From the Desk of Dale Crossley and Evan Shear

Keeping Emotions in Check Despite the Current Market Volatility

“If you cannot control your emotions, you cannot control your money.”  Warren Buffet

The annual inflation rate hit 9.1% in June, the highest it has been in more than 40 years. The market is continuing to experience high volatility and uncertainty, as it has since the beginning of 2022. Unfortunately, not much has changed. We understand – letting your emotions not get the best of you is easier said than done, especially since the markets seem to fluctuate almost hourly. It’s not the first time in history we’ve had volatility, and it certainly won’t be the last.

What History Has to Say About the Current Market Volatility & Uncertainty

BlackRock, the world's largest asset manager, recently downgraded its stock market outlook in response to the ongoing market volatility and uncertainty. As a result, the firm is currently reducing its stake in equities and re-allocating the money to investment-grade credit. However, the ongoing market volatility and uncertainty will not persist forever, and history can prove it. For example, the 1970s oil crisis caused a dip in the market's performance between 1973 and 1974, but it still recovered and grew. The 2008 banking and credit crisis also caused a significant dip in the market's performance, but it passed, too. Likewise, we believe the current decline is only temporary.

Fortunately, the Fed is taking measures to curb the current inflation by raising interest rates. The Fed's move to raise interest rates will affect inflation and investments in the following ways:

• Inflation – A higher interest rate reduces the availability and circulation of money, thus reducing spending and helping curb inflation.
• Investing – A higher interest rate also affects companies' cash flow and ability to raise capital, lowering their current and future performance outlook. This (coupled with the reduced money supply) makes many investors cautious about buying more stocks.

Interestingly, a change in interest rates impacts the stock market almost immediately. However, changing interest rates usually take longer (up to 12 months) to impact the economy.

Inflation's Impact on Earning & Spending

Unfortunately, inflation is also starting to erode spending and investors' earnings, and Wall Street is indicating that it may scale back its earnings forecasts. The forecast on S&P 500 companies' aggregate earnings has appreciated by 2% for 2022 and 2023.*

However, runaway inflation may likely erode this forecast, and there are credible concerns about a looming recession. Wall Street reduces its consensus call on aggregate EPS in the S&P 500 by about 15% in 12 months in a typical recession. Considering that the current expectation of aggregate profits is $239, a decline of 15% could bring the figure down to $206. The S&P 500 index may also drop from 3783 to 3200.

Geopolitical Tensions May Persist

Geopolitical tensions, not new of course, affect the economy's and the market's performance. For example, America's withdrawal from the Iran nuclear deal in 2019 caused a notable dip in the market's performance.

Unfortunately, the world is experiencing multiple geopolitical conflicts, and the BlackRock Geopolitical Risk Indicator suggests that they may persist. The most notable geopolitical conflicts include:

• The Russia-NATO conflict
• S.-China strategic competition
• Gulf tensions, most notably the stalled Iran nuclear deal
• North Korea's nuclear buildup
• European fragmentation
• Climate policy gridlock
• Terrorist attacks
• Major cyberattacks

Some of these geopolitical tensions pose a greater risk to the market than others. For example, the Russia-NATO conflict is more pressing than the ongoing European fragmentation. However, overall the market and investors are currently the most focused on inflation.

The Market Has Proven to be Resilient

Not much has changed since the beginning of the year. The ups and downs in the market, sometimes hourly, are still enough to cause angst. During this market downturn, the best defense is to make informed, not emotional decisions. Voyage, our proprietary investment process, especially helps during times like these. Investors who make long-term investments can remain confident — and upturns have always been stronger and more rewarding than pullbacks.

If you have any questions, please reach out.  Especially during this time, that’s why we’re here.  

*https://www.barrons.com/articles/earnings-forecasts-stock-market-51655931777

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. All opinions are as of this date and are subject to change without notice. Past performance is not a guarantee of future results.

Why contribute to a Roth IRA?

Consider the benefits and limits associated with making post-tax contributions to an individual retirement account.

