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Topic: Portfolio Management

The RMD deadline is looming — here’s what you need to know

As we approach the end of the year, now is a good time to take a closer look at required minimum distributions (RMDs). Required minimum distributions apply to retirement accounts such as IRAs, SEP plans and Simple IRAs, as well as 401(k)s, 403(b)s, 457(b)s, profit-sharing plans and other defined contribution plans. Money that is invested in retirement accounts is not tax-free; it grows tax-deferred over time, and the government has rules about when it must be taken out. 

What are RMDs?

Once you turn 72 years old, you are required to take minimum distributions from your traditional IRAs and most employer-sponsored retirement plans. You can always take more than the minimum amount if you choose. You also can take money out of your retirement account before age 72 (penalty-free after age 59½). However, there is a minimum amount that must be taken each year at age 72, whether you have taken money out before that age or not. Failing to take the full amount of the RMD could result in a penalty tax of 50% on the difference. For example, if your RMD is $5,000, and you fail take that amount out of your plan, you could face a $2,500 penalty!

Generally, RMDs must be taken by Dec. 31 each year. You are allowed to delay the first RMD until April 1 after the year in which you reach RMD age — but in that case, you will need to take two RMDs in one year, with the second coming by Dec. 31. Taking two distributions in one year might bump you into a higher income tax bracket, so this often is not the recommended approach.

How much do I have to withdraw each year?

The amount changes each year, according to your age. The first step is to calculate the Dec. 31 balance for your retirement accounts. Next, find your age in the IRS uniform lifetime table and the corresponding distribution period. (The distribution period is an estimate of how many years you will be taking RMDs.) Divide the balance by the distribution period to determine the RMD. In the example below, the ending balance of the retirement accounts is $958,405. At 74 years of age, the distribution period is 23.8. Therefore, the RMD would be $40,269, the minimum amount that must be withdrawn from the accounts for the year. This amount is taxed as ordinary income. 

You are allowed to take the entire RMD out of one account, even if you have several retirement accounts, or you can take it from several retirement accounts — as long as you withdraw the required minimum amount in total.

Graphic showing how RMDs are calculated

Exceptions to RMDs

There is one exception when it comes to 401(k) RMDs. If you are still working for the company sponsoring your plan by the time you turn the required age and you don’t own 5% or more of that company, you may be able to avoid RMDs. However, not all plans allow this, so you need to double-check with the plan administrator. Once you leave the company, you will need to start taking withdrawals from your 401(k). Please keep in mind that this exception applies to 401(k)s only.  If you have an IRA in addition to your 401(k), you will need to take your RMD regardless of whether you are still working or not.

Recent RMD rule changes and complexities

The SECURE Act of 2019 raised the RMD age from 70½ to 72 beginning in 2020. That means if you reached age 70½ before 2020, you are currently taking RMDs. Then came the pandemic, and in 2020, Congress passed the CARES Act. One of the purposes of this act was to help individuals manage financial challenges brought on by the pandemic, and RMDs were waived for 2020 — including any that were postponed in 2019. Please note that RMDs have resumed for 2021 and must be taken this year; the CARES Act applied to 2020 only.

The IRS has issued new life expectancy tables designed to help investors stretch their retirement savings over a longer period. These new tables take effect for RMDs beginning in 2022. What does this mean for you? This will typically lead to lower annual RMD amounts and potentially lower income tax obligations. However, if the portfolio balance of your retirement accounts continues to grow, then the amount you must take as a distribution also may continue to grow.

How to minimize the tax impact of RMDs

An individual donor can contribute up to $100,000 per year in qualified charitable donations (QCDs) if the individual is 70½ or older. In married couples, each spouse can make QCDs up to $100,000 for a potential total of $200,000. QCDs can be made only to certain qualified charitable organizations; they cannot be made to donor-advised funds. If a donor makes a QCD that exceeds the individual’s RMD, the extra distribution cannot be carried over (i.e., used to meet the minimum distribution in following years).

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So, what can we learn from all this? An RMD is the smallest amount you must withdraw from your tax-deferred retirement accounts every year after a certain age. If you have multiple retirement accounts, you can withdraw money from each account or from one account, as long as you withdraw the total required minimum. Each dollar withdrawn as part of the RMD is ordinary income. If you have charitable donations and are over the age of 70, using part or all of your RMD can be a great planning tool. (You will need to make sure the funds go directly from the retirement account to the charitable organization.)

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value. As we say each week, it is important to stay the course and focus on the long-term goal — not on one specific data point or indicator.

