If you are someone who makes New Year’s financial resolutions and often doesn’t keep them, behavioral economics can help. Behavioral economics studies psychology as it relates to economic decision-making. Ideally, people would make the financial decisions that are appropriate and will benefit them the most.

In economics, the rational choice theory states that when presented with choices under scarcity, people will choose the option with the most personal satisfaction. However, scarcity is an economic problem that is the gap between our financial resources and wants. Scarcity requires us to decide how to use our financial resources efficiently, but often that may differ depending on our choices.

That’s where behavioral economics comes in. Sometimes we make rational decisions, and other times, irrational decisions about our financial resources. Here is a few examples of behavioral economics, rational, or irrational decision-making when it comes to our finances:

Budgeting

Buying a coffee shop latte twice a week versus daily spending, which is more than your budget allows.

Debt

Paying off credit card debt and not using credit versus making payments but accumulating more monthly debt.

Investing

Consistently investing each month versus occasionally investing, depending on market performance.

Herd Mentality

Spending and investing based on your financial situation versus spending and investing in keeping up with your peers.

When it comes to keeping New Year’s financial resolutions, understanding behavioral economics may help you make confident financial decisions in the following areas:

Personal Debt

Working toward eliminating personal debt such as credit card, auto, or other personal loans.

Investments

Determining appropriate investments for your goals, risk tolerance, timeline, and situation.

Retirement Savings

Regularly contributing to your retirement savings accounts and maximizing contribution amounts based on your age and timeline until retirement.

Insurance

Reviewing, updating, and purchasing insurance coverage for your situation to offset the risk that can derail your financial goals.

Money Management

Develop a monthly budget to help you understand your cash flow and where you can make objective improvements.

Seek Investment Help

Working with a financial professional for comprehensive financial planning and working toward it.

Behavioral economics is the psychology that can help you be mindful of the consequences of your financial decisions in the New Year. Start by writing down your financial resolutions, thinking about them, creating your plan, working toward them, and revising. It may help to discuss your financial resolutions with an accountability partner, such as a spouse, close friend, or financial professional.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking # 1-05351060

Sources:

https://www.investopedia.com/terms/b/behavioraleconomics.asp

https://www.investopedia.com/terms/s/scarcity.asp

https://www.investopedia.com/articles/02/112502.asp

Just as it is important to be physically and mentally fit, it is also important to be fiscally fit. Fiscal fitness is not only about how much money you earn or the balance in your savings or retirement accounts. Instead, it is about the relationship you have with your finances. Here are five signs that you are fiscally fit and tips on how to potentially improve the health of your wealth.

1. Grateful

If you resent your financial situation, you may not be fiscally fit. Sometimes, this might occur due to an unexpected change in your life, such as losing a job. But in other cases, resentfulness springs from poor money management habits.

Living above your means usually creates a lot of stress. It may also take a toll on your personal life. Identify areas where you may make changes that allow you to feel grateful rather than resentful about your situation. Fiscally fit people feel grateful about their money and the things it allows them to do.

2. Well-Informed

Fiscally fit people are well-informed. They understand financial essentials. They have the knowledge they need to make sound decisions about their current and future finances. That said, you do not necessarily need to know everything about finances. Ideally, you should be financially literate and bring in financial professionals as required to help you.

3. Forward-Looking

Do you think about the future? Or are you just living for today? Even if you are very comfortable and grateful about your current finances, you may not be financially healthy if you do not have a plan for tomorrow. Ideally, you should have short- and long-term financial goals and manage your money in ways that help you work toward those goals.

4. Optimistic

People who have high levels of fiscal fitness are optimistic. They are not worried about the financial aspects of the future because they have a plan in place. They save for the future and put aside enough to cover unexpected emergencies. They have insurance coverage or contingency plans just in case they develop a major illness, get in an accident, become disabled, die prematurely or encounter other unforeseen issues and challenges.

5. Confident

Having confidence about your finances is a major sign of fiscal fitness. Well-informed and forward-looking people feel confident about the decisions they make about their money. Whether splurging on a luxury item, sticking to a budget or putting money into savings, they feel confident in those decisions.

