Category: Insights

Read all of the insights coming from the experts at confluence financial partners.

  • How to Nurture Moneywise Children

    Teach your children to treasure their financial legacy.

    Most parents appreciate the importance of traditional education in their child’s development considering the obvious intellectual and social benefits. Yet all too many forget that a financial education is also crucial for ensuring their offspring’s long-term well-being.The good news is it’s never too early or too late to begin sharing your financial wisdom and experiences with your family. By taking the time to teach your children the value of money, you’ll have the comfort of knowing they’ll understand how to care for their own financial legacy when the time comes.

    An Essential Skill

    Like reading, financial literacy is an essential skill, but unfortunately, it’s not typically taught in school. Rather, it’s up to parents to pass on their financial knowledge to ensure the next generation is capable of taking care of the wealth they’ve built.

    Pre-kindergarten age is a great time to introduce the basics, including the idea that you must work to earn money in order to pay for items and services, as well as the value of different coins and bills. As they get a little older, your child can start doing chores and earning an allowance. Help them go through the motions of saving up for something they’d like to buy and deciding whether or not it’s a worthwhile purchase.

    With pre-teens and teenagers, there are several other steps you can take, such as helping them open a savings account with their earnings from chores, babysitting or other jobs. Share your own tips on managing a budget and introduce them to the concept of investing and saving for retirement. Simply being transparent with your children about the realities and costs of living can go a long way in preparing them for the future.

    Sharing Your Financial Legacy

    While products such as trusts and wills can help ensure your wishes are carried out, they can’t give your heirs the true understanding of how to save, grow and spend money wisely. In fact, if your children are going to receive a sizable inheritance, they may get overwhelmed by sudden wealth without a solid foundation to rely on. It’s also a good idea to introduce your children, when they’re ready, to your financial advisor and other professional partners, so they’ll know where to find expert guidance when dealing with money issues.

    Next Steps

    • Write out a sample budget with your children, explaining the expenses you have each month, such as utilities and groceries
    • Help them open a savings or checking account
    • Schedule a time for them to join you for a meeting with your financial advisor

    Family and Life Events

    August 14, 2019

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    Katie Montagazzi

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  • Make Lasting Memories by Savoring Life’s Simple Joys

    Make Lasting Memories by Savoring Life’s Simple Joys

    While extravagant vacations are great, you don’t need to spend a lot of money to make meaningful memories with your loved ones. A slow morning on the first day of summer. Baking cookies with the littles. A great meal surrounded by close friends or family. The best memories come in all shapes and sizes, both planned and unplanned. And while there’s nothing like going on that vacation you’ve been looking forward to for months, sometimes it’s the small, unexpected delights that stay with us the longest.

    So how can you lead a life with more moments worth savoring? Here are a few tips to help you get started.

    Focus on the Little Things

    There’s nothing wrong with a bucket list full of exotic travel destinations or goals to buy that yacht or plan a big family reunion. After all, helping you work toward those goals is what a well-planned life is all about. Still, that’s usually not our day-to-day life. There are so many moments in between those grander experiences that are opportunities to explore smaller joys that, when added together, can be just as memorable or fulfilling as a big trip.

    Start by picturing your perfect day. What do you do or eat? Who and what do you see? Perhaps it’s reading a book, listening to music or getting outside. Maybe you want to spend more time with close friends. After thinking it over, consider how to bring a few of those elements into your regular routine.

    For example, maybe you want to get outside and see one of your friends more often. Consider putting a weekly date on the calendar with them to go for a walk, helping you fulfill both goals. Or perhaps you want to spend more time with your grandkids and also do more at-home cooking. Can the kids help? It could turn into an opportunity to not only spend time together, but for you to share some of your skills and insights with the next generation – doing something as simple as making a pizza.

    When trying to find ways to bring the whole family together, consider what everyone is most interested in. Do your kids or grandkids have favorite activities you can do together? Maybe it’s going to an escape room or planning a watch party for their favorite show. Better yet, take turns choosing the plans for a monthly get-together. Experiences are a great way to connect and they make excellent gifts, too.

    Commit to Unplugging

    Social media has given us unprecedented access to loved ones near and far, and it’s made it easier than ever to share our lives (for better or for worse). But while it makes capturing a moment so easy, social media can also put extra pressure on ourselves and our experiences to be and look perfect – making it that much harder to cultivate and cherish authentic memories.

