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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

Planning personal finances used to be the worry of the wealthy and their worry—usually preservation of wealth—was attended to by teams of trust officers and lawyers. Many of today’s middle class families have different concerns: funding retirement; educating children; protecting assets; and coping with unexpected changes in health, employment, and marital situations. But, whether your goal is to build or protect assets, it may be better to start sooner rather than later. Where to begin? Once you have the resolve, you may choose to work with a financial professional whose services resides in the planning process itself. Such an individual can help you focus on the big picture, and may hold licenses and credentials allowing him or her to provide specialized services or products related to accounting, taxes, insurance, investing, and so on. Rather than zeroing in on such issues, your financial professional will start where you are, guiding you through an organized and methodical process. Step One: Building the Relationship Financial professionals typically follow a set procedure in helping you develop a long-range financial strategy. The first step is to establish and define the relationship by delineating the responsibilities of each so that you fully understand the nature and extent of the services provided. At this point, you may discuss how the financial professional will be compensated—flat fee, a percentage of your assets, commissions paid by a third party for products included in your plan, or a combination. Steps Two through Four: Exploring Your Financial Life Step two may involve identifying your personal and financial goals, your time horizon for achieving them, and the level of risk you are comfortable assuming. A detailed questionnaire may be used. Step three consists of comparing your stated goals with your current financial situation—your assets, liabilities, cash flow, insurance coverage, investments, and taxes. Step four offers concrete recommendations on ways to help work towards your goals using your current resources. Steps Five and Six: Implementing an Action Plan Having agreed on an action plan, step five is when you and the financial professional decide who will implement the strategy. This step may involve either you or the professional engaging the services of a specialist, an insurance agent or accountant, for example. The sixth and final step is really an ongoing one: Periodically reviewing your progress toward your goals and checking that your strategy is still in synch with your objectives. Over and above your personal situation, you should feel free to discuss with your financial professional any changes in the economy, stock market, and tax laws that you think may have an impact on your financial strategy. The more “in touch” you are with your financial professional, the more attuned your financial strategy may be with your needs and goals. PFGFPL01-X 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. 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. This article was prepared by Liberty Publishing, Inc. LPL Tracking #1-05175139

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: To pursue long-term returns that first and foremost strive to help clients work toward all goals in their financial plans. 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. 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. Investors should be aware of the risks of investments in foreign securities, particularly investments in securities of companies in developing nations. These include the risks of currency fluctuation of political and economic instability and of less well-developed government supervision and regulation of business and industry practices, as well as differences in accounting standards.

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. LPL Tracking # 1-05056219

For many, autumn is the best time of year. The return of cool breezes, comforting foods, and pumpkins can be invigorating. It’s also a bookmark of sorts, especially for your finances—a perfect time to take stock of your spending after the summer’s over to see what lies ahead. These tips can help you make simple, sensible choices and take action to make the most of your money, from your food choices to your financial options to protecting your most valuable assets. Bask in the Bounty Autumn is all about fresh food, and you can get more bang for your buck with these tips. Fall Fruits & Veggies: This one’s all about supply and demand: you can usually get good prices on in-season fruits and veggies because they’re so plentiful. So stock up on autumn produce like apples, beets, pomegranates, squashes, and sweet potatoes, to name a few. They’ll be bursting with flavor and health benefits—especially at the local farmers market—without busting your budget. Store Up Soup: Speaking of fresh vegetables, they go really well in soup, another fall favorite—making it easier for you to maximize the produce you buy. A bonus for your bottom line: soup also freezes quite well. It can last up to three months frozen, so you can make one large pot of it and feed your family for weeks. Focus on Financials It’s been said that planning is bringing the future into the present so you can do something about it now, and that’s especially true when it comes to your end-of-year