Thinking about opening or contributing to a Roth IRA? Learn more about the benefits of this type of retirement account and your possible eligibility to contribute.

Consider the positives

The key benefits of Roth IRAs include:

All distributions from the account can be tax free. Although contributions to a Roth IRA are not tax deductible, earnings grow free of taxes. When you reach age 59 1/2, if the Roth IRA has been in place for at least 5 years, any withdrawal from the contributions and earnings is tax free. Avoiding the tax bite at the time of withdrawal in retirement can be attractive – particularly for investors who anticipate having a higher marginal income tax rate at the time of withdrawal than they do at the time of contribution.

No required minimum distributions. While distributions from a traditional IRA must begin upon reaching age 72, there are no similar requirements for a Roth IRA.

No age limit on contributions. You can continue contributing to your IRA – Roth or traditional – as long as you have earned income.

Withdrawals may be made without penalty for a first-time home purchase. As with a traditional IRA, you can withdraw funds from your Roth IRA (up to a lifetime maximum of $10,000) to make a down payment on a first-time home purchase. A first-time homebuyer is defined as someone who has not owned a home for 2 years prior to the purchase of the new home.

Roth IRA

• Contribute after-tax dollars
• Withdrawals in retirement are tax-free
• No required minimum distributions
• Income limits apply
• Traditional IRA

Contribute pre-tax dollars

• Withdrawals in retirement are taxable
• Required minimum distributions at age 72
• No income limits

Learn your Roth limits

In 2022, an individual may contribute up to $6,000 to their IRAs – $7,000 if they are 50 years of age or older. Keep in mind that modified adjusted growth income (MAGI) phase-out limits apply.

Single filer or head of household: The full Roth contribution limit is available to individuals filing as single or head of household with a MAGI of less than $129,000. The amount is phased out for MAGIs between $129,000 and $144,000.

Married filing jointly: The full Roth contribution limit is available to married individuals filing joint returns with MAGIs of less than $204,000. The amount is phased out for MAGIs between $204,000 and $214,000.

Married filing separately: If you have not lived with your spouse at any point during the year and file separately, MAGI limits mirror those for single filers and heads of household. If you lived with your spouse at any time during the year and file separately, no Roth contribution is allowed unless MAGI is less than $10,000.

Your financial advisor can answer any questions you may have about the features and benefits of IRAs and help determine which type may be appropriate for addressing your retirement needs.

Please note that changes in tax laws or regulations may occur at any time and could substantially impact your situation. While familiar with the tax provisions of the issues presented herein, Raymond James financial advisors are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Material created by Raymond James for use by its advisors.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

Sorting through complicated compensation plans

Managing earnings tax efficiently may be just as important as the compensation package itself.

You’ve worked hard to rise through the ranks. As a corporate executive, you know all too well the demands on your time, the importance of decisions you have to make, and the stewardship required to keep your company thriving. It’s a demanding job. And managing the significant wealth that accompanies it takes skill, attention to detail and a lot of planning.

Executive compensation packages usually consist of short-term and long-term incentives that come in a variety of forms, above base salaries. They might include annual bonuses and stock options--both of which come in many forms. It might feel like a lot to wade through, especially when you start thinking about the next chapter for you, whether that’s preparing for retirement or a new phase in your career.

How should you draw upon your income options in the most tax-efficient way? Do you need to consider how your investments in company stock will affect you years down the line? These are questions best to ponder while you can adjust how you’re managing your bonuses, stock grants and stock options.

Here are some tips for sorting through these complex compensation plans.

Ask for an accounting of your total benefits and compensation. It’s becoming more common for companies with generous perks to share total compensation package figures with employees. As an executive, you’ll want to know the rules around exercising stock options, vesting schedules and policies about how to draw deferred compensation. Understanding these policies will help you avoid equity concentration down the line as well.

