In the News
The first half of the year is almost in the rearview mirror and it seems like every month goes by faster than the last. We feel summertime is a great chance to touch base so we can take stock of your accomplishments thus far, and can also uncover any needs for adjustments with plenty of time before year end.
Our annual review letters will go out in July but in the meantime, here are a few areas we recommend you examine prior to our meeting:
Review financial goals. Look at your overall financial resolutions and long-term goals to determine whether you are making appropriate progress or if there’s a need for adjustments.
Revisit your budget. Have there been any significant life changes that may impact your financial needs such as marriage, the birth of a child, divorce, or job change? Determine if any recurring costs could be eliminated or any spending habits tightened up.
Tackle taxes. Do you focus on taxes right before tax time, when it may be too late to implement effective tax-saving strategies? Review your investments and tax withholdings to make sure you’re incurring the smallest tax burden possible. Also, look for opportunities to maximize charitable deductions, use an FSA account, or make adjustments that could lighten your tax load.
Assess savings. Do you have at least three months of living expenses in your emergency fund? If you’re not there yet, don’t worry! Look to see how you can start building it up and consider setting up automatic deposits. Also, check on your progress toward other savings goals.
Review retirement. Look at the progress of your retirement savings and determine if you need to increase contributions or not. Consider account types, contribution sources, and tax implications.
Check on credit. It’s good practice to pull a free credit report every year and examine for any discrepancies or suspicious activity and review your score. The three major bureaus offer a free report every 12-months. If needed, adjust where possible to improve your credit score.
Evaluate debt. Debt can be a major expense and a hindrance to making progress on goals. Review outstanding debt and what progress has been made toward eliminating it and adjust any habits to prevent you from incurring more.
We look forward to seeing you all in the months ahead. Have a great start to summer!
Securities and investment advisory services offered through Royal Alliance Associates, Inc. (RAA) Member FINRA/SIPC. Additional Advisory Services offered through First Financial Advisors Group. RAA is separately owned and other entities and or marketing names, products or services referenced here are independent of RAA.
Banks, Interest Rates, and Landings
Welcome to Spring, a time of new beginnings! March was a busy month in the markets, giving us plenty to review.
Banks
Let's start off with the quote, unquote "Banking Crisis". Last month, Silicon Valley Bank, a well-known and trusted bank in northern California, collapsed causing a shock to the banking system. Later Signature Bank, a NY based bank, also closed its doors. Silicon Valley Bank (SVB) catered to venture capital technology
companies in Silicon Valley; this is a risky business model for a bank in general. On top of that they didn't follow a basic tenet of finance–matching assets to liabilities. The bank's long-term bond holdings were hurt by the Fed's series of interest rate hikes in 2022 and SVB disclosed a $1.8 billion loss after completing a $21 billion sale of its fixed-income portfolio. Due to their investment in longer-duration treasury securities they could not manage short-term demands when
customers started pulling their funds from the bank.1
Unlike SVB, Signature Bank (SBNY) was a private bank that had broad exposure to crypto currency and real estate companies. SBNY was shut down due to regulators concern about depositors withdrawing large amounts of money after the failure of SVB and the fear of continued contagion loomed large. The Federal Reserve, FDIC, and the Treasury Department quickly moved into action to ease concerns across the health of the banking system. Large money center banks have also been working together to help other banks to avoid a similar situation.3 While bank failures may cause investor concern and market volatility, it's important to remember that they are rare. The U.S. banking system is in a much different position than in 2008-2009 mostly due to legislation that was passed to help make lending standards more strict. As we gain more insight into the business models of these two banks, it appears that questionable management decisions, not poor lending standards, caused their failures.