Are you fiscally fit? If the concepts above accurately describe you, then you probably are fiscally fit. If not, you may need some extra help. Consider consulting with a financial professional regularly to manage your finances.

Important Disclosures:

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #1-05345915.

For many people, a new year provides a new start—and nothing says “new start” like a fresh new set of financial goals. But setting these goals is easier said than done. What steps should you take to get the most bang for your buck over the next year? Below we discuss three New Year’s resolutions that may help you get your new year off to a great start.

Pay Off High-Interest Debt

Whether you have a payday loan, a credit card balance, a personal loan, or another type of debt that carries a higher-than-average interest rate, it’s important to make a plan to pay this debt off as quickly as possible. If you have $6,000 in credit card debt at a 20 percent interest rate, it typically takes nearly 2 years to pay this debt off at a rate of $300 per month—and you may pay $1,374 in interest in the process. If, on the other hand, you raise your monthly payment amount to $600, you end up paying the debt off in only 12 months and save $750 in interest costs.

The more you pay each month, the faster your balance is likely to drop, and the less interest may accrue. If you can’t afford to pay off your debt quickly, consider consolidating it into a single loan with a lower interest rate or transferring the balance to a 0% interest credit card.

Make a Student Loan Plan

Repayment of federal student loans has been paused since March 2020, and this moratorium is likely to continue through January 31, 2022. During this repayment pause, these loans haven’t accrued any interest, and voluntary payments that borrowers have made have gone straight toward the outstanding balance. However, beginning in February 2022, student loan holders are likely to begin repayment. If you haven’t been accounting for this payment in your budget during the moratorium, you need to add it back. You may also want to consider making some optional payments now, while they may still be applied at the 0 percent interest rate.

Create a Will or Estate Plan

More than half of all Gen Xers and Millennials don’t have any sort of written will. But while death isn’t something anyone wants to dwell on, particularly at the dawn of a new year, it’s important to have your last wishes put into writing in the event of your untimely passing. Having to navigate the accounting and division of your assets without a will may cause strife among even the closest family members. Whether you visit an attorney to discuss your estate plan or download a fill-in-the-blank form online, getting your affairs in order may be one of the greatest gifts you could give to your loved ones.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

LPL Tracking # 1-05195662

Sources

https://wallethub.com/credit-card-calculator

https://www.nytimes.com/2021/08/06/us/politics/biden-student-loan-repayment-extension.html

https://www.caring.com/caregivers/estate-planning/wills-survey/2017-survey/

Tax planning can be advantageous when done during the year and well in advance of year’s end. Opportunities exist for you to mitigate tax liability, which may leave more income for you and/or your family.

Generally, people put off tax planning because paying income taxes is an obligation. So, this “negative” view can cause frustration. It is often simpler to say, “Let’s see how everything shakes out between January 1 and April 15.” However, after December 31, all you can do is deal with your tax liability. On the other hand, if you take care of the tax planning now, you may save more on April 15.

Considering doing a trial tax return based on your projected personal income and deductions. Afterward, you can adjust your W-4 Form accordingly.

If you expect to have income that is not subject to withholding, review your required quarterly estimated tax payments. If you fail to have enough tax withheld or make sufficient estimated tax payments by the end of the year, you may be subject to penalties and interest. Adjust your W-4 or estimated payments to make up any shortfall.

It may be beneficial to keep an eye on what is happening in Congress. Tax reform is an ongoing process, and there may be more changes ahead.

If you can control when you receive income or take deductions, consider deferring income into next year if you expect to be in a lower tax bracket. Likewise, accelerate your deductions if you expect to be in a higher tax bracket this year as opposed to next. If you expect a tax change for the upcoming year, you may want to revisit this issue.

Watch out for the alternative minimum tax (AMT) if you expect to have any large tax items this year such as depreciation deductions, tax-exempt interest, or charitable contributions. To avoid the AMT, consider strategies such as re-positioning assets or delaying charitable contributions.

However, if you are subject to the AMT, consider accelerating next year’s income into this year if your regular tax bracket would be higher than the AMT rate. If your itemized deductions increase the likelihood of triggering the AMT and do not generate significant tax savings, consider postponing deductions into next year if you are subject to the AMT this year.

