Updated: Feb 25

Clint Carpenter, Director of Operations

Hello and thanks for listening to First Choice Financial Solutions market commentary. I’m Clint Carpenter, Director of Operations. I’ll start things off with a quick summary of where we’re at so far this year, and then I’ll pass the mic to my colleague Kris Venezia, market analyst, followed by Daryl Eckman, our economic strategist.

Whether you can believe it or not, the end of February is already upon us, as is the one-year mark since the beginning of the pandemic. This time last year we certainly had no idea what was upon us as a society, did we? The major indices, which have been rather volatile as of late, have posted fairly good returns so far this year. Both the DOW and the S&P are up slightly over 4% YTD, and the NASDAQ has gained 5%.

Treasury yields have ticked up in the past few weeks, especially the longer out we go. The 1-year is still yielding next-to-nothing, less than one-tenth of a percent, but the 10-year is paying close to 1.4 and the 30-year has climbed to 2.2%. This has pushed mortgage rates up slightly as well, the national average just climbed back over 3%, although only slightly. The Fed continues to have a soft outlook on inflation and interest-rate policy, but we know that can change at the drop of a hat. We are heavily scrutinizing fixed income positions in our portfolios right now, turning our attention instead to where else we can find value and yield.

The price of oil is on a tear, with WTI crude at about $63/bbl today. Gold continues it’s steady but slow decline, currently at $1,797/oz, and silver, which had some recent excitement, has settled just shy of $28/oz.

Kris Venezia, Market Analyst

We have seen a recent under performance from the Nasdaq which is largely made up of tech names. I want to touch on that to start.

Without getting too much into the weeds, the recent rise in rates on the long end caused some selling of the tech names. When rates rise, it puts pressure on growth stocks of which many are tech.

I think it's important to keep in mind that tech overall has still performed really well to start the year. We aren't going to completely change our outlook on growth because of a blip. However, if rates continue to rise, it's a risk we'll have to monitor.

Another topic I want to go over briefly is recent testimony from Federal Reserve Chairman Jerome Powell. He spoke in front of the U.S. Senate.

One big takeaway was his analysis of inflation. There is a growing belief that inflation will rise as the economy reopens once more people are vaccinated. Chairman Powell said he is not concerned about high inflation at this point. He explained that he believes the pandemic is causing a strain on the economy that's more deflationary than inflationary.

A second takeaway was Powell's commentary on the Fed's asset purchases. The Fed is a huge buyer of debt (bonds). He said the Fed sees the economy still in a rough spot, so it will continue to buy debt at a high level. The Fed buying debt is a way for them to keep rates under control (buying debt can push rates down).

The Democrats' Covid relief bill is continuing to progress through Congress. It has basically no Republican support at this time, we'll see if that changes when votes start happening on the full floors.

The House is expected vote and pass the bill by the end of the week. The legislation would then go to the Senate. Democrats do not need Republican support to work it through, but, it takes just one Democrat in the Senate to throw a wrench into everything.

The nearly $2 trillion bill is seen as a catalyst for the markets. Investors believe that money will flood into the economy and support spending and asset prices. The expectation is that Democrats will get it through the House and Senate and onto President Biden's desk in mid-March.

Finally, I want to discuss a short story I picked up from flipping through earnings reports. John Deere, the company that makes a lot of farm equipment, had an interesting tidbit in their very good report last week.

Executives said they have seen farmers spending more money on upgrading their equipment. They explained that when farmers first started receiving financial aid last year, farmers put that money towards paying off debt and into a rainy day fund. With debts paid off and the outlook brighter, Deere executives said farmers are now starting to put that money to work.

While this story is specific, it supports a macro idea that consumers across the country are going through a similar process. We have seen many Americans beefing up their bank accounts during the pandemic. There's also evidence that shows Americans used stimulus checks and other Covid relief aid to pay off debt. With more debt paid off and bank accounts filled up, we could see consumers start spending money aggressively as the economy opens up more in the summer.

Daryl Eckman, President

I want to talk more big picture. It's really important to pay attention to the attitudes from investors right now.

We like to think like we know it all, but it's important for us to take a good hard look and see where our blind spots might be. Since we are not too full of ourselves, we will be more on our toes and see things from more angles.

We are anticipating at any given time that a correction could happen. We want that to happen because corrections give us an opportunity to take money off the sidelines.

