing debt while saving for the long-term. It’s also important to regularly evaluate your financial strategy to ensure it reflects your current goals and objectives, so please keep us in mind any time you’re considering making changes to your strategy.

At the recent Bloomberg New Economy Forum, there were calls for more government stimulus  support to boost consumer spending and keep the economy running, and not just in the U.S. Christine Lagarde, the president of the European Central Bank, warned that stimulus needs to continue playing a role until the virus is contained. Like many countries across the globe, Southeast Asia took a hit during the second quarter, rebounded in the third and has braced for increased outbreaks occurring in the final quarter of 2020.4

Wall Street analysts warn that it won’t take much for the U.S., Europe and Japan economies to contract again in the next two quarters, despite the bounce back last summer.5 Overall, economists expect the global economy to shrink by 5% in 2020, in part due to the 20% reduction in world trade.6

One idea to help rebuild economies is to retrain workers who have lost jobs during the pandemic in fields, such as cybersecurity, software programming and other technology positions.7

1 John Letzing. World Economic Forum. Nov. 5, 2020. “Countries are piling on record amounts of debt amid COVID-19. Here’s what that means.” https://www.weforum.org/agenda/2020/11/covid-19-has-countries-borrowing-money-just-about-as-quickly-as-they-can-print-it/. Accessed Nov. 24, 2020.

2 Peter G. Peterson Foundation. Dec. 19, 2019. “Nine trillion added to the national debt over the last decade.”; https://www.pgpf.org/blog/2019/12/9-trillion-added-to-the-national-debt-over-the-last-decade. Accessed Nov. 24, 2020.

3 Investopedia. Sept. 23, 2020. “The National Debt Explained”; https://www.investopedia.com/updates/usa-national-debt/. Accessed Nov. 24, 2020.

4 Bloomberg. Nov. 23, 2020. “World Leaders Urge Pressing the Pedal on Stimulus.” https://www.bloomberg.com/news/articles/2020-11-18/tokyo-bolsters-push-to-lure-business-from-hong-kong-nef-update. Accessed Nov. 24, 2020.

5 Enda Curran and Jeff Black. BloombergQuint. Nov. 17, 2020. “World Economy Teeters Near New Slump, Defying Vaccine Optimism.” https://www.bloombergquint.com/global-economics/world-economy-risks-buckling-into-2021-despite-vaccine-nearing. Accessed Nov. 24, 2020.

6 Dr. Dan Steinbock. The Street. Nov. 23, 2020. “World’s Largest Free-Trade Pact Inspiration for Global Recovery.” https://www.thestreet.com/economonitor/news/from-rcep-and-brics-to-apec-and-g20-summits-worlds-largest-free-trade-pact-inspiration-for-global-recovery. Accessed Nov. 24, 2020.

7 Rory Heilakka. World Economic Forum. Nov. 24, 2020. “How upskilling could help cities rebuild after Coronavirus.” https://www.weforum.org/agenda/2020/11/how-upskilling-could-help-cities-rebuild-after-coronavirus/. Accessed Nov. 24, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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China’s Rebound

In mid-November, China signed an important and symbolic free-trade agreement with 14 countries, including Japan, South Korea, New Zealand and Australia. The deal, which represents 30% of the world’s population, eliminates tariffs and quotas on 65% of goods traded in the Asia-Pacific region. Global economists say the deal is further evidence of Asia’s growing power, particularly considering China’s feuding tariffs with the U.S. throughout the past four years.1

According to data from the International Monetary Fund, in 2019, China represented 40% of global economic growth – more than the global growth contributions of the U.S., Europe and Japan combined. This year, China’s economy has proven quite resilient, particularly when compared to other developed countries in the wake of the global financial crisis, Trump tariffs and even the coronavirus.2

How about you? Has your household proven to be as resilient in the wake of this global crisis as your friends, family and colleagues? If so, what was the key? Perhaps it is because you were able to maintain your level of income. What makes your job or source of income more reliable than others during an economic crisis that has affected so many industries? Consider whether your spending levels as the same as before. Perhaps not the same types of expenses, but has your solid financial status given you confidence to spend without interruption? It’s important to ask these questions because we don’t want our success to be a matter of haphazard good luck.