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: Fidelity, AARP, Broadridge

Promo for article on cryptocurrencies

This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management. Investor Disclosures: https://bit.ly/KF-Disclosures

Are cryptocurrencies as good as gold?

Cryptocurrencies continue to generate a lot of interest among investors, yet they remain an enigma for most people. They also are a somewhat controversial asset class with a wide range of potential outcomes for investors. 

What is the allure of cryptocurrencies?

For starters, cryptocurrencies are not associated with any government or any one financial institution. They can be transferred from one individual to another without the help of a central organization. The supply of bitcoin is fixed, whereas a central bank can manipulate the amount of currency in circulation to help control the economy. As we have written before, money supply is one of the main tools the Federal Reserve uses to speed up or slow down an economy.

More and more companies are accepting payment via bitcoin. There are an estimated 6,000-plus brands of cryptocurrency in existence today, and many investors think that if they invest in the smaller, newer cryptocurrencies, they might have a chance for the kind of big returns that early bitcoin investors have experienced.

Historically, gold has been one of the go-to asset classes for investors who are worried about inflation or who want a hedge against a market downturn. As the chart below shows, gold has typically generated positive returns during periods of negative equity returns. Bitcoin, on the other hand, moved in the same direction as the market, and the losses were more severe.

Chart showing the contrasting performances of bitcoin and gold during down markets

For investors who view bitcoin as a substitute for gold — as an inflation hedge or commodity replacement — the chart below outlines similarities and differences between the asset classes.

Chart showing the differences between bitcoin and gold

What are the risks of cryptocurrencies?

Cryptocurrencies do not provide steady, reliable cash flows — nor do they generate earnings through exposure to economic growth. The price of cryptocurrencies tends to be highly volatile. For example: The price of bitcoin was about $63,000 in mid-April, proceeded to lose more than half of its value by late July, and is back at record highs in mid-November. As a result, they have not offered consistent or reliable diversification in portfolios. In fact, bitcoin’s correlation to traditional asset classes has risen during recent periods, possibly because of increasing adoption in the marketplace. Also, cryptocurrencies are not regulated in the same manner and are not insured by the federal government. The SEC is expected to increase regulation and begin taxing cryptocurrencies.

How do you invest in bitcoin? 

There are several ways to invest in cryptocurrency. The most popular mediums are through the online exchange, Coinbase, or through exchange traded funds (ETFs). Until recently, the main ETF on bitcoin was Grayscale Bitcoin Trust (ticker GBTC). A new ETF was launched as competition in October — The ProShares Bitcoin Strategy ETF (ticker BITO) — and has seen a large inflow of assets.

Is it wise to invest in bitcoin and other cryptocurrencies?

For many investors, the world of cryptocurrency remains difficult to understand. Many investors maintain a mantra not to invest in something you don’t understand. We wrote about the basics of cryptocurrency earlier this year and explained how bitcoin was created and how it works. There remains little consensus on the value and use of cryptocurrencies, and with the lack of consensus comes both opportunity and risk. 

Promo for a beginner's guide to bitcoin

So, what can we learn from all this? It is important for investors not to confuse trading in ultra-risky assets like cryptocurrency with more traditional approaches to investing. For individuals with a long-term horizon and a high tolerance for risk, there can be a place for buying assets that have wild swings in value. Bitcoin and other cryptocurrencies remain a relatively new asset class and investment vehicle. They are still a risky investment that may or may not pay off. Investors should invest only as much as they are willing to lose, and if one does invest, it should be part of a well-diversified portfolio.

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time and downturns present opportunities to purchase stocks at a lower value. As we say each week, it is important to stay the course and focus on the long-term goal — not on one specific data point or one indicator.

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: Morningstar, Kestra

Promo for article on the formula for wealth

This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management. Investor Disclosures: https://bit.ly/KF-Disclosures

Biden’s revised spending bill: What you need to know

Last week, President Biden announced the framework for the “Build Back Better” spending bill and outlined the plan to pay for it. The proposed bill stands at roughly $1.75 trillion, far less than the original $3 trillion. The social spending package focuses heavily on climate change, green energy provisions, childcare programs, expanded Medicare benefits and health care coverages, and universal kindergarten.

The chart below summarizes how the spending package would be funded: a new 15% minimum tax for corporations, a tax on corporate stock buybacks, investing in the IRS to boost enforcement, and a new surtax of 5% on individual income greater than $10 million with an additional 3% on income greater than $25 million.

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Proposals left in

Surtax on wealthy individuals: A 5% surtax would apply to individuals with income over $10 million. An additional 3% surtax would apply to income over $25 million.

