Archives for December 2015

16 Financial Resolutions for 2016

1As the end of 2015 approaches, it’s time to start thinking about how to make 2016 a success for you and your loved ones. Though there’s little consensus about their origins, we know that Americans have been making New Year’s resolutions since at least the 1770s. [i] In 2015, 31% of Americans made financial resolutions.[ii]

Here are 16 financial resolutions to help make 2016 healthy, happy, and successful:

1. Create emergency savings

Life is full of unexpected emergencies, and some extra cash can help a serious illness, home repair, or other sudden financial need from derailing your finances. Prepare for unpredictable expenses by putting aside six to eight months of expenses in an easily accessible cash-equivalent account.

  1. Make a monthly budget and stick to it

Budgets may sound like a lot of unnecessary work, especially if you’re financially comfortable, but it’s quite easy to let your spending go off the rails if you’re not tracking it in some way. Set a budget and work on sticking to it for a couple of months. Don’t aim for perfection; instead, try for incremental improvement.

  1. Save more for the future

Are you on track for retirement and other goals? Most Americans could stand to put more money away for the future. We recommend keeping separate “buckets” of savings for short-, medium-, and long-term goals and leveraging tax-advantaged accounts where possible. Let us know if you’d like help saving for specific goals so that we can help ensure you have the right strategy for your needs and timeline.

  1. Make retirement plan contributions regularly (instead of all at once)

We believe that “time in the market” is critical to long-term investing success. Instead of waiting until the last minute to make your annual contributions, give your money more time to grow by making automatic contributions to your accounts every month.

  1. Maximize your retirement plan contributions

Tax-managed retirement accounts are one the most powerful ways to save for a more comfortable retirement. Make the most of them by contributing as much as you can each tax year. We usually recommend maxing out employer-sponsored plans first to take advantage of any matching contributions your employer may offer. Give us a call if you need help understanding your retirement account options.

  1. Pay down high-interest debt

High-interest debt can make it very hard to get ahead financially. If you’re carrying a lot of debt, make paying it down a priority. Contact us for help managing expenses and getting on top of your debt.

  1. Set goals for the future and work with a professional to help you achieve them

In our experience, people who set goals for themselves and create strategies to pursue them are much more likely to see success. One study found that investors who leveraged specific financial strategies saw greater long-term financial success.[iii] Sit down with your loved ones to discuss your financial goals; when you’re ready to discuss your thoughts, call our office to schedule a no-obligation consultation.

  1. Create a powerful legacy for the world

We believe that a rich life is about more than financial success and a comfortable lifestyle. Whether you want to leave something to your loved ones, or contribute to causes close to your heart, take some time to think about the legacy you will leave for the future.

  1. Review your estate planning and legal documents

Your core legal documents should be regularly reviewed to make sure that they keep up with your life. If it’s been a few years since you took a look at your documents, dust them off and make sure that they still represent your wishes.

  1. Review the beneficiaries of your financial accounts and insurance policies

When is the last time you updated your beneficiaries? Since beneficiary provisions are independent of your will or other estate provisions, it’s critical to keep them current. Contact us for assistance with gathering account documents and making needed updates.

  1. Stay on top of your health

Healthcare is a major expense for most Americans, especially when serious illness strikes. Take steps to protect your health (and your wallet) by building a healthy lifestyle and being proactive about preventative care.

  1. Protect your credit and identity

Identity theft and financial fraud are serious threats that can compromise your financial wellbeing. Protect yourself by reviewing financial statements and bills carefully for unauthorized activity. Check your credit report for free each year at www.annualcreditreport.com.

  1. Review your tax strategies for potential savings

Recent changes to tax laws mean that your tax burden may have increased. Give us a call to discuss tax strategies that may help you reduce your tax burden.

  1. Involve your loved ones in your finances

If you (or your spouse) don’t get involved in the family finances, it’s time to start. Work together to make financial decisions and make sure that each of you understands the overall game plan for your finances. At minimum, make sure that your loved ones know how to access financial accounts and understand your wishes.

  1. Identify your goals for 2016

What do you want to accomplish in 2016? Whether you want to get a raise, go on a wonderful vacation, or spend more time with your family, take a moment now to write them down.

