Last week was the 2-year anniversary of the 3/23/20 Covid low from which we enjoyed an approximate 100% return on the S&P 500. Last week, financial markets digested a Fed narrative that many felt was more hawkish than the FOMC meeting narrative the prior week as well as continued Russian aggression in Ukraine and more commodity price inflation. Equity markets managed to deliver a second consecutive positive week despite Treasury yields moving sharply higher to levels not seen since 2019. The U.S. was up 1.5% while international markets were flat to slightly negative while the yield curve moved higher in a parallel fashion leaving the 10yr UST at 2.48% as we approach quarter-end.
Market Anecdotes
• The selloff in U.S. treasuries continued last week with yields continuing their move sharply higher in a relatively parallel fashion across the curve while the slope remained. A key question is at what level do higher yields begin to pressure risk assets? • Across twelve separate Fed speaking engagements, officials made clear the need for rates to reach neutral and move into restrictive territory, while maintaining flexibility along the way. • Arbor Research published a note illustrating the fact that inflation is clearly a global phenomenon with annual inflation ranging from 42% in South America to 5.7% in Canada. • Strategas increased the percentage likelihood of recession to 35% due to the economic impacts of Fed tightening, higher rates, inflation, supply chain disruptions, and commodity price shocks. Meanwhile, yield curve slopes and economic data continue to paint a constructive picture. • With such a pronounced two-year return ending March 2022, the third year of a strong bull market does tend to pose more challenging returns for investors. • A more strategic (and contrarian) view on Europe given the Ukrainian crisis is that the U.S. economic recovery is more advanced, leaving Europe with more of a recovery window. U.S. GDP recovered to Q4 2019 level back in 2Q 2021 while Europe reached it finally in Q4 2021. • Short-term risks surrounding housing are mounting given the rise in interest rates and the impact on affordability/monthly mortgage payments while long-term fundamentals remain intact. • European policy makers will attempt to offset the impact of the Ukraine crisis through looser fiscal spending and U.S. lawmakers have reopened the door to negotiations on the reconciliation package in a slimmed down version of the initial $3.5t proposal but several roadblocks remain. • The BCA geopolitical team is assigning a high likelihood that China will help Russia manage U.S. sanctions leading to U.S. sanctions on China later this year.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.
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Last week was certainly a nice break from the unfriendly side of market volatility. War, monetary policy, Covid BA.2 data points, and both policy and politics in China were the primary influences driving markets last week. The S&P 500 was up 6.2% while developed international (+7.5%) and emerging markets (+6.6%) performed even better. The recovery was broad-based across sectors with only energy (-3.6%) posting losses. Interest rates ticked higher, and the yield curve flattened as investors handicapped Fed policy and narratives following the highly anticipated meeting and corresponding 25bps rate hike from the FOMC. Commodity markets (-2%) and the USD (-0.9%) were down slightly last week.
Market Anecdotes
•U.S. equity markets bounced higher in strong fashion last week with a string of four +1% moves (S&P 500 and NASDAQ) and even bigger bounces in Europe and U.S. small caps. • After a ‘death cross’ on Monday, the S&P 500 went on to rally sharply back above its 50-day moving average, broke the downtrend channel in place since the early January record, and pushed nearly back to its upper Bollinger Band. • The Fed raised rates by 25bps, forecasted six more, and reiterated they will remain nimble as data rolls in. Dot plot interest rate projections show a 1.9% median target by year-end and a 2.8% target by the end of 2023. Balance sheet policy guidance (QT) will be forthcoming in May. • The FOMC GDP forecast for 2022 was ratcheted down from 4.0% to 2.8%, the inflation outlook was increased from 2.6% to 4.3%. Wage growth and housing costs are the key ‘sticky’ components while supply chain and Russia-Ukraine disruptions loom in the background. • A key decision point for the economy and stock market will be what level is the true ‘neutral rate’ of interest. Is it the FOMC’s terminal rate of 2.4% or is it closer to 3-4%? Stock markets would appreciate the Fed halting hikes below the neutral rate in the short term, policy would eventually have to counteract remaining too stimulative in the long-term. • Last week the BoE delivered a dovish surprise with its 25bps rate hike by signaling a more cautious outlook and policy approach while the BoJ held rates steady as expected. • China’s top economic official provided assurance that policymakers will implement measures to stimulate the economy and support the capital markets provided a big mid-week boost to risk assets. • China’s zero-tolerance policy towards the COVID-19 may carry consequences to domestic economic conditions in addition to further aggravating global supply chain disruptions. • The WSJ noted Zillow’s $56,000 average home price appreciation through February 2022 is the first time in the data series history where the homes earned more than their owners. • The specter of rising rates and a narrow equity risk premium has owners of vanilla 60/40 portfolios driving plenty of attention and focus on alternative investments. • Oil supply is under a microscope with the spike in uncertainty given stronger than expected U.S. production discipline, core-OPEC 2.0 production increases, and Iran/Russia indicating favorable resolution of their trade concerns which should allow 1.3m b/d back into global export markets.