    Moreover, according to Psychology Today, the average American has five social media accounts and spends an hour and 20 minutes each day browsing their feeds. That’s more than 37 hours every month! Imagine the memories we could create over a year with that time.

    If you’ve found yourself getting sucked into social media, consider taking a break or limiting the time you spend scrolling. Time management apps and new settings on phones allow you to set timers so you receive an alert when you’ve gone over your allotted time on specific apps.

    Learn to Be Present

    It’s hard to fully take in a great moment when we’re distracted, whether by our never-ending to-do list or our phone. Learning how to quiet our mind for even short periods of time can leave us open for moments of serendipity and spontaneity. Perhaps you run into a friend at the grocery store and decide to catch up over lunch, or spot a bed of flowers in full bloom while on a walk – both things you may have missed while checking your phone or worrying over all the errands on your list.

    Meditation has been proven to help reduce stress and anxiety while improving our concentration. And with several popular apps out there with guided meditations, it’s never been easier to give it a try. While some require subscriptions, most offer a free trial so you can see how you like it before making a commitment.

    Enjoy the Moments Worth Living For

    Living for the moment is all about applying that stop-and-smell-the-roses mindset to your daily life. That way, even when you aren’t cruising the Mediterranean or celebrating your birthday with a bash, you might just stumble upon a few more exciting moments and soak up some extra memories along the way.

    Sources: Psychology Today; Huffington Post

    Raymond James is not affiliated with any organizations mentioned.

    Family and Life Events

    June 26, 2019

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    Katie Montagazzi

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  • End of Year Tax Savings Strategies

    Check This List – Twice – Before Year-End

    Proactive investors know that the months before year-end are an ideal time to make any final tax-saving moves.

    While keeping in mind your long-term investment goals, meet with your advisor and coordinate with your tax professional to examine nuances and changes that could impact your typical year-end planning.

    Mind Your RMDs

    Be thoughtful about required minimum distributions (RMDs) to ensure that you comply with the rules. If applicable and you have yet to do so, take your 2017 RMD to avoid a 50% penalty on required amounts not taken. Other considerations:

    • By automating your RMDs with your advisor, ensure that you never miss this important deadline.
    • You can take your first RMD during the year you reach age 70½, or you can delay it until April 1 of the following year. Know, however, that if you delay and take two distributions in the first year after turning 70½, your income could be inflated, which may affect your tax-bracket standing.
    • Subsequent RMDs must be taken no later than December 31 of each calendar year.
    • Qualified charitable distributions allow traditional IRA owners who transfer RMDs to qualified charities to exclude the amount donated from their adjusted gross incomes, up to $100,000.
    • Be mindful of how taking a distribution will impact your taxable income or tax bracket. If you have space left in your bracket or a down income year, you may want to consider taking additional distributions.

    To Harvest or Not to Harvest

    Evaluate whether you could benefit from tax-loss harvesting – selling a losing investment to offset gains or establish a deduction of up to $3,000. Excess losses also can be carried forward to future years. With your advisor, examine the following subtleties when aiming to decrease your tax bill:

    • Short-term gains are taxed at a higher marginal rate; aim to reduce those first.
    • Don’t disrupt your long-term investment strategy when harvesting losses.
    • Be aware of “wash sale” rules that affect new purchases before and after the sale of a security. If you sell a security at a loss but purchase another “substantially identical” security – within 30 days before or after the sale date – the IRS likely will consider that a “wash sale” and disallow the loss deduction. The IRS will look at all your accounts – 401(k), IRA, etc. – when determining if a wash sale occurred.

    Manage Your Income and Deductions

    Those at or near the next tax bracket should pay close attention to anything that might bump them up and plan to reduce taxable income before the end of the year.

    • Consider making a donation. Giving to a charity can benefit a cause you care about and reduce your taxable income. Make sure your gifts are well-documented. You also can gift up to $14,000 tax free to as many individuals as you wish.
    • Determine if it makes sense to accelerate deductions or defer income, potentially allowing you to minimize your current tax liability. Some companies may give you an opportunity to defer bonuses and so forth into a future year as well.
    • Certain retirement plans also can help you defer taxes. Contributing to a traditional 401(k) allows you to pay income tax only when you withdraw money from the plan in the future, at which point your income and tax rate may be lower or you may have more deductions available to offset the income.*
    • Evaluate your income sources – earned income, corporate bonds, municipal bonds, qualified dividends, etc. – to reduce the overall tax impact.

