Our mission is to help you Preserve Your Assets and Protect Your Lifestyle. Our newsletter is aimed to educate you on the economic environment, as well as provide life perspective and financial planning ideas that can help you!

As always, your well-being is everything to us. If you have any questions about your financial or investment plan, please contact us anytime. 

Quarterly Market Review

We thought it would be beneficial to share with you some key observations from three of our research partners along with an outline of our conclusions. 

iM Global Partner’s Market Slides

1. Most likely Scenario – Recession in the next 12 months (Fed intent on hiking to stem inflation, LEI plunging, yield curve inversion at a level which historically always been accompanied by a recession)
2. Stocks may not be adequately discounting earnings decline while bonds appear attractive with backup in yields
3. Continue to favor emerging market stocks on a relative basis, due to their superior medium-term (five-year) expected returns.

NDR Digest

1. Global Asset Allocation Current –
   1. 65% stocks (Overweight compared to 55% benchmark)
   2. 0% cash (Underweight compared to 10% benchmark)
   3. 35% bonds (Marketweight compared to 35% benchmark)

       b.  Cyclical bull market potential supported by pessimism extreme, continuation of secular bull market makes it likely that cyclical bear has ended. NDR estimates 2.4% real global GDP growth in 2023 and assign a 65% chance of severe global recession. Recession in developed economies and a Chinese reopening present offsetting risks. Global inflation has peaked but will stay higher for longer. 2023 year end target for S&P 4300. Fed to end the tightening cycle in Q1 but won’t cut rates before September. Bonds should, once again, provide an effective hedge for portfolios.

Schwab Market Perspective

       a.  With a hawkish Fed intending to keep rates higher for longer, the return of a higher risk-free rate has important implications for stock investors. Not only are stock fundamentals coming back into play courtesy of higher rates and economic weakness, but the market’s leadership profile is decisively shifting. Gone are the days when the market’s gains depended on the performance of just a handful of stocks. (i.e., the “big five”) Despite consistent messaging from the Fed that it plans to “hike and hold”, the futures market is pricing in rate cuts late in the year. The diverging views about policy suggest that investors have more faith than the Fed itself in the Fed’s ability to rein in inflation. A tighter-for-longer policy in the face of slowing growth and easing inflation would likely mean an even greater inversion of the yield curve and lower long-term yields over time. In equities, the bounce in the 4th quarter rally was led by international stocks. The outperformance by international stocks may continue in 2023. International stocks tend to possess more of the characteristics, like high dividend yields and lower price-to-cash flow ratios, that have outperformed in 2022. Earnings growth is also stronger outside the US, and analysts expect it to remain so in 2023. This may become more pronounced with a pause or reversal in the sharp rise of the dollar that characterized much of 2022.

Our Conclusions:

• The Fed is intent on staying aggressive and maintaining that stance. As the saying goes, “Don’t Fight the Fed” whether it’s an easing or tightening cycle. In the short term, investors should be prepared for a cyclical downturn as the Fed keeps the brakes on. On a go-forward basis, we do expect that our financial planning software will actually project better expected returns for both stocks and bonds given the repricing we’ve seen in 2022.

• Congruent with Schwab research, we’re pleased with our diversification into “fundamentally weighted ETFs” for some of our equity exposure as they definitely held up considerably better than traditional market-cap weighted indices that are led up and down by the big five. International Markets: The US has outperformed the rest of the world for years, but the tide may be turning. A reversal of the dollar would be a boon for international and emerging market equities and is something to pay close attention to as we potentially see a baton shift from the near decade long US leadership.

• We agree with all the research above with regards to fixed income – the math has improved and they will once again provide an effective hedge for portfolios. With that said, we still believe strongly in our alternative income sleeve to generate the higher income needed to help offset the higher inflationary pressures we expect in the intermediate future (Rising wage pressure, onshoring/deglobalization side effects, commodity scarcity)

If you have questions about your portfolio, please contact us anytime. 

This Is Life - "Happy 2023!"

Life Perspective from Pat Guinet, Founding Partner

Another year comes and goes… 2022 is behind us, and  2023 is just beginning. The New Year is a time for resetting, assessing new goals, and thinking of things we wish we had done in 2022 that we “will” begin doing in 2023. We thought it would be fun to share some of our personal goals with you!
 
Casey is the pragmatist in our group… You don’t really need a new year to begin establishing positive change. If there’s an adjustment to life that needs to be done… Casey simply puts the new resolution/change in place. It doesn’t matter if its January, June, or even November… ; ) Positive change  does not need a “New Year”. If it makes sense at the time ….. commit to it and move forward. I have watched Casey over years follow this course of personal improvement and growth…… Remarkable …….. And I see it reflected in everthing he does….. whether its his two daughters, his wife or simply in helping friends and clients.
 
Hung is incorporating meditation into his daily routine……… 20 minutes a day …….. The benefits of yoga and the ability to quiet your mind is a remarkable exercise for personal improvement both spiritually and physically. I am always amazed by his positivity, commitment to family, and commitment to life. Next time you speak with him, ask him how his yoga “resolution” is going.
 
Personally, for me it is committing to “balance”; a continuation of what I have been working on for the last 6 years as I have navigated moving to a new house, starting a company with two amazing partners, and experiencing separation and divorce. I begin the day with a positive thought derived from Soul’s Journey Lesson Cards – priceless. I am committed to having daily “balance” between work, exercise, introspection and simply being grateful for where I am in life.

We all have our way of using the New Year to “improve” …….. How many times have we started the year with a bold plan of change only to have it end 30 days later? Our suggestion is goals are good, but make them achievable and sustainable! Do not overwhelm and over-commit!  It’s very similar to how we approach managing money and financial planning. Create a plan and investment strategy that is sustainable over the long term ……. Real change takes time. Taking little steps versus bold moves seems to increase the likelihood of permanent success.
 
As we all begin 2023….. let’s make it a year of positivity, achievable goals, and an appreciation for how fortunate we are to live the lives we live. Thank from the three of us to you and yours.
All the best,
 
Hung, Casey, and Pat
 

Education to Empower You- SECURE Act 2.0

The SECURE 2.0 spending bill was recently signed into law on December 29, 2022. SECURE 2.0 contains dozens of provisions. The highlights include increasing the age at which retirees must begin taking RMDs from IRA and 401(k) accounts, and changes to the size of catch-up contributions for older workers with workplace plans. Additional changes are meant to help younger people continue saving while paying off student debt, making it easier to move accounts from employer to employer, and allowing people to save for emergencies within retirement accounts. We found a great summary that provides more detail that is worth a read. If you have questions about how this new bill might impact you, please contact us anytime.

Please click here to download. 

We are here to help and offer objective advice. If you would like to discuss any of these topics or any questions relating to financial planning and/or the markets, please click HERE and pick a time on our calendar.