Economic Release Highlights
• U.S. Retail Sales for February were in line with consensus estimates (0.3% vs 0.4%) • February PPI data were in the ballpark of very hot consensus expectations with MoM headline (0.8% vs 1.0%) and core (0.2% vs 0.6%) readings and YoY readings of 10% and 8.4%. • February U.S. Housing Starts (1.769mm), Housing Permits (1.859mm), and Existing Home Sales (6.020mm) were relatively in line with expectations. • The March Housing Market Index fell just short of expectations at 79 versus consensus of 81. • February U.S. Industrial Production of 0.5% and Manufacturing Output of 1.2% were at and in excess of consensus respectively.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.
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The Russian invasion of Ukraine dominated headlines last week in what felt like a slow-motion offensive which became very real very fast on Wednesday evening. We’ll refrain from commenting on the specific situation in Ukraine, as it remains too fluid for any tangible takeaways currently, instead focusing our attention on financial market reactions and potential economic implications. Along those lines, and as with most geopolitical events, markets seemed to have priced in a good deal of the fallout in advance, ultimately leaving financial markets in a push-pull situation between strong economic fundamentals and geopolitical risks. U.S. equity markets finished the week in the black while developed and emerging market equities traded down 1.3% and 3.8% respectively. Oil rallied in the overseas Brent crude contract, but WTI was flat on the week while interest rates in the U.S. actually increased across the curve and we saw a subtle bid in the USD.
Market Anecdotes
• Some historical perspective on market corrections and policy uncertainty serves as a reminder to avoid the ‘in the moment’ risk aversion urge and just play through or buy the mire. • Last week’s Russian invasion of Ukraine pushed the Ruble to a record low, the Russian stock market down over 35%, Brent crude prices over the $100bbl level for the first time since 2014, European natural gas prices up nearly 50%, and strong rallies across grains and metals. • U.S. trade and financial exposure to Russia is somewhat limited but Russia is the world’s third-largest producer of oil and second-largest of natural gas. Europe and China are most reliant on Russian energy exports. • While really bad news is clearly not yet priced in, we will be monitoring the situation closely as things unfold in Eastern Europe. In the near term, we do expect some short-term strength in the USD, continued tailwinds in cyclically oriented sectors and would favor more geopolitically insulated markets for the time being. • At this point it seems that treasury yields, the USD, gold, and credit spreads aren’t sounding any significant alarm bells. • Monetary policy trajectory seems marginally impacted thus far with the expected pace of rate hikes slowing slightly, due to tightening financial conditions, with an expectation for a 25bps hike in March. No changes are expected surrounding balance sheet activity. • Foreign stocks are holding up much better than their U.S. peers thus far in 2022 with valuations and rising rates likely playing a material role in the differing results over the short term. • While rental and housing prices have garnered a lot of attention in the inflation debate, energy has been the biggest contributor to inflation every month since February 2021 and last month it added 1.71% to the 7.50% YoY rise in CPI with the geopolitical unrest set to add to the trend.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.
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A couple of years ago Karlan and I went on a cruise that ended in Boston.Since we had a little extra time we decided to check out Nantucket Island.I’m sure some of you might be familiar with it but just in case you haven’t been there, I thought I would fill you in!We found it so quaint, unique and relaxing. I returned again in hopes to plan a trip for others to enjoy also.
Nantucket (the sister island to Martha’s Vineyard) was the whaling capitol of the 19th century.Herman Melville wrote Moby Dick after visiting there. The downtown streets and all cobble stone.You can drive jeeps on the beach while keeping an eye out for seals as you make your way to one of 3 picturesque lighthouses!
The whole area is fascinating especially if you enjoy history.The whaling museum is high on that list.The hotel we chose (the Nantucket Hotel) is a block or 2 from downtown making everything accessible with a short walk. There are also bike rentals close by for further exploring. There are many great restaurants and shops. They are all locally owned since there are not any chains there. My favorite restaurant is a pub called “Den of Thieves!”… I like the casual English vibe. Because the island has many nice restaurants they have their own cooking demo/school close by.
