Market Update 10-10-18

Market Update

In light of the past week activity in the market, we wanted to share a short update.  Amazingly 6 trading days ago the U.S. Markets were trading at all-time highs.  With today’s selloff, the S&P 500 is now down approximately 5% from those all-time highs.  Many of the salient points today were covered in our latest monthly market update, which can be found here.  The largest issue seems to be stemming from the relative strength of the U.S. economy, which is causing the Fed to raise rates and driving strength in the U.S. dollar.  The result has been significant outperformance of the U.S. equity markets relative to the rest of the world.

Our position is to focus on the long-term, global diversification and taking an appropriate level of risk.  As you look at your accounts, you will see the equity portion lower.  However, as the selloff in equities intensified, we saw bonds go up in price.  So, the conservative portion of your allocation, fixed income, was essentially flat today and dampened the volatility of the equity sell-off.  The sell-off has been sharp and quick, but certainly not out of historical expectations.  We will continue to monitor markets and adjust as necessary.  Please feel free to contact your advisor with additional questions.

Kevin M. Churchill, CFA, CFP®
Chief Investment Officer

Scottsdale/Phoenix Area: (480) 990-3300

Tucson: (520) 321-4100

Salt Lake City Area: (801) 899-7600

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*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment advisor. 

The Great Wealth Transfer

Wealth Transfer

Over the next twenty years, there will be a wealth transfer that exceeds $30 trillion as the Baby Boomer generation passes the remainder of their wealth to the Millennials and subsequent generations.  The Baby Boomers (born 1946-1964) are considered the wealthiest generation, currently controlling 70% of all the disposable income in the United States.  Its imperative families develop a plan to transfer assets since the transfer of wealth is inevitable.  For most families, the transferring wealth was acquired during this lifetime and not inherited from the previous generation.  

When starting to plan for wealth transfer pre-retirees should prepare for their retirement first, healthcare costs second, and the remaining transferring assets last.  Although some individuals choose not to involve their family members that will become the beneficiaries of their assets, including qualified tax and legal professionals are important.  But don’t write off including your heirs in all aspects of wealth transfer planning if you’d like more than just one generation to benefit

Preparing your heirs to take over your estate eventually passing their remaining assets on to their beneficiaries is equally important.  Heirs that are unprepared in managing money, investments or seeking financial guidance from qualified professionals seldom have enough inheritance left over for their heirs.  Some families choose to ‘train’ heirs by teaching how to wisely invest so they can give some away through philanthropy.  Without financial education, frequent investment decision making and a purpose to preserve the inherited wealth, many estate transfers rarely survive.  The complexities of wealth preservation are not taught in school or other institutions and can only demonstrate through modeling, professional guidance, and the generation’s intention to pass their wealth forward.

If the generation set to inherit from the Baby Boomers does a good job preserving what they inherit, it’s possible it could easily provide financial benefits to others for the next thirty to forty years.  And that’s worth planning.

As financial advisors, we spend a lot of time preparing for building wealth, but not passing it on to subsequent generations.  If you would like guidance on The Great Wealth Transfer to your beneficiaries, we welcome a meeting with all of you.

Contact us today!

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

Tariffs and Trade Wars: The Impact into Q3

Trade War

After months of verbal threats between the EU, China and the US, tariffs, and counter-tariffs started in July 2018, leaving American consumers and investors wondering how much of an impact it will have on them. Already three months into the trade war, consumers are not swaying from buying imports despite the increasing costs. In July, the US Trade Deficit increased to $50.1 billion, a 9.6 percent increase from the previous month while imports increased .9% to a record $261.2 billion, proving that Americans’ demand for imports remains strong. August’s data is expected to be out the first week of October and indications are it will be higher than the July’s. It’s notable that the EU and China exported the most goods into the US of any of the trade partners during this time.

What will the impact be as the tariffs continue? Increased costs of goods (including food, clothing and other necessities) may cause households to have the less discretionary cash to spend on other items considered non-essential, such as electronics, entertainment, automobiles or even events. If costs continue to rise, Americans may eventually choose to not spend on goods produced in the United States either.

The counter-tariffs imposed to hurt foreign buyers will impact American companies, farmers and workers, and eventually overall company profits as countries impose their tariffs on US goods. Many retirement savings accounts invest in US-based companies which may see decreased earnings and share values as tariffs apply to their products. Eventually, this could reflect in the account values of American investors. Retaliation has started from other countries by the US being left out of new trade agreements as the current administration considers pulling out of the World Trade Organization.