By considering the above tips and establishing the most suitable strategies for your situation, you may optimize your opportunities and mitigate your liability. Consult a tax professional for more information according to your unique circumstances.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

This article was prepared by Liberty Publishing, Inc.

LPL Tracking #1-05184701

TAXCHECK-X

If you’re considering giving back to society or a cause as part of your financial planning, there are many ways you can do so. You can make an impact while receiving tax benefits by including philanthropic giving as part of a holistic approach to charitable giving in your financial plan. Philanthropic giving addresses the root cause of social issues and requires a more strategic, long-term strategy. Philanthropic giving often includes inviting younger generations to participate to become part of a family’s legacy. Here are actions to guide you as you work towards having philanthropy as part of your financial planning:

Identify Your Values

Determine your reason for giving and what you want to change. Since philanthropy is giving over time, determine how long you want to give and if you want it as part of your family’s legacy for the next generation to manage.

Define Your Goals

Your financial professional can help you define your goals and implement a giving plan as part of your financial plan. Each year, evaluate how much you intend to give and when. Depending on your circumstances, you may include a giving schedule, such as quarterly or a one-time contribution each year. Other things to consider when defining your philanthropic goals include:

• Your giving in retirement

• Giving through your estate plan

• Including giving as part of a business-exit strategy

Select Your Charities

To ensure a charity is legitimate, ask the charity for details about their mission and how they’ll use your donation. The charity should also provide proof that it’s a 501(c)(3) public charity or private foundation so that your contribution is tax-deductible. As a second fact check on the charity, visit the IRS Tax Exempt Organization Search list to ensure it is a reputable, tax-exempt charity.

Understand How to Maximize Giving

Financial and tax professionals can help you determine how to maximize the tax advantages of giving. As tax laws change, your financial plan and giving plan may need to revise so that you receive the tax benefits of your gift. Here are a few ways to maximize your giving:

• Qualified Charitable Distributions (QCDs)– If you’re age 70 1/2 or older, you can use a QCD to donate directly from your IRA to the charity of your choice. This strategy allows you to deduct the amount transferred to the charity from your taxable income. You can use a QCD each year versus taking the distribution and paying taxes.

• Bunch your donations- By making charitable contributions for several years at one time, the total of your itemized deductions may exceed the standard deduction and offer some tax benefits.

• Itemize your contributions- Charitable contributions can reduce your tax bill if you choose to itemize when filing your taxes. Work with your tax professional to determine how to itemize your giving if the total of your deductions plus charitable gifts equals more than the standard allowable deduction.

Determine Which Strategies to Use

There are strategies that you can use or establish to help you organize your giving within your financial plan, such as:

• Donor-Advised Funds (DAF) – A donor-advised fund allows you to donate cash or securities, which are non-refundable, to a nonprofit organization. You may claim a tax deduction for the year you contribute to the DAF rather than the year your contribution goes to the charity. Stay in touch with your financial professional, as proposed legislative changes may impact when donors can receive the tax deduction.

• Charitable Trusts – A charitable trust allows you to donate assets to a chosen tax-exempt organization to help you minimize taxes. Consult your financial and legal professionals to help you understand how trusts work and if you intend to include giving securities as part of your giving plan.

• Private Foundations – A private foundation (PF) is a nonprofit charitable entity created by an individual or a business. An initial donation, known as an endowment, is used to generate income to make grants to charities per the foundation’s charitable purpose. Consult with your financial, legal, and tax professionals to determine if a PF is appropriate for your situation.

Consider Giving Other Assets

There are other assets you can give to charity as part of your financial plan that is not associated with securities:

• Real Estate- If you have a property you no longer need, you can donate it to charity.

• Cash – With a cash gift, you may receive a tax deduction equal to the amount of money you donated minus the value of any products or services you received.

• Life insurance – You can name a charity as the beneficiary on your life insurance contract or choose to donate the cash value accumulation each year.

