Our mission is to help you Preserve Your Assets and Protect Your Lifestyle. Our newsletter aims to educate you on the economic environment and provide life perspectives and financial planning ideas to help you!
Quarterly Market Review
iM Global Partner’s Market Slides
- Heading into the year, we expressed caution that elevated stock market valuations, especially for the US technology companies, combined with policy uncertainty, could leave the market vulnerable to volatility. After hitting new highs on February 19th, US stocks suffered their first “correction” since 2023, when the S&P 500 declined a total of 10% through March 15th.
- Performance in the first quarter was a great reminder of the benefits of diversification. Sharp losses in US stocks (growth stocks in particular) were offset by gains in US large cap value, foreign stocks, investment grade bonds.
- The consistently ever-changing tariff landscape is clearly weighing on consumers and businesses. Uncertainty seems to be a tactical tool in Trump’s governance toolkit, as if to give him political leverage to achieve his desired outcome. To put it simply, the stock market hates uncertainty. And uncertainty around trade and tariffs will continue to be a headwind for US stocks.
Morningstar
- Trump’s tariffs took uncertainty to a whole new level by throwing global trade networks built over a period of decades into disarray. The uncertainty around how long tariffs will be in place, at what level, and how other countries will respond means the countless businesses affected by tariffs can’t predict what their costs will be or what consumers will have to pay for their products.
- During times of crisis, global investors usually seek out the safety of US dollars and assets. This time around, investors appear to think that buying the dollar might be akin to running into a burning house instead of away. Should the dollar’s decline foreshadow a sustained shift in global capital flows, the ramifications could be significant. That could include making it harder for the US to finance its massive pile of government debt, which in turn would require higher interest rates on bonds, which would filter through the economy through higher mortgage rates and make it more costly for businesses to finance their growth.
- There is one key difference between the current crisis and both the 2008 crisis and the pandemic. In 2008, you couldn’t “unpop” a bubble that was being popped. Likewise, in the pandemic, the government could only mitigate economic fallout, not cure the pandemic entirely. But with tariffs, it’s a different story. More than 90% of the damage can be undone if the tariffs are rescinded quickly and there’s a credible promise not to bring them back.
Schwab Market Perspective
- The speed and depth of recent market declines has been nothing short of breathtaking and is unquestionably a result of both the chaotic nature of trade policymaking but also the magnitude of what has been announced in terms of tariff rates. The difficulty with assessing where tariff policy goes from here lies in the fact that the reciprocal tariffs announced (and then paused) by the White House were based on the export-import differential the US has with other countries – not the tariff rates those countries charge the US goods being exported.
- If tariff rates stay high for a long time, we do think it significantly ups the odds of a recession unfolding this year. The rub is that it can occur through various channels. If businesses absorb most of the cost into their profit margins, there is higher risk of them having to shed costs – including labor. If they decide to pass higher costs onto consumers, there is a risk of a larger spike in inflation.
- The trade conflict puts the Federal Reserve in a difficult spot. A prolonged conflict could drive the economy into recession, which would warrant easing monetary policy. However, inflation is still holding above the Fed’s 2% target and tariffs will likely send it higher.
What GFP is saying with information from the above:
- As we mentioned in our last newsletter, how the other players respond to the administration’s reshaping of the global trade order was going to direct where the global economy and markets were headed. China and the bond markets might make Trump’s plans a bit bumpy. (China exports to the US are only 3% of their total exports and were fast to respond with reciprocal tariffs. They also have started selling their US treasury bond holdings which is what prompted the steep shift in treasury yields).
- President Trump’s tariffs may have long term benefits but they are also challenging the US dollar’s role as the global reserve currency. For the dollar to retain its safe-haven status, the US economy must be both the consumer and lender of last resort. Current policies are making both difficult. If it persists, the US risks diminishing its global financial influence.
- While some of our alternative income funds have seen some price decline as the tariff wars have escalated here in April, it is not a surprise given the probability of a deeper economic downturn has increased amidst this policy uncertainty. We remain confident in their ability to outearn traditional bonds in this higher inflationary world we foresee over a 3-5 year timeline. Coincidently, the current blended yield on our alternative income sleeve is also greater than the consensus expected return of the US equity markets for the next 5 years.