  1. Keep your resolutions!

One study found that people keep just 8% of the New Year’s resolutions they make.[iv] Improve the chances that you will keep your resolutions by making your goals simple, concrete, and actionable. Instead of saying: “I will save more for the future in 2016,” say: “I will contribute $4,500 to my retirement accounts by December 31, 2016” or “I will pay off $2,000 of credit card debt by April 15.”

As 2015 draws to a close, we would like to extend our thanks for the trust and confidence you’ve placed in our firm. You’ve made this year one to remember, and we are sincerely grateful for the privilege and opportunity to serve. We look forward to serving you and yours for many years to come.

If you have questions about your future or would like some support in keeping your financial resolutions, please give us a call. Together, let’s make 2016 a success.


 

[i] http://articles.courant.com/2013-11-19/community/hcrs-82240-wethersfield-20131115_1_christmas-open-house-christmas-traditions-santa-claus

[ii] https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/2015-new-year-resolutions-fact-sheet.pdf

[iii] http://corporate.morningstar.com/ib/documents/PublishedResearch/AlphaBetaandNowGamma.pdf

[iv] http://www.forbes.com/sites/dandiamond/2013/01/01/just-8-of-people-achieve-their-new-years-resolutions-heres-how-they-did-it/

Qualified Charitable Distributions From IRAs Have Been Permanently Extended

The Consolidated Appropriations Act, signed into law on December 18, 2015, includes a provision, effective immediately, that permanently extends the ability of individuals at least age 70½ to take qualified charitable distributions (QCDs) from Traditional, Rollover, or Roth IRAs for payment directly to a qualifying charitable organization.

The following restrictions apply to QCDs:

  • A qualifying charitable organization is a public charity as described in IRC 170(b)(1)(A), but does not include donor-advised funds, supporting organizations, or private foundations.
  • Only outright gifts are eligible; contributions to charitable gift annuities, charitable remainder trusts, pooled income funds, or other split-interest entities do not qualify.
  • The amount of the distribution can be excluded from income up to a maximum amount of $100,000 per year.
  • The entire amount must otherwise be includable in income.
  • The entire amount must otherwise be tax deductible as a charitable contribution.
  • The amount of the distribution cannot also be taken as a charitable deduction.
  • The amount distributed to the charity counts toward meeting the required minimum distribution for the year distributed.

For more information about the Consolidated Appropriations Act, 2016, refer to https://www.gpo.gov/fdsys/pkg/BILLS-114hr2029enr/pdf/BILLS-114hr2029enr.pdf

Stocks End Holiday Week Positive – Weekly Update for December 28, 2015

Markets ended the holiday week on an upbeat note, giving stocks their best week since late November. For the week, the S&P 500 gained 2.76%, the Dow grew 2.47%, and the NASDAQ rose 2.55%.

On the economic front, final data on third-quarter economic growth showed that Gross Domestic Product (GDP) grew 2.0%, down from the previous estimate of 2.1%. The report showed that a slew of global issues cut into demand for U.S. goods abroad; on the positive side, what growth we had was driven by domestic demand.

As the holiday shopping season fades, data shows that retailers are struggling to meet even modest sales goals. The last Saturday before Christmas can often make or break the season with last-minute shoppers flooding stores. However, this year’s sales were tepid, and forecasts predict holiday sales to grow 3.1% over last year, down from 4.1% growth in 2014.

The data also shows that shopping trends are shifting away from brick and mortar stores toward online retailers. Sales at physical stores dropped 5.8% over last year while traffic fell 8.0% between early November and mid-December. In contrast, online sales rose 11.8% between late November and late December. The increased online volume strained supply chains, causing some popular retailers, like Eddie Bauer [EBHI] to miss Christmas shipping deadlines.

The week ahead, sandwiched between two trading holidays, has historically been slow, though surprises are always possible. On the calendar are reports about housing and consumer confidence, which investors are hoping will show that rising fortunes in the labor market continue to translate into spending.

As we enter the final week of 2015, we’re confronted by the fact that markets may close out the year flat. While that’s frustrating for investors who were hoping to see the continued recovery translate into strong stock returns, it’s important to consider the many headwinds markets had to contend with this year: global economic weakness, historic highs, terrorism, and declining commodity prices. Stay tuned for next week’s update where we review 2015 and discuss expectations for the year to come.