If you’re there in the fall they are harvesting cranberries in the middle of the island – (how cool and picturesque is that?!) Picking up fresh produce at Bartlett’s Farm is worth the time as is eating lunch at the picnic tables outside “Something Natural” (yummy sandwiches and homemade cookies)☺
It is a thriving year-round community unlike Martha’s Vineyard which is only “open” in the summer.Every time I meet someone who has spent any time there, their comment is always that they love it.
Come a day early or stay an extra day or two in Boston (the birthplace of our independence.)Plymouth is close by as is Cape Cod.
Nantucket is only a ferry ride from Boston but a world away.It will be a unique experience that we want to share with all of you. We anticipate a whale of a good time! ☺
We always encourage our clients to travel while good health allows! Lately Karlan and I have been trying to follow our own advice and recently took an Alaskan cruise. We had heard that it was a popular destination so we didn’t want to miss out! We chose a 2 week cruise that started in Seward (about an hour and a half drive from Anchorage) and ended in Vancouver, BC. I’m glad we chose to go for 2 weeks because it allowed for more opportunities to explore the places that shorter cruises skip. We also chose to cruise with a small luxury line that can go in smaller fjords and has a fraction of the amount of people. We are talking 300 instead of 3000! (that was our personal preference). I won’t bore you with all the stops and details but I will attempt to give you a couple of tips and highlights.
We had the opportunity to visit a handful of small Alaskan towns. Whenever I get to go somewhere new, I always think “what would it be like to live here?” I had a hard time picturing actually living there. Every single village was beautiful, but it would be a fairly drastic culture change. They are very dependent on supplies being brought to them since the mountains meet the water with no space to grow anything or raise animals. Every town we visited (no matter how small of a population) had its own quilt and or yarn shop. I guess you have to pass the time somehow during the long cold dark winters!
Seward and Sitka are lovely towns that don’t seem as commercialized. Sitka was part of Russia until 1867 and still has a Russian feel with St. Michael’s Orthodox Church onion dome and the souvenirs mostly of a Russian theme. On the other hand, Juneau and Ketchikan are full of jewelry stores and clearly setup for cruise ships. Fun fact: Juneau is the only state capital (aside from Honolulu) that you can only reach by boat or airplane. There aren’t any roads to drive there!
If you love observing nature, Alaska will not disappoint! Among other things, we enjoyed many bald eagle sightings and observed dozens of whales.
Our cruise was in September which, it turns out, isn’t the best choice as far as weather goes. It was quite chilly and rainy a good part of the time. They get 44” of rain annually in Ketchikan We came to discover that there isn’t a “perfect” time to visit. Each season has its pros and cons.
In Skagway we journeyed on the White Pass and Yukon route railroad. Seeing the route that those men traveled to attempt to make their fortune in the gold rush was quite sobering. There’s an interesting museum there in Skagway that will help you re-live the notorious Yukon gold rush.
We visited an old salmon cannery in British Columbia. Be thankful you didn’t have to work there! Those that did had to keep their hands in cold water while processing the fish. In order to prevent hypothermia they stood in warm water to offset their freezing hands! No thank you.
Our cruise ended in Vancouver. What a lovely city! We took the opportunity to ride bikes in and around Stanley Park. What a great way to spend a couple of hours. The park is beautiful and you’ll enjoy the beautiful views of the Vancouver harbor. Get your tickets! 🙂
Tucker Advisors, one of the nation’s largest insurance field marketing organizations, recently held a national training conference for top insurance producers in Littleton, Colorado.
The keynote speakers included Karlan Tucker, CEO, Tucker Financial Solutions and Tom Hegna, PBS TV host and best-selling author of “Don’t Worry, Retire Happy.”
Tucker and Hegna reviewed retirement topics including income planning, annuities, and happiness in retirement.
According to Tucker, most retirees are concerned with “outliving their life savings, because they [retirees] don’t know how long they’re going to live.” Hegna agreed, “The long-term care threat…can wipe out your life savings.”
To lower longevity risks, Tucker recommends that an individual self-fund a pension with their 401K accounts. An individual can create a pension by converting a 401K with a fixed index annuity into “a safe opportunity to grow for the purpose of generating income.”
Hegna recommends that individuals work with a financial advisor to assist in developing a retirement income plan. In his book, “Don’t Worry, Retire Happy” he provides seven simple steps:
Hegna noted that individuals should use life insurance as the most efficient way to transfer wealth.