• Art and collectibles – Often, gifted art and collectibles are auctioned to raise money at charity events. To use either as part of your giving, have a certified appraisal completed with reporting so that you can submit the appraisal information and the donation documentation at tax time, indicating the value of your donation. Consult your tax professional regarding how to value and report these specific assets.

A benefit of including philanthropy in your financial plan is that it helps to ensure that your goals are listed, that a plan implements appropriate strategies, and progress toward your goals is monitored. Contact your financial professional to start your philanthropic planning today.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #1-05326016

Sources

https://www.theamericancollege.edu/news-center/5-ways-financial-advisors-help-charitable-giving

https://www.investopedia.com/financial-edge/1112/the-difference-between-private-foundations-and-public-charities.aspx

As we approach the end of the year, you may want to review areas that may impact your wealth and estate planning next year. In this year-end planning guide, we examine four critical areas to consider that may affect your finances:

Generational Wealth Transfer

Generational wealth transfer may become more important when an event occurs, such as a death, a marriage, or the birth of a new family member. However, it’s essential to plan for generational wealth transfer by ensuring all these crucial actions have been completed:

• Established a Trust document- If you don’t have a trust document, your family may need to go through probate, a tedious court process to transfer your assets retroactively, which can be expensive and public.

• Updated beneficiary information- Consistently check the beneficiaries listed on your legal documents, retirement savings, and insurance plans, as these designations can outweigh what is in a will. Life transitions that may impact a change in beneficiaries include divorce, the birth of a new child, the loss of a loved one, a marriage, etc.

• Established directives- Review all legal directives such as power of attorney documents, medical care directives, and your trust document to ensure all information is up to date in case the relationship with the named individual(s) changes.

• Completed an inventory of assets- Periodically update inventory assets listed in your trust documents, such as real estate, collectibles, vehicles, etc., and intangible assets, such as savings accounts, life insurance policies, retirement plans, ownership in a company, and more.

• Drafted, reviewed, or updated a last will- It is important that your last will details your wishes regarding the distribution of your property, money, and assets that aren’t in your trust document. Remember to update your will as your financial and family situation changes.

Minimizing Taxes

Building wealth and planning for taxes are essential and often require the help of financial, tax, and legal professionals. For some, tax policies can impact how much taxes to pay domestically and abroad when living or working in a foreign country, or if they own companies in a foreign country. Consider these taxes that may impact your tax situation:

• Income tax- Income tax is a source of revenue that governments impose on businesses and individuals within their jurisdiction. If you work or own a business in a foreign country, you may need to file taxes in more than one country. For this reason, you must consult a tax professional in each country for the latest tax laws

• Estate tax and gift tax- The IRS limits the valuation of assets that can pass to heirs’ estate tax-free, and states set their own gift tax thresholds that are impacted by where the deceased resided and heirs live. As you plan for who pays taxes when your assets pass to your heirs, work with your financial and tax professionals to determine which tax-advantaged strategies are appropriate for your situation.

• Generation-skipping tax- The generation-skipping transfer tax is a federal tax that results when a property is transferred by gift or inheritance to a beneficiary who is at least 37½ years younger than the donor. Consult your tax professional on how transferring assets to a grandchild or other heir may impact their tax situation if inheriting from you.

Legacy Planning

Legacy planning is leaving a legacy for others, which often includes protecting others when you pass on your values and financial dreams. Some individuals give their wealth to benefit their children and their children’s children. If the wealth is great enough, endowments may be created to help many people over time. Legacy wealth transfer may become complex due to the types of assets you own, changes in tax legislation, economics, and political environments. You must consult financial, tax, and legal professionals to pass assets without economic consequences to heirs.

Succession Planning

Succession planning generally involves trusts, private trust companies, and foundations offered in various jurisdictions to ensure your wealth transfers to the next generation as efficiently as possible. There are two types of succession planning for individuals to consider:

• Generational succession planning- Planning to help ensure your wealth passes to the next generation and is comprehensively managed and passed to the next generation.

• Business succession planning- If you own a business, business succession planning may cover selling your business and retiring, selling but staying on part-time, and passing ownership to another family member or key employee.