Thank you for making 2015 an amazing year for us. We are honored and humbled by the trust you have placed in us as clients, and we look forward to serving you and your loved ones in 2016.

ECONOMIC CALENDAR:

Monday: Dallas Fed Mfg. Survey
Tuesday: International Trade in Goods, S&P Case-Shiller HPI, Consumer Confidence
Wednesday: Pending Home Sales Index, EIA Petroleum Status Report
Thursday: Jobless Claims, Chicago PMI
Friday: U.S. Markets Closed for New Year’s Day

2015-12-25 Market Performance Chart

HEADLINES:

Consumer sentiment rises to five-month high. Consumers regained their optimism about the U.S. economy at the end of December, pushing a measure of sentiment to the highest level since July.

Durable goods orders flat in November. Orders for long-lasting manufactured goods were flat in November and a measure of business investment fell, indicating that demand remains weak.

Weekly jobless claims close to four-decade low. The number of Americans filing new applications for unemployment benefits fell to a near-42-year low. Though seasonal factors may be affecting the data, the drop is another sign indicating that the labor market continues to improve.

Personal income rises for eighth straight month. Solid wage gains pushed up income in November for the eighth month in a row, raising hopes that consumer spending and economic growth should increase next year.

The Fed Raised Interest Rates. Now What? Weekly Update – December 21, 2015

Image courtesy of FreeDigitalPhotos.net/jscreationzs

Image courtesy of
FreeDigitalPhotos.net/jscreationzs

After a brief rally after the Federal Reserve announced its historic decision, markets ended another choppy week in the red, battered by plummeting oil prices and rocky investor sentiment. For the week, the S&P 500 lost 0.34%, the Dow dropped 0.79%, and the NASDAQ fell 0.21%.[i]

If you’re one of the millions of Americans who have better ways of spending time than watching the Federal Reserve, you may be wondering what will happen now that the Fed has voted to raise interest rates last week for the first time since 2006.[ii]

In her remarks, Fed Chair Janet Yellen said that the Fed believes that the recovery has come a long way and that the economy is ready for a “modest increase” in interest rates.[iii] The chart below will help put the rate increase in perspective:

 

ffr

Source: Federal Reserve Economic Data. Daily Effective Federal Funds Rate

After years of historically low rates, the Fed voted to raise rate targets by just a fraction of a percent. Though we don’t have definitive information about the pace of future rate increases, experts believe that the Fed is likely to raise rates several more times in 2016 and 2017, always assuming the economy remains on track for growth.[iv] Even if the Fed continues to raise rates regularly, it will take years to get back to historically average rates.

We can expect the coming weeks to be volatile for both stocks and bonds as investors adjust to the new rate environment. Historically, markets have experienced volatility after rate increases and occasionally moved into correction territory (defined as pullbacks of 10% or more). However, stocks and bonds usually experience positive returns in the initial years after the Fed begins tightening policy.[v] That being said, the past doesn’t predict the future, and we’ll be closely monitoring markets in the weeks and months to come.

Bottom line: The Fed rate raise is not necessarily a bad thing. The hike underscores the fact that the U.S. economy has made tremendous progress in the last 7 years. However, the raise also comes at a time when millions of Americans are underemployed, inflation is still below targets, and global headwinds are blowing in the face of U.S. firms. Realistically, there was never going to be a perfect time to raise rates, and it’s clear that the Fed is planning to take a gradual approach to future hikes.

Can the economy maintain its pace of growth without the Fed’s foot on the accelerator? We’ll see.

