Four years down. In those four years we have been through a pandemic, two bear markets, a historical interest rate hiking cycle, a bond market crash, two great market years, recession fears, geopolitical tensions and everything in between. As we move into year five of Birds Eye Wealth Planning, I wanted to dive into a couple of important updates:
- We’re excited to announce a newly refreshed Birds Eye Wealth Planning website. There are two specific areas we want to highlight. First, the updated client portal gives you access to any 3rd party that we are currently working with. We have solutions for all aspects of your financial life. Investment planning, cash management solutions, tax planning, estate planning – it’s all available. All it takes is a phone call so we can address anything that might be concerning to you. Second, the SEC has finally given some clarity on client testimonials. To that end, on the client portal page you will see a link to a website called Wealthtender. Wealthtender provides the format to ensure we stay compliant in the client testimonials we publish. We would very much appreciate it if you could find the time to leave a review for us. When you click on the Wealthtender site, scroll down to the bottom and click the “write a review” link.
- As I mentioned above, we have implemented solutions for everything and anything in your financial world. If you need tax help, we can run your tax return through Holistiplan, our tax analysis software. This analysis will scour for any potential deductions you are not taking advantage of and generate a list of recommendations. If the market has you overly worried and you want something guaranteed, we have partnered with StoneCastle to offer high yield cash savings accounts. If you need estate planning help, we have partnered with Trust and Will to help you complete your necessary estate documents. If you need help with life insurance or long-term care, we have partnered with The Fortis Agency to provide any insurance help you may need. If you have questions about Medicare and need help with your supplement plans, we have partnered with NJ Life and Health Insurance Group. If you need property and casualty insurance help, we have the Pigott Agency that can handle home, auto, commercial and any other business insurance needs. One thing I like to point out in all of the agencies above is they are INDEPENDENT. Like Birds Eye, there are no singular relationships with any companies. We have the ability to do business with anyone, so we pick and choose which company fits your specific situation and so do the firms above.
- Year to date we have seen excellent returns across all segments of the market. The NASDAQ leads the way with a YTD return of over 19% followed closely by the S&P 500 as I write this. After three straight years of negative bond returns, it looks like the interest rate hike has worked its way through as we are currently at a total return over 3%. However, the year has not been without its challenges. Even though the NASDAQ leads the way, we saw a selloff putting it in correction territory as recently as August and have seen two other pullbacks during the year. Yet another reminder that the best investing is often boring and produces results through consistent deposits and not a desire to “time the market.”
- As I have mentioned in previous blogs, inflation has been the key driver of the market. Analysts were constantly looking for data to confirm timing of the Federal Reserve rate cut. We now live in a world where the market has priced in a rate cut 100% this month. The only question is whether it will be 25 or 50 basis points. Attention has now turned to the labor market. Although just six months ago, a bad labor report was a good thing as it theoretically would lead to rate cutting, it is now a bad thing as it could signal that these elevated rates have driven us towards a recession. Even though I would argue we already are in a recession, the economy has not met the actual definition of two straight quarters of GDP decline. (While the government can keep telling me the economy is in a great spot, I work with people every day on their finances. I can see the impact this economy is currently having on people’s free cash flow). Regardless, from a strict market analysis, we need to see labor statistics hold steady and/or improve for continued market growth. So, the data needs to be bad enough to encourage rate cuts, but not bad enough to spark recession fears. Make sense? Yeah, I didn’t think so.
- The election is our number one driver of phone calls lately. I have already written about election year investing which you can revisit here. For financial purposes, the election will have major implications on the tax landscape as the TCJA (Tax Cuts and Jobs Act) which is our current tax code is set to expire in 2025. Should Trump be elected, I would expect that code to be extended. ***This next sentence is not a political statement or endorsement. Thank you for listening*** Current Federal tax rates are lower than they were prior to the TCJA being enacted. That’s simply a fact. Additionally, the estate tax exemptions are significantly higher (higher exemptions being good) than they were. Should the TCJA expire, we would need to re-evaluate everything from current deductions to new tax brackets to the total estate value. Furthermore, there has been a lot of talk on taxation of capital gains, both realized and unrealized. That would require a completely separate blog, which I will write when we know what the tax code looks like. I will make this statement with regard to capital gains. The government on both sides are the most financially illiterate people I have ever seen. Our national debt is astronomical, yet our spending continues to be out of control. The last thing we should support is them being able to take more of the profit you make by investing in companies. They literally do nothing to earn that tax money. If you disagree with that assessment, I would love to have a conversation with you.
- We cannot change what’s going to happen, we can only offer solutions for that volatility. For those that are close to or in retirement, we are utilizing an active portfolio that can move 25% of the equity portfolio immediately to cash. That’s not to say we can catch the actual top, but we can prevent the free falls we saw in ’08, ’20 and ’22. We can simply move part of the portfolio to cash as a preservation method. One technique we always utilize is to have 1 or 2 years of income in non-risk assets so if there is a significant downturn we are not pulling income from a negative portfolio. We have access to fixed products such as short-term multi-year guaranteed annuities (MYGA) or CD’s. If you have excess cash sitting in checking or savings accounts not earning real interest, you are throwing money away. We haven’t seen rates like this in a long time, and they will be coming down relatively soon. So, take advantage of interest rates while you can. We have access to guaranteed income annuities. Once again, the payout rates are as high as they have been in a decade due to the Federal Reserve rate. If you’re fearful of all of your retirement savings and income being in the market, understand you have options with these products. Annuities developed a bad reputation, and in some cases for good reason, but when the right ones are chosen, they provide an excellent buffer and risk management tool in your overall plan.
The bottom line is, yes, we are in uncertain times, but that is not uncommon. While I’ve been an advisor since 2011, Birds Eye was created in 2020. In that short period of time, we have seen a pandemic, a stock market crash, a bond market crash, the quickest interest rate hike in history, historic levels of inflation, and two great years in the market. But we are still here. Along the way, we have improved our processes, established relationships with strategic partners and fortified our investment and financial planning lineup to help deal with everything I mentioned above and the stress that comes with it. All it takes is a phone call or an email to let us know what concerns are on your mind. Can’t wait to hear from you.