Left in, but revised

Corporate tax rate: The House bill proposed a new top corporate tax rate of 26.5%. That was replaced in the compromise bill with a 15% minimum tax to ensure that no corporations can use loopholes and incentives in the tax code to pay a lower rate.

Taken out

Individual income tax rates: The House bill proposed increasing the top rate from 37% to 39.6% for individuals over $400,000 in income, but the proposal was dropped from the compromise bill.

Capital gains: The House bill proposed a new top rate on capital gains and dividends of 25% for individuals with more than $400,000 in income (vs. the current 0%, 15%, and 20%, depending on income), but the proposal was dropped from the compromise bill.

Estate tax: The House bill would have dropped the amount of inherited assets exempt from the estate tax from the current level of $11.7 million to about $6 million, but the proposal was dropped from the compromise bill.

Roth IRA conversions: The House bill would have prohibited Roth IRA conversions for both traditional IRAs and employer-sponsored plans for taxpayers with incomes above $400,000, but the proposal was dropped from the compromise bill.

Roth conversion limits: The House bill would have prohibited Roth IRA conversions for wealthier taxpayers beginning in 2032. That provision was dropped from the compromise bill.

Cap on aggregate retirement account balances: The House bill proposed that individuals with more than $10 million in tax-advantaged retirement accounts would be required to take required minimum distributions (RMDs), regardless of their age. That proposal was dropped from the compromise bill.

Billionaires’ tax on unrealized gains: An idea was floated in the Senate to levy an annual tax on unrealized gains for individuals with $1 billion or more in assets. But the plan did not attract enough support and was scrapped.

Taken out (for now)

State and Local Tax (SALT) Deduction: A group of lawmakers has been pushing to increase the $10,000 cap on the deduction for state and local taxes, which was imposed in 2017. While the provision was not included in the compromise bill, these lawmakers have said that they will continue to push for an increase in the cap. Democratic leaders have not yet ruled that out.

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For investors, the big news is that almost all the proposed tax increases that would have affected income, capital gains and estate taxes were dropped. Both the House and the Senate still must pass the revised bill, so more changes could be coming. We will continue to watch this very closely, and we will keep you apprised of major developments. If the bill passes, most individuals will not see any tax increases.

The new tax plan appears to pose less of a risk to equities than the plan that previously had been proposed. Even with all the talk of potential equity valuations, hyperinflation and Fed tapering, money has continued to flow into bond funds in comparison to equity funds, as the chart below shows. Over the last 12 years, bond funds have seen inflows of $3.34T, compared to equity inflows of only $.36T. If the fund flows were to reverse and equity inflows caught up with bond fund inflows, the equity markets could sustain the current rally.

Chart showing stock vs. bonds flows over time since 2009

So, what can we learn from all this? We continue to believe that it is better to plan than to predict. Building a plan to achieve one’s financial goals across a range of outcomes is the best practice, rather than being solely focused on what may happen if taxes increase.

Changes to your plan make sense only if they are in line with your goals; a well-built plan should provide guardrails and forestall emotional reactions when markets do not go the way we hope.

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value. More and more noise is creeping into the markets today – worries about inflation, higher energy prices, slower growth, possible stagflation, etc. 

The amount of liquidity in the markets remains at record levels. While questions do exist today about the state of the economy, many positives remain about our global economy. As we say each week, it is important to stay the course, focusing on the long-term goal and not on one specific data point or indicator.

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: Investment Company Institute, Schwab

promo for an article called Saving for College? What You Need to Know About 529 Plans

This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management. Investor Disclosures: https://bit.ly/KF-Disclosures

Saving for college? What you need to know about 529 plans

Last week, we wrote about Social Security and retirement. This week, we are focusing on the opposite end of the lifecycle spectrum: planning for college. With the price of college continuing to rise, saving enough money to pay for four years of education can feel like an overwhelming task. 
 
In 2019-2020, the average cost of a year at an in-state public university was roughly $22,000, while a year of private school was more than $50,000. By the time today’s newborns are set to enroll in college, four years at an in-state public university probably will cost more than $265,000. The longer you wait to start saving for college, the less time you allow for compound growth, and therefore, you will spend more of your own money, rather than letting your money work for you. It is never too early to begin saving for the educational objectives of your family, whether that means for your kids or your grandkids.

Chart showing hypothetical growth of a college savings fund starting at a child's birth versus waiting one or five years to start saving

The most common and most popular way to save for college tuition is through a 529 plan, named after the section in the Internal Revenue Code that authorizes qualified tuition plans. A 529 account is an education investment account with rules and guidelines set by individual states. Each state negotiates the fees for management and mutual funds separately. If you live in a state that does not have an income tax (like Texas), you can choose to invest in any state’s 529 plan.