We should continue to engage in intentional, goal-driven financial planning to keep our household on track and secure. If you have survived the financial effects of the COVID outbreak to date, congratulations. Keep doing what you’re doing. If you’ve slipped a bit, assess your financial weaknesses and devise a plan to shore them up. As always, we are here to help enhance your portfolio, realize investment opportunities and secure your family’s financial future.

In China, the coronavirus is largely under control. Consequently, the economic recovery has been V-shaped, led by strong domestic consumer demand. This trendline demonstrates a direct correlation between “flattening the curve” and economic recovery. Chinese revenues continue to trend upward in auto sales, residential real estate, and even restaurants and bars – although the latter are not fully restored to pre-pandemic levels due to continued caution with large indoor gatherings.3

The obvious lesson here is that containing COVID-19 is the key to any country’s economic recovery. The evidence doesn’t lie solely with China. Other countries that have successfully controlled the spread of the virus, such as Taiwan, South Korea and Lithuania, also experienced lessened economic effects.4

Like every other country in the world, the Chinese economy will not be able to recover completely until a safe and effective vaccine is widely available. However, because it acted quickly and aggressively to contain the virus within its boundaries, the country is expected to continue being a driver of global growth, even being called “the world’s best consumer story in 2021.”5

1 Jill Disis and Laura He. CNN. Nov. 17, 2020. “China signs huge Asia Pacific trade deal with 14 countries.” https://www.cnn.com/2020/11/16/economy/rcep-trade-agreement-intl-hnk/index.html. Accessed Nov. 17, 2020.

2 Andy Rothman. Matthews Asia. July 16, 2020. “China’s Economic resilience.” https://global.matthewsasia.com/resources/docs/global.matthewsasia.com/pdf/Sinology/071620-Sinology.pdf. Accessed Nov. 16, 2020.

3 Andy Rothman. Matthews Asia. Aug. 14, 2020. “Four China Trends.” https://global.matthewsasia.com/resources/docs/global.matthewsasia.com/pdf/Sinology/081420-Sinology.pdf. Accessed Nov. 16, 2020.

4 Joe Hasell. Our World in Data. Sept. 1, 2020. “Which countries have protected both health and the economy in the pandemic?” https://ourworldindata.org/covid-health-economy. Accessed Nov. 16, 2020.

5 Andy Rothman. Matthews Asia. Oct. 19, 2020. “China After COVID.” https://us.matthewsasia.com/perspectives-on-asia/sinology/default.fs. Accessed Nov. 16, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives.

The information contained in this material is provided by third parties and has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Open Enrollment: Health Care Insurance Takes Priority

The Patient Protection and Affordable Care Act (ACA) – passed in 2010 and known colloquially as “Obamacare” – has experienced quite a ride. Initially, it was embraced by millions of Americans for whom it afforded tax-subsidized health insurance without access to employer-sponsored coverage. At the same time, it was derided for increasing government sharing costs to provide that coverage.

However, throughout the years, the ACA has become more embraced by a wider audience. As workers lost jobs, they discovered an affordable insurance option and, today, most know someone who has benefited from health reform legislation. Perhaps the most popular benefit is banning insurance companies from declining coverage – or charging more – for pre-existing conditions.

