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Financial Planning

Weekly Insights 11/21/22 – 11/25/22

Giving Thanks

Thanksgiving is a time to pause and give thanks.  Here at Secured Retirement, we are especially thankful for our clients and the numerous relationships we have established over the years.  Despite experiencing what has been a rather challenging year for investors in the markets, we can still be thankful for having the privilege of living in one of the most economically developed countries in the world and what is arguably the most economically prosperous, and undoubtedly the most technologically advanced, time in world history.  And even if the elections from a few weeks ago did not give the result you had hoped for, we can all be thankful for the opportunity to participate in free elections and all the freedoms we enjoy as Americans. 

Equities were slightly lower last week, giving back some of the gains from the previous week.  The Producer Price Index (PPI), a measure of wholesale inflation, came in below expectations, adding credence to the peak inflation narrative and consistent with the softer than expected Consumer Price Index (CPI) report from the previous week.  However, inflation still remains stubbornly high and indications remain that the Federal Reserve will continue to raise interest rates in the near term. But what has changed are expectations for peak rates this cycle and how long they will hold.  As of now, the expectation is the Fed will raise the Fed Funds rate to 5.00% (it is currently 4.00%) in the first quarter of 2023, where it will remain into at least the late part of the year and likely into the early part of 2024.  This will give the Fed time to assess how effective tighter monetary policy has been in the fight against inflation.  Obviously much will happen over this time and the chances are high the Fed will need to adjust, but this is what the market is currently pricing in and changes in Fed action will impact both stock and bond markets. 

Treasury bond yields have become even further inverted, meaning shorter maturities have a higher yield than longer maturities. Such inversions have historically been reliable predictors of recessions since longer term interest rates reflect expected economic growth.  But it was not all bad news last week. Oil prices dropped nearly 10% and this may provide some relief on the inflation-front.  But since we are entering the winter heating season and tensions remain on the geopolitical front, this may be a short-lived reprieve in the energy markets. 

Is Santa Coming to Town?

With signs pointing toward a recession sometime in the next year, a focus remains on consumer spending since it makes up two-thirds of GDP.  Consumers are being stretched with paychecks not going as far as they used to as we continue to deal with the highest levels of inflation seen in 40 years, but consumer spending seemingly remains resilient. This was evidenced by the stronger than expected October retail sales report.  The big question is whether this strength will continue through the holiday season against the somewhat demure economic backdrop. 

Last week was a big week for retail earnings, most notably Wal-Mart and Target.  Discounter Wal-Mart indicated good progress in selling off inventory and market share growth while Target’s earnings showed consumers becoming increasingly cautious in their discretionary spending given inflation and economic uncertainty.  Home improvement retailers Lowe’s and The Home Depot both highlighted resilient consumer demand and homeowners investing in their existing properties as a function of the housing market slowdown. 

Sales have slowed considerably in the housing market with higher mortgage rates causing monthly payments to increase substantially.  There is evidence of prices dropping in some areas, but overall, prices have remained rather steady.  Reasons for this include very limited inventory and homeowners are in a much stronger financial position than they were before the financial crisis of 2007-2008.  But with mortgage rates remaining at the highest levels seen in over 15 years, 2023 is shaping up to be a challenging year in the housing market. 

Looking Ahead

This week is a short one for the markets due to the holiday and there are no significant economic events.  The stock market is open for a shortened session on Friday.  Often in the past we have seen some market volatility on Black Friday, but generally on very low volume. Retailers are likely to share details of early holiday-related sales volume early next week, which if robust could provide momentum for the markets into early December, as it often has in years past.  We are long-term investors and do not concern ourselves with short-term market movements, but these are shared as historical reference to be mindful of in the days and weeks ahead.  It will be seen if we follow similar patterns.  This year is shaping up to be a little different than years past in the stock market since there will be extra emphasis on inflation reports and the Fed meeting in the middle of the month. 

Time is running out to review your portfolio and retirement plan, especially if you need to make modifications prior to year-end.  If you have not done so recently or would like a second opinion, please do not hesitate to contact us.  Take time this week to pause and think about all the things you are thankful for.