Each year, you can invest up to $15,000 per parent or $30,000 per couple into a 529 plan. Grandparents — or anyone else, such as a family member or friend — also can contribute the same amount to a 529 plan. A 529 account can be super funded with one-time contributions of $75,000 per person or $150,000 per couple; this uses up five years of annual gifting. 

Earnings in 529 plans are not taxed under the federal tax code. Withdrawals for eligible expenses are tax-free, and many states allow 529 contributions to be deducted from state income taxes. If withdrawals are used for purposes other than qualified education expenses, the earnings can be subject to a 10% federal tax penalty and, if applicable, state income tax. The chart below highlights qualified expenses that can be taken from a 529 plan. As always, please consult your CPA for tax questions.

Chart explaining expenses that can be covered tax-free with 529 plans

The Tax Cuts and Jobs Act of 2017 provided investors additional options for how they can spend their 529 dollars. You can now use up to $10,000 per year from 529 accounts to pay private tuition for children attending kindergarten through 12th grade.

Additionally, 529 plans offer several other great benefits, including:

Federal and state tax breaks

* As long as the money is used for qualified higher education expenses, no taxes are owed on 529 plan earnings.

* If you live in a state with a state income tax and you use that state’s plan, you avoid state taxes as well.

Age-based investment options

* 529 plans offer investments based on the age of the student and your family’s risk tolerance. Age-based plans automatically adjust the risk level from aggressive to conservative as the student gets closer to college.

No income-based restrictions

* No matter what your income level is, you can contribute to a 529 plan.

Flexibility of use

529 plans can be used for college, graduate school, trade schools and kindergarten through 12th grade. If there are leftover funds available, the money can remain in the 529 plan for another beneficiary (such as a sibling or grandchild), or a parent can use it for continuing education or for paying down student loan debt.

Ability to change investments

Federal tax law allows the account holder to change investments once a year or when there is a change of beneficiary.

Wealth transfer using a 529 plan

* Contributing to a 529 plan can also help grandparents or others reduce the size of their taxable estate while helping fund a grandchild’s education.

* Money held inside a 529 plan is outside of one’s estate. 

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So, what can we learn from all this? A 529 plan allows you to save for a wide range of academic needs while also taking advantage of state and federal tax benefits. College savings plans are easy to set up, and anyone may contribute to them. The IRS allows individuals to fund five years of gifting at one time to frontload the plans and allow the investments more time to grow.

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value.  

More and more noise is creeping into the markets today – worries about inflation, higher energy prices, slower growth, possible stagflation, etc. The amount of liquidity in the markets remains at record levels. There still exists a chance that we see additional stimulus into the economy through an infrastructure package and possibly even a social spending package. While questions exist about the state of the economy, there remain many positives about our global economy and reasons to be optimistic. As we say each week, it is important to stay the course, focus on the long-term goal and not focus on one specific data point or one indicator.

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: American Funds, Fidelity, College Board

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This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management. Investor Disclosures: https://bit.ly/KF-Disclosures

Energy prices, interest rates and inflation: Your questions answered

What’s driving interest rates higher? What is inflation — and is it transitory or here to stay? What is stagflation? What are real rates versus nominal rates? Why does everyone keep talking about inflation and interest rates? Why are energy prices so high?

With so many unanswered questions, the noise in the financial markets remains at a high level. The energy world has changed drastically since April 2020, when we wrote about the negative price of a barrel of oil! West Texas Crude oil prices are now over $80 a barrel. Energy prices, as measured by the CPI index, are up 25% over the last year, as seen in the chart below. If you remove food and energy from the CPI calculation, the year-over-year change in consumer prices is only 4%, not the reported 5.3%. A perfect storm of energy shortages and high demand has made the outlook uncertain for energy prices globally. Prices are surging for oil, natural gas and coal, along with other commodities such as lumber, used cars and shipping costs — and there are supply chain disruptions as well. The demand for energy is outpacing the supply, and when that happens, prices will rise to meet the demand. 

For those who want to compare this oil surge to the 1970s, there are several critical differences:

* The energy intensity of gross domestic product (GDP) is half of what it was in the 1970s.

* Fracking wasn’t available in the 1970s, and now, it can rapidly increase production.

* The U.S. is now an exporter of oil versus being a major importer 50 years ago.