finances. Work Benefits: Company benefits often begin on January 1, so pay close attention to your company’s open enrollment period to determine the best insurance option for you and your family. Consider benefits like a flexible savings account (FSA), a health savings account (HSA), and a 401(k) (especially if there’s company matching) to determine what would best suit your family. Two important things to keep in mind: just because your benefit choices worked for you this year, it doesn’t mean they will next year, and for an existing FSA, make sure to use your money if there’s an end-of-year deadline! Finally, any company-sponsored discounts (such as a weight-loss program or gym membership) need to be submitted by the end of the year, so make sure to submit the paperwork to cash in. Education: If you have kids in college, look ahead to the spring semester. Granted, you may think “They just went back to school,” but now’s the time to focus on financial education planning. Keep an eye out for federal financial aid (FAFSA) application deadlines (which usually open in early fall). Spring tuition for many colleges can be due as early as November and as late as January, so mark it on your calendar and plan accordingly—especially with holiday bills also on the horizon—to avoid getting docked with late fees. Investments: Things change all the time in the finance world, especially taxes and laws, and these tend to go into effect in the new year. If you’re looking ahead with your other investments, such as your stock portfolio or loans, be well educated about your options and about what’s happening—and expected to happen—going forward. The best course of action? Touch base with your financial advisor, who can steer you on the path that’s right for you. Holiday Shopping: Many times, I’ve paid the price (literally and figuratively) for waiting until December to take care of my holiday shopping—when you’re desperate, stock is depleted, and the calendar is dwindling down, you’ll tend to pay full price. But if you’re smart about it, you can plan ahead and enjoy the holiday rush. During the next several weeks between now and Black Friday be intentional as you prepare for what you want to buy—and what you want to pay for it. Scour the internet, and keep a spreadsheet of prices; that way, you’ll get a sense of what you can expect to spend and what’s a good deal. Also, be sure to set aside a little money out of every paycheck for the holidays—or do what I do: know your calendar. If you get paid biweekly, two months out of the year have an extra payday; October is one such month this year. See if you can dedicate part or all of your extra check to your holiday shopping, which will really help when the January credit card bills arrive. Don’t Wait for Winter Take advantage of the lovely autumn weather to cut down your bills—and prevent costly ones. Home: Fall is a great time to get your home ready inside and out for winter, which can offer big cost savings. Cleaning out your gutters in late autumn, when all the leaves have fallen, can help you avoid drainage trouble in winter, when it might also be difficult to remedy the situation. If your driveway or sidewalk needs repair, do it now before rain and ice seep into the cracks and holes, potentially causing costly underlying damage. And speaking of ice, if you live in a cooler climate, make sure that you remove outdoor hoses, turn off your water supply to outdoor spigots, and drain the spigots; otherwise, when the nighttime temperatures creep toward freezing later in the season, you may find yourself in a world of financial hurt when your pipes freeze. Inside, you can cut down on future bills by ensuring your home is warm during the coming months. Have your furnace (and fireplace, if you have one) serviced and change its filter so it’s at peak capacity, and check your windows and doors for drafts and cracks, sealing where needed. Car: Much like you can with your home, taking necessary steps to winterize your car now can save you financial headaches down the (icy) road. Check your antifreeze level and temperature, tread life and balance of your tires (which should also be rotated), and the status of your wipers and windshield fluid. Have your heater and defrosters checked to make sure they are functioning well, and make sure you have an emergency kit. LPL Tracking #1-05175159

We were happy to see a peaceful transition of power at the Presidential Inauguration today and look forward to unifying our country. In today’s update, I’ll cover the proposed stimulus bill and possible tax and infrastructure policies coming out of the new administration. Biden Unveils $1.9 Trillion COVID Stimulus Plan President Biden’s proposed stimulus plan includes a central promise for most Americans to receive direct payments of $2,000. However, it has been reduced by $600 from approval by the Congress and President Biden in December. President Biden is pushing for $350 billion in funding assistance for state and local governments plus $20 billion for public transit systems. President Biden would also like to extend the unemployment benefits until mid-March. What was new with this proposal was that President Biden called for doubling of the minimum wage, from $7.25 to $15 per hour. The wage increase will seek to end the compensation structure for those in the service sector, who are largely compensated through tips and have a minimum wage of $2.13 