Have a very Happy Thanksgiving!

Nathan Zeller, CFA, CFP®

Chief Investment Strategist
Secured Retirement
nzeller@securedretirements.com

Please contact us if you would like to review your individual financial plan or learn how the TaxSmart™ Retirement Program can help you.   

info@securedretirements.com
Office phone # 952-460-3260

Weekly Insights 11/14/22 – 11/18/22

Powerball

Last week one lucky winner purchased a Powerball ticket worth over 2 billion dollars.  It is highly unlikely that person is reading this (but if you are, please call us right away as there are some urgent matters to discuss).  For people planning their retirement, winning the Powerball is not a viable option as the odds are extremely low.  It is up to each of us to save for retirement and then have a plan for spending wisely.  There are some things left to chance in retirement, such as hoping the stock market provides positive returns, but the odds of success are much greater.

Equities were higher last week, more than erasing the prior week’s declines.  The markets sold-off sharply on Wednesday following the results of the mid-term elections.  But this was followed by an outsized rally on Thursday in the wake of a softer-than-expected Consumer Price Index (CPI) report.  Growth was a big outperformer of value, most notably technology companies, with megacap tech enjoying an especially strong week.  Treasury bonds rallied and interest rates, especially longer term, fell significantly after the report. 

The CPI report was seen as an affirmation of the peak-inflation thesis and seems to provide evidence of a long-expected slowdown in price growth.  This report may alter the trajectory of future action by the Federal Reserve and it is now thought the Fed will pause interest rate hikes in the not-to-distant future and the terminal rate may not be far away.  The ensuing stock market rally is confirmation that the largest factors affecting stocks right now are interest rates and monetary policy from the Fed. 

Expectations for a rate hike at the December Fed meeting are now at 50 basis points, or one-half of one percent.  Indications are the Fed will step down the pace of rate hikes, but they plan to continue a path of raising interest rates.  CPI remains elevated and at levels similar to what we saw in the spring, which at the time were the highest levels seen in 40 years.  It will take a few months to confirm if inflation has indeed peaked.  At the pace it is dropping, it will still take years to return to the Fed’s annual inflation target of 2%. 

Lottery Winnings

The intent of this weekly update is to discuss the markets, but we feel it worthwhile to pause and touch on the Powerball drawing as it can be a lesson for anyone saving money.  The person who won last week’s drawing probably will not have to worry about replacing lost income or having enough money to live off for the remainder of their lives, assuming they seek the help of a knowledgeable team of advisors.  But will they walk away with over $2 billion and join the elite club of ultra-wealthy billionaires?  The answer is no.  They will be offered either a lump sum of just under one billion dollars or they can take 30 equal payments of about $67 million per year.  Federal and state taxes will take about half of all payments.  Unless the winner happens to live in a state without an income tax, in which case the federal government will still take nearly 40%.  If the winner elects the lump sum, they will receive less than $500 million of the stated prize of $2 billion; still plenty of money to live quite comfortably.  Retirees face a similar predicament, albeit with much smaller numbers.  You do not get to keep all that you win, save, or earn.  Uncle Sam and the IRS will want their share. 

Let’s assume you have saved $1 million dollars in an IRA for retirement and your plan is to withdraw 4% per year to fund your annual income needs.  Federal and state income taxes are likely to be around 20% of any withdrawal from a qualified plan (IRA, 401K, etc.) so you will have to withdraw 5% to fund your 4% income need and have enough to pay taxes on the distributions.  If you were to take out the entire account balance at one time, you would be subject to federal and state income taxes of about 50%, essentially making the one million dollars saved for retirement worth five-hundred thousand dollars.  That nest egg you have saved for retirement may not be worth as much as you think it is.  Many people subject themselves to a large tax burden that could have been avoided with some proactive planning. Also remember there may be future changes in the tax code and there is likely to be the need to take out larger amounts to keep up with inflation.   