Chart showing changes in consumer price index

All these factors are making economists question how transitory inflation is. What if we have inflation with lower growth, which we call stagflation? Stagflation refers to an economy that is experiencing a simultaneous increase in inflation and stagnation of economic output (slow or negative economic growth). Investors have had little experience with stagflation in recent decades. Only 41 quarters since 1960 (17% of the time) have been in a stagflation environment, and most of those occurred in the 1970s. We believe the equity market should continue to be strong as investors gain confidence that the current pace of inflation is transitory and not permanent. 

As shipping costs come down, the supply of goods increases, prices will drop and some of the inflationary pressures that we feel today will dissipate. Eventually, the boats that are floating at sea full of goods will be offloaded, and those goods will make their way into the economy. Therefore, the Fed continues to say that the inflation we are experiencing today is transitory and expected to level off — even if it takes a year or two to do so.

So what’s driving interest rates higher? Interest rates are largely impacted by two factors: policy decisions made by the Fed and investor expectations of those decisions over the long run. The Fed would like to moderate the speed at which Treasury yields rise through its tapering of asset purchases. The Fed is maintaining a dual mandate of price stability and maximum employment before it considers raising short-term rates. The chart below reflects the difference between nominal rates and real rates. 

Nominal rates are the rates we commonly discuss and read about — the 10-year Treasury rate, for example. Real rates are the interest rates that an investor receives after adjusting for inflation – the real yield you receive from owning an asset. If a Treasury bond were to pay you 5% nominal yield per year, but inflation is 3% per year, you would have a real rate of only 2%. As seen in the chart below, if the 10-year Treasury rate is 1.3% and inflation is running around 2.3%, then the real yield is now a -1%. This means investors who are buying Treasuries now are essentially expected to earn a negative 1% in real yield annually.

Chart showing nominal yield versus real yield

So, what can we learn from all this? More and more noise is creeping into the markets today: worries about inflation, higher energy prices, slower growth and possible stagflation. The amount of liquidity in the markets remain at record levels. There still exists a chance that we will see additional stimulus into the economy through an infrastructure package. While questions exist about the state of the economy, there remain many reasons to be optimistic. As we say each week, it is important to stay the course and focus on the long-term goal, not on one specific data point or one indicator.

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value. 

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: Blackrock, CNBC, Horizon, Schwab

Promo for article on the formula for wealth

This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management. Investor Disclosures: https://bit.ly/KF-Disclosures

October can be scary for investors, but there’s no reason to panic

September held true to its history of being the worst month for performance on average since the S&P 500’s inception in 1928. The month ended with increased volatility (as measured by the VIX index) and negative market sentiment. Its negative market returns marked the first time in eight months that the S&P 500 ended a month in negative territory. There was no shortage of risks working against the financial markets, including debt ceiling negotiations, fiscal policy uncertainty, monetary policy uncertainty, global supply chain bottlenecks, slowing economic growth projections from the Delta variant and ongoing inflation fears.

How does the VIX index work? Read “Coping with Volatility in the Market.”
 
The chart below depicts the VIX index over the last 27 years. Volatility has risen recently, reflecting the possibility of a broader distribution of potential market outcomes based on many of the risks listed above. We are a far cry from volatility levels seen during the financial crisis of 2008 or the global pandemic in 2020, however; the VIX index remains below average heading into the fourth quarter of the year.

Chart showing stock market volatility over the last 27 years, up until October 2021

October remains the most volatile month of the calendar, as you can see from the chart below. October’s above-average volatility isn’t a function of any one year or a presidential cycle; it has been consistent over decades and market cycles. As volatility increases, it doesn’t necessarily mean that the market will go down more — but it does mean that the ranges of market movements increase. Often, with increased volatility comes increased emotion accompanying the ups and downs. The feeling of panic when the market is moving down feels greater than the relief or joy feels when the market is moving up.

Chart showing stock market volatility by month, with the highest being found in October

As we wrote last week, more than 90% of the S&P 500 holdings have had at least a 10% correction from their highs this year. The same now holds true for both the NASDAQ and Russell 2000 (small cap stock index). Looking further under the hood of each index below, the average stock decline is far greater than the 10% correction. 

Chart showing year-to-date correction for three indexes

So, what can we learn from all this? With many stocks already in correction mode and potential increased volatility on the horizon, it is important to remember that investing is a disciplined process and not a game of timing when to get in or when to get out of the market. “Buy the dip” continues to be a prominent strategy among many investors and one of the reasons market pullbacks have not been as prominent in 2021. The larger dips we have seen recently as volatility has increased have led to some larger declines, followed by stronger bounce backs. As we say each week, it is important to stay the course and focus on the long-term goal — not on one specific data point or indicator.