    Evaluate Life Changes

    From welcoming a new family member to moving to a new state, any number of life changes may have impacted your circumstances over the past year. Bring your financial advisor up to speed on major life changes and ask how they could affect your year-end planning.

    • Moving, for example, can have a significant impact on taxes and estate planning, especially if you have relocated from a high income tax state to a low income tax state, from a state with an estate income tax to one without or vice versa, or if you have moved to a state with increased asset protection. Note that moving expenses themselves, however, are no longer deductible as an itemized deduction for non-military members.
    • Give thought to your family members’ life changes as well as your own – job changes, births, deaths, weddings and divorces for example can all necessitate changes – and consider updating your estate documents accordingly.

    Next Steps

    Consider these to-dos as you prepare to make the most of year-end financial moves, and discuss with your financial advisor and tax professional:

    • Manage your income and deductions, paying close attention to your tax bracket, especially if you are on the edge.
    • Remember to take your RMD, if applicable.
    • Evaluate your investments, keeping in mind whether you could benefit from tax-loss harvesting.
    • Make a list of the life changes you and your family have experienced during the year.

    *Withdrawals prior to age 59 1/2 may also be subject to a 10% federal penalty tax. RMDs are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation. Raymond James advisors do not provide tax advice. 

    TAX PLANNING

    November 21, 2018

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    Greg Weimer

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  • Redefining Your Retirement

    Redefining Your Retirement

    Today’s retirees are choosing from a variety of retirement styles. What’s yours?

    Although an estimated 10,000 baby boomers reach retirement age every day, how each chooses to spend their free time can be quite different. Today’s retirees wish to forge new identities and seek new experiences, while redefining how they spend their time and money.

    See if one or more of these new retiree profiles resonates with you. Deciding how you’ll stay busy can go a long way toward helping you plan and save for your dream retirement.

    The Giver

    Givers contribute time, talent and, yes, even money to support causes close to their hearts. While the typical American spends 20 minutes a day engaged in volunteer, civic or religious activities, the Giver over age 65 dedicates a half hour or more, according to the Bureau of Labor Statistics.

    One retiree may use her musical talents to play the violin for hospital patients, while another works behind the scenes updating a nonprofit’s website. Either way, it’s all about making a meaningful difference.

    Note: Givers may become too altruistic, spending more time and money than planned, undermining health or financial stability.

    Givers represent 33% of working retirees.

    The Thinker

    Thinkers have a deep desire for lifelong learning. They may retire in a college town, take classes, read for pleasure and engage in contemplative activities.

    Many colleges and universities are designing courses aimed at this new senior class. Campuses can be found in areas with affordable housing, quality education, teaching opportunities, walking and biking trails, and excellent transportation, healthcare and entertainment options.

    Note: If you’ve established a 529 plan for a child or grandchild, you may be able to use unneeded funds for your own continuing education. Ask your financial advisor about potentially withdrawing funds without penalties.

    Cognitively active people are 2.6 times less likely to develop dementia or Alzheimer’s.

    The Entrepreneur

    Entrepreneurs typically start a business that’s different from a past career, bringing decades of experience, success, passion and emotional intelligence to their new ventures.

    Goals include a fulfilling career, increased flexibility and enjoyment in their work. Some hope their new endeavors will becomes self-sustaining, while allowing for work/life balance.

    Note: A small business entails a business plan, startup costs, insurance and a financial plan. Work with a professional tax planner and financial advisor to build a successful venture.

    Nearly 3 out of 5 working retirees consider a different line of work.

    The Explorer

    The Explorer dedicates up to a quarter of their financial resources on travel. These globetrotters invest in experiences and indulge their wanderlust while they have the health, energy and resources.

    Good saving habits help Explorers immerse themselves among other cultures, foods and languages.

    Note: Plan for ongoing travel expenses, desired location, frequency and duration, as well as inflation and foreign exchange rates. Health-related issues may become a limitation in later years.