per hour. This $1.9 trillion economic package is largely in line with what was previewed by the press. But if you looked at the banks, they were expecting $750 billion to a trillion dollar range. We think a lot of that has to do with President Biden taking a moon shot for negotiation reasons. Not only will the Republicans balk at those numbers, it is probably even overly aggressive for centrist Democrats. Centrist Policy Views We have been using a lot of Goldman Sachs analyses, because we believe they have credible information and great visual representation. The graph below shows us the political spectrum that many people in the Senate are falling on. In the center, we can see that there are more centrist Republicans than extreme Republicans. On the flip side, there are more extreme Democrats than centrist Democrats. Therefore, the Senate has more in common with that centrist Republicans than they do the extreme Democrats. President Biden has said that he does not want to use the reconciliation process — which requires 60 votes — to pass this bill. Even if the bill were to use reconciliation with a 50-50 split in the Senate and very narrow margins of the house, it would require basically every Democrat to vote unanimously. That’s a pretty tall order, based on the chart above. Therefore, this is likely to constrain what Democrats might accomplish even via that reconciliation. Second, the reconciliation process has never been used to pass discretionary spending. It appears that half of this proposal (including state and fiscal aid, education grants, and public health spending) will fall in this category where the centrist Democrats probably are going to push back and not pass the bill in its entirety. Coronavirus Relief and Fiscal Stimulus Proposals President Biden has released the details of his COVID-relief plan, which the transition team estimates to cost $1.9 trillion (8.6% of GDP). We do not expect all of the elements of the proposal to pass, with revisions in areas that have been contested for some time. Near-term fiscal measures from $750 billion (3.4% of GDP) to $1.1 trillion (5% of GDP). This is likely to be the first of two major proposals with a second proposal dealing with taxes, infrastructure, and benefit programs to pass around mid-year. Again, this is likely why President Biden is putting out such big numbers early on — so he can has negotiating power for a package closer to $1 trillion later in the year. Will Personal Taxes Rise? We’ve been getting a lot of questions from clients along the lines of, “With both the House and Senate now controlled by Democrats as well as President Biden, what will it look like under Democratic rule?” We don’t subscribe to dire straights people have put out there that things will be fundamentally different. Upper-income tax rates will most likely increase to finance other personal tax reductions. But if you look at the graph below, you may be asking yourself who is going to bear the brunt of that at 0.1% or the top 1%? Well, 95-99% percentile and income is going to see a marginal increase in their taxes. Congress will likely reverse some of the individual income tax changes that Congress passed in 2017, but a net increase in personal taxes is not expected. Specifically, Goldman Sachs believes the top marginal rate to go back to 39.6% from 37% and limitations on itemized deductions to return. However, since the changes the 2017 tax law made in both of those areas expire after 2025, this would only raise around $160 billion over ten years, according to estimates from the Tax Policy Center. For more context, many of these 2017 tax laws were passed via the reconciliation process at the time. They were only able to pass with a number of timetables and sun setting clauses for when they expire. So, Democrats don’t even necessarily have to increase taxes at this point — they can just let the 2017 tax laws expire, and many of the changes would go away. We do not think we need to have increases in taxes, but what we do think is more deductions for state and local income and property taxes. A higher income tax and other taxes were benefiting from the deductions. Having some type of slight increase in the taxes with a reduction in or bringing back those itemized deductions in some manner will probably be some type of tax increase. There have also been questions regarding Social Security taxes. Biden's proposal is to apply 12.4% of Social Security payroll tax on incomes over $400,000, which would probably be the biggest tax increase seen in his policy. That's unlikely to go through, because it cannot be done via reconciliation and would need those 60 votes. Therefore, the item that is probably the largest tax increase is arguably the most unlikely to get pushed through. Will Capital Gains Taxes Increase? What about capital gains taxes? Capital gains taxes are unlikely to rise as much as President Biden has proposed. During the presidential election campaign, President BIden proposed that long-term capital gains and dividends should be taxed at the rate of ordinary income tax – 39.6% for any individual whose income was over $400,000. It's harder to roll out any tax increase on capital gains and dividends. However, if the Congress does re-raise the rates on capital gains and dividends, it is a good thing to point to. Will Corporate Taxes Rise? Continuing with Goldman’s analysis, they expect that corporate tax increase to