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value. 

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: JP Morgan, MarketWatch, Schwab

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This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management. Investor Disclosures: https://bit.ly/KF-Disclosures

Here’s why the market’s climb is a bumpy ride

Although the stock market has experienced a steady climb this year, the TRIP is always an interesting ride — and rarely a steady one. Along the journey, the market typically faces many hurdles; currently, those speed bumps are Taxes, Rates, Inflation and Prices (valuation). 
 
Global stocks will always have a myriad of worries, despite favorable longer-term economic forecasts and bright spots. The Organization for Economic Cooperation and Development forecasts that every one of the 45 major economies in the world should be growing next year, with about half experiencing slower growth than last year. Global economic growth is expected to be 6% for this year and 4.9% for 2022, according to the International Monetary Fund. For context, growth above 4% is understood to be an economic boom, whereas growth below 2% is considered a global recession. 

chart showing global gdp over time

The fundamental strength of the economy remains intact, powered by vaccines and the U.S. consumer. The global growth slowdown is expected following the strong reopening trade in the wake of the global pandemic. Price remains a major speed bump for the economy, both in the labor markets and in the supply chain. Firms need workers; there are more jobs available than there are workers right now. Therefore, companies are paying more for employees, which will disrupt profits. 

Shipping capacity remains too limited to satisfy the rebound in consumer demand, and cargo prices are through the roof (as seen below). Eventually, supply and demand will equalize, which will reduce costs, but until that time, shipping and other supply chain costs will soften corporate profits.

chart showing increasing shipping costs

Throughout the year, we continue to see underlying movement between different sectors in the S&P 500. For example, Treasury rates rise, leading to investors selling technology stocks and buying financials and oil stocks — or instead, the 10-year Treasury falls, and the big-cap technology sector comes roaring back. Under the surface of the rally, many stocks in the S&P 500 already have reached correction territory this year, as seen in the chart below. Nearly 90% of the stocks in the S&P 500 have had at least a 10% correction at some point in 2021. The fact that so many stocks have had close to a 10% drawdown reflects what we have discussed recently: that there are some fundamental challenges in the economy, and now we have disagreements in Washington over the debt ceiling and potential government shutdown.

chart showing market drawdowns over time

As we reach the end of September, Congress is faced with a pileup of legislative issues that have stock market implications. The most immediate deadline facing Congress is a potential government shutdown on Oct. 1. A tentative deal is in the works to temporarily fund through early December, but it is not a done deal. The chart below projects the economic impact of any government shutdown. The longer a shutdown occurs, the larger the impact on the U.S. economy. Markets also are watching the standoff over raising the debt ceiling. To date, Congress has never failed to raise the debt ceiling before the country would technically go into default.

chart showing impact of government shutdowns

So, what can we learn from all this? The current TRIP of the economy may not be the smoothest road. Please remember: While we may hit some speed bumps along our TRIP, we have been down this road before. Whether it’s tax increases, inflation, interest rates, equity valuations or government shutdowns, history has always shown that markets tend to move past these bumps. It is important to focus on the long-term goal and not on one specific data point or indicator.

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time and downturns present opportunities to purchase stocks at a lower value. 

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: Blackstone, The Daily Shot, Schwab

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This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management. Investor Disclosures: https://bit.ly/KF-Disclosures

The market’s moving: Keeping up with China, Washington and COVID

Global stocks started the week with the worst daily performance since May as investors digested the news over the weekend about the troubled Chinese property market. China Evergrande Group, the world’s most indebted property developer, is at risk of default this week on its debt payments. The potential long-term fallout from Evergrande’s liquidity crisis is unknown — as is any potential spillover to other financial markets. We also do not know how the Chinese government may act to bail out the real estate behemoth. Monday’s sell-off briefly pushed the S&P 500 to 5% below its last record on an intraday basis for the first time since October 2020 (see chart below). 

Chart showing stock market performance since July 2020

Several other factors also are affecting the current market environment, and we will address each of them below:

1. Angst in Washington over the upcoming expiration of the borrowing limit (debt ceiling) and a potential government shutdown

2. New proposed tax increases

3. Lingering inflationary worries and when the Fed’s tapering may start

4. The effect of the Delta variant on the economy

Angst in Washington

If Congress fails to raise the borrowing limit, the U.S. government would default for the first time. “The U.S. has never defaulted. Not once,” Treasury Secretary Janet Yellen said. “Doing so would likely precipitate a historic financial crisis that would compound the damage of the continuing public health emergency.” The deadline to avoid both a government shutdown and the debt ceiling issue is a moving target. Raising or suspending the debt ceiling does not authorize additional spending, but it increases the spending limit, similar to a credit card. 

