Clint Carpenter, Director of Operations

The markets have certainly ebbed and flowed as of late, but we’re still positive year-to-date in our main indices. The S&P 500 is at 4,110, up about 9.5% for the year, the DOW is just over 34,000, which is a YTD gain of 11%, and the star of last year, the NASDAQ, is only up about 2% so far this year, at about 13,100.

Treasury yields have come back down a bit since you last heard from us in April - the one-year is paying .05%, the 10 is yielding 1.6% and the 30-year is at 2.4%. The average 30-year mortgage will cost you 3% APR today.

WTI Crude is down to about $63/bbl, gold will cost you $1,826 per ounce and silver is at $27.

Kris Venezia, Market Analyst

I want to dig into what I have been finding as I go through through corporate earnings reports. We're in that window where companies give us their perspective on how they're doing. Corporate executives also take questions on what they see ahead which is helpful.

I won't dig into the nitty gritty, but I want to talk about the main general topics I have found as I look through these reports.

The big immediate takeaway is that earnings have really crushed expectations. We have seen a majority of companies report profits and revenue that was way better than anticipated to start the year. It tells us that the economy is coming back quicker than what was expected by a lot of analysts.

U.S. and Asia are doing better than Europe. Is this a surprise? No, but it is incredible when companies like Coca-Cola and McDonalds show how much Europe is lagging in its recovery.

The consumer is strong. Companies like Chipotle, Domino's, Apple and Amazon all highlight this as they report consumers not just buying from them, but spending more than they did in the past. People aren't just getting pizza, they're splurging on that cheesy bread too.

There are supply chain issues persisting. The car industry is the best example of this with Ford saying they're being forced to make less cars because of shortages of items like chips.

Daryl Eckman, President

Inflation seems to be on everyone's lips right now. We have been getting a number of phone calls from people asking us what we think about inflation.

I'm not going to spend a lot of time on inflation because I went through it on our last podcast. You can find it on our website if you want to get my opinion on inflation.

We are seeing issues with the supply chain. The semiconductor industry is working to deal with a shortage there that is impacting businesses.

I want to discuss market volatility. We actually like volatility because it gives us buying opportunities. Our clients hear this on a regular basis. Volatility gives us conviction to do some of the buying; honestly, we do not love buying when things are high. When the market performs really well, we tend to look for opportunities to take some money off the table.

We also are good at controlling our emotions when volatility comes up. It can be difficult to emotionally handle volatility and that is one of our strengths.

Bottom line, we want to use the volatility as an opportunity to find buying and selling opportunities. If you want more clarification on volatility, please reach out and we can go into more details.

Clint Carpenter

To wrap us up here, I thought I would touch just briefly on something that, second maybe to inflation, I’ve been receiving the most questions about - which is Biden’s plan to offset more than $4 trillion in spending proposals with higher taxes.

Specifically, we’re talking about the $2.3 trillion “jobs and infrastructure” package announced last month, as well as the $1.8 trillion “families” spending plan. The first and larger bill, it is proposed, will be paid for entirely by a hike in the top corporate tax rate from 21% to 28%- this was just cut down from 35% in 2017.

The second “families” bill, is planned to be funded by increasing enforcement at the IRS and by raising taxes on high-income Americans and investors. Namely, Biden’s proposal is to approximately double the amount of capital gains taxes paid by investors who earn more than $1MM annually - they say only about .3% of investors would be affected by that change.

Clearly, these proposals are brand new and will work their way through committees and negotiations with both parties, and we’ll end up with an entirely different version of the bill later. We’re paying very close attention to it, but there is little sense in reacting strongly now while it is still in its infancy. These types of bills, especially in today’s political climate and congressional stalemates are huge battles. So, know that we follow every detail of it, but can’t say what will ultimately pass through.

Thanks as always for listening today. If you’d like to discuss anything further about the earnings season, inflation, or these tax proposals, please don’t hesitate to give us a call or shoot us an email. Thanks and have a great day!

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Clint Carpenter, Director of Operations

Year-to-date, both the DOW and the S&P 500 are up close to 9%, so far. The NASDAQ, which soared last year, has been a little more tame thus far, up 6% year-to-date.

Treasury yields continue to see-saw, with the 1-year yielding .07%, the 10-year paying 1.6%, and the 30-year down to 2.32%. The average national mortgage rate in the US is 2.97% APR for a 30-year fixed loan.

WTI Crude oil seems to have settled around $60/bbl over the last few weeks. Gold has also calmed a bit, it’s priced at $1,741/oz. Silver sits at $25/oz.

Kris Venezia, Market Analyst

Hello, I want to discuss what we're looking ahead at as we try to figure out how to position portfolios.

First, it's important to briefly explain how we got here. The S&P 500 has crossed over 4000 and we have the Dow at record levels as well. We're in what's called a "risk on" environment. Investors are flooding into stocks and real estate and that's boosting asset prices. The market has continued to get good news. We recently had more stimulus pumped in, rates are still very low, Covid rates are slowing down and we're seeing signs of job growth really coming through the rest of 2021. It's hard to be negative or a "bear" right now.

So what's ahead?