One of the more challenging provisions has been the individual mandate that requires everyone to purchase health insurance or pay a penalty. This particular clause has been challenged all the way to the U.S. Supreme Court (SCOTUS) three times, most recently in November. Even if the mandate is found unconstitutional, it’s unlikely the Supreme Court will strike down the entire ACA.1

Regardless of the popularity or fate of Obamacare, it still doesn’t fully meet the nation’s needs. To date, 43.4% of the nation’s adults ages 19 to 64 are underinsured and 12.5% of adults remain altogether uninsured.2

This fall, Americans have engaged in yet another open enrollment period amid the backdrop of the SCOTUS hearing and the presidential election. For many, health care was a primary issue on the ballot. The enrollment period affects nearly everyone, including workers who select employer-sponsored insurance3, those in the individual market4, and individuals who can continue or change their Medicare plan.5 Health care insurance options can be confusing, mainly because they don’t always cover all of your needs. If you are looking for ways to help pay for possible uncovered health care expenses, we may be able to help. Some insurance products, such as life insurance and annuities, provide various options you may want to consider. We’d be happy to discuss your options based on your unique situation.

Because of the many jobs lost due to the coronavirus, employer-sponsored benefits are more appreciated than ever before. And because of the pandemic, benefits experts say employees are more aware of options they may not have paid attention to in the past – such as sufficient life and long-term disability insurance.6

With a new presidential administration taking office, it will be interesting to see how new health care reforms play out in Congress. According to a new report on the current state of our health care system, the numbers aren’t good. Presently:

  • Americans are living shorter lives than they did in 2014.
  • African-Americans are twice as likely as whites to die from treatable conditions.
  • Health coverage gains have stalled rather than increased.
  • Insurance coverage rates vary widely from state-to-state.
  • Health insurance affordability and out-of-pocket costs have gotten worse.

Another insight evidenced by the coronavirus is that the U.S. health care system is far less prepared than other wealthy nations to adequately deal with a pandemic situation.7

Content prepared by Kara Stefan Communications

1 Nina Totenburg. NPR. Nov. 10, 2020. “Will Supreme Court Invalidate Obamacare A Decade After It Was Enacted?” https://www.npr.org/2020/11/10/932441334/will-supreme-court-invalidate-obamacare-a-decade-after-it-was-enacted. Accessed Nov. 13, 2020.

2 Sara R. Collins, Munira Z. Gunja, and Gabriella N. Aboulafia. Commonwealth Fund. Aug. 19, 2020. “U.S. Health Insurance Coverage in 2020: A Looming Crisis in Affordability.” https://www.commonwealthfund.org/publications/issue-briefs/2020/aug/looming-crisis-health-coverage-2020-biennial. Accessed Nov. 13, 2020.

3 Maggie Germano. Forbes. Nov. 13, 2020. “Half Of Employees Believe Open Enrollment Is More Important In 2020 Than It Was In 2019.” https://www.forbes.com/sites/maggiegermano/2020/11/13/half-of-employees-believe-open-enrollment-is-more-important-in-2020-than-it-was-in-2019/?sh=21b01f6e74d5. Accessed Nov. 13, 2020.

4 Julie Appleby. NPR. Oct. 20, 2020. “The Affordable Care Act’s Fate Is In Flux But 2021 Health Plan Prices Are Stable.” https://www.npr.org/sections/health-shots/2020/10/20/925596125/the-affordable-care-acts-fate-is-in-flux-but-2021-health-plan-prices-are-stable. Accessed Nov. 13, 2020.

5 Sarah O’Brien. CNBC. Nov. 4, 2020. “Here are tips for getting your 2021 Medicare drug coverage right during open enrollment.” https://www.cnbc.com/2020/11/04/here-are-tips-for-getting-your-2021-medicare-drug-coverage-right-.html. Accessed Nov. 3, 2020.

6 Jessica Dickler. CNBC. Nov. 2, 2020. “Open enrollment is underway — here are 5 tips for maximizing your benefits during a public health crisis.” https://www.cnbc.com/2020/11/02/5-things-to-watch-out-for-during-open-enrollment-amid-coronavirus.html. Accessed Nov. 13, 2020.

7 Dan Cook. BenefitsPro. Sept. 12, 2020. “U.S. health care system on life support, say test results from new study.” https://www.benefitspro.com/2020/09/14/u-s-health-care-system-on-life-support-say-test-results-from-new-study/. Accessed Nov. 13, 2020.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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