Here are some other things you may want to consider in your succession planning:

• Investment strategies

• Involving the successors

• Clarify your values and purpose

• Work with professionals who will help monitor your situation across generations.

Estate planning can be challenging for some due to the complexities of their situation but manageable when done over time. Now is a great time to use this planning guide as you work with your financial professional to plan for the start of the New Year.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #1-05326016

Sources

https://www.investopedia.com/terms/g/generation-skipping-transfer-tax.asp

https://www.investopedia.com/articles/personal-finance/070715/quick-guide-highnetworth-estate-planning.asp https://www.investopedia.com/terms/g/generation-skipping-transfer-tax.asp

Your retirement is the reward after years of hard work and saving. You might dream of traveling, want to invest in a vacation home, or want to take up a new hobby. For an enjoyable retirement, saving is critical. Take charge of your retirement and work toward your goals with the help of these few tips and tricks.

1. Take Advantage of a Company 401(k) Match

When a company provides a matching contribution for your retirement savings, it is like getting free money to invest. This strategy may help your portfolio grow larger. Find out the amount of your 401(k) contribution that your company matches, and make sure you contribute that much to your 410(k). This strategy is like getting an extra company bonus each year.1

2. Start Early

No matter your age, you may save for retirement. The longer your money is invested, the greater chance you may have that your savings grows. Make your savings allocations a part of your monthly budget, like any other bill. Take advantage of payroll contributions if you have a company 401(k). If you set up an automatic savings process, you put money away with each paycheck without thinking about it.2

3. Fully Fund a Health Savings Account

Healthcare costs continue to rise yearly, and you may face significant health expenses as you age. Consider contributing money to a health savings account to prepare for these costs. When you contribute to a health savings account, it is tax deductible. You may withdraw the money tax-free as needed to pay for qualified medical expenses. In 2022, you may contribute up to $7,300 annually for a family and $3,650 for an individual. While a health savings account is a way to prepare for medical costs, it is also a way to help save for retirement. Once you hit 65, you may use the funds in the account to pay for anything, not just healthcare expenses.1

4. Find the Perfect Place to Retire

When saving for retirement, it is essential to know your goals for retirement and where you plan to retire. If you are considering moving for retirement, you might find a state that may help your money go further. Many states are good for retirees. Some have great weather, some top-notch health care services, and others do not impose a state tax. Not paying state tax on your retirement funds may make retirement easier.1

5. Look for Tax Advantages at 50

Taxes may get a little easier for you once you are at the age of 50. As you get nearer to retirement, you may take advantage of the increased limits for retirement contributions. This additional amount may help boost your retirement savings while taking advantage of the tax breaks that retirement plans offer. After age 50, contributions to a traditional individual retirement account (IRA) or a Roth IRA may increase from $6,000 to $7,0003, and you may contribute an additional $6,500 to your employer-sponsored plan.1

Get your retirement savings on track by utilizing these tips.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #1-05313109.

Footnotes

1 8 Essential Tips for Retirement Saving, Investopedia, https://www.investopedia.com/articles/investing/111714/8-essential-tips-retirement-saving.asp

2 How to Win at Retirement Savings, The New York Times, https://www.nytimes.com/guides/business/saving-money-for-retirement

3 Retirement Plans FAQs Regarding IRAs, Internal Revenue Service, https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras

Executive Summary

With inflation and interest rates on the rise and a mid-term election around the corner, it is no surprise we’re facing a volatile time in the market. In fact, by the much-contested definition of “recession,” we are already in a mild one. (The general rule of thumb is that two negative quarters of GDP signifies a recession.) Still, we’ll likely have to wait until after election season to hear the official word.

Why? The National Bureau of Economic Research (NBER) is responsible for defining when a recession begins and ends. With the election coming up in November, the non-partisan NBER does not seem to want to get political and has stayed tight-lipped.

Whatever the decision is, if we are in a recession, it’s a mild one so far. But with inflation rising, market returns on a rollercoaster, and a stubbornly inverted yield curve sticking around, it’s anyone’s guess whether this will turn into a full-blown recession or not.

Theme 1: All eyes remain on inflation.