I am also noticing in my conversations with clients that Democrats are more optimistic with the economy and Republicans are more pessimistic with the recent changes in Washington. It's our job to not let political bias impact how we are investing funds.

If you have concerns at this moment, reach out to us and we have plenty of information and research that demonstrates how the market performs over the long term.

Clint Carpenter

The IRS is open for business, and we’re here to help you file your taxes. The agency started accepting returns on February 12th, and as of right now, the deadline to file is April 15th. We could still see that deadline pushed back as we did last year, in fact the IRS has pushed the deadline for residents of Texas to July 15, citing the damage caused by the recent winter storms. I wouldn’t be surprised if it’s pushed back for everyone, considering delays in sending out tax forms by various government agencies and private companies. I’m aware of a few 2019 returns that have yet to be processed still, as well.

Another note on taxes - if you did not receive the full amount of stimulus you believe you’re eligible for, there is a Recovery Credit to claim on your 2020 tax return. You can now also log in to the IRS website, create a login to view your tax account, and you’ll see a summary of the stimulus amounts the IRS has on file as having been paid to you. I’d highly encourage anyone listening to do that, not only to check your stimulus, but to keep an eye on your tax filing history and monitor for fraudulent returns filed in your name.

Alright, we covered a lot today, but I hope you enjoyed the content. Please always feel free to reach out to us via our website, social media or the old-fashioned way, give us a call at 888-545-4746. Thanks for listening and have a great day.

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Clint Carpenter, Director of Operations

Hi, Happy New Year and welcome to First Choice Financial Solutions Market Commentary. I’m Clint Carpenter, Director of Operations. I’ll also be introducing you shortly to Kris Venezia, Market Analyst, followed by Daryl Eckman, Economic Strategist. I’ll get things started here with a quick summary of the markets and then pass it over to my colleagues for some commentary.

So! 2021 is already off to a pretty interesting start in the markets, but let’s take a quick look back at 2020. The S&P 500, the most widely watched index, finished the year up more than 16%. The Dow gained 7.25% and the NASDAQ really outperformed, returning over 43%. So far this year, we saw each of the main three stock indexes get close to a 2% year-to-date return, but they’ve come back down to under 1% year-to-date. We’ll see what, if anything, can break this momentum.

Treasury yields continue to rise very slightly. The 1-year is paying .1%, the 10 year is paying just over 1% and the 30-year is getting much closer to 2%. Our average national mortgage rate is at about 2.9% still. Gold is currently $1,844/oz, continuing its gradual decline. Oil is still headed up, WTI is currently priced a bit shy of $54/bbl.

Kris Venezia, Associate Vice President of Investments

We have had some recent bad data with the economy. Employment Data: ​Initial jobless claims nearly hit 1 million last week. It was one of the worst numbers we'd seen in awhile.

The last jobs report also showed the economy lost 140-thousand jobs. The unemployment rate stayed basically unchanged at just a tick over 6.5%. The hope was that we'd consistently see jobs come back and the unemployment rate drop, so the December jobs report was disappointing. Consumer Sentiment: Consumers, overall, are still not big believers in the economy. The University of Michigan publishes statistics on consumer sentiment. It found consumers still pessimistic about the economy. However, looking deeper into the data, there is a political factor influencing the study. Republicans have turned sour on the economy since November. I'll let you do the math there. Democrats are only slightly more optimistic, according to this study, despite a positive election for them. Consumer Activity, Mixed Across The Country: The real-time data for consumer activity, like people going out to eat or how often they get gas or how many people are flying, is mixed across the country. Overall, it's another data point that's slipped a bit over the last few months, but it hasn't been a dramatic drop off. The interesting item here is the data differs across the country. For example, data shows people in Arizona much more active than people in Pennsylvania. Could there be seasonal trends impacting the data? The weather is nicer in Arizona, I can confirm that.