- It was nice to see the benefits of staying diversified pay off in the 1st quarter. It is hard, even for advisors to stay disciplined and not to overloaded in the investment areas that seem to be “can’t-lose”. It does always seem that markets have a way reminding all investors that this isn’t supposed to be easy….
If you have questions about your portfolio, please contact us anytime.
This is Life: Market Volatility and Staying Focused
By: Patrick Guinet , CIMA®
In early April, we saw historic levels of market volatility. In times of uncertainty, it’s easy for fear to take the wheel. Volatility, headlines, and speculation can create a fog that makes even the most seasoned investors question their direction.
These are the times when a good financial advisory team matters most. Our comprehensive financial planning and investment approach helps provide perspective, peace of mind, and a level calm so that you know “HOW” you are doing.
Helpful information that will keep you informed and focused as we navigate this volatile time together:
- Probability Score of Your Plan: If your score is within its stated range or above, it’s a strong sign that you are still on track.
- Investment Portfolio Performance: Understanding how your portfolio’s volatility(risk) compares to the stock market (S&P 500) will also provide some perspective.
This information is easily accessed from three sources:
- GFP Client Portal: Access to your Probability Score and Performance. You can manipulate the dates to see YTD returns OR from the market peak on 2/19 to its low on 4/8(A 20% decline of the S&P 500).
- Portfolio & Market Review Document: This is provided to you during your regularly scheduled review via ZOOM or by phone.
- Contact US: If you have questions or just need to talk something through, reach out anytime by call, email, or text.
FINAL THOUGHTS
Through thoughtful planning and diversified investments, we have prepared you for market ups and downs. While markets may be uncertain, your plan is not.
And remember—we’re not just here to build your financial plan and manage your assets, but to support you through these times. We’re always here for you.
Education to Empower You: Turning Market Volatility Into Opportunity
We’re always on the lookout for smart ways to help clients navigate uncertain markets. While volatility can feel unsettling, it often presents strategic planning opportunities. One such strategy when markets are down that is worth considering is a Roth IRA conversion.
What is a Roth Conversion?
A Roth conversion involves transferring assets from a traditional IRA or other pre-tax retirement account into a Roth IRA. When you convert, you’ll pay taxes on the amount moved—since the funds were originally tax-deferred—but once inside the Roth, the money grows tax-free and can be withdrawn tax-free in retirement, provided certain requirements are met.
Why Now Might Be a Good Time
With market pullbacks, the value of a portfolio may temporarily decline. That means converting could allow you to move more shares into a Roth account while paying less in taxes—essentially putting future market growth on your side, in a tax-free environment.
Here’s how that plays out:
- Let’s say your IRA held $100,000 in stocks last year, and today that same portfolio is worth $80,000.
- If you convert now, you pay tax on $80,000, not $100,000.
- When the market rebounds—and your investments recover inside the Roth—you won’t owe tax on that recovery or any future gains.
It’s a rare instance where a market drop can be used to your advantage.
Other Reasons to Consider a Roth Conversion
- Tax Diversification: Converting part of your traditional IRA now gives you flexibility in retirement. You’ll have both tax-deferred and tax-free options to pull from, which can help you manage future tax brackets.
- Legacy Planning: Roth IRAs don’t have required minimum distributions (RMDs) during your lifetime, and your heirs can benefit from tax-free growth as well.
- Rising Tax Rates: If you believe tax rates will go up in the future, converting at today’s rates could save you money in the long run.
Things to Keep in Mind
- Taxes are due now: Converting triggers income tax on the amount converted, so it’s important to plan carefully and ensure you have cash available to pay the tax bill.
- Medicare & Tax Brackets: A large conversion could push you into a higher tax bracket or increase your Medicare premiums. We'll help you model these scenarios to find the right amount and timing.
- No Do-Overs: Unlike in years past, Roth conversions are permanent—you can’t reverse them. So thoughtful planning is key.
We can help you analyze if a Roth Conversion is right for you.
Contact us below to learn more.