ECONOMIC CALENDAR:

Tuesday: GDP, Existing Home Sales

Wednesday: Durable Goods Orders, Personal Income and Outlays, New Home Sales, Consumer Sentiment, EIA Petroleum Status Report

Thursday: Jobless Claims

2015-12-21


HEADLINES:

Housing starts increase sharply. Groundbreaking on new construction rebounded from a seven-month low and jumped 10.5% last month. Permits for new buildings also surged to a multi-month high, highlighting strength in the housing market.[vi]

Weekly jobless claims fall. The number of Americans filing new claims for unemployment benefits dropped last week from a five-month high, suggesting that the labor market continues to improve.[vii]

Inflation remains stable. A measure of inflation – the general increase in the cost of goods and services in the U.S. – remained flat in November. However, core prices that exclude volatile food and fuel increased by 0.2%, indicating that inflation is firming up.[viii]

Industrial production drops in November. Warm weather and other factors drove the industrial sector of the economy lower by 0.6% last month. Though seasonal factors are affecting the data, lower global demand is making the effects more severe.[ix]

[i] http://finance.yahoo.com/q/hp?s=%5EGSPC&a=11&b=14&c=2015&d=11&e=18&f=2015&g=d

http://finance.yahoo.com/q/hp?a=11&b=14&c=2015&d=11&e=18&f=2015&g=d&s=%5EDJI%2C+&ql=1

http://finance.yahoo.com/q/hp?a=11&b=14&c=2015&d=11&e=18&f=2015&g=d&s=%5EIXIC%2C+&ql=1

[ii] http://qz.com/574923/the-fed-just-raised-rates-for-the-first-time-since-2006/

[iii] http://www.reuters.com/article/us-usa-fed-idUSKBN0TY2EX20151218

[iv] http://guggenheiminvestments.com/perspectives/macro-view/what-the-fed-s-rate-hike-means-for-investors

[v] http://guggenheiminvestments.com/perspectives/macro-view/what-the-fed-s-rate-hike-means-for-investors

[vi] http://www.foxbusiness.com/economy-policy/2015/12/16/november-housing-starts/

[vii] http://www.foxbusiness.com/economy-policy/2015/12/17/weekly-jobless-claims/

[viii] http://www.foxbusiness.com/economy-policy/2015/12/15/consumer-prices/

[ix] http://wsj-us.econoday.com/byshoweventfull.asp?fid=467182&cust=wsj-us&year=2015&lid=0&prev=/byweek.asp#top

Global Growth Worries Weigh on Markets Weekly Update – December 14, 2015

Image courtesy of FreeDigitalPhotos.net/Master isolated images

Image courtesy of FreeDigitalPhotos.net/Master isolated images

Markets ended a volatile week sharply down after oil hit near-seven-year lows and a major corporate merger highlighted global growth woes. For the week, the S&P 500 fell 3.79%, the Dow dropped 3.26%, and the NASDAQ lost 4.06%.[i]

Worries about the global economy took center stage last week as oil prices skidded to multi-year lows on warning of a supply glut. U.S. crude oil futures dropped over 10% lower for the week on expectations that oil prices may suffer from declining demand, high production volume, and a warm weather forecast.[ii]

Also underscoring the global weakness was the news that two of America’s largest corporate behemoths – Dow Chemical [DOW.WD] and DuPont [DD] – have agreed to combine in one of the largest mergers in U.S. history.[iii] Though the deal may yield cost-cutting benefits to shareholders, investors largely viewed it as a move to battle darkening global growth.[iv]

All this gloom and doom about the global economy complicates the upcoming Federal Reserve decision about raising interest rates. In August, when a surprise move by the Chinese to devalue the yuan sent shockwaves through financial markets, the Fed declined a rate hike.[v] Now, the Chinese are loosening the yuan again, raising concerns about the health of the world’s second-largest economy.[vi]

Will global woes derail the Fed’s intent to raise rates? We’ll have to see.

Official statements from the Fed have emphasized that the Fed is closely weighing the strengthening domestic economy against global concerns in their rate decisions. Currently, Wall Street odds strongly favor a December rate hike, with one firm putting the probability at 79%.[vii] (Data as of 12/12/15)

In the week ahead, all eyes will be on the Fed’s meeting, and investors will focus on the official announcement and Janet Yellen’s press conference on Wednesday afternoon. Investors will also look carefully at manufacturing and industrial production data to see whether global woes are affecting critical domestic industries.

