Just a few short weeks ago the futures market expectation was at least two more 25-basis-point rate hikes by Q3, before the discussion to lower rates may have started in Q4. As of writing this article, the futures market is now expecting no further hikes, and cuts to start at the first Fed meeting of Q3 at the end of July. Although we are not as optimistic as the futures market with regard to the timing of the cuts, our current analysis has us close to split on whether or not we will see further hikes in early May, with signals pointing to the fact that this past meeting could very well have the last hike in this cycle. That said, looking at historical periods of inflationary instability it can tend to go up and down in spikes, and there is always the possibility we are far from done fighting it back down to the 2% level as the Fed intends. If we do not continue to see decline in CPI and PCE, the Fed will face some difficult monetary policy decisions.

The relatively recent yield curve inversion indicators have again raised concerns of recession risk, but unlike the false alarm in late 2019, the troubled signs have started to follow. Typically, this means a recession risk about a year later. Albeit minor, we do expect to see a mild recession later this year. If it remains somewhere between the Fed’s desired soft landing and a mild recession we would be happy with that result. This is what we currently project to be the most likely outcome on the back of strong household financials as well as corporate finances that have for the most part proven resilient with regard to the jobs market. Of course all of this can change, and will be a focus of ours as we move through spring into summer.

With all of this in mind we are satisfied with our portfolio performance across our benchmarks, and management strategies looking ahead will continue to regularly monitor the news, data, and statistics that drive our portfolio rebalancing and re-weighting. While a recessionary cycle will be a challenge for equity markets and corporate earnings, the result is often more favorable for the bond market. Despite that uncertainty ahead, equities’ long-term performance in a well-balanced portfolio are still strong, and a focus on quality stocks and defensive stocks, especially those in oversold areas can prove fruitful. Other sectors such as Healthcare, Consumer Staples, and Utilities will become more important to our overall holdings as well given its resiliency to recessions historically.

Based on our internal weighting metrics at the time of writing this we are Overweight (Health Care, Information Technology, Industrials), Neutral-High (Consumer Staples, Consumer Discretionary, Utilities), Neutral-Low (Real Estate, Materials), and Underweight (Financials, Energy, Communications). This will likely change throughout the quarter as we continue to monitor the economic situation and the central banks decisions. That said a few mainstays that have served portfolios well over the last 6 months will continue to play a big role going forward. We will maintain a large allocation to gold utilizing the iShares Gold Trust (IAU), which as our second largest holding, is up about 23% over the past 6 months as of writing this. Our largest holding, an Information Technology ETF (FTEC), which saw a past 6-month performance of 17.33% as of writing this will take a step down as our top allocation in favor of a wider range of Information Technology exposure where we remain overweight.

Looking further ahead, no matter how disconnected you may be, we are sure you have heard at least something about the Artificial Intelligence boom that is happening in tech. Here at Retirement Systems, we continue to develop and integrate technology into our daily processes, and Machine Learning and AI have and will continue to be a valuable asset to our team. From the Data Science behind our market outlooks and decision-making processes to sharing information and resources with our clients, we are excited about a number of projects in development. In the back half of 2023 we expect to launch a new portfolio focusing on exposure to this fascinating and exponentially growing new industry led by names like Google and Microsoft. GOOG, which will almost certainly be a part of this new portfolio will continue to be a large holding to start Q2, which is up just under 19% over the last month as of writing this. Soon thereafter we expect to unveil our first portfolios that will actually utilize these processes alongside our team aiming to drive decisions, allowing us to innovate faster, while exploring a wider range of data and investment opportunities. As always, past results are not indicative of future performance. Nothing contained in this newsletter is to influence any investment decisions, please remember to communicate with your Investment Advisor Representative for any buy/sell orders. More to come on that front, but until next quarter, thank you for putting your continued trust in us here at Retirement Systems, and if you have any please questions don’t ever hesitate to contact your advisor.

by James Tuccori

The post Market Outlook appeared first on Retirement Systems Advisors.

Contributing to an IRA can be done up until the tax deadline, April 18th, while still getting credit towards your 2022 taxes. There are two types of IRAs you can contribute to. By making a contribution to a Traditional IRA, you may be able to reduce your taxable income for the year, potentially lowering the amount of income tax owed to the government. This can help you keep more of your hard-earned money and build more of your retirement savings.

It’s also important to know that, you can take advantage of tax-deferred growth via a Roth IRA by contributing to a Roth IRA before the tax deadline. Roth IRA contributions are taxed on the front end, which  means that any earnings generated by the Roth IRA investments can grow tax-free until the funds are withdrawn in retirement. This tax-deferred growth can help clients accumulate more funds over time and potentially increase their retirement savings.

You should also understand on the different types of IRAs available, including Traditional and Roth IRAs, that there are contribution limits for each. For example, for the tax year 2022, individuals under the age of 50 can contribute up to $6,000 to their Traditional or Roth IRA, while those over 50 can contribute up to $7,000. Please be mindful of income limits for Roth IRA account contributions.

Keep in mind that you can only contribute to an IRA using earned income, money derived from paid work. So whether you’re still working, or retired and working part-time, it is likely that you should be contributing to an IRA. And, if you have a significant balance of non-qualified money, usually money in savings, CD’s, brokerage accounts, etc. using that money to make your contributions would turn the non-qualified, double-taxed money, meaning money that you pay income tax on and any capital gain, into qualified money where you’d only need to pay taxes once.

It’s our job to help clients understand the benefits of this strategy and guide you in making informed decisions about your retirement savings.

by Gianni Perkovic

The post IRA Contributions before Tax Deadline appeared first on Retirement Systems Advisors.

In the case of SVB they purchased long term bond securities which would cause problems later. The reason this caused a problem is because they purchased these long term bonds in a very low interest rate environment and so when interest rates started to go up substantially then those longer term bonds were taking pretty big losses. Usually this wouldn’t be a huge problem as they were long term bonds and however in the case of SVB they had to sell these bond positions at large losses in order to cover their deposits because clients started to ask for money back. These losses accumulated so much that as SVB considered what their options were it seemed issuing stock for a capital raise was their best option per Goldman Sachs advice. However when SVB announced they would be issuing stock for a capital raise the stock sank drastically as this alarmed investors and the clients of the bank became concerned by the masses and initiated a “bank run” essentially withdrawing as much as they could from the bank which would go on to cause the bank to be unable to meet its obligations, and as such collapse, which thereafter caused the  government to effectively step in. The government, most notably the FDIC, Federal Deposit Insurance Corporation, decided to act decisively to protect 100% of the deposits as opposed to the maximum $250,000 that’s widely recognized. Some important factors for this decision is that 99% of the clients of SVB had deposits above $250,000 and many of these companies are the future of tomorrow’s innovation and letting them go under would have drastic consequences.

We are monitoring the banking industry actively and would like to remind you that while there are bad apples out there we don’t fear for the banking system entirely and we do observe that this bank in particular had a concentrated exposure to one particular sector, in this case, tech companies, which is a risk in and of itself.

by Richard Corral

The post Silicon Valley Bank appeared first on Retirement Systems Advisors.