Tucker recommends fixed index annuities to many of his clients as a way to produce income in retirement. Tucker said, “If you’re going to quit your job, you need income.”
Hegna noted, “Today’s media is all about investing in the market.” Hegna reminds Baby Boomers, “once you hit retirement, you’re in the distribution phase and it’s all about guaranteed income while taking key risks off the table.”
A key to a happy retirement is eliminating or lower the longevity risks. Tucker noted, “An individual doesn’t know how long they are going to live. That’s a longevity risk and most retirees never get the income right. They have a pile of assets. They either take too much and run out of money, or take too little, and then they sacrifice the quality of their retirement.” Tucker said, “Every day I help individuals with retirement income plans. This is the first step in having a happy and quality retirement.”
Karlan Tucker Reviews
Tucker Financial Solutions CEO Karlan Tucker reviews topics on retirement planning, personal finances, fixed index annuities, life insurance, and asset management. Karlan Tucker is a financial fiduciary, radio talk show host, and author.
About Tucker Financial Solutions:
Tucker Financial Solutions, a retirement planning, financial advisory, and investment firm, specializing in fixed index annuities, life insurance, asset management, and college funding. Tucker Financial Solutions, founded in 1991, is located in Littleton, Colorado. Tucker Financial Solutions is part of the Tucker companies, which include Tucker Advisors, Tucker Asset Management, and Tucker College Solutions.
Tucker Financial Solutions hosts new Retirement Seminar
Denver, Co – Tucker Financial Solutions announces a new 2017 retirement seminar: Preparing For A 30 Year Retirement.
Brad Smith, a retirement income expert, will discuss ways to generate sustainable and consistent income during retirement.
In the seminar, Brad will discuss:
A new sustainable withdrawal rate to insure that you never fun out of money.
Reveal how to receive up to $250,000 in additional Social Security benefit income.
How to get your portfolio to provide a lifetime of income – even in return.
Tucker Financial Solutions is hosting this new retirement seminar on February 9th and February 20th at Eddie Merlot’s in Centennial, CO. RSVP is required.
If you would like to attend this retirement seminar, click here.
Karlan Tucker reviews 7 retirement income planning tips for 2017. Tucker Financial Solutions is a full service retirement planning, financial advisory and investment firm.
1. Hold a year-end review
If you plan to retire in the next five years, or currently retired, December and January is a great time to conduct a review of your retirement income plan. Are you on track? Is your principal protected from market downside? Are you on track to meet your goals? “Every day we meet individuals, who plan to retire within the next 10 years, concerned they will run out of money during retirement. Your income plan must include a plan of reliable and increasing income that will outlast you. How could upcoming life events or employment impact your current plan? Year end is a great time to schedule a second opinion to review your plan,” noted Tucker.
2. Reduce Fees
Research and analyze the fees that are currently embedded in your portfolio. FINRA offers an excellent tool to analyze mutual funds, EFTs and ETNs. Enter the mutual funds, EFTs and ETNs in your portfolio and analyze the net fees for a specific holding period. Typically 10 years holding period provides a good benchmark to costs. “Many times after we provide a portfolio review for a prospective client, they are shocked at the amount of fees and other costs we uncover. Taxes and fees are corrosive to a retirement plan principal and earnings. Minimizing both taxes and fees can provide a more secure retirement,” added Tucker
3. Lower Your Tolerance for Risk
As the Dow attempts to crack the 20K milestone, don’t get complacent and keep a majority of your assets exposed to the market. The stock market appears to have cyclical patterns; its highs and its lows can bring a sense of achievement or despair. Avoid the emotions of the market.
“In 2017, consider taking some risk off the table. Ask yourself: if the market drops substantially over the next several months, how will that impact my retirement income plan? In many cases, a market drop of 10% or greater, can substantially impact the plan. You might consider fixed index annuities as a way to lower the risk and yet provide a retirement income vehicle,” said Tucker. Karlan Tucker reviews portfolios regularly and has found that many retirees are 100% exposed to the market downside – this is a potential retirement income catastrophe should the market drop.
4. Enjoy the Upside, Minimize the Downside
If you want to participate on the potential upside in the market; consider this, fixed index annuities as a way to participate in the market upside yet protect your principal from the market downside. The Financial Research Corporation of Boston noted “no other investment vehicle can rival the income annuity for retirement security.”
“The annualized Dow Jones Industrial Average (DJIA) has average just 3.4% in the last 16 years. You invest your hard earn capital into stock market. You take the risk; but, there isn’t much reward,” added Tucker.