Looking Ahead

We should soon receive further clarity around the balance of power in the House of Representatives as final votes are tallied.  Earnings are winding down with only a handful of names still reporting.  This coming week does bring another inflation report, the Producer Price Index (PPI), as well as retail sales.  The latter could receive larger than usual attention given that consumer sentiment came in weaker than expected last week.  Catalysts for the market may be somewhat limited over the next few weeks, especially with the Thanksgiving holiday.  Another inflation number, Personal Consumption Expenditures (PCE), which happens to be the Fed’s preferred gauge of inflation, is released at the end of the month.  Markets remain dependent upon action from the Fed and there are still numerous data points before their next meeting in December. 

Don’t chance your retirement on something with a very low probability of success, such as the lottery.  Planning for retirement should not be left to chance at all.  Be sure to have a solid plan for saving and, perhaps more importantly, withdrawing your money while limiting taxes.  Contact us if you feel the odds are not in your favor and we will help guide you toward the path of winning.

Have a wonderful week!

Nathan Zeller, CFA, CFP®

Chief Investment Strategist
Secured Retirement
nzeller@securedretirements.com

Please contact us if you would like to review your individual financial plan or learn how the TaxSmart™ Retirement Program can help you.   

info@securedretirements.com
Office phone # 952-460-3260

Weekly Insights 11/7/22 – 11/11/22

Switching Gears

When driving a car or riding a bike, you need to shift gears from time to time depending upon certain factors such as the speed you are traveling and the incline of the road.  A gear change generally happens quickly and multiple times throughout a trip.  If you are investing for the long-term, which you should be, there are going to be changes, not only in your individual situation as life happens but also in your portfolio as a result of changes in the markets.  And when it comes to the markets, we are now seeing the beginning of a shift.  

The Federal Reserve hiked interest rates by another 75 basis points, or three-quarters of one percent; the sixth rate hike of the year and fourth consecutive hike of that magnitude. After the Fed’s monetary policy statement, equity markets initially moved higher with the flick of a possibility the Fed might slow, or even pause, rate hikes.  But it wasn’t the rate hike that was the real news. During the Fed’s press conference, Chairman Jerome Powell quashed any ideas of the central bank pausing rate hikes anytime soon.  The message was that the Fed may slow the pace of the hikes but the forecast of the terminal rate, or peak in interest rates, is now higher than it was just two months ago, signaling a slight shift in expectations.   The terminal fed funds rate is now expected to be reached in May, 2023 compared to the previous expectation of this occurring in March, 2023. 

The shift in Fed expectations also contributed to the steep move higher in bond yields with the spread in yields between 2-year and 10-year U.S. Treasuries reaching the largest inversion since 1982.  Interest rates on the short end of the yield curve rose to the highest levels since 2007.  Moves higher in longer term rates have especially had an impact on the housing market, which has been hard hit by the shock of 7% mortgage rates and is seen weighing on economic growth.

The Long Road

Equities were lower last week after posting back-to-back weekly gains.  After the Fed press conference on Wednesday stocks fell sharply as investors reversed previous bets on the possibility of a pivot or pause.  It is still widely anticipated the Fed will pause at some point next year to assess the impact of rate hikes, but that does not necessarily mean they will pivot.  85% of S&P 500 companies have now reported earnings with a blended growth rate less than what was expected at the end of the quarter, according to FactSet. Despite growth rates coming in below expectations, the markets have reacted mostly favorably.  This is likely because of a low bar being set, results being better than feared and the possibility of oversold conditions. 

Labor market reports last week were mixed with the headline numbers being positive and ahead of consensus.  However, underlying data shows a mixed bag.  Average hourly earnings increased more than expected, leading to the narrative that wage pressures continue to contribute to inflation.  The unemployment rate moved higher, but much of that was attributable to the number of people leaving the workforce.  While some of the data may be troubling, this is only one month’s worth of data so should not yet change views on the long-term trends of the economy.  But it could be warnings signs of what might be coming.  And it is labor market resilience that is a key factor contributing to the “higher for longer” narrative.  The hope is that the labor market will remain healthy while softening enough to allow inflationary pressures to abate. 