Despite the tariffs and trade war, it is positive that the American economy has remained strong throughout the latest quarter. Because we are in the early stages of the trade war economists are unable to predict how prices and portfolios will fare in the future.  The trade war landscape is changing day-by-day which is why now may be a good time to review your portfolio if you have concerns.

 

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

Happy Retirement, LIBOR

LIBOR in London

 

There’s a number that is going away soon that has an impact on your life; it’s called LIBOR.  LIBOR (London Interbank Offered Rate) is used to determine the interest rates banks charge each other for overnight, one-month, three-month, six-month, and one-year loans. LIBOR is a substantial number because it decides, in part, the interest rate you will pay for loans, credit cards, and even your mortgage or refinance. Banks add their markup (another percentage) to LIBOR to calculate what to charge consumers. LIBOR has been the benchmark for banks throughout the world since 1969, but will be phased out worldwide by the end of 2021.

LIBOR seemed to work well until the financial crisis when inaccurate bank reporting to LIBOR made way for rate manipulation. Unlike a stock price which calculates on the buying and selling of the public, LIBOR compiles information from a bank’s observation or reporting of their daily rate, which is voluntary. By making up false information during the financial crisis, some banks profited illegally. For this reason, regulators worldwide are phasing out LIBOR.

In the United States, LIBOR is being replaced by SOFR (Secured Overnight Financing Rate), which is already approved for rate calculation. SOFR has compiled information back to 2014 and began publishing earlier this summer. SOFR uses the Federal Reserve’s fed funds rate and the yield on the ten-year Treasury note and others, using real data on the previous day’s trading on our currency.

Currently, traders in the United States have already started to see the LIBOR-SOFR rate as we transition toward LIBOR’s retirement.

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

Why it ‘Pays to Be Nice’ When Divorcing

Divorce is a common occurrence in the US, with 50% of all first marriages ending in divorce. According to the American Psychological Society, that is even higher for those marrying a second time. Marriages end for many reasons from infidelity, stress, personality changes, and financial. They are not only devastating to the children and extended family but devastating to your assets and ability to accumulate future assets. Divorce requires assets to be divided, attorneys to receive payments (on-going sometimes), and the divorcing couple soon finds themselves having to live on less to make ends meet. Studies find that the divorced spouses need more than a 30% increase in their income to maintain the same standard of living they had before divorcing.

When emotions come into play, divorces often turn into battles to take assets, leaving a financial battle scar on the other spouse. Divorce doesn’t have to be this way. Uncontested divorces cost hundreds of dollars, whereas divorces taking months or even years can end up costing thousands of dollars- usually paid from the settlement of assets. The cost of ending a marriage, having to live on less, decreased income (for those paying alimony or child support) from becoming a single-earner household can make divorce almost as destructive to your retirement savings as the Great Recession was. Aside from the above reasons, retirement assets are usually divided to ‘equalize’ the retirement savings of each spouse. 

When marriages are going well, couples participate together in financial planning, developing personal budgets, and savings and spending plans. The same should happen when anticipating a divorce, during divorce proceedings, and after the marriage ends. Financial advisors are in a position to discuss with both spouses (at the same meeting if amicable) the effects of fighting over assets, a plan to maintain retirement savings going forward, and keep the couple on track to retire as planned. If solutions can happen without fighting between attorneys, the couple stands to win by ‘playing nice,’ saving what they worked so hard to achieve before the marriage fell apart. The impending divorce now becomes ‘business,’ but understanding what you want and why can have positive financial outcomes for both parties.

Financial advisors can’t provide legal advice when it comes to divorce but can provide financial guidance regarding the liquidating of assets, effects on retirement accounts and future retirement savings, budgeting for a single-earner household, and other economic questions you may have. During this time joint investment accounts, personal investment accounts, and all financial records must be disclosed to the other party. Our office will remain impartial as we view each client as vital while we continue advising both of you.

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

Estate Plans and Wills: Not Just for Retirees

Last WillRegardless of your age, having a will or estate plan is essential for many reasons, and isn’t just limited to passing assets at death. A will provides necessary asset passing, although many times isn’t enough when situations become more complicated. Although estate plans and wills become typically become active at death, they can be helpful during catastrophic life events, while still living. One such document that is part of both an estate plan and a will is a Medical Directive, which provides the blueprint for your wishes in the event of a debilitating injury or illness.