Interest Rates
The current interest rate environment also continued to weigh on the financial markets last month. Some believed the banking sector issues would cause the Fed to pause its interest rate hikes. That didn't happen, as they raised rates another 25 basis points at the close of the Federal Open MarketCommittee's two-day meeting in March.4
Fed officials were placed in the difficult position of balancing the banking system's opposing risks of still-high inflation and stressors. The Committee had considered leaving rates unchanged given banking stressors but unanimously voted to raise rates citing elevated inflation, resilient economic activity, and a strong labor market.4
The official announcement hinted that the Fed might soon be done raising rates while stating it was too early to ascertain the degree to which the economy could slow from the current banking strains. The increase was the Fed's ninth-consecutive hike, bringing its benchmark federal funds rate to a range between 4.75% and 5%, the highest level since September 2007.4
Landings
What type of landing are we headed for? The bottom line is that the Federal Reserve is trying to strike a proper balance between managing inflation and addressing banking troubles. That's not to say we might not face additional banking issuesor economic challenges in the weeks and months ahead but there's
one thing for certain; market volatility and the current banking system can test the mettle of even the savviest investor.
As always, we are here for you. If you hear or read anything that causes you concern, please do not hesitate to reach out to us.
1. BusinessInsider.com, March 10, 2023
2. CNBC.com, March 27, 2023
3. CNBC.com, March 27, 2023
4. WSJ.com, March 22, 2023
Welcome to March, a time for renewal and growth, a time when we look forward to spring, when the days are growing longer, and the weather is beginning to warm. Unfortunately, February’s market performance felt more like atrophy, not growth. We saw stocks slide lower last month, despite posting solid gains to begin the year. The S&P fell more than 2%, cutting its year-to-date return to 3.4%.
At the end of January, investors had started to feel like inflation might finally be waning, but then we saw inflation expand again in February. The Fed has reiterated its desire to hold inflation at 2.0%, but with evidence that the economy can withstand further tightening, Chair Jerome Powell has made it clear that more interest rate increases are likely.
A sizeable portion of the economic news recently has been contradictory, resulting in a lot of uncertainty (and the inability to clearly determine what direction the economy is headed). In times like these, it's important to review your financial plan and remember that we are investing your money with your specific goals in mind.
As April 15th draws near, we'd also like to remind you to make your annual IRA contributions if you haven't done so already. Depending on your situation, they may be deducted from your taxable income. Many of our clients find it easier to set these contributions up automatically on a quarterly or annual basis; if this interests you, let us know and we'll get you setup.
As always, we’re here for you. If you have concerns about current economic conditions, questions about finances, or need to chat about taxes, just give us a call.
info@firstfinancialag.com
(631) 689-1515
First Financial Advisors Group
http://www.firstfinancialny.com
Securities and investment advisory services offered through Royal Alliance Associates, Inc. (RAA) Member FINRA/SIPC. Additional Advisory Services offered through First Financial Advisors Group. RAA is separately owned and other entities and or marketing names, products or services referenced here are independent of RAA.
Welcome to February! The month started off with a 25 basis point rate increase by the Federal Reserve and another hawkish press conference by Chair Jerome Powell. While he acknowledged that "the disinflationary process" has started, he also noted that the FOMC still sees a need for "ongoing increases in the target range."[1] He also stated that it seems unlikely the Fed would cut rates this year, an opinion that the market seems to disagree with.
Regardless of who is right, we believe we'll continue to be in this extended period of volatility at least in the short term. We continue to position your portfolios for your specific goals and to take advantage of this higher interest rate environment where possible.
February also begins the runway leading up to tax season which means it's time to start putting together all the documents you'll need to file -- April 18th will be here before you know it. Below is a checklist to help you get organized.
Also please keep an eye out for another email from us later this week that will include a short client survey. As we plan our marketing and events calendar for the year, we would love to get your feedback.
Sending best wishes for warmth and sunshine - Spring is right around the corner!
As always, if you have any questions or concerns, please do not hesitate to give us a call.
[1] https://www.cnbc.com/2023/02/01/fed-rate-decision-february-2023-quarter-point-hike.html
info@firstfinancialag.com
(631) 689-1515
First Financial Advisors Group
http://www.firstfinancialny.com
Securities and investment advisory services offered through Royal Alliance Associates, Inc. (RAA) Member FINRA/SIPC. Additional Advisory Services offered through First Financial Advisors Group. RAA is separately owned and other entities and or marketing names, products or services referenced here are independent of RAA.
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