Looking Ahead

week brings the mid-term elections where current projections are that there will be a shift in control of Congress.  This remains to be seen and is contingent upon several key races, which at this point appear to be very tight. If such a shift were to occur, it would likely lead to gridlock since there would be different parties in control of the executive and legislative branches of government.  Markets tend to prefer gridlock, which may especially be the case today since there has been a large amount of government spending, arguably contributing to ongoing inflationary pressures.  There is likely to be a sharp reaction in the markets immediately following the election but it could be rather short-lived and we want to remind readers to remain focused on the long-term. 

Also of great significance this week is the monthly release of the Consumer Price Index (CPI).  While not necessarily the favored inflation measure of the Federal Reserve, this is the most widely accepted measure of inflation.  What will be of most interest is the Core CPI, which excludes food and energy.  Headline CPI, while remaining quite elevated, has slowly been trending downward over the past couple of months but Core CPI continues to move higher.  Currently futures are pricing in a 50/50 split in expectations for rate hikes of 50 and 75 basis points (one-half and three-quarters of a percent, respectively) at the December Fed meeting.  The CPI report is likely to push probabilities in one direction or the other. 

As we mentioned at the onset, you will likely need to make modifications and adjustments in your retirement plan, especially as shifts occur in the markets.  We are here to ensure that despite these changes your retirement plan stays on track.  Contact us if you would like to discuss your individual plan to ensure you are making the changes necessary to arrive at your destination. 

Have a wonderful week!

Nathan Zeller, CFA, CFP®

Chief Investment Strategist
Secured Retirement
nzeller@securedretirements.com

Please contact us if you would like to review your individual financial plan or learn how the TaxSmart™ Retirement Program can help you.   

info@securedretirements.com
Office phone # 952-460-3260

Weekly Insights 10/31/22 – 11/4/22

Thriller

Michael Jackson’s Thriller is often considered to be the best music video ever made.  The video is every bit as theatrical as it is musical, evoking themes of horror films and therefore tends to receive substantial radio playtime this time of year, around Halloween.  Thriller movies, as a genre, often give viewers heightening feelings of suspense, excitement, and anticipation.  Even though it is likely most of us have felt those same feelings in regard to the markets this year, chances are they could be amplified over the next couple of weeks with a flurry of activity.    

Equities were higher for a second straight week, driven largely by the uptick in quarterly earnings reports as well as third quarter GDP surprising to the upside.  Despite weathering some blows in the form of multiple megacap earnings disappointments, the markets remained resilient, nearing levels not seen in a month. This does beg the usual question of whether this is another bear-market rally, as we have experienced multiple times this year, or is this a move with some traction, perhaps the beginning of a sustained rebound?

The market seemed to take some support from the idea the Fed could soon begin to slow the pace of tightening (“step down”) or even take a break to allow the Fed to evaluate lagged policy impacts.  Corporate commentary during earnings calls has been cautious, flagging increased macroeconomic uncertainty, lingering supply chain issues, and inflation challenges.  On the positive side, consumer resilience seems to remain intact. And therein lies our issue – markets continue to be largely driven by Fed action, which is dependent upon inflation data.  The employment situation remains robust, leading to higher wages and further supporting consumer spending, both of which contribute to ongoing inflation.  The longer the Fed raises interest rates, the higher the probability of a recession.  It seems we are stuck in a continuous feedback loop, and it will not be until something “breaks,” most likely either labor markets or consumer sentiment, that the Fed is likely to let off the gas pedal.

Monster Mash

The events of the next two weeks will shape the outlook of the markets for the remainder of the year.  On Wednesday of this week the Federal Reserve will announce its latest interest rate decision, which is highly anticipated to be a 75-basis point, or three-quarters of one percent, hike for the fourth time in a row.  Since that move is already widely expected, it is not the announcement itself that will drive markets but rather the comments afterwards.  The Fed should give hints about its expected path forward, possibly signaling plans to ease back from the aggressive pace of rate hikes, which could provide thrust for the stock market.  Conversely, if the comments lead toward continued rate hikes of similar magnitude, akin to Fed Chairman Powell’s comments in Jackson (WY) in August, it could send markets lower. 

