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The $trategist - Deja vu Again?

Q1 2022

Déjà vu Again?

Tom Wargin CFA, CFP®

As I was pondering what my article should focus on, I thought of the banking crisis and possible effects on the economy and markets but that is being played out in real time and, so far, may be a minor blip. Certainly, I don’t know what the eventual ripples will be from it. Perhaps, a few more banks and some zombie companies (unprofitable smaller publicly traded companies) may bite the dust also.

Liz Ann Sonders from Schwab is saying we are in the middle of a “rolling recession”. Certain segments of the economy are being hit by inflation, higher rates, or lagging consumer spending and the market is self-correcting them.

She also points out that the ten largest stocks in the S&P 500 were responsible for 90% of the index’s first-quarter increase, with the triumvirate of Apple, Microsoft, and Nvidia contributing more than 50%. The financial sector has only spent one week at the bottom this year, but persistent pressure has been enough to send the sector to the bottom of the leaderboard year-to-date. It’s a far cry from tech’s 21.5% gain, putting the spread between tech and financials at 27.6% for this year. That is the widest gap since the first quarter of 2009. Until we can see the rest of the market start to make advances, this will remain a choppy market favoring quality companies with positive earnings growth.

From my perspective, I’m seeing similarities to the market drop in 1974 - 75, which was a water torture type of decline where the market would drop for several days or a week and then bounce up slightly. The path, however, was continually down-ending in a drop of close to 55%. I’m hoping we don’t see that type of decline this time and I don’t believe we will. Our view for returns in 2023 has shifted to a range of -15% to +15%. That’s a pretty wide range but not close to -55%.

So, for now, extending duration in bond funds - which might be able to give us something close to equity market returns in the next 1 - 3 years - makes more sense than increasing the equity allocation. That is our strategy currently while waiting for our equity participation indicators to turn decidedly positive.

Planning Notes

June Ann Schroeder, R.N. CFP®

Increasing Interest in Financial Education

Just ahead of Financial Literacy Month, which is April, the Financial Planning Association (FPA) released stats about its programs from 2022, showing that attendance increased by 212% during the year. Headcounts at financial literacy workshops and pro bono planning sessions grew to 17,302, up from 5,546 in 2021. Pro bono provided more than 11,500 hours across more than 4,400 recipients. Source: Investment News

Catalytic Woes

According to a report by the National Insurance Crime Bureau, the increase in catalytic converter thefts has been dramatic-2200% in the past decade! Catalytic converters contain valuable metals and are crucial in curbing vehicle emissions, and you probably can’t drive long without one. Average estimates for replacing catalytic converters range from $933 to $4,414. Comprehensive car insurance can help if your catalytic converter is stolen, while warranty coverage can help in the event your converter stops working. But prevention is best. Some ideas: use secure parking or install a lock, shield, or car alarm.

Good News for 529s

Starting October 1, 2023, the FAFSA for 2024-2025 academic year will not require distributions from a grandparent-owned 529 (or one owned by any other family member or a friend) to be reported at all. Some colleges use a secondary report, the CSS Profile, that may ask about outside contributions.

Debt On the Rise

In the last quarter of 2022, credit card balances increased by $61 billion to $986 billion, a record high according to the New York Federal Reserve Bank’s Quarterly Report on Household Debt. The previous high for credit card balances was set before the pandemic at $927 billion. The average person in the U.S. is around $96,400 in debt according to Forbes.

End of Covid Emergency Could Cost

Your insurance coverage could be affected. Prior to May 11, the end of the public health emergency, ask your insurer what will change. Insurers may make changes to coverage models and deadlines for payments and extensions, among other options.

Retirement in Danger

Only 10% of U.S. retirees have saved more than $1M. According to a recent study by the Transamerica Center for Retirement Studies, the median amount that boomers (76 million Americans born between 1946 and 1964), have saved for retirement is $144,000.

Client Alerts

Shannon Nook, FPQP ™

Investment Policy Statement Review

We continue to manage your account allocation in accordance with your most recent designated investment objectives, Investment Policy Statement (IPS). We are required to have your current IPS objectives on file, which is why we request an update from you at least every two years. Therefore, it is critical that you complete the IPS forms in a timely fashion to allow us to properly comply with the authorities and invest according to your needs vs. risk level. Thanks for your immediate attention to returning these items! NOTE: It is your responsibility to advise us before the 2-year update if there has been a change in your financial situation, income needs, investment objectives, or if you would like to impose, add, or modify any reasonable restrictions on the management of your accounts. Contact us to discuss this further.

It’s Regulation Time Again!

If you’re interested in a free copy of any of the following documents, please contact info@lfgwi.com or call our office directly at 262-785-1377. • ADV: SEC Registration Summary • Business Continuity Plan: Emergency backup plan • CRS (Common Reporting Standard): Explanation of who we are • Privacy Notice: How we handle your private information Summer Hours • Memorial to Labor Day • Monday to Thursday from 9 to 5 • Friday from 9 to 2 • Evenings by request