{"id":1828,"date":"2021-10-06T19:31:21","date_gmt":"2021-10-06T19:31:21","guid":{"rendered":"https:\/\/mgfs.net\/?p=1828"},"modified":"2021-10-15T17:31:27","modified_gmt":"2021-10-15T17:31:27","slug":"from-the-desk-of-mgfs-important-quarterly-insights-2","status":"publish","type":"post","link":"https:\/\/mgfs.net\/blog\/from-the-desk-of-mgfs-important-quarterly-insights-2\/","title":{"rendered":"From The Desk of MGFS: Important Quarterly Insights"},"content":{"rendered":"\t\t
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3RD<\/sup> QUARTER 2021<\/strong><\/h2>

In this report, we will cover topics related to your financial planning and wealth management needs. We will also address inflation in greater depth because inflation, along with potential future tax reform, may have the biggest impacts on the economy and future markets.<\/p>

Topics:<\/strong><\/p>

  • Behavioral Finance<\/li>
  • Notable Headlines<\/li>
  • Economic News<\/li>
  • Inflation (new and important topic)<\/li>
  • Market News<\/li><\/ul>

    Behavioral Finance<\/strong><\/h2>

    What\u2019s on your mind?<\/strong> Markets continue to drift higher with pauses and hints of volatility. Where are the markets heading? Are we in a bubble? Why is there so much price inflation? Is it temporary? Will interest rates change soon?<\/p>

    Our Views<\/strong><\/p>

    While we have recently experienced some downward pressure, the Federal Reserve continues to provide sufficient tailwinds for the markets to continue upwards. This is due in large part to their ongoing purchases of securities which increase capital in circulation and liquidity. Therefore, the shorter-term indicators, for now, remain bullish.<\/p>

    • We believe that inflation in lumber, concrete, and steel prices is due to supply chain logistics and is transitory. However, overall price inflation is here and growing and it will be important to recognize its impact in our lives and portfolios.<\/li>
    • If the Biden\u00a0administration\u2019s spending legislation is implemented, these changes could impact future corporate and individual tax rates, corporate profits, and economic growth. As the market does not like uncertainty, it is reasonable to expect and to prepare for market volatility, as we have seen most recently.<\/li>
    • We believe that markets react to daily news like speedboats and can \u201cturn on a dime.\u201d Economies do change course but adjust slowly like a freighter.\u00a0 These dynamics define why we believe in active portfolio management.\u00a0 For those of you with advisory and risk management solutions, you are well positioned for ongoing opportunities and risks.<\/li>
    • It is important to focus on your goals and revisit your portfolio allocations and planning. Between now and year-end is as good time to focus on investment and tax planning.<\/li>
    • This may be a great time to talk to us about Roth conversions or other tax- exempt strategies. We have previously written about the importance of tax diversification and having more assets in tax-exempt accounts. While it is intuitive to want to minimize taxes today, and we are effortful with this as well, much of our planning is for the reduction of future taxes. What is right for one is not always for another. Find out what strategies make sense for you.<\/li>
    • We strongly encourage you to tune out headline economic and market noise from media, friends, associates, and family. The media has changed from relaying news to its audiences to shaping news, which often results in drama. Individual contacts, usually well-intentioned, can misguide and cause unnecessary fear, stress, and emotions.<\/li>
    • Always remember that markets are cyclical both on the upside and downside. Volatility is part of investing. Stay calm! Do not panic or overreact when downward pressures are strong. Please reach out to us when you are feeling concerned or stressed about the economy, the markets, and your individual needs.<\/li>
    • As many of you know, we love great quotes. Here is a one from the Japanese scholar Okakaura Kakuzo, \u201cThe art of life is a constant readjustment to our surroundings.\u201d Those words of wisdom apply to everything, including financial planning.<\/li><\/ul>

      Overall, we are cautiously optimistic for the time being.<\/p>

      Notable Headlines<\/strong><\/h2>
      • The administration\u2019s $3.5 trillion spending bill, and $1.2 trillion infrastructure bill passed by the Senate are making their way through Congress.<\/li>
      • America reflects and remembers the fallen on the 20th<\/sup> anniversary of 9\/11.<\/li>
      • New Orleans residents and neighbors rely on outside cooperation for help as they slowly recover from Hurricane Ida.<\/li>
      • According to the Department of Education, The Biden administration, since January, has canceled $9.5 billion in federal student loan debt for more than 563,000 borrowers.<\/li><\/ul>

        Economic News<\/strong><\/h2>
        • The economy continues to grow due to pent up demand since its re-opening, money printing by the Federal Reserve, and massive Federal borrowing to fund pandemic loans and benefits. Unemployment claims have declined with the end of various federal unemployment programs.<\/li>
        • While the economy is growing, the pace of economic growth has slowed partially due to increased concerns about the Delta variant and supply chain shortages. Restaurants and bars reduced payrolls this last month; car and truck sales were lower in August.<\/li>
        • There\u00a0may be a significant number of job openings in the US, estimated to be as high as 10.9 million, which is 2.5 million more than the 8.4 million unemployed individuals.<\/li>
        • A debt crunch\u00a0may be a significant number of job openings in the US, estimated to be as high as 10.9 million, which is 2.5 million more than the 8.4 million unemployed individuals.<\/li>
        • As of this writing the US debt ceiling is unresolved but likely to be extended as it has been in the past. If this continues into later October, market volatility may increase.<\/li><\/ul>