Employment reports will be released on Friday, which could influence further Fed action. As was mentioned earlier, if the labor market remains robust and steady, despite being good news for the economy and workforce, it could be bad news for the stock market since it may be perceived the Fed will need to maintain their current course of tightening.  The same can be said for the inflation reports being released next week, which are likely to have an even larger influence on Fed policy, especially their December meeting. Also occurring next week are the mid-term elections.  Polls seem to be trending in the direction of the party not currently in power. This is viewed positively by the markets since many of the policies enacted by the current Administration are not always seen as being friendly to the markets and inflation.  If the opposing party were to gain control of Congress it would cause at least somewhat of a stalemate, limiting the ability of the current Administration to take further action.  If the outcome is as the polls indicate, it could be a boost for the markets.  Overall, the markets simply do not like uncertainty so simply getting past the election should provide some tailwinds. 

Looking Ahead

In addition to the aforementioned events, earnings reports continue in earnest this week.  We expect to hear the same themes, primarily around continued inflationary pressures leading to lower profit margins but also consumer spending remaining strong.  Outlooks for many companies have been tepid given the great deal of economic uncertainty.  There was interesting action in the longer-end of the yield curve last week with bond yields falling rather dramatically.  This would indicate future projections for growth and interest rates are falling.  Also, the yield of the 3-month T-bill has now fallen below that of the 10-year Treasury Note which historically has been a strong predictor of a future recession. We continue to believe there will be a recession sometime in 2023, however we also think it will be mild and relatively short-lived.  We also are of the belief that the markets and economy, which very much related, are not one in the same and therefore a recession does not necessarily mean continued pain in the stock markets. 

Your retirement plan should not be like a movie and cause feelings of suspense and anxiety.  Make sure you have a solid plan in place so you can enjoy a worry-free retirement, regardless of what happens in the markets.  If you would like to ensure you are on-track, call us for a free evaluation using our TaxSmartTM Retirement Scorecard. 

Have a wonderful week!

Nathan Zeller, CFA, CFP®

Chief Investment Strategist
Secured Retirement
nzeller@securedretirements.com

Please contact us if you would like to review your individual financial plan or learn how the TaxSmart™ Retirement Program can help you.   

info@securedretirements.com
Office phone # 952-460-3260

Weekly Insights 10/24/22 – 10/28/22

Spooky and Scary

Halloween is based upon traditional celebrations of remembering the dead, hence the symbolism of spooky ghosts, zombies, and skeletons.  This event, despite rather dark undertones, now tends to be a time of fun, especially for children.  The markets, both stock and bond, have been scary this entire year and for most savers and investors, have been devoid of fun.  Will this end soon and will we return to better days?

Equities were higher last week with the major indices more than rebounding from the previous week’s declines, which saw the markets fall to their lowest levels since 2020.  It was the strongest weekly performance for the S&P 500 and Nasdaq since June and one of the best weeks of the year. These gains came on the heels of decent earnings reports.  Given the current economic backdrop, analysts have lowered earnings estimates for the quarter so positive price movements last week may indicate that much of the bad news had already been baked into the markets.  Key themes from earnings included elevated labor and freight costs as well as mixed signals on consumer demand.  Goods producers reported weakening demand while service companies, including travel and hospitality, showed consumers remaining resilient.    

Bond markets made relatively large moves last week with interest rates continuing to move sharply higher.  Yields on short-term debt instruments look very compelling for the first time in over 15 years.  But yields are still less than inflation, meaning that investors will not maintain purchasing power. Also, while providing relative safety and being an option for short-term investments, long-term investors allocating to bonds could mean missing out on a stock market rebound.  Many market prognosticators are predicting the markets will drop further, which may very well end up being the case, but even if it is, we still feel that we are much closer to the bottom than the top and investors will eventually be rewarded for their perseverance.  A quick market rebound seems unlikely, but our view remains that stocks maintain an attractive risk/return profile over a longer time horizon. 