Without estate plan and will documents in place, the decision is left to your family to make decisions you wouldn’t have been happy about. At times these decisions may lead to conflict among family members, additional expenses paid by heirs or from your estate, or an extended probate at death as its run through the court system in your state of residence.

There’s just as much planning for living as there is for dying, which is why there is no reason to wait to have either done. We recommend working with an attorney that specializes in this type of law (and not everything else). As you age, have children or acquire more assets, your situation changes and so should your estate plan. There are common mistakes to avoid in every estate plan or will to prevent:

  • Naming Beneficiaries and Contingent Beneficiaries. Update name changes, changing and removing beneficiaries should be done periodically to ensure your estate plan has the most recent information.  Common mistakes include misspelling names, incorrect dates of birth, and the wrong former last name of a beneficiary. This pertains to investment accounts that require recipients. Naming a child as a beneficiary requires legal due diligence, as minor can’t inherit assets and need an adult to manage the assets until the child is eighteen years old (or older).
  • Naming Specific Investments. As people age, the likelihood of an investment no longer owned by the grantor is likely, unless the estate plan or will has been updated to remove it. If a specific asset is named to pass to an individual and no longer part of the estate, it may cause extended probate or lead to the asset being repurchased or ‘equalized’ through another monetary settlement to the beneficiary.
  • Not Naming the Beneficiary of your Financial Accounts or Life Insurance Policies as your Estate. If you intend to have the estate plan be the final legal document that contains everything in your estate, you can eliminate problems later. Having some accounts or policies that name an individual and some that name the estate may cause heirs to contest the estate plan or will. Your attorney will determine which is best for your situation and wishes. Having a will or estate plan drafted by a legal professional is strongly encouraged as an integral piece of financial planning. Secondly, keep us updated on your desire to changes beneficiaries, contingent beneficiaries, and changes to investment accounts we may not manage but have included in your financial plan. Lastly, please provide us with a copy of your estate plan, will, and other relevant legal documents as they pertain to your investments to help ensure the information we have is streamlined. We are here to provide you with any necessary financial records requested by your legal professional as you create or update your estate plans and wills.

 

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

End of Year Money Moves

Grab Your Calendar

 

It’s that time of year again; kids go back to school, the election season is near, fall holiday planning starts, and suddenly we all move closer to the end of 2018. As we approach the last quarter of the year, remember these ‘money moves’ that you still have time to make:

  1. Add to Your 401K. Now is the time to make additional contributions if you are not already maximizing. Some companies include bonuses in the last paycheck of the year. Consider giving yourself the ‘gift’ of the bonus down the road with a higher balance retirement account.
  2. Re-balance Your Investment Accounts. Meet with me to re-balance your accounts and reassess your financial plan with updated information.
  3. Check Your Budget. Analyze saving and spending, and readjust if necessary. Finish this year by updating your budget to start next year with a spending plan.
  4. Make Purchases With Cash. If you spend on holiday gifts, plan to pay with cash (or debit cards) and keep credit card balances low. Cash purchases are often less than credit purchases per item.
  5. Meet With Your Tax Professional. Discussing options to off-set taxes you will need to pay for 2018 can save you money. It’s better to be prepared and have time to make some changes then be ‘shocked’ at filing time. This year will see the Tax Cuts and Jobs Act takes effect in full force.
  6. Complete a New Risk Assessment and Financial Plan. If you haven’t done either of these in a few years, now is the time to update all information and update your financial plan.

Regardless of how busy you may be at the end of the year, procrastination can hurt your progress toward your goals. Financial planning is for everyone irrespective of age or income and is about your financial situation today so that you can plan for your financial future.
I highly recommend doing these simple steps before 2018 is over and look forward to working with you. Contact us with any questions!

 

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

Why the Technology (and Person) Managing Your Money Matters

Money and technology are so closely related that if a financial advisor isn’t employing the latest technology, how will it equate to risk for you and your money?  When it comes to managing your money, you expect your financial advisor to have the best technology resources available to do the job. 

Since the last recession, the financial services industry is leading the way in technology development, with healthcare second and other sectors closely following. 