Tip: Pay close attention to the vesting rules. Your window to exercise vested stock options may accelerate upon retirement, and unvested restricted stock and performance shares may be forfeited when you are no longer an employee. If you have unvested awards, consider including them when negotiating your retirement package.

Consider if you can delay lump-sum payments until you’re no longer drawing a salary. When you retire, you’ll likely be at your maximum earnings, and adding lump-sum payments from your nonqualified deferred compensation plan and accumulated stock awards could significantly boost your adjusted gross income as well as your tax obligations. You may be given the choice to take a lump-sum payout in the near term or push payments out five to 10 years, essentially creating a predictable income stream. Your decision is irrevocable, so think through the implications carefully with your accountant and professional advisors.

Work with your advisor to determine your cash-flow needs in the near future. If you’re going to be exiting the organization, whether it’s to retire or do something else, you may be relying on cashing in stock to bolster your income. In your calculations, be sure to include your tax liability when exercising stock options. If you’re planning to retire, think about what you’ll need to fund health coverage or other insurance as well.

Concentrate on equity concentration. Executive compensation often includes substantial equity in your company’s stock. And you may be attached to it. After all, you helped build the company and are proud of what you’ve accomplished. It could be hard to imagine a time when the stock may falter. But there’s no sure thing in investing, so it makes sense to diversify your holdings to limit overexposure to just one investment.

Work with your accountant to sell your stock over time so you don’t trigger unnecessary tax consequences, violate any insider trading regulations, or infringe on any holding rules established by your company. Then work with your advisor to invest the proceeds in a more diverse range of securities. Putting strategies in place for diversifying is best done sooner rather than later, before the situation becomes an issue.

Tip: The Securities and Exchange Commission’s Rule 10b5-1 allows you to strategically sell an established number of shares at regular intervals to avoid perceptions of insider trading.

Delay Social Security. If you’re retiring in the near future, consider delaying Social Security as long as possible so that the payments don’t coincide with years when you have to take large, deferred compensation payments. Avoid unnecessarily increasing your marginal tax bracket and, therefore, your overall tax burden if you can.

Take into account proposed tax code. Every year there is the potential for tax changes that affect executive compensation. You may need to make changes to your income or investment strategy to reduce potential tax burdens. It’s worth revisiting every year and pulling in your advisor and accountant to recalibrate if necessary.

Keep in mind that these are general guidelines. Depending on your unique situation and the plans you’re making for the future, there may be specific actions you could take to minimize your tax consequences. Consult with your accountant and advisor to determine what will work best for you and your family.

Next steps

If your executive compensation package is getting complex:

• Bring together your accountant, financial advisor and attorney for a meeting to discuss your vision for the future
• Keep an eye on tax code changes that may affect your tax responsibility year to year
• Enjoy the wealth you’ve worked so hard to earn; be sure to write that into your plans

Sources: The Wall Street Journal; Harvard Law School Forum on Corporate Governance and Financial Regulation

Raymond James and its advisors do not offer tax advice. You should discuss any tax matters with the appropriate professional.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

Evacuating for a storm or fire? Have these documents ready.

Proactive organization can make insurance claims and other recovery activities easier.

Preparing for an unexpected storm or fire can help protect both your personal and financial well-being. Consider these recommendations for protecting important documents and making a swift, safe evacuation.

Saving your documents

If a fire, hurricane or other natural disaster occurs, the documents needed to rebuild your life should either be with you or stored somewhere safely out of harm’s way. Waterproof, fireproof safes offer protection for your most important items, offering a level of security in the event of a last-minute evacuation. For disasters that can be forecasted further in advance – think weather-related events like hurricanes – it may be beneficial to take important papers with you.

While many of the documents below can be replaced, keeping them safe will make insurance claims and other recovery activities easier. Consider bringing:

• Identification: passports, immigration papers, military discharge papers, immunization records, Social Security cards
• Family records and certificates: birth, adoption, marriage, divorce, death
• Home and vehicle: deeds, titles, registration, loan papers
• Planning documents: wills, trusts, powers of attorney, healthcare directives
• Insurance information: health, life, home, vehicle

Consider placing them in a three-ring binder with pockets for easy portability, and store within a water resistant bag. Waterproof and fireproof boxes are usually quite heavy, but a heavy-duty waterproof bag from a sporting goods store or large, resealable plastic bag can serve as a lighter alternative.