Trick or Treat

Currently markets are primarily focused on monetary policy action from the Federal Reserve so what may have provided the most thrust for the markets last week were comments from Fed officials stating that we are likely to see a “step-down” in interest rate increases, beginning in December where current expectations are now for a 50-basis point (one-half of one percent) rate hike.  While not the “pivot” wanted by some, this is still viewed positively by the stock markets since it would be the first step towards ending interest rate increases and eventually leading to the pivot of lowering rates.  Looking past December, as of now, market expectations are for a 25-basis point (one-quarter of one percent) rate hike next February and then the Fed will pause, waiting until December 2023 to begin lowering interest rates, continuing into 2024.  However, much will happen between now and then and it is all but guaranteed these forecasts will change as we see shifts in inflation and economic growth. 

Also helping push markets higher is the removal of uncertainty.  With CPI being recently reported and an all-but foregone conclusion the Fed will raise interest rates by another 75 basis points in November, the only major uncertainty in the short-term are the upcoming elections.  The mere fact that we will soon know the outcomes should provide tailwinds for the markets and there is a real possibility we could see a “melt-up” in the markets during the last two months of the year.  While a reprieve from this year’s selling would be most welcomed, moves higher may only be temporary. With a recession looming on the horizon, 2023 is setting up to be another difficult year and we can certainly expect continued volatility.  However, looking out longer term, into 2024 and beyond, we remain very optimistic and still believe the stock market will provide ample opportunity for increasing wealth of investors. 

Looking Ahead

The week ahead represents the peak of this earnings cycle since it will be the busiest, including the mega cap tech names.  As always, the focus may not be on the earnings themselves, which are backward-looking, but rather the outlook and future guidance provided.   Investor optimism remains historically low but may improve if earnings remain solid and we continue to see gains in the markets.  The major economic report of the week will be Q3 advance GDP. Will it be a third quarter in a row with negative real GDP growth?  Analysts estimates say not and expectations are for a positive number, but these same analysts have been inaccurate in the past.  We do not feel the reported GDP number will be very meaningful since there are so many other indicators of economic growth which presently do not point toward this being a recession.  However, if the GDP report comes in better than expected, it could be a catalyst to push the stock market higher, at least on a short-term basis. A worse than expected report will likely be discounted and have minimal impact. 

Perhaps one of the most recognizable symbols associated with Halloween is the jack-o-lantern, which was traditionally thought to scare evil spirits.   While no jack-o-lantern can scare away bad markets, there are steps you can take to protect your portfolio and retirement.  If you are spooked by the markets, we are here to help you develop a worry-free retirement plan. 

Have a wonderful week!

Nathan Zeller, CFA, CFP®

Chief Investment Strategist
Secured Retirement
nzeller@securedretirements.com

Please contact us if you would like to review your individual financial plan or learn how the TaxSmart™ Retirement Program can help you.   

info@securedretirements.com
Office phone # 952-460-3260

Weekly Insights 10/17/22 – 10/21/22

A Body in Motion…

…stays in motion.  This is the beginning of Sir Isaac Newton’s First Law of Motion and is the basic premise of inertia.  Even though economic events and the stock market are not subject to the laws of physics, it may seem as if they still apply. The example that readily comes to mind is inflation.  It is the second part of Newton’s First Law that may be most fitting – …except as compelled to change that state by external forces impressed upon it.  The Federal Reserve is trying to be this force; raising interest rates aggressively and decreasing the money supply in an effort to slow inflation.

Last week’s inflation readings, the Consumer Price Index (CPI) and Producer Price Index (PPI), both contained a good deal of underlying data and can be interpreted various ways. Overall they were viewed as being slightly hotter than expected and looking at the headline numbers, it appears inflation remains persistently high.  The readings are slowly receding and it may appear as if we have already experienced “peak” inflation.  But what is concerning is that as we dig into the numbers further, core inflation, which excludes food and energy, was higher than expected, and remains higher than we have seen it in 40 years, exceeding previous levels seen this year when headline inflation was higher than it is now.  Despite the Fed’s efforts, inflation is not slowing as much as hoped, but we also need to acknowledge there is generally a considerable lag time between Fed action and the impact it has on the economy. This lag is what leads to general concern the Fed will overshoot and raise rates higher than needed to tame inflation, pushing the economy into a recession. At some point we expect the Fed to stop raising rates and pause for an extended period of time to determine the effects, before taking further action.       

