As we are seeing, the markets are becoming more and more concerned with a recession and a prolonged inflationary environment. This is not a surprise when you examine the data close enough, but not everyone does.
The FED is trying to sell everyone on the notion of their ability to raise interest rates and not slip into a recession by doing so. Our opinion is that would be the equivalent of turning in a found lottery ticket and winning the powerball, or winning the Kentucky Derby as a replacement entry with 80-1 odds in the final stretch! It of course could happen as strange things sometime do but we are not willing to bet on them.
It appears that long-duration bonds are now coming back into favor alluding to a reduction in volatility in that portion of the bond markets. For how long, we are not sure but we will be adding them back into portfolios soon.
Converting to ROTH IRA's.
When converting from a Traditional IRA to a ROTH IRA, you have to carefully consider your current and anticipated tax brackets. You also need to have time on your side to benefit enough from the conversion.
If you are in the 24 or 25% tax bracket now and go to convert a portion of your traditional IRA into a ROTH IRA, you will be paying 24% in taxes on the portion your convert. Simple enough, right?
This money will also be added to your existing taxable income level in the year you convert. This could be an issue for some.
If you plan to retire in and live on say 6K per month, you should be in the 20% tax bracket, leading you to realize a 4% higher tax level at conversion than in retirement.
If you convert with say, 7-8 years to retirement, and it's an average or bear market condition at the time of conversion, your investments in your new ROTH may not grow enough to receive the time value of money benefit the ROTH offers and therefore the whole exercise was in vain.
So are you saying not to use ROTH IRA's? Not at all....
A ROTH Option inside your 401K or 403B would be a great option since you are beginning from scratch with new deposits. This contribution amount is still subject to income taxes so you still need to be considerate of your overall balance between pre-tax and roth but could still be a nice addition to your plan.
GREENLIGHT TO MOVE
We will be moving from our current location on Britt Farm Drive we have occupied since 2007 to our new location downtown Lafayette at 310 N Ferry St June 1st-ish. It is behind RED7 & Next to the Fountain Bank and Trust Building.
We will also be giving our logo a fresh new look since we have to change address, stationary and business cards, now seemed like a perfect time.
My staff have all voted unanimously that I take a vacation for 2 weeks while they plan and execute the move in a less stressful manner and I reluctantly agreed so we will be available during the move but you may need to leave a message and wait on a return call back from May 25 to about June 4/5th while we are getting settled in and situated and all our IT and offices are getting set up.
Till we speak again, enjoy the summer weather we are now getting!
Jon
General Market Commentary
With the Fed in focus, the markets experienced wide price swings over the course of last week, as technology companies led the market lower.
The Dow Jones Industrial Average slipped 0.24%, while the Standard & Poor’s 500 declined 0.21%. The Nasdaq Composite index dropped 1.54% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 1.99%.1,2,3
A Wild Week
After successive daily gains to begin the week, stocks staged a powerful relief rally in response to Wednesday’s Federal Open Market Committee (FOMC) announcement, aided by Fed Chair Powell’s comment that a 75-basis point hike was not under active consideration.
Stocks, however, dropped the following day as investors reassessed the implications of a tighter monetary policy. Also on Thursday, the yield on the 10-year Treasury Note closed above three percent. News that worker productivity fell 7.5% and labor costs rose 11.6% in the first quarter fanned inflation fears and added to investor unease. Despite a better-than-expected employment report, stocks closed out the week with another day of losses amid volatile trading.4
Fed Raises Rates
The May 2022 FOMC meeting resulted in an increase of 50 basis points in the federal funds rate, the largest rate increase since 2000. In a post-meeting press conference, Fed Chair Powell said additional 50 basis point hikes are likely, acknowledging that inflation was much too high and sending assurances that he was committed to price stability.
The Fed also announced that it would begin reducing its $9 trillion balance sheet by $95 billion a month, a step the markets had been anticipating.5
This Week: Key Economic Data
Wednesday: Consumer Price Index (CPI).
Thursday: Producer Price Index (PPI). Jobless Claims.
Friday: Consumer Sentiment.
Source: Econoday, May 6, 2022The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
Wednesday: The Walt Disney Company (DIS), Rivian Automotive, Inc. (RIVN).
Thursday: Affirm Holdings, Inc. (AFRM).
Source: Zacks, May 6, 2022Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
"A pleasure is full grown only when it is remembered."
– C.S. Lewis
You May Be Able to File Your State and Federal Tax Returns for Free
Taxpayers whose adjusted gross income was $72,000 or less may be able to file their federal taxes for free using IRS Free File and may also be able to do their state taxes at no charge through the same service. More than 20 states have their own state Free File program that is similar to the federal service.
IRS Free File partners also feature a number of helpful online products and through Free File, taxpayers can choose the Free File option, guided tax preparation, or Free File Fillable Forms. Make sure to filter for the free options because some additional services may have a charge.
* 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 professional.
Tip adapted from IRS.gov6
What Is Meatless Monday?
Thanks to new (and much more delicious) meat substitutes, more people are swapping at least one meal a week for a vegetarian dish. One of the most popular ways to do this is starting Meatless Monday in your household!
There are many potential health and environmental benefits of eating less meat and more plant-based choices. While you might not be ready or interested in giving up meat entirely, subbing in meatless meals on Monday is a great change of pace and might open your eyes to more delicious plant-based meals like:
Veggie lasagna
Vegetarian pizza
Pasta with lentils
Homemade falafel and hummus
Protein-packed salads
The possibilities for Meatless Monday are endless! Your body and the environment will thank you for eating more plants.
Tip adapted from The Monday Campaigns7
A librarian finds that pages have been ripped out of a novel. Pages 28, 29, 148, 211 and 212 are torn out. Given this, how many separate sheets of paper have been torn from the book?
Last week’s riddle: What is the number missing within this sequence? 4, 7, 11, 18, 29, 47, __, 123, 199, 322. Answer: The missing number is 76. Beginning with the third number in the sequence, each number is the sum of the two preceding numbers.
Rainbow Bridge, Smiths Ferry, Idaho.
Footnotes and Sources
1. The Wall Street Journal, May 6, 2022
2. The Wall Street Journal, May 6, 2022
3. The Wall Street Journal, May 6, 2022
4. CNBC, May 5, 2022
5. CNBC, May 4, 2022
6. IRS.gov, February 16, 2021
7. mondaycampaigns.org, February 22, 2022
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
Please consult your financial professional for additional information.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.