Inflation continues to be the market’s main focus, compelling the Fed to substantially increase interest rates. We have talked at length about the relationship between rising rates and inflation, so let us dive into a different chapter in the inflation story: the Strategic Petroleum Reserve (SPR).

The SPR is effectively the U.S. government’s backup oil reserve. It’s there to serve as a buffer in case of crisis, but it is also a powerful political tool. Both the Bush and now Biden administrations have leveraged the SPR to help bring oil prices down. To deal with the current crisis, the Biden administration has been releasing 1 million barrels per day. Demand and production are stable, but much of the recent declining prices were due to the extra oil coming out of the SPR. This is set to end shortly before the next election.

Our current petroleum reserve isn’t just low — it’s the lowest it’s been since the 1980s. In addition, OPEC+ (meaning OPEC with Russia) is slowing production, and our SPR reserves diminishing. We could see energy reassert itself as an inflation driver the next quarter, especially if we avoid a deeper recession.

If inflation creeps back in and stays elevated, it will be difficult for the Fed to make their perceived pivot and could increase the chance of a more-than-mild recession in 2023. To give a quick summary, more stock market volatility is the most likely outcome.

Theme 2: A rollercoaster of returns.

Once again, volatility described last quarter. Intra-quarter returns were up close to 15% through August. The market thought inflation had peaked and began a rally, but August’s high inflation reading stopped both investors and Fed officials in their tracks.

At the most recent Sept. 20 policy meeting, chairman Jerome Powell alluded to even more planned rate hikes before the end of the year. The result of this quick pivot was a drastic selloff of bonds and stocks. Although returns were up 15%, they ended the quarter at -5%, as you can see in the Morningstar graph below.

The next graph adds to the volatility story. As you can see, at the end of August — when the market was still up about 5% for the quarter — the expectation was that Fed fund rates would be at the level they’re at now at the end of the year. Instead, they’re now projected to be 50 basis points (or 0.5%) higher. The market had to price out 50 basis points of rate hikes over the course of one month while the market went down.

Theme 3: The inverted yield curve hasn’t budged.

Rising interest rates put pressure on equities and financial conditions. Between these rate hikes and inflation, it’s no surprise the yield curve has remained inverted.

Remember, the yield curve shows the relationship between long- and short-term interest rates. When it’s inverted, a consistent explanation of this phenomenon is investors are moving short-term bond money into long-term bonds. That implies investors may be viewing the market pessimistically. The inverted curve could also signify that demand for short-term cash is increasing as banks slow lending.

Inverted yield curves have predicted future recessions with 100% accuracy. So, once again, we may already be in a mild recession with politics and NBER possibly at play.

Looking Ahead

We are heading into what I call silly season, a.k.a. mid-term election season. We would not be surprised post-election to see the news come out officially that we’re in — and have been in — a recession. It also would not be surprising to see inflation level out after the election to around 6% — well above the Fed target.

Regarding trading ranges, the S&P is currently in the 3500 – 3900 range. Below 3500, we would buy aggressively and would likely fade above 3900. That puts us in a bit of a holding pattern until we see which direction to go. For now, we have raised some cash in portfolios, and certain equity strategies hold near 10% in short-term treasuries be redeployed if we see positive signals or used to buy back into the market if we see S&P numbers drop below 3500. If we break out above 3900 and our indicators turn positive, we would then add risk. The GWS Investment Committee considers all these scenarios when managing your money.

With all the forces impacting the market, it can be hard to sift through the noise, which is why our Investment Committee does it for you. The GWS Investment Committee remains committed to the following investment management goals for our clients:

1. To pursue long-term returns that first and foremost strive to help clients work toward all goals in their financial plans.

2. To seek excess return above each portfolio’s benchmark over a three-year trailing time period and a full market cycle, in order to hopefully cover client fees and add surplus to their portfolios.

3. To implement investment strategies that align with each client’s personal volatility and benchmark sensitivity to help them remain confidently invested and long-term focused.