Well, the market continues to see positives on the horizon.

Job openings hit their highest level in two-years which is a positive sign. We still are at spot where there needs to be more of a recovery with jobs. The official unemployment rate is at 6%, but, economists have pointed out that there's several million people who left the workforce when the pandemic started. They might not be counted on those jobless numbers, but, if we want a booming economy, we want these people participating.

Democrats are pitching another couple trillion for infrastructure spending. If more money gets pushed into the economy, it should push asset prices up.

Consumers are really starting to open their wallets. JP Morgan and Bank of America put out data on card spending, and we are seeing robust spending for consumers. We're also seeing consumers shift their spending more towards experiences. We are seeing more spending on flights, going out to eat and booking hotels.

Like I said, hard to be negative right now as investors look ahead. Of course, there's always risks, and we have to be aware of what could really disrupt the market.

The biggest one that worries investors, long term, is high inflation. I won't get into the nitty gritty of how that would all play out, but high inflation would put a dent into the U.S. economy.

A second one, that goes along with the inflation conversation, is higher rates. We have seen rates rise a little, but they are still low. If the economy really opens up and starts to overheat, we could see rates rise. A high rate environment hurts many parts of the stock market, like high growth stocks and big dividend stocks. Higher rates would also motivate us to make more robust portfolio changes. If rates are higher, it makes bonds much more attractive. We would look to generate more income for the portfolios, through bonds, in a higher rate environment.

Outside of that, there are some less likely risks that could pose problems. While it's not likely, we could see a Covid mutation that the vaccines don't protect against and this would really hamper the recovery. The Democrats infrastructure plan includes raising the corporate tax rate, and if business have to pay more taxes, it will have an impact on their earnings. Finally, Congress or the White House could make big tech or China a bigger priority. If U.S. politicians go after big tech companies over anti-trust issues, it could have a very negative impact on some of the largest stocks in the market. Also, if Congress or the White House decides to step up pressure on China, it would also ruffle the markets.

My biggest fear is the excessive risk taking some investors are taking. When investors are over-invested in risk assets, like real estate and stocks, it can cause big problems when something negative does, eventually, happen. People get forced to sell assets and it can cause this ripple effect of selling. We saw this a little over a year ago when investors were positioned far too aggressively in early 2020. We had a negative event happen and there was no smooth way off the ride, instead, we had excessive selling.

Daryl Eckman, President

The economy is certainly moving in the right direction. We are seeing many leading indicators pushing in a positive direction.

The Business Activity Index has really soared and shows expansion in the economy. The major indicators are showing momentum that the economy is showing signs of doing better.

The increased vaccine distribution is certainly helping with the economic recovery. It is helping to allow the economy reopen.

The weather has also played a factor recently. There was some bad weather in parts of the country in February, and with that bad weather subsiding, parts of the economy have been able to open up.

We think the unemployment rate will continue to drop. There appears to be so much momentum with businesses hiring employees.

The combination of better weather in parts of the country, more people getting vaccinated and officials getting rid of restrictions should have a very positive economic impact.

The numbers in March were so good that we are anticipating some choppiness, on the economic indicators, in April.

We haven't really been too surprised with the data coming out, it's around what we expected. If anything, we have been a little surprised with how good the data has been, it's blown by a lot of projections.

Clint Carpenter

These calls cover a lot of broad macro-economic information, but we are always considering your specific needs ...

A heads up to our clients, over the next few weeks we’ll be sending out your most recent investment suitability responses we have on file. You may remember this as our little pop quiz, just asking for some of the basic details that help us provide suitable financial advise to each of our unique clients. It asks for basic information about income and net worth, but also presents a few scenarios for you to consider that help us measure your tolerance for risk. Your responses to this are greatly appreciated so that we can make sure we’re continuing to provide the best advice we can and make sure your portfolio is adapted to your specific circumstances. So, if you will, please keep an eye out for that correspondence and let us know if you have any changes to the information.

Just a few tax related reminders - the deadline to file your U.S. return has been extended to May 17th. The IRS has also set that as the date to make your prior-year 2020 IRA contributions, so be sure to make note of that revised tax day this year.

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Clint Carpenter, Director of Operations

The main indices continue to see-saw - the S&P 500 is down slightly today but remains up by about 5.5% year-to-date. The NASDAQ is down over 1% today, but also remains up, by about 3.5% year-to-date. The DOW, our industrial index, is up well over 8% already, ytd. So, we have an interesting market that is breaking somewhat with recent trends.

Treasuries have climbed again, despite recent Fed commentary. The 1-year is paying .07%, the 10-year is yielding 1.7%, and the 30-year is all the way up to 2.4%. That has the country’s average mortgage rate at about 3.2% APR.

Oil, which has been on the rise recently mostly due to the reopening trend, is having a rough day today- it’s down 4% to about $62/bbl. There are some worries about vaccines in Europe slowing down their reopening process, but really, it’s also just common for a commodity to overextend itself when it rises this much, so a short-term decline isn’t much to worry about.

Last bit here on precious metals - Gold will cost you about $1,730/oz today and silver is continuing to hover at $26/oz.