          Inflation
          Very Important!
          Please read this section<\/span><\/em><\/strong><\/h2>

          The key point from this section is that inflation may grow and negatively impact market performance and volatility in future years.\u00a0 Price inflation will affect your household budgets, so we suggest you monitor your cash flow over time.<\/p>

          • Inflation is primarily a monetary phenomenon starting with the creation of money by the Federal Reserve. This provides liquidity into the banking system. When banks loan and invest the excess liquidity into the economy (currently at around $4 trillion), more money chases fewer goods. This is inflationary. Then prices and wages increase, referred to as price inflation. This has been happening quietly behind headline news for years.<\/li>
          • As you have probably already noticed, prices for daily products and services have increased with the consumer price index (CPI) up 5.3% over the last year. Another way to think about this in terms of savings and investment performance: if you have a CD rate of 0.10%, the \u201creal\u201d (inflation-adjusted) return is -5.2%.<\/li>
          • On a national basis, inflation has increased more than salary and wages for the past four months. That means inflation-adjusted real wages are negative, as well.<\/li>
          • A Kroger executive warned that grocery prices are about to become even higher this year as Kroger will be passing on their increased expenses to consumers.<\/li>
          • The Fed produces a report eight times a year called the Beige Book which is an anecdotal summary of economic activity from across the 12 Federal Reserve Districts. In the most recent report issued on September 8th<\/sup>, they reported the following: \u201cInflation was reported to be steady at an elevated pace\u2026.With massive resource shortages, input price pressures continued to be widespread\u2026. Businesses are finding it easier to pass along more cost increases through higher prices. Several districts indicated that businesses anticipate significant hikes in their selling prices in the months ahead.\u201d<\/li>
          • You have seen dramatic price inflation in the real estate market this year. We now expect with the national eviction moratorium over, except perhaps in Illinois, that rents will increase over the next few years.<\/li>
          • Currently, the Fed has been buying $120 billion a month in asset purchases. When the Fed changes its loose monetary policy and lowers the amount of monthly asset purchases (also known as tapering), volatility may rise.<\/li><\/ul>

            How do we combat inflation?\u00a0 Of the many approaches, two of the three core income planning strategies outlined in our book \u201cGuided Retirement Income Planning\u201d, bucketing and flooring, serve to prepare you for inflation.\u00a0 You do not need to be focused on or in retirement for these strategies to help with liquidity or simply, your emotions associated with market volatility. Contact us if you need to discuss or review these strategies in more depth.<\/p>

            Market News<\/strong><\/h2>
            • Here is what economist Brian Wesbury is saying about the markets. \u201cThe bottom line is that we are bullish for now, but fully aware that we have been in a pristine environment for stocks. A slowdown in GDP will likely slow profit growth, while rising inflation will eventually lift long-term interest rates. Tax hikes are a threat, as are tougher Covid-related restrictions that limit a private-sector recovery. However, with the Fed\u2019s position as easy as it is, the tailwinds from easy money remain strong.\u201d.<\/li>
            • Per economist Robert Genetski \u201cmonetary policy remains expansive. As long as the Fed reaffirms its commitment to low interest rates, the outlook for stocks remain positive.\u201d<\/li>
            • Corporate earnings are still beating expectations and should continue with a low interest rate environment. This is an indicator of bullishness for equities (stocks) and relative stability for fixed income (bonds).<\/li>
            • Remember that September and October are historically and seasonally a volatile time of the year. Be aware and do not be surprised by higher volatility and downward pressure.<\/li>
            • Most of you have a long-term plan. If you do not, you should. If you do, stay with it because strategies seeking to create clarity, reinforce what is in your control and peace of mind. And as Nick Murray, an industry pundit, always states \u201cgood companies are profitable in the long-term.\u201d<\/li><\/ul>

              If you would like to review your portfolio or feel your needs may be changing in the near future (now through 5 years), please contact us. Our ultimate mission as a firm is to simplify complexity and to guide you with more clarity.<\/p>

              Wealth brings complexity,
              we bring clarity.<\/span><\/strong><\/h3>

              \u00a0<\/p>

              Regards,<\/p>

              Barry E Moschel, Partner, RICP\u00ae, CLU\u00ae, ChFC\u00ae, CPA
              Adam L Schwartz, Partner, CFP\u00ae, NSSA\u00ae\u00a0
              Tom Manno, CFP\u00ae\u00a0<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

              3RD QUARTER 2021 In this report, we will cover topics related to your financial planning and wealth management needs. We will also address inflation in greater depth because inflation, along with potential future tax reform, may have the biggest impacts on the economy and future markets. Topics: Behavioral Finance Notable Headlines Economic News Inflation (new […]<\/p>\n","protected":false},"author":2,"featured_media":1833,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/posts\/1828"}],"collection":[{"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/comments?post=1828"}],"version-history":[{"count":3,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/posts\/1828\/revisions"}],"predecessor-version":[{"id":1837,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/posts\/1828\/revisions\/1837"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/media\/1833"}],"wp:attachment":[{"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/media?parent=1828"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/categories?post=1828"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/tags?post=1828"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}