ECONOMIC CALENDAR:

Tuesday: Consumer Price Index, Empire State Mfg. Survey, Housing Market Index, Treasury International Capital

Wednesday: Housing Starts, Industrial Production, PMI Manufacturing Index Flash, EIA Petroleum Status Report, FOMC Meeting Announcement, FOMC Forecasts, Fed Chair Press Conference

Thursday: Jobless Claims, Philadelphia Fed Business Outlook Survey

12-14-15

HEADLINES:

Retail sales rise in November. Americans boosted their spending in November, offering retailers hope for the season. Excluding gasoline, whose price has declined sharply, retail sales are up 0.3%.[viii]

Consumer sentiment ticks upward in December. Consumers regained some confidence this month, which hopefully bodes well for the critical holiday shopping season.[ix]

Business inventories flat in October. After a tiny increase in inventory purchases in September, businesses left their stockpiles flat in October as total business sales fell. The weakness could impact growth in the fourth quarter.[x]

Jobless claims jump to five-month high. Weekly claims rose 13,000 last week though the increase doesn’t necessarily indicate worsening conditions. Claims tend to be volatile around the holidays and underlying data remains positive.[xi]

[i] http://finance.yahoo.com/q/hp?s=%5EGSPC&a=11&b=7&c=2015&d=11&e=11&f=2015&g=d

http://finance.yahoo.com/q/hp?a=11&b=7&c=2015&d=11&e=11&f=2015&g=d&s=%5EDJI%2C+&ql=1

http://finance.yahoo.com/q/hp?a=11&b=7&c=2015&d=11&e=11&f=2015&g=d&s=%5EIXIC%2C+&ql=1

[ii] http://www.cnbc.com/2015/12/10/us-crude-oil-holds-near-2009-lows-as-global-glut-persists.html

[iii] http://www.usatoday.com/story/money/business/2015/12/11/dupont-dow-chemical-merger/77137888/

[iv] http://www.cnbc.com/2015/12/11/us-markets.html

[v] http://qz.com/572388/investors-have-already-begun-worrying-about-the-feds-second-rate-hike/

[vi] http://www.cnbc.com/2015/12/11/china-yuan-falls-to-lowest-since-august-2011-versus-dollar.html

[vii] http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html (Data as of 12/12/15)

[viii] http://www.foxbusiness.com/economy-policy/2015/12/11/november-retail-sales/

[ix] http://www.foxbusiness.com/economy-policy/2015/12/11/consumer-sentiment-ticks-up-in-december/

[x] http://www.foxnews.com/us/2015/12/11/us-businesses-left-stockpiles-unchanged-in-october-while-sales-fell-raising/

[xi] http://www.foxbusiness.com/economy-policy/2015/12/10/weekly-jobless-claims/

Jobs Report Gives Fed Green Light for December Rate Hike Weekly Update – December 7, 2015

Image courtesy of FreeDigitalPhotos.net/jscreationzs

Image courtesy of FreeDigitalPhotos.net/jscreationzs

Markets shrugged off a volatile week Friday to close positive, buoyed by a strong jobs report and an easing of uncertainty around the Federal Reserve’s next interest rate decision. For the week, the S&P 500 grew 0.08%, the Dow gained 0.28%, and the NASDAQ added 0.29%.[i]

Stocks surged late last week after a strong November jobs report gave investors renewed confidence in the economy. Data shows that the economy gained 211,000 jobs in November, beating the forecast of 200,000. More importantly, the October report was revised upward, giving us back-to-back months of strong labor market growth.[ii] The unemployment rate remained flat at 5.0%, while wages increased by 2.3% from a year ago.[iii] Digging deeper into the data, we see that jobs were created in multiple sectors of the economy, supporting broad-based growth.[iv] The upbeat report may give the Fed what it needs to go ahead with interest rate increases in the coming months.

Fed chair Janet Yellen also signaled her readiness to raise interest rates in speeches last week. She told Congress that gradual rate hikes are likely to begin in December as long as there are no major shocks that might undermine confidence in the economy. She also warned that waiting too long to raise rates might force the Fed into tightening monetary policy quickly to avoid overheating the economy.[v]

However, the news overseas is not so rosy. Markets slid on Thursday when investors here and abroad reacted badly to the European Central Bank’s new stimulus plans. Investors felt that the ECB’s plans were too little, too late, and they responded by selling.[vi] In China, economic sentiment remains cautious as additional data shows that demand is still weakening and further risks to growth exist.[vii]

Bottom line: The jobs report and other domestic data may give the Fed the boost it needs to raise interest rates at the mid-December Open Market Committee meeting. Weighing on the other side are ongoing concerns about global growth; however, as long as nothing major happens between now and the December meeting, the odds seem to favor an interest rate increase.