be no more than 25%. This is in line with the corporate tax rate that President Biden campaigned on. There is not going to be sufficient support for congressional Democrats to implement these proposals, but there will be enough support amongst centrist Democrats to raise the corporate tax rate, probably around that 25%. One thing to note is that each percentage point increase will generate a $100 billion in additional revenue, according to models (we all know an increase in taxes would also change behavior). This would increase about $400 billion over the next 10 years. This shows you how much more spending is happening vs. additional revenue. Infrastructure Plan The infrastructure plan is likely going to focus on taxes, infrastructure, and renewable energy. The believed price tag is at $3 trillion. We won’t get deep into this yet, since we haven’t even seen a proposal (which will likely come at the end of summer). For the infrastructure build to be proposed, there has to be some type of consensus to the moderate Democrats with some of the Republicans. Money Supply The money supply is the green line. We can see that it is above the money supply growth all the way back to 2012. A lot of it is the $600 stimulus checks that are starting to hit people's banks account and we still have the $1-2 trillion package that is being presented for the next stimulus package. Fed leadership has been pushing back against premature tapering, which could constrain the money supply growth. They want to see a 2% inflation for a year before raising rates. Why is that important? Usually once it hits an annualized 2%, the central bank would begin to slow the money supply growth because you do need to get ahead of inflation. If you let it continue on for a full year you risk runaway inflation. Fed Chair Powell said the economy is far from the Fed’s employment and inflation goals. Therefore, it is not the time to be talking about exiting the market with a aggressive monetary policy. Q4 Earnings Begin in Earnest Earning season is wrapping up this week, even though it is a short week. We are going to see 43 companies in the S&P 500 to report. The consensus expects the S&P 500 to report the fourth quarter year over year earnings percentage growth of -11% as virus restrictions still are tampering the growth of cyclical sectors. U.S. Consumer Prices Rise for 7th Straight Month Now we’re back to our inflation theme. We’ve seen prices rise for seven straight months, a rate we haven’t seem for some time. Consumer price has all items in that basket. There’s still a drag on services, because restaurants and service companies are not moving up. However, we are beginning to see that roll off as well. Commodities are leading the charge (think food bills — we’ve all seen that), but gasoline is beginning to move up as well. A lot of the things that have been holding the Consumer Price Index back, but now have a stabilized based and are beginning to move up. Price Points for Dollar Cost Averaging Let’s look at price points. The market continues to trend up. We can see that long-term trend — a slope of about 10% annualized. We expect to see long-term rates around 6% for equity returns after adjusting for inflation. With 10% you're going to have pullback to dampen that slope as well as inflation pulling some of that off. We are certainly in line with how the market continues to react. A lot of people are worried about market valuations with the amount of stimulus that is being produced, both fiscal and monetary that the market is acting in a rational way, and it is not significantly overvalued. Everything is certainly priced to rich premiums. However, when you consider other options, we think equity markets are attractive, and that is why they continue to move up. U.S. Dollar Index If we look at the dollar index the last couple of weeks, we have seen a stabilized price and the dollar, though we are near lows. We ultimately expect the dollar to push further below and we will move into a cycle where the dollar has been declining relative to other currencies, after it has been strong for so long. Near Term Relative Strength Despite severe headwinds for small companies, large businesses increase taxes with a possible increase of the minimum wage, which would certainly hurt the smaller companies. They have a lot of bumps in the road, but nonetheless these companies are outperforming the other sectors. This has been an area that continues to outpace. Just during this time frame, the S&P 500 is the leading index up 6.33% for the year, but obviously things will continue to change. We expect to see a number of changes over the next 100 days of the Biden administration. We don’t see anything extraordinary that will impact the market negatively, but we are always ready to address black swans. What’s more important than unknown risk are the unknowable. For now, we believe the market and economy will move forward throughout 2021. For real-time updates, be sure to tune in on Tuesday – Thursday on YouTube LIVE for our “Daily 3x3” livestreams and Wednesday for “Market Insights.” Follow us on our Facebook, LinkedIn and YouTube so you never miss updates! --- 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. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risk including the possible loss of principal. No strategy assures success or protects against loss. Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.