Coronavirus Cases And Hospitalizations Are Still High, Putting Pressure on Officials: The number of Coronavirus cases is still elevated. Hospitals continue to report that they have a high number of patients needing care because of the virus. Officials have been very reluctant to implement shutdown measures that we saw in spring of 2020. France and England have taken some stricter measures, using curfews, for example, but in the United States governors have held off on major lock downs. However, if hospitalizations and cases rise even higher, it could put more pressure on officials to take stronger action. A Lot of Momentum for Stimulus: ​There is a lot of momentum for another stimulus bill. Republican Marco Rubio has come out in favor of sending $2,000 to Americans (this is 600 +1400). Moderate Democratic Senator Joe Manchin made a comment about being against another stimulus check and the backlash was so swift, he flipped that opinion within three hours. President-elect Joe Biden put out his stimulus proposal, with the tab coming in close to $2 trillion. Democrats have control of the House, Senate and White House soon. There are very, very strong odds that at least another $1 trillion in fiscal support will pour into this economy.

J&J With A Single Dose Vaccine Expected In March It feels a little swept under the rug, but Johnson & Johnson has had some success in studies with a single dose vaccine. The current vaccines require a dose and then a month later a second dose. A single dose vaccine would help speed up the vaccination process. It also gives us a third company producing vaccines for the public. Little Support For Shut Downs, Politically Despite the high number of coronavirus cases, there is not much emphasis behind bringing back shut downs. We have seen states institute seating capacity limits at restaurants but in most of the country, people can technically go out to eat or see a movie, etc.

The Fed Fed Chairman Jerome Powell spoke last week. He continues to emphasize that the Fed will keep their pedal down and continue with this low rate environment. The low rate environment will continue to push money into assets like stocks and real estate.

Market Concerns Looking Ahead Biden Administration, What Are Its Priorities? ​I am still curious as to what the Biden Administration is going to do. I believe the agenda shifted in a big way when Democrats won the Georgia senate races, but we'll see. What will his stance be on China? What will his stance be on big tech? Biden has stressed bringing the country together. China and big tech are two issues that have bipartisan support. Democrats and Republicans have both pushed for a hard stance on China. They also have expressed frustrations with big tech. Democrats have not been thrilled with the large amount of power Facebook, Google, Apple and Amazon have. Republicans have been angry with the way big tech and social media policies their platforms. Rising Rates....

We have seen rates rise with the positive vaccine and stimulus news. When rates go up, it can drive dollars away from stocks and real estate. People are going to be less eager to buy a home if mortgage rates go up. Investors might put more money into bonds or CD's if they see what they consider to be a safer investment that gives some sort of a return.

The one caveat to this is the Fed. They have insisted that they will do whatever it takes to keep rates low. The Fed could use their unlimited spending power to help ensure that rates stay down.

Daryl Eckman, President & CEO

There is some optimism and the markets are showing that, there's even a hint of interest rates going up.

I think most people right now are looking for political calm which should help the markets. We've been a little surprised at the lack of volatility with the changing of the guard in Washington D.C.

There is some concern about unemployment but hopefully that improves as the year goes on. Studies from states show nearly half of states have vaccinated at least 10-percent of their population.

What are we doing right now? We are starting to nibble into the value stocks. They have been out of favor for a long time, usually there is a back-and-forth between value and growth stocks. Growth stocks are technology stocks, like Apple. Right now, we are looking at some of the value stocks. We don't get into individual stocks, but the groups include auto stocks and bank stocks.

There is a concern over rising interest rates. We'll continue to monitor that. There is also a future concern about foreclosures. We would anticipate some foreclosures later in the year and that could set off a decline in the real estate market.

We really haven't been talking too much about international stocks but there will be a lot to watch there with the new administration in Washington. We will see what the Biden cabinet and advisors want to do with those international relationships.

We have been waiting for that market pullback. When that happens, we will want to put more money into the market. Do not be afraid of the pullback, we want that to happen. If you have any concerns or questions about your finances, give us a call. We also do so much more than just investing your money, we're more than stocks and bonds.

Clint Carpenter

I’ll just come back in here with a few points for the beginning of the year. First, it’s a good idea to take a look at your paycheck withholdings at the beginning of any new year to make sure you aren’t withholding too much or too little.

We have some tools that can help you zero in on that magic number. If you adjusted your withholdings mid-year last year, you’ll definitely want to make sure you’re set up for 2021.

Also, speaking of taxes, the IRS has delayed the beginning of the filing season to February 12th. That means even if you have all of your documents and you’re ready to file, you won’t be able to for a few more weeks.