Proposed Tax Increases

As we wrote about last week, the House Ways & Means committee proposed tax increases on the wealthy to help fund a $3.5 trillion economic package. Remember, these are just proposed tax increases and not law.  The main tax increases in the proposal are: 

* Raise the top individual tax rate from 37% to 39.6%.

* Apply a 3% surtax on incomes greater than $5 million.

* Raise the long-term capital gains tax rate to 25% for couples making more than $450,000.

Chart showing details of tax rate pproposals

Inflation

Inflation remains on the forefront of consumers’ minds as prices of many goods and services continue to rise due to lack of inventory and empty shelves caused by shipping delay and costs out of China. The Federal Reserve Chairman, Jerome Powell, has stated on numerous occasions that the Fed believes inflation to be transitory – meaning temporary. His reasoning is as follows: 

* It’s not broad based. Inflation is concentrated in a few sectors that were hit hardest by the pandemic.

* The biggest price surges already are receding. Lumber and used car prices are now stabilizing or dropping after rocketing higher.

* Wages are rising, but not faster than productivity gains.

* Globally, price pressures are downward with an aging population and advancements in technology. 

The Federal Reserve concludes its two-day meeting this week and the focus remains on when the Fed will begin to taper its purchases. As we wrote about recently, “tapering” is a term that describes the process of gradually stopping asset purchases. When the Fed begins to taper, it purchases fewer bonds, which reduces additional money flowing into the economy, in hopes of slowing economic growth. All of this is done with the focus on controlling inflation and the economy. The Federal Reserve Bank tries to signal its intentions and be transparent with the hope that the impact to the financial markets is minimized.

COVID

Chart showing U.S. COVID cases since February 2020

Due to the Delta variant, COVID cases remain near January levels. As colder weather approaches and flu season ramps up, the fear is that COVID variants could continue to slow economic growth. Future GDP forecast is expected to decline from recent highs — but it’s not expected to be derailed by COVID. 

So, what can we learn from all this? The current stock market continues to digest a multitude of economic messages: a potential default by China Evergrande group, inflationary pressures, proposed tax hikes, the Federal Reserve’s plans to start tapering and increase rates, and the ongoing global pandemic. It is important to focus on the long-term goal — and not to focus on only one data point or indicator. 

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value. 

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: CNBC, Reuters, Schwab, BEA Conference Board

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This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management. Investor Disclosures: https://bit.ly/KF-Disclosures

Here’s what we’re watching after the market’s stumble

The Dow Jones and S&P 500 suffered five straight days of losses, the worst weekly performance since June. Different factors may have caused the selling last week: the Delta variant and its impact on slowing economic growth, the Federal Reserve’s tapering and how it may handle inflationary pressures, current stock valuations and potential tax hikes proposed by the Biden administration. Typically, it is something investors don’t see coming — such as a pandemic or global financial crisis — that causes the larger market selloffs, not something that investors already expect. 
 
Market pullbacks should be expected, especially since the largest drawdown year-to-date has been 4.2%. The “textbook correction,” in which stocks pull back at least 10%, is natural and healthy market functioning and behavior. As seen in the chart below, the S&P 500 has been in a recent trading lull, going many sessions without a 1% move — but the lull has been nowhere near what we have seen in the last few years.

Chart showing consecutive trading days without a 1% move since 1993

Contributing to the recent market jitters is the current state of inflation and concerns over how to pay for potential additional infrastructure spending. Prices for consumer goods rose less than expected in August, a sign that inflation may be starting to cool. The consumer price index (CPI), which measures a basket of common products as well as various energy goods, increased 5.3% from a year ago. That’s less than the expected increase of 5.4% and a smaller increase month over month. Energy prices accounted for much of the recent inflation increase; energy is up 25% from a year ago, and gasoline prices have surged 42% over the same period. 

Chart showing percent change in CPI over a 12-month period

This week, the House Ways and Means Committee released a more detailed overview of potential tax changes to help pay for the proposed infrastructure and expansion of social programs. The highlights of the current plan are as follows: 

* Top marginal tax rate increase from 37% to 39.6%; also, a 3% surtax on individuals with adjusted gross income greater than $5 million.

* Capital gains rate increase from 20% to 25% for “certain high-income individuals.”

* Changing the corporate tax rate from a flat tax to a tiered tax rate, with the proposed top rate at 26.5%.

* Estate and gift tax exemptions would drop back to $5 million (plus inflation adjustments), down from the current $11.7 million per person.