5. Start Preparing for Health Care Expenses and Long-Term Care
Health care and long-term care continue to rise year over year. Start planning now on how to pay for these expenses during your retirement years. Health care and long term care costs are fast ways to exhaust retirement savings, home equity, and other assets. “The odds are high that many retirees will need some form of long-term care. It can financially wipe out a couple’s savings in a matter of months. You don’t have a retirement plan if health care and long-term care is not planned for,” said Tucker.
6. Cut Costs, Save More
Saving when employed is easier than going back to work at age 70 because you didn’t save enough while working in younger years. Retirees who enter back into the work force after retirement are often working for minimum wage because of a lapse in skill set and experience. Find ways now to lower spending: housing, cell phone, cable, college expenses, insurance, automobiles, and etc. Take a lesson from the younger millennials. Millennials are creatively cutting housing, transportation, and entertainment costs to maintain their lifestyles.
“Review all of your household operating costs. What can you lower or cut to help achieve your retirement income goals? Lowering a cable, skipping going out to a restaurant or eliminate a cell phone bill can make a substantial difference. Calculating a 5% annual compound rate while saving $200 per month over 15 years, an individual could have $52,000 in savings,” added Tucker.
7. Avoid Taxes in Retirement
Income taxes and real estate taxes in retirement are difficult to predict. Many economists believe that the Federal government will need to increase taxes to offset the multi-trillion dollars deficit. If you plan now, there are several ways to get tax free income in retirement. “If taxes rise in retirement, you need a plan to receive tax free income from your Roth IRAs and the cash values of a life insurance policy,” said Tucker.
About Karlan Tucker
Karlan Tucker, CEO, Tucker Financial Solutions
Karlan Tucker is the CEO and Founder of Tucker Financial Solutions located in Littleton, Colorado. He is also a radio talk host and author. He’s been interviewed nationwide on television and radio stations. Since 1991, he and his advisory team have helped Coloradans successfully retire. Regularly he reviews topics on investing, retirement, college planning and taxes.
About Tucker Financial Solutions
Tucker Financial Solutions, a retirement and investment advisory firm, specializes in fixed index annuities, life insurance, asset management, and college funding. Tucker Financial Solutions, founded in 1991, is located in Littleton, Colorado. Tucker Financial Solutions is part of the Tucker companies, which include Tucker Advisors, Tucker Asset Management, and Tucker College Solutions.
Investment advisory services provided through Tucker Asset Management LLC, a register investment adviser. Guarantees are based on the claims-paying ability of the insurance company.
About Karlan Tucker Reviews
Karlan Tucker reviews regularly financial planning, investing, taxes, college planning, wealth management, annuities and asset allocation.
As Karlan Tucker reviews tax strategies he keeps in mind that taxes are our greatest lifetime expense. This means we should do all we can every year to reduce what we owe Uncle Sam so we get to keep more of our hard earned money.
Almost daily Karlan Tucker reviews prospective client’s portfolios to assist them in developing retirement income plans. Taxes are corrosive to both earnings and principal.
Here are ten strategies that will save you tens of thousands to millions in taxes over your life depending on your annual income.
Fund Roth IRA’s – Tax free income
Fund Life insurance then borrow the cash value tax-free. The death benefit will pay of the loan resulting in tax-free income.
Fully vested Bonus Annuities will pay up to 50% of the taxes in your traditional IRA’s using the bonus the Insurance Company gave you in exchange for managing your money. This also stops up to 50% of your RMD’s at age 70.5 and beyond.
Move to a state with no state income tax
Invest in rental properties to take advantage of the tax deductions
Purchase tax free municipal bonds
Purchase a QLAC annuity – They don’t have RMD’s reducing your taxes
Own life insurance – The death benefit is tax free – your heirs then can use it to pay the taxes in your tax infested IRA’s they just inherited.
Keep all your tax deductible expense receipts then deduct them from your income. Every year people pay taxes on income they didn’t get to keep as a result of poor record keeping
If you collect Social Security prior to your full retirement age, which for many is age 66, and continue to work, your wages will cause your Social Security income to get taxed. Be careful to coordinate when you take SS with when you actually quit working.
For the full details of every strategy above please call us to schedule a complimentary visit.
Tucker Financial Solutions 303-734-1234
Karlan Tucker has been helping his clients save taxes and be prepared for retirement for the past 35 years.
As Karlan Tucker reviews tax strategies he keeps in mind that taxes are our greatest lifetime expense. This means we should do all we can every year to reduce what we owe Uncle Sam so we get to keep more of our hard earned money.