We’ll see if and when they push the filing deadline back, as they did last year. We’ll be sure to communicate any other major changes to the filing season.​

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Clint Carpenter, Director of Operations

With the end of the year rapidly approaching, who would have thought we’d end up here looking at a year-to-date NASDAQ return of nearly 43%, while the S&P 500 is up about 14% and the DOW is up only around 5%. That’s the widest divergence we’ve seen between the main the three stock indexes in more than a decade!

Treasuries have remained low, although our longer notes have increased somewhat. It's nowhere near where we started at the beginning of 2020, however. The 1-year is paying .09%, the 10-year is at .95%, and the 30-year is yielding 1.7%. We’re seeing average mortgage rates across the country at about 3.9%, although there are certainly lower rates to be had depending on your market and your lender. If you’re wondering if you should be considering refinancing, certainly get in touch and we’ll give you our opinion.

Gold is currently $1,863/oz, off quite a bit from record highs earlier this year. WTI Crude oil is also down today, but on a recovery track from lows earlier this year. It’s currently priced at $47/bbl.

Kris Venezia, Associate Vice President of Investments

I want to start with a question I have been getting over the last several weeks, "Why does the market keep going up?"

Well, there are several reasons that have made investors bullish despite the ongoing pandemic.

The vaccine breakthroughs. The vaccine breakthroughs give investors an easy way to look ahead to a rosier future. I am not a doctor, but the general assumption from medical experts is that people should be vaccinated by fall of 2021.

The market is always trying to look ahead. Investors are buying into companies that they believe will benefit in what's being called a "reopening" trade. For this reason, we have seen airlines, oil companies, hotels, and financials really outperform since the vaccine news was announced.

More stimulus. Congress continues to push for more stimulus with the House and Senate overwhelming passing a nearly trillion-dollar COVID relief bill. Senate Majority Leader Mitch McConnell, House Speaker Nancy Pelosi and President-elect Joe Biden have all said they want to put together another package sometime in early 2021.

At the time of this writing, President Trump has criticized the bill and it's unclear if he'll sign the legislation passed by Congress.

Consumer activity. Despite the pandemic, consumers have been out spending money and there has not been widespread shutdowns.

There are certain parts of the economy that are still being stung. Restaurants who do not have easy takeout options and bars are definitely hurting. However, outside of that, data indicates consumers are spending money on home improvement, clothes and a lot of takeout. A lot of alcohol, too.

As far as shutdowns go, there appears to be no political appetite to institute shutdowns like we saw earlier this year. There are parts of the country that have put in place a curfew or put limitations on places like restaurants, but we just aren't seeing the same type of shutdowns like we did in April.

The election. Investors were thrilled with the results of the election. Going into the election, there were fears of a blue wave and the policies that would bring about. We did not see that happen.

The House is a razor-thin Democratic majority and the Senate will be tight no matter what happens in Georgia.

This means that we will not see any of the more dramatic ideas that far-left or far-right members of Congress bring up. Even better for investors, the slim majorities in Congress will motivate Democrats and Republicans to pursue ideas that are more popular. These popular ideas could include topics like tax cuts or government spending for certain initiatives (ie stimulus checks).

As we head into the new year, there are several issues we have our eyes on.

What items will the Biden administration make the top priority once he takes office?

How will the relationship between U.S. and China change under the Biden administration?

Will we see a drop in consumer activity after the holidays with the high number of cases in the United States?

Will the Fed keep their foot on the pedal through 2021, or will they take their foot off the gas as the vaccine roll out continues?

Daryl Eckman, President & CEO

When it comes to talking about politics, there’s a difference between economic policies and social policies. We concentrate more on economic policies that are put in place.

At this time, there hasn’t been a major shift on the current economic policies. It could change under the Biden administration, but there hasn’t been any hints, except for possible increased taxes. The U.S. is still the best protected free enterprise economy in the world. It is still a hot bed for technology, innovated technology, invention and protection in private property.

I do not see much inflation in the near future, the Fed is still interested in keeping interests rates low and buying treasuries. As a result, we’ve been moving out of those long-term bonds.

We are continuing to check portfolios and monitor how their allocated for the future. We have had conservatively balanced portfolios still get nice rates of return.

We’re not entirely backing out of tech stocks, but we are rebalancing the portfolios.

We’re also encouraging our clients to stay in touch with us. Please, reach out to us if you haven’t heard from us, and we will try to call you more often.

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