* Eliminating Roth conversions for IRAs and workplace plans for married couples earning more than $450,000 (and for individuals earning more than $400,000).

Chart showing current and proposed tax rates

Remember, these are proposed tax changes that still have a long way to go before becoming law. Changes can and will occur as negotiations continue over the infrastructure spending package. In our opinion, concern about changes in estate tax law is a good reason to consult with estate attorneys to discuss the current plan. Similarly, avoiding potential higher capital gains rates may be a good idea if it makes sense in the context of your overall financial plan. It is important to remember that the proposed tax changes are just that: proposals, not laws. We will be ready and proactive if tax law changes occur for capital gains and Roth IRA contributions.

So, what can we learn from all this? The stock market continues to digest mixed economic messages as well as the impact of the Delta variant, inflationary pressures, and the Federal Reserve’s response to tapering, rates and potential tax hikes. It is important not to focus on one data point or one indicator, but to look at the big picture. 

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value. 

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: CNBC, The New York Times, Forbes, House Ways and Means Committee, U.S. Bureau of Labor Statistics

This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management. Investor Disclosures: https://bit.ly/KF-Disclosures

Making sense of the economy’s mixed messages

The S&P 500 closed at new highs 54 times in the first eight months of the year, with almost one-third of the trading days in 2021 seeing records. That’s the highest annual rate of record highs. August was the seventh consecutive positive month, marking the longest winning streak since January 2018, and as we recently wrote, the maximum drawdown so far this year in the S&P 500 has been 4.2%.

Chart showing the number of trading days in which the S&P 500 closed at new highs in a number of years

Inflation continues to be top of mind for many investors. We continue to see different sectors of the economy having a spike in prices: First it was lumber, then wholesale used car prices. Now, it’s the cost of shipping goods; the shipping industry is the latest to suffer in the supply-and-demand war. The price of sending a 40-foot container from Shanghai to Los Angeles looks like the chart of a meme stock, shooting straight up (172%) in a very short period. 

Why is this occurring? Supply and demand.

Ships are stuck in port because China closed certain ports due to COVID outbreaks, and U.S. companies are increasing orders to meet upcoming holiday demand. As we have discussed before, when demand outpaces supply, the price of goods rises. Prices eventually rise to an extent where demand then falls. Then the supply of goods finally catches up to the demand, and prices continue to fall as excess goods flood the market. On the positive side, the demand for new containers being ordered is strong. It takes time for these containers to be built — possibly more than a year — and once the supply of containers is more plentiful, prices can normalize. 

Chart showing supply and demand for shipping orders

Inflation concerns are omnipresent. At last week’s Jackson Hole Summit, the Fed chair noted a “COVID-constrained supply side unable to keep up with demand,” leading to “elevated inflation in durable goods.” In other words: Yes, we’ve experienced higher prices, but the belief remains that these price increases will only be temporary. The Fed continues to reiterate that we are seeing inflation, especially in year-over-year comparisons, but as the world economy reopens, economists predict that inflation will fall to an acceptable level, as seen in the chart below.

Chart showing inflation forecasts through the fourth quarter of 2021

The jobs report last Friday delivered a big miss for August with only 235,000 new jobs. Leisure and hospitality added almost no new jobs after the last several months of more than 300,000 jobs. On a positive note, the unemployment rate dropped to 5.2%. This jobs report may influence when the Fed starts to taper and when it actually decides to raise rates; if job growth and the economy are slowing, the need to raise rates to slow down economic growth diminishes. 

So, what can we learn from all this? There are many different economic indicators that can send mixed signals to the stock market. It is important not to focus only on one data point or one indicator, but to look at the big picture and follow economic trends. We continue to watch economic data closely and to monitor the COVID variants’ effect on the global economy and Federal Reserve policy, as well as China’s increased regulations and restrictions.

From a portfolio perspective, we continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been. Making market decisions based on what might happen may be detrimental to long-term performance. The key is to stay invested and stick with the financial plan. Markets go up and down over time, and downturns present opportunities to purchase stocks at a lower value. 

It all starts with a solid financial plan for the long run that understands the level of risk that is acceptable for each client. Regarding investments, we believe in diversification and having different asset classes that allow you to stay invested. The best option is to stick with a broadly diversified portfolio that can help you to achieve your own specific financial goals — regardless of market volatility. Long-term fundamentals are what matter.

Sources: Arbor Data, Goldman Sachs, Horizon Asset Management, CNBC

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This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. Kestra IS and Kestra AS are not affiliated with CD Wealth Management. Investor Disclosures: https://bit.ly/KF-Disclosures