Kris Venezia, Market Analyst

I really want to focus on the Fed and rates in my discussion because it's having such an big role in the markets and the overall economy right now.

The Fed has two major tools to control rates. One is its own Fed Funds rate, which I won't get into, but other interest rates like interest your bank pays you, mortgage rates or corporate borrowing rates are all influenced by it. The second way the Fed controls rates is by buying U.S. Debt, what you hear as "Treasuries", which, without getting into the nitty gritty, keeps rates low.

When times are tough, the Fed wants to keep rates low. They want to motivate people to go out and spend money to help juice the economy. When your checking account pays .01% interest, it motivates you to seek out other investments like riskier bonds or stocks or real estate.

When the economy is going well, the Fed, in the past, would raise rates because they don't want to the economy to overheat. If too much money is being printed and moving around, it can cause inflation.

At this moment in time, the Fed is in a very difficult spot. The Federal Reserve is keeping monetary policy really loose. They set their own rate at zero and are buying billions-of-dollars of Treasuries every week. They are telling investors that the economy is still in a shaky spot.

The problem is.. investors are looking ahead and see a good economy on the horizon. They believe people have saved money, received money through those stimulus acts and will be motivated to spend as we move out of this pandemic.

The reason this is a problem is that the global market and investors influence rates. Once again, without getting too much into the nitty gritty, rates are rising as investors re-position their portfolios for a booming economy.

When rates rise, it causes shifts in the markets. Companies that are trying to aggressively grow, like tech companies, tend to lag the broader market. The reason for this is because to grow quickly, those companies need to borrow money. If it gets more expensive to borrow money, it hurts their growth prospects.

When rates rise, there are certain areas of the market that perform well. Banks are the biggest winner because they lend money at higher rates. In this situation, where there is optimism about the economy, industrial companies also perform well. Honeywell, Deere and Caterpillar are some of those names that are outperforming as the economic outlook improves.

They key for us, as money managers, is to examine if rates are at a point where they will have a dramatic effect on the markets. I like to give my perspective by asking this question. The U.S. 10-year is at 1.7% which means you can give money to Uncle Sam, and you will get your money back in 10-years with 1.7% interest. Is that attractive to the average investor? Would you be happy if we called you every year and said we got you 1.7%? Mortgage rates are still around 3%. Is that going to stop someone from buying a house? If you've been alive for more than 10 years, you know that's still very low.

Daryl Eckman, President

I want to talk about inflation. The way inflation is measured is by examining different baskets of goods and seeing how those prices fluctuate over time. If those prices rise, we call that inflation.

We are not very concerned about inflation, but it is coming onto the radar. The Federal Reserve has been using different vehicles to keep interest rates low, and they do have tools to change policy and try and combat inflation if that becomes more of a reality.

As far as rates go, we see rates rising on the end of that yield curve. We are seeing 10 and 30 year Treasuries starting to pick up. The front end of the curve, those short term Treasuries, are staying very low.

Banks like higher rates because they get to lend money out at higher rates.

At this point, we are not overly concerned about interest rates or inflation. It is something we will monitor as the economy reopens to see if things overheat, but right now, we are not losing sleep over those issues.

We like to see some inflation, it shows that the economy is growing. We really don't like deflation which is when prices are dropping. A terrible example of that was back in the Great Depression when farmers were dumping milk because prices plummeted.

The goal is to be in that sweet spot where there's some inflation, but not too much inflation where consumer prices are getting out of control.

Clint Carpenter

First, regarding taxes, the IRS has pushed the filing deadline to May 15. You’ll get an extra month to gather documents and reach out to us for assistance completing your tax return. The reason for delay leads me into my next point…

The Biden administration and congress have passed the $1.9 Trillion American Rescue Plan Act, known more colloquially as the “new stimulus bill”. The package includes direct stimulus payments of $1,400 to people within certain income thresholds - basically, single people making less than $75k or married couples making less than $150k will qualify for the full amount, it phases out from there until it disappears entirely above $80 or $160k. New this time around, you can receive an additional $1,400 for each of your dependents, regardless of their age.

Also, regarding stimulus payments from last year, if you think you should have received payments but didn’t, you’ll be able to indicate that on your 2020 tax return via the recovery rebate credit. The important thing here is that you can use your 2020 income to qualify. So, if you made less than you did in 2019, you might be owed some money.

If you received any unemployment income in 2020, the new bill excludes a portion of it from income taxation if you’re under certain income limits. If you already filed, the IRS says don’t file an amendment - they will likely correct this on their end and issue you any additional refund that you are due.

There are several other elements of the stimulus bill that I won’t detail here, but am happy to discuss if you feel they might apply to you. These include extended unemployment benefits, expanded child tax credits that you can receive now, in advance, and premium assistance on COBRA health insurance - that’s a big one. If you lost your job last year due to COVID and are on COBRA insurance, there is major assistance available to you. There are also new grants and loan programs available to small business owners. They’re complex, but we can help you understand them.

A lot of great information in today’s market commentary, you couldn’t be blamed for not catching it all. Rather than rewinding and listening again, just give us a call to discuss anything you need some extra help with. You’re welcome to email me,, or give us a call at 888-545-4746.

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