A lot could change as we head into election season, and we are committed to keeping you up to date on our Monthly Market Insights broadcasts at 3:30 p.m. CT via YouTube Live. Be sure to tune in! We are here to help you make sure you are doing the right things to preserve your wealth, which is part of our mission to help people become and remain financially self-reliant.

Disclosures

Securities and advisory services are offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.

The opinions expressed are those of John Gatewood as of the date stated on this material and are subject to change. There is no guarantee that any forecasts made will come to pass. This material does not constitute investment advice and is not intended to endorse any specific investment or security.

Please remember that all investments carry some level of risk, including the potential loss of principal invested. Indexes and/or benchmarks are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance and are not indicative of any specific investment. Diversification and strategic asset allocation do not assure profit or protect against loss. With fixed income securities and bonds, when interest rates rise, bond prices usually fall because an investor may earn a higher yield with another bond. Moreover, the longer the maturity of a bond the greater the risk. When interest rates are at low levels, there is a risk that a significant rise in interest rates can occur in a short period of time and cause losses to the market value of any bonds that you own. At maturity, the issuer of the bond is obligated to return the principal (original investment) to the investor. High-yield bonds present greater credit risk than bonds of higher quality. Bond investors should carefully consider risks such as interest rate risk, credit risk, liquidity risk, securities lending risk, repurchase and reverse repurchase transaction risk.

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Too many focus on immediate needs versus saving for retirement

American workers find it difficult to save for retirement because their distant financial needs tend to take a backseat to more immediate economic concerns, even if they have their day-to-day finances under control or are financially literate, according to a study by the Center for Retirement Research at Boston College.

In the issue titled: “Are Americans of All Ages and Income Levels Shortsighted About Their Finances?” researchers Steven A. Sass and Jorge D. Ramos-Mercado analyzed the results of a FINRA Investor Education Foundation survey to determine how Americans balance the need for long-term saving with their current financial concerns. The survey sample included 9,473 households in which the main respondent was between the ages of 25 and 60.

The Study

To examine the question of whether the financial assessments of workers at all income levels are shortsighted, the study created three age groups (25-34, 35-50, and 50-60) and divided each age group into terciles (three groups) based on household income, adjusted for household size.

The study looked at the respondents’ answers to questions about how satisfied they are with their personal financial condition, and about the extent to which they are able to meet specific day-to-day and distant financial needs.

The indicators used for day-to-day problems were “difficulty covering expenses,” “heavy debt burdens,” “unemployment,” and “inability to access $2,000;” while the indicators used for distant problems were “no retirement plan,” “no life insurance,” “no medical insurance,” “mortgage underwater,” “not saving for college,” and “concern about repaying student loans.”

Financial Problems Varied More by Income

Not surprisingly, the analysis showed that the incidence of financial problems varied much more by income than it did by age, as deficiencies were much more prevalent in lower- than in higher-income households.

For example, the findings indicated that 80% of households in the bottom income tercile, but only 33% of households in the top income tercile, reported that they were have difficulties covering expenses.

However, the results also showed that among respondents of all income levels and age groups, having problems with day-to-day expenses was associated with large statistically significant reductions in financial satisfaction, whereas the relationship between financial satisfaction and distant problems was much more muted. Among the distant problems, only not saving for college and not having medical insurance were associated with statistically significant reductions in satisfaction in all three age groups.

The findings further indicated that the relationships between financial assessments and specific deficiencies varied much less by income than they did by age, with people of different ages having different concerns.

For example, the inability to access $2,000 and the inability to repay college loans were associated with much larger reductions in satisfaction at younger ages, whereas having heavy debt burdens and an underwater mortgage were associated with greater reductions in satisfaction at middle and older ages.

Financial Planning Matters

The major exception to this pattern was in the area of retirement planning: the results indicated that there was no relationship between having no retirement plan and financial satisfaction among workers in any age group, and that having no retirement plan was associated with a statistically significant reduction in financial satisfaction among respondents in the top income tercile only.

Sass and Ramos-Mercado concluded that Americans of all ages and income levels appear to be shortsighted about their finances. The authors therefore recommended that steps be taken to make it easy and automatic for households to save enough to secure a basic level of financial well-being in retirement.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by RSW Publishing.

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