    There are just as many Explorers over age 75 as there are among younger groups.

    The Part-Timer

    The Part-Timer, like the Entrepreneur, seeks a career change, but may not wish to commit to a full-time position. Some favor mini-retirements – periods of work followed by intermissions for relaxation. Think consulting and contracting, for example.

    Note: Returning to work, even part time, can incur expenses such as new work attire, transportation and dining out. Evaluate the impact of additional income on your current tax bracket, Social Security benefits, healthcare coverage, and potential contributions to retirement plans.

    There are more than 7.1 million Part-Timers age 55 or older.

    The Foodie

    Foodies prefer quality dining and enjoying the experience of the meal. They typically spend about an hour and 20 minutes when dining, relishing how food and drink increases their quality of life. They enjoy experimenting with new creations, introducing new flavors or bringing friends and family together.

    Since the Foodie spends time shopping for and preparing meals, other expenses are typically lower.

    Note: Food connoisseurs need to factor in healthcare costs and inflation, as well as utilities and transportation.

    Foodies spend, on average, 28% of their income on food and beverage.

    The Athlete

    The Athlete may compete in triathlons or play tennis into their 80s and beyond. They stay in top form and enjoy training and competition.

    As the Athlete eventually slows down, or faces sudden illness or injury, healthcare costs can account for a significant share of retirement income, including Medicare expenses, prescriptions or long-term care needs.

    Note: It’s important to budget for proper equipment and training. Select an appropriate Medicare or healthcare policy and account for expenses that aren’t covered. Be sure to factor in inflation and long-term care or assisted living.

    Approximately a third of Americans over 65 are considered physically active.

    Next Steps

    • Decide what type or types of retirement styles you’d like to pursue
    • Further explore the necessary steps to achieving your goals
    • Talk to your financial advisor about the best strategy for turning your retirement dream into reality

    Sources: Journal of Financial Planning: “How retirees spend their time”; Bureau of Labor Statistics; Robert S. Wilson, Ph.D., Rush Alzheimer’s Disease Center; Work in Retirement: Myths and Motivation; J.P. Morgan “Cost of Waiting” study; President’s Council on Fitness, Sports & Nutrition

    Earnings in 529 plans are not subject to federal tax, and in most cases, state tax, so long as you use withdrawals for eligible education expenses, such as tuition and room and board. However, if you withdraw money from a 529 plan and do not use it on an eligible education expense, you generally will be subject to income tax and an additional 10% federal tax penalty on earnings. Investors should consider before investing, whether the investor’s or the designated beneficiary’s home state offers state tax or other benefits only available for investments in such state’s 529 savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. 529 plans offered outside their resident state may not provide the same tax benefits as those offered within their state.

    RETIREMENT AND LONGEVITY

    August 15, 2018

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    Marissa Dinello

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  • 2 Things Every Investor Should Know About SECURE Act 2.0

    In late December, a $1.7T omnibus spending package was passed in Congress and subsequently signed into law by President Biden. This bill included some significant updates to the landmark 2019 SECURE Act, such that this portion of the legislation is being referred to as SECURE Act 2.0.

    While there are many important updates in the law, I’d like to focus on two items that we believe are especially significant

    1. Required Minimum Distribution (RMD) Age Increase

    Beginning 1/1/2023, the new beginning age for RMDs will be 73. By 2033, the age for RMDs will be pushed back further to 75.

    This means that investors who will turn 72 in 2023 received a pass on what would have been their first RMD! It also means that the window of opportunity for income planning in retirement is extended.

    Some of the most opportune years in terms of income planning are the years between retirement and when RMDs begin. In these years, individuals tend to be in a relatively low tax bracket, because they no longer have high employment income and they also don’t yet have required income coming from their retirement accounts.

    If these retirees are able to live on Social Security and income from taxable brokerage accounts, they could end up in an unusually low tax bracket. These years can then be used to “harvest” capital gains at a 0% tax rate, or convert portions of a traditional IRA to a Roth IRA. The lower adjusted gross income can also help retirees save on things like Medicare and Social Security taxes.  

    Pushing the RMD age out to 73 and then 75 will give retirees additional time to take advantage of these opportunities.