Looking at the week ahead, investors will be poring over November retail sales data, consumer sentiment, and inflation reports ahead of the Fed’s meeting on the 15th and 16th. Positive news would likely fuel additional speculation about a December rate hike.[viii]

Right now, markets appear to have a somewhat unhealthy codependence on central banks. As decoupling between the U.S. and the rest of the world continues, we can expect a seesaw of emotions to drive additional volatility. At the moment, a solid jobs report is being viewed favorably by investors because it takes away some of the uncertainty around interest rate hikes. However, sentiment could sour quickly when some other headline changes the odds. On top of the standard end-of-year shuffling of portfolios, we’re expecting the next couple of weeks to be volatile.

ECONOMIC CALENDAR:

Tuesday: JOLTS

Wednesday: EIA Petroleum Status Report

Thursday: Jobless Claims, Import and Export Prices. Treasury Budget

Friday: PPI-FD, Retail Sales, Business Inventories, Consumer Sentiment

12-07


HEADLINES:

Holiday deal-making drives auto sales. Black Friday and early holiday shopping propelled November motor vehicle sales to the biggest month in 14 years.[ix]

Beige book shows economic activity expanding. A Federal Reserve report of anecdotal business activity shows that the economy expanded moderately between October and November.[x]

OPEC votes to maintain production. Even as rig counts are falling under the weight of cheap oil, the important Organization of the Petroleum Exporting Countries (OPEC) organization voted to keep producing high volumes of oil to maintain market share.[xi]

Manufacturing report suggests gloom. A measure of manufacturing activity in the key Chicago area shows that a strong dollar, slowing global growth, and other factors may foretell weakness in the manufacturing sector.[xii]

[i] http://finance.yahoo.com/q/hp?s=%5EGSPC&a=10&b=30&c=2015&d=11&e=4&f=2015&g=d

http://finance.yahoo.com/q/hp?a=10&b=30&c=2015&d=11&e=4&f=2015&g=d&s=%5EDJI%2C+&ql=1

http://finance.yahoo.com/q/hp?a=10&b=30&c=2015&d=11&e=4&f=2015&g=d&s=%5EIXIC%2C+&ql=1

http://finance.yahoo.com/q/hp?a=10&b=23&c=2015&d=10&e=27&f=2015&g=d&s=%5EDJI%2C+&ql=1

http://finance.yahoo.com/q/hp?a=10&b=23&c=2015&d=10&e=27&f=2015&g=d&s=%5EIXIC%2C+&ql=1

[ii] http://www.ft.com/fastft/436001/us-october-jobs-tally-revised-up-298000

[iii] http://blogs.barrons.com/stockstowatchtoday/2015/12/04/good-enough-stocks-pop-as-payrolls-suggest-imminent-rate-hike/

[iv] http://www.bls.gov/news.release/empsit.nr0.htm

[v] http://www.bloomberg.com/news/articles/2015-12-02/yellen-signals-confidence-in-economy-ahead-of-fed-rate-decision

[vi] http://www.usatoday.com/story/money/markets/2015/12/03/stocks-set-rebound-ecb-rate-decision-looms/76711922/

[vii] http://www.cnbc.com/2015/12/03/asian-stocks-expected-to-open-lower-as-ecb-decision-fed-comments-disappoint-investors.html

[viii] http://www.foxbusiness.com/economy-policy/2015/12/04/week-ahead-inflation-retail-sales-and-consumer-sentiment/

[ix] http://www.foxbusiness.com/industries/2015/12/01/fiat-chrysler-november-sales-rose-xx/

[x] http://www.foxbusiness.com/economy-policy/2015/12/02/federal-reserve-beige-book/

[xi] http://www.cnbc.com/2015/12/03/us-crude-climbs-on-weaker-dollar-ahead-of-opec-meeting.html

[xii] http://www.marketwatch.com/story/chicago-pmi-suggests-us-manufacturing-is-still-gloomy-2015-11-30

Hixon Zuercher December 2015 Monthly Video Update