Preparing your emergency bag

Proponents of preparedness recommend keeping a small bag packed with essentials for a quick escape. Your emergency bag should remain ready to go at all times, ideal for an unanticipated evacuation. Your water resistant duffel bag or knapsack can include items such as:

• Your documents binder
• Photos or video of your property for later insurance claims Safe deposit box key, if applicable
• Notepad and pen flashlight
• Small first-aid kit
• Bottled water and nonperishable snacks
• Extra resealable bags

An additional “quick grab” list will ensure you won’t forget items that would be inconvenient to keep in your emergency bag at all times. Examples include:

• Backup of your computer, especially if it stores personal information
• Cash for food and gas, as ATMs may not be in service
• Required medications
• Phone or tablet and chargers

Planning for pets

If conditions are unsafe for you, they’re unsafe for your pets as well. Research in advance which public shelters, lodging facilities or kennels can take care of your pets if you’re unable to bring them with you during an evacuation. If you have an exotic pet, try contacting local pet stores or zoological gardens located in a safe area. Your local SPCA or other pet-oriented organization can also likely provide information.

Additional steps to prepare your pets include:

• Making copies of your pets’ updated immunization records
• Filling out a pet ID card with a recent picture, description, contact information, medical details and care instructions
• Compiling a kit with items like collars, leashes, medications, food, water, treats, toys, litter/pans, first aid supplies, and carriers

Depending on the type of natural hazards your area is prone to, additional provisions might be needed. But regardless of the particular peril, these precautions can provide a greater sense of security in the face of an unexpected disaster.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

From the Desk of Dale Crossley and Evan Shear

We hope you and your loved ones are doing well.

There’s no shortage of nerve-wracking headlines, particularly as Russia continues to wage war against Ukraine. Our hearts go out to the people of Ukraine as they fight to keep their country sovereign. Pair worrisome geopolitical tensions with rising inflation and soaring oil prices, and the markets are struggling to gain ground. Adding to the volatility, during the mid-March Federal Open Market Committee meeting, interest rates were increased a bit earlier than anticipated to help curb rising inflation. The market downturn is the unfortunate part of investing. Although it's very hard to keep emotions in check with the current headlines, we carefully plan for periods of economic downturns and market instability. 

Although expected, March was the first interest rate increase since 2018. The decision was based on 2022 inflation projections previously at 2.7%  and adjusted up to 4.3%, as well as GDP growth projections originally at 4%, but adjusted down to 2.8%. By raising or lowering interest rates, the Fed stimulates or slows down economic growth, as needed. Fed officials anticipate at least another 150 basis points in rate hikes by the end of the year to keep rising inflation in check. The markets will be closely watching the timing and frequency of interest rate increases as it's a delicate balancing act raising rates enough to curb inflation, but not too much as to completely stunt economic growth. 

Lastly, you may also be aware that during the first quarter of this year, we experienced a yield curve inversion of the 2-year Treasury yield and the ten-year Treasury yield. This is often, but not always, an indicator of an upcoming recession. It’s important to note that the spread between the 3-month Treasury yield and the 10-year Treasury yield has not inverted, which is positive. While this yield curve inversion is being carefully watched, since 1976, there have been 10 inversions of this yield curve, but only 6 recessions.

The Russia-Ukraine conflict continues to be a destabilizing factor in global markets, but the Fed has repeatedly asserted that the U.S. economy and labor market are strong. We’ll be keeping a close eye on all of these factors affecting the markets and keeping you informed. As always, if you have questions or concerns about your portfolio, please do not hesitate to reach out. 

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. All opinions are as of this date and are subject to change without notice. Past performance is not a guarantee of future results.