    2. 529 accounts to Roth IRAs

    For the first time, 529s will be allowed to rollover tax-free to Roth IRAs, albeit with significant restrictions.

    The total amount allowed to be rolled over in aggregate is $35,000, and the rollovers must be done in accordance with the annual Roth contribution limits (currently $6,500 for those under age 50). In addition, the 529 must have been established for at least 15 years.

    This change will help to alleviate investor fears of what may happen to 529 funds if the beneficiary chooses not to pursue higher education.

    The change also allows for a strategy whereby investors begin planned rollovers to a Roth IRA once the beneficiary turns 16. At today’s limits (which will be adjusted up for inflation), a 529 beneficiary could have $35,000 plus earnings saved in a Roth IRA before graduating from college. That is a solid head start!

    If you have questions about how these opportunities could affect your financial planning, please call one of our offices to speak with a wealth manager today.

    See below for additional key provisions in SECURE Act 2.0:

    Marissa Dinello
    About the Author

    marissa.dinello@confluencefp.com
    Email Marissa

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    Marissa Dinello

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  • Banking Safety in Uncertain Times: A Guide to Deposit Accounts and Cash Investments

    The banking system recently became front-page news following the failure of two banks in March. The headlines related to bank failures can illicit very emotional responses about safety of deposit accounts and cash investment solutions.

    We believe it is more important than ever to look through the headlines to the fundamentals of cash management.

    Cash management fundamentally breaks down into two categories:

    1. Deposit accounts, and
    2. Cash investment solutions.

    While the two have similarities, there are fundamental differences with structure and protection.

    Deposit Accounts

    • Bank Deposits: Interest-bearing account at a banking institution, such as a savings or checking account.
      • These accounts do not have market risk.
      • Insured by the Federal Deposit Insurance Corporation (FDIC) to applicable limits
        • FDIC deposit insurance is backed by the full faith and credit of the United States government. Currently, FDIC coverage extends to $250,000 per owner (and per account type), considering the underlying banking institution. For example, a joint account may have $500,000 of FDIC coverage at a single banking institution.

    Cash Investment Solutions    

    • Certificates of Deposit (CDs):  Investment that earns interest on a lump sum basis for a defined period of time.
      • In contrast to deposits, CD’s typically offer higher interest rates versus bank deposits to compensate for monies being unavailable during the life of the investment.
      • FDIC coverage applies to $250,000 per individual per issuing institution.
    • Individual Treasuries: Securities issued by the US Government, can be interest-bearing or zero coupon (earn lump-sum at maturity). The term of Treasuries can vary significantly: 4 weeks to 30 years.
      • Exempt from state and local taxes, but subject to federal tax.
      • Not covered by FDIC insurance, rather explicitly backed by the full faith and credit of the United States government.
    • Government Money Market Mutual Funds: Mutual funds that invest in Treasuries and US Government securities, paying interest on a recurring basis. Government money markets target a stable $1.00 value (not guaranteed)
      • Not FDIC insured.
      • Money market mutual funds underwent significant changes starting in 2016, which introduced redemption fees and liquidity gates, an effort to introduce a tool to combat any “run” on money markets. Only government money market funds are exempt from the rules surrounding redemption fees and gates (however, they can adopt them if previously disclosed to investors). Currently, none of the government money market funds offered by Raymond James have adopted redemption fees and gates.

    In addition to FDIC insurance and backing of the full faith and credit of the US government, most assets held at firms such as Raymond James are covered by the Securities Investor Protection Corporation (SIPC), to applicable limits. The SIPC was established in 1970 and protects client assets up to $500,000, including $250,000 of cash. SIPC account protection would apply in the event a firm fails financially and is unable to meet obligations to clients, not against a loss in market value.

    Despite the negative and unsettling headlines, there are multiple robust cash management solutions available to clients, with multiple layers of risk mitigation. At Confluence Financial Partners, we believe in the soundness of our banking system and maintain complete confidence in our client cash management tools. 

    William Winkeler
    About the Author

    Bill has more than 15 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the Investment Advisory Committee and develops and implements investment strategy for clients of the firm, as well as communicates investment content with clients.