The CPI report not only bolstered expectations that the Fed will raise rates by 75 basis points (0.75%) at their November meeting and at least another 50 basis points (0.50%) at their December meeting, but now the terminal Fed Funds rate is expected to be close to 5%.  For reference, it is currently at 3.25% so this implies further rate hikes into 2023.  The prediction of the peak in the Fed Funds rate continues to be revised higher, indicating just how stubborn inflation has become as well as how slow it may be for it to substantively abate.  But even if inflation is beginning to slow, it will most likely be a long time before we see it within the 2-3% comfort zone of the Fed and to a point where it is no longer front and center in everyday life. 

Equal and Opposite Reaction

After the CPI report was released last Thursday, the markets began to plummet but quickly recovered and closed higher, having one of their best days in over two years.  There really is no explanation for this except it may be that the CPI report was not a complete disaster or simply that after five days of losses bargain hunters took over and the buyers stepped in.  The S&P 500 did drop below the YTD lows seen in June before the sharp reversal and recovery.  The lows may be providing some support and we could see the markets bounce around these same levels until we begin to see a larger, more sustained move in either direction. 

Current market sentiment is at some of the lowest levels ever. Historically this has been a contrarian indicator and a signal that a market bottom is near.  But as we have experienced so far this year, this market cycle is different than most others.  Since we think interest rates are going to continue marching higher and we will see a recession in the next year, we do not yet think the stock markets have seen the bottom.  Surprisingly, many individual stocks are still trading above their June lows, signaling some strength.  Given the amount of negative sentiment and short-selling in the market, once things turn around we could see a rather fast rebound as short-sellers are forced to cover and the markets gain momentum in a positive direction.

Looking Ahead

The focus of the markets now will shift to third quarter earnings.  This week we will see earnings reports ramp up and the majority of S&P 500 companies will report earnings over the next few weeks.  With lowered expectations for growth, we do not expect strong earnings to be a catalyst for a move upwards in the market as we have seen most quarters over the past several years.  Further, markets do not like uncertainty and the upcoming elections are providing a bit of an overhang on the market.  Once we get past the elections, regardless of the outcome, and remove the uncertainty we would not be surprised to see a rally into the end of the year. 

It is worth noting that the Social Security Administration announced last week that retirement benefits will increase by 8.7% in 2023, the largest cost-of-living adjustment since 1981.  There have only been three times since the start of automatic adjustments in 1975 that it has been higher, all of which were during the high inflation years of 1975 through 1981.   This increase will be welcomed by many as it helps maintain purchasing power.  But this is also a reminder that any source of income, especially in retirement, should be viewed on a real, or inflation-adjusted, basis. 

We would like to thank those of you who came out to hear Becky Swansburg provide her insights into the current tax situation and how it is likely to affect your retirement.  If you would like to discuss your individual situation in more detail and implement some of the strategies discussed, please call our office to schedule a time to meet with one of our advisors.  Be confident your retirement plan is not adversely affected by external forces and remains in positive motion. 

Have a wonderful week!

Nathan Zeller, CFA, CFP®

Chief Investment Strategist
Secured Retirement
nzeller@securedretirements.com

Please contact us if you would like to review your individual financial plan or learn how the TaxSmart™ Retirement Program can help you.   

info@securedretirements.com
Office phone # 952-460-3260

Ryan Keapproth

Ryan Keapproth

Retirement Planner

Ryan is dedicated to serving clients to achieve their retirement goals. Ryan’s holistic approach centers on wealth management strategies with a focus on income planning throughout retirement. As a Financial Advisor, Ryan is an Investment Adviser Representative (IAR), life and health insurance licensed and a Certified Tax Preparer. Ryan is a graduate of the University of Minnesota, with an Accounting and Finance major.

Ryan is a lifelong Minnesotan originally from Woodbury and currently residing in Bloomington with his wife, Riamae, and their rescue Terrier Beagle mix, Douglas. He and his family are avid travelers in their free time. Ryan enjoys playing golf and poker, and describes himself as a major foodie enjoying new restaurants around the cities whenever possible. He is a sports fan especially when the Vikings and Timberwolves are playing.