Among the new technologies, Artificial Intelligence (AI) and machine learning are in first place for the top development trend in financial services.  The acceptance of AI at large financial companies has still deemed a threat to the old system of money management but continues to be widely accepted by established advisors (ages 35-44) even more so than advisors that are new to the industry.  New technology is helping clients and advisors to be more efficient in managing assets and their risk.

One of the new developments using AI is in behavioral finance software that determines client behaviors and their adversity to risk before selecting funds, ETFs and other assets to be managed inside portfolios.  No longer should selection be done manually when AI can search funds with precision based on client behavioral perimeters.  Without an assessment of client behaviors before market activity, potential losses may impact the client and be more difficult to recover. 

When behavioral finance software combines with risk profiling, the assessment of misaligned investment choices can be overridden helping to build better portfolios based on scientific data and not solely on past performance.  Without behavioral considerations, misaligned investment choices aren’t just possible, but likely.

Investment managers must continuously upgrade their technology infrastructure to keep up with client expectations and best practices to continually improve the client experience and make advisors better at their jobs.  While robo technology, or portfolio automation, continues to become an accepted part of the investment equation for younger clients with fewer assets, to clients transferring wealth to future generations, artificial intelligence and machine learning are the next great frontier.

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

The Value of Planning for Life’s Messes

Planning is valuable for many reasons and helps to ‘normalize’ things when you find yourself in the middle of an unexpected life event.  A death, a critical illness, job loss, new family member, an inheritance, divorce, or a catastrophic event that can cause a major financial detour.  How you plan will help determine how you survive and normalize after these events.

Planning can be as simple as making sure you have the right insurance coverage, from personal insurance such as medical and critical illness insurance, property insurance and an emergency fund.  All insurance is to offset risk, cover expenses, and to protect other assets such as retirement accounts that you’ve accumulated.  An additional item is to have a will in case something happens to you so that your loved ones carry out your wishes.

Some people consider financial planning to include risks that are health related.  If you or a family member had a major medical event or condition, would you have the financial assets to cover all the expenses and cover your loss of income related to the medical event?  How would it impact your portfolio and ability to accumulate assets?  Which assets would you choose to liquidate first?

With life’s always changing events, planning for the unexpected when experiencing a significant life event is essential.  It is possible to run scenarios within a financial plan to see outcomes of specific circumstances and how they may impact you.  If you get detoured by an event or wrong investment decision, planning can help you to recover quickly to a ‘new normal.’  Life can be messy and what you do now will make the difference in what may happen later.  No one can predict the future, but it helps to prepare ourselves now as much as we can. 

If you would like to visit regarding planning for potential risks and how it may impact your portfolio, please contact our office. We have a team of experts to lead you through the murky financial waters. 

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

Social Security Retirement Benefits: Why Waiting May Be the Best Decision

Taking Social Security Benefits can be a guessing game unless you do your research to figure out what age to take benefits is the best for you.  Do you receive benefits at the earliest age or wait until your full benefit age?  Will you die in early retirement or live a longer life than you imagined?  These are the challenging questions many pre-retirees ask because it can add up to thousands of dollars over your lifetime.  Most people want to get their benefits sooner than later, not realizing that the odds are in their favor for living longer than they thought.  Pre-retirees need to plan for the long haul, or so to speak each generation, on average, is living longer than the previous. 

Finding out your ‘break even’ age for Social Security is important to determine what age is best to start taking benefits.  Once you make the decision and start benefits at a specific age, you can’t change your decision since it is essentially ‘locked-in’ for life.  Benefit amounts will not increase, aside from the occasional small cost of living increases. 

The best way to determine when to start taking benefits is by running a break-even analysis to find your break-even benefit age.  The break-even age is when an individual’s total lifetime Social Security benefits received would be equal to the benefit amount, but using a different claiming age.  When doing your pre-retirement income planning, the break-even analysis is a crucial piece of information to consider.

Deciding to start Social Security benefits at the first opportunity or delaying benefits is a personal decision.  Factors to consider are other retirement assets available and their value, genetic health factors, and outstanding debt and lifestyle considerations.  If you would like more information on social security benefits and implementing it into your financial plan along with other assets, contact our office for a meeting. Our fiduciary standards always ensure we put your best interest at heart. 

 

*Advisory services offered through Trajan Wealth, L.L.C., an SEC-registered investment adviser. 

*These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

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