    Pittsburgh

    724-719-6600
    bill.winkeler@confluencefp.com
    Email Bill

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    William Winkeler

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  • Stock Market Recap: April 2024

    Month in Review

    • April saw major bond and stock markets decline due to a shifting interest rate outlook, following higher-than-expected inflation data. The S&P 500 had its first 5% or greater drop since October 2023 in April.
    • In the equity market – areas with greater sensitivity to high interest rates lagged, such as small cap stocks (-7.04%, Russell 2000 TR Index). Large cap stocks also declined, with value stocks down -4.27% (Russell 1000 Value TR Index) and growth stocks down -4.24% (Russell 1000 Growth TR Index). Emerging market equities bucked the trend and finished in positive territory (+0.45% MSCI Emerging Market NR Index).
    • As of April 30th, investors were no longer pricing a cut to the Fed Fund rate for 2024, leading major bond markets to 2024 lows (-2.53% in April, Bloomberg Barclays Aggregate Bond TR Index).

    Looking Beyond Narrow Equity Market Leadership

    Large growth companies continue to drive a large portion of the US equity market’s results during the past three and five years – April was no different. The S&P 500 (weighted by the size of the companies in the index) has outperformed the equal-weighted S&P 500 (representing the results of the average company) by an increasingly wide margin over the past 18 to 24 months.

    This has been driven by fast-growing technology companies: technology stocks represent roughly 30% of the market-cap weighted S&P 500, compared to 14% weight in the equal-weighted S&P 500. However, it is important to adopt a longer perspective during these unusual periods. Over the past 15- and 20-year periods, as well as since 2003 – the equal weighted S&P 500 index is ahead or in-line with the market cap weighted S&P 500. On a calendar year basis, the equal-weighted S&P 500 has finished ahead 12 out of 21 years through 2023.

    Although the market has been very top heavy, with the fast-growing technology companies driving the market, markets are cyclical, and longer-time horizons highlight the balance over time.

    Source: Raymond James, FactSet. Data as of 2/29/2024. Since inception date of the equal-weighted is 1/3/2003.

    What’s on Deck for May?

    • Inflation data will be top-of-mind given the recent hot streak in data. Federal Reserve commentary around the data will also be closely watched by investors.
    • First quarter 2024 earnings will wrap up in May. Through the end of April, earnings have finished ahead of expectations for S&P 500 companies that have reported. 
    William Winkeler
    About the Author

    Bill has more than 15 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the Investment Advisory Committee and develops and implements investment strategy for clients of the firm, as well as communicates investment content with clients.

    Pittsburgh

    724-719-6600
    bill.winkeler@confluencefp.com
    Email Bill
    April-2024-Market-RecapDownload

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    William Winkeler

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  • Exit Planning: 5 Important Points for Business Owners to Consider

    Exit Planning is an extremely important concept for business owners.

    What is Exit Planning you may ask?

    The conventional definition is it is the creation of a plan and strategy to ultimately transfer or liquidate the ownership of a business. This definition, however, is too rigid in our opinion and focuses on the end goal rather than the process. We believe Exit Planning is vital to business owners, even if they are not considering an imminent sale of their business.

    The planning done today increases the value in a business tomorrow. Exit Planning or “value creation” is not a one-time event and should always be part of the business strategy.

    As Certified Exit Planning Advisors (CEPA), we have leveraged the Exit Planning Institute’s program to expand our knowledge in this area. The following are important points for business owners to consider:

    • The Exit Planning process should begin a minimum of 3 years prior to a potential transfer. Value creation is a process that takes time.
    • To improve your business, ask yourself every 90 days whether you are figuring out how to grow or whether you are preparing to sell.
    • There are numerous exit options. Make sure you understand all of them. There is sometimes value where you do not expect!
    • Business attractiveness is not necessarily exit readiness. A business can be attractive to potential buyers, but have a management team or business that is not ready to transfer for a variety of reasons. Determine what is needed to increase readiness.
    • Surround yourself with the right advisors and consultants. Build your value creation team. This should consist of professionals such as accountants, attorneys, financial planners, and business brokers all who have experience in Exit Planning.

    If you have any questions about the future of your business or know of someone who may find value in a discussion, please let us know.

    Gregory Weimer
    About the Author

    Gregory developed a passion for the financial services industry early in life, drawn to the meaningful impact investing and thoughtful financial planning can have on people’s lives.

