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The Strategist - Where Do We Go From Here

Q3 2023

Where Do We Go From Here?

Tom Wargin CFA, CFP

With the markets surprising most everyone to the upside this year, many are wondering what comes next. Certainly, we were surprised also. The indicators that we have followed for many years pointed to a positive outcome in only one month early in the year. They are now continuing their decline and pointing to another market correction to come soon.

We don’t have a measure as to the magnitude of the decline but based on the historical accuracy of the indicators we are confident that a reversion is coming. That is why we have kept almost all of your portfolios conservatively positioned to date. It is our intention to maintain that for the near term.

An inverted yield curve, which has signaled a recession every time in the past, is coming but it has not happened so far by typical measures. According to Liz Ann Sonders from Schwab, we have been experiencing a rolling recession affecting different sectors or industries at different times. This has masked the effects that a typical recession would have exhibited.

If that is the case, based on historical data, small cap stocks should do very well coming out of recession. So far this year, as measured by the Russell 2000 index, small cap stocks are down (0.89%) as this is written. That compares to the NASDAQ Composite, which is up 28.3%, primarily due to the performance of the magnificent seven companies, which accounted for 95% of the gain. Those are: • Apple (NASDAQ: AAPL) • Microsoft (NASDAQ: MSFT) • Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) • Amazon (NASDAQ: AMZN) • Nvidia (NASDAQ: NVDA) • Tesla (NASDAQ: TSLA) • Meta Platforms (NASDAQ: META) formerly Facebook

The median stock in the S&P 500 is up only 5%. With short term Treasury bills yielding over 5% and 10-year Treasuries at 4.6%, perhaps you can understand why we are still negative for the stock market in the near term. However, we are very optimistic about stocks over periods greater than five years.

Because of recent actions in the Mideast as well as the ongoing war in Ukraine, you may be wondering what effect this could have on the markets. Typically, there is a short term decline followed by a rise in stocks due to the increase in the economy from military production and the ripple effects of that. War is never good but unfortunately seems destined from past unresolved grievances. We can pray that there is a better solution available.

As opportunities arise, we plan to take advantage of them.

Planning Notes

June Schroeder, R.N. CFP

Medicare Fraud Alert

An LFG client sent this to me: “I recently experienced a fraudulent claim on my Medicare. I noticed it on my monthly Medicare summary mailing. That’s the ‘this is not a bill’ statement. Many people never look at this statement. I did report the issue to both Medicare and my insurance company.” This warrants a reminder to check Medicare bills, and also the “not bills,” carefully. If you suspect fraud, report it to 1-800-MEDICARE (1-800-633-4227). Visit Medicare.gov, the official source for Medicare information, to learn more about preventing Medicare fraud Remember, Medicare will never call you unprompted and ask you for your personal information.

Publishers Clearing House Fraud

I personally received a call from “Publishers Clearing House” informing me that I had won the “phone number lottery” and was going to receive $8.5 million and a Mercedes convertible in my choice of either blue or black! I know that PCH does not call winners, but this scam and others by phone, email, or letter, have cost Americans $8.8 billion in 2022! Be vigilant and savvy consumers at all times, please.

Rounding UP Works

That request to round up your bill at the checkout counter for charity is one of the simplest ways to help nonprofits. U.S. companies raised more than $749 million from consumers at checkout in 2022, a 24% increase from 2020. Source: The Wall Street Journal.

Four-Day School Week on the Rise

Parents workday and childcare schedules have been disrupted. Out of 13,000 school districts nationwide, nearly 900 now operate on a truncated schedule, up from 662 in 2019 and a little more than 100 in 1999.

Client Alerts

Shannon Nook, FPQP

LFG Winter Hours

8:30am - 6:00pm Monday to Thursday, 8:30am - 5:00pm Fridays, Closed Thanksgiving Day and day after,   Closed December 22, 25, 29 & Jan 1

Medicare Open Enrollment Through December 7

Be sure to check your plan changes in coverage levels and co-pays, especially Medicare Part C (Medicare Advantage) and Part D drug plans. You may benefit from a switch if your meds, health, or doctors have changed. Try the online Medicare Plan Finder which might help simplify the process to compare plans. Or, if you need some personalized help in figuring out the best options for you, contact www.65incorporated.com. They don’t sell insurance, just advice.


If you reached the age of 72 (73 if you turned 72 after December 31, 2022), you must take a Required Minimum Client Alerts Distribution (RMD) from your IRA. You can make Qualified Charitable Distributions (QCD) to your favorite charities tax-free from your IRA RMD. To avoid a penalty, RMD funds must be out of the IRA before 12/31/2023 (4/1/2024 for first timers) either as a QCD or a taxable distribution to you.

It’s Charitable Donation/Gifting Time

Timing is everything to get the deduction for this year. Checks must be mailed, and credit card donations must be posted to the card, by December 31. QCDs and gifts of stock must also be transferred/settled by December 31 and are between custodians like Schwab and a charity custodian requiring multiple days.

Free Application for Federal Student Aid (FAFSA) Update

Changes go into effect for the 2024-25 school year and the form will now open in December 2023. Tax information from 2022 will be used. FAFSA needs to be completed every year a student is in college and affects all families with students already in college, not just those starting in 2024 and beyond. A good site for more details is here.