    McMurray

    724-271-8801
    gregory.weimer@confluencefp.com
    Email Greg

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    Gregory Weimer

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  • Stock Market Recap: May 2024

    Month in Review

    • Markets rebounded after the first 5% drop in April, with all major stock and bond markets finishing May in positive territory.
    • Technology powered large cap growth higher (+5.99%, Russell 1000 Growth TR Index), leading all equity markets higher during the month. Small cap stocks rebounded during the month of May, with the Russell 2000 rising +5.02% (Russell 2000 TR Index). Outside the United States, developed international and emerging market equities both rose in May.
    • Major bond markets also rallied higher in May as investors’ outlook for interest rate cuts stabilized. The Barclays Aggregate Bond TR Index rose +1.70% in May.

    Improving Fundamental Picture

    Equity markets are off to a strong start to 2024, despite surprising persistence of inflation and higher-for-longer interest rates.

    What has been driving markets higher through these headwinds?

    This year has been characterized by improving fundamentals, both with corporate earnings and dividends rising above expectations. First quarter earnings for the S&P 500 have risen nearly twice the estimates from earlier in 2024, and investors have also increased 2025 earnings growth estimates to nearly +14%. Increased investments in technology, along with the supporting infrastructure, appear to have been underestimated by investors heading in 2024. Estimates for growth in 2024 and 2025 have also increased for US small cap stocks and international stocks.

    Sources: Capital Group, FactSet. Earnings growth refers to annual change in earnings per share. As of May 14, 2024.

    Dividends are also tracking ahead of expectations, thanks in part to an increase in dividend payments among technology companies. S&P Dow Jones estimates the S&P 500 dividend to increase by 6% in 2024, compared to a 5% increase in 2023. Over the long-run, stocks will follow fundamentals, and corporate earnings and dividends have been a positive surprise in 2024.

    What’s on Deck for June?

    • No rate cuts are expected, but investors will continue to focus on inflation data and Federal Reserve communication throughout the month.
    William Winkeler
    About the Author

    Bill has more than 15 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the Investment Advisory Committee and develops and implements investment strategy for clients of the firm, as well as communicates investment content with clients.

    Pittsburgh

    724-719-6600
    bill.winkeler@confluencefp.com
    Email Bill
    May-2024-Market-RecapDownload

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    William Winkeler

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  • Stock Market Recap: August 2023

    Month in Review

    • Major stock indices broke a two-month streak of gains, with all major indices finishing down for the month.
    • Growth companies regained favor after two months of value and small cap companies leading the market.
    • Bond prices declined due to rising interest rates.

    Insight on Inflation

    Despite the market volatility, evidence from July’s inflation report suggests progress towards a “soft landing” scenario, where inflation is gradually decreasing, and the economy avoids a recession. In July, headline inflation was at +3.3%, year-over-year, down from its peak of 9.1% in June 2022. Unlike June 2022, supply chains and goods have largely normalized, with wages and services being the key drivers of inflation today.

    Source: BLS, FactSet, J.P. Morgan Asset Management. CPI used is CPI-U and values shown are % change vs. one year ago. Core CPI is defined as CPI excluding food and energy prices. The Personal Consumption Expenditure (PCE) deflator employs an evolving chain-weighted basket of consumer expenditures instead of the fixed-weight basket used in CPI calculations.  Guide to the Markets – U.S. Data are as of August 31, 2023.

    What’s on Deck for September?

    • The August jobs report supplied additional evidence towards a “soft landing” outcome – more people joined the workforce while wage growth slowed, indicating steady but slower economic growth.
    • A “soft landing” could lead to the Federal Reserve not needing to raise interest rates as high as previously predicted, potentially benefiting stocks and bonds.
    • Investors will now pay close attention to the September and November Federal Reserve meetings for clues about future rate hikes or general shifts in policy.

    Download the August 2023 Market Recap below:

    Market-Recap-Aug-2023-1Download
    William Winkeler
    About the Author

    Bill has more than 15 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the Investment Advisory Committee and develops and implements investment strategy for clients of the firm, as well as communicates investment content with clients.

    Pittsburgh

    724-719-6600
    bill.winkeler@confluencefp.com
    Email Bill

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    William Winkeler

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