New technology has made it easier for people to invest on their own, but doing so may not always be the best option when saving for important life goals. Enlisting the help of a trusted financial advisor can help minimize slip-ups and ensure that your financial plan stays on track. With this in mind, here are several of the potential benefits you could enjoy from partnering with an advisor:

1. Benefit From Their Expertise 

Even if you watch for the latest financial news and your TV is constantly tuned to financial networks, competing with professionals to access valuable information and the training required to digest and act on it takes work. Not only do financial advisors often have resources at their disposal that retail investors do not, but they also have the time to commit to the markets and plenty of experience to lean on.

Many financial advisors have licenses and certifications that denote expertise in certain financial planning topics, from tax and risk management to investing and retirement planning. These certifications are earned through years of study and hands-on experience navigating the markets and helping clients fulfill various needs. Of course, these topics are complex, but piecing them together into an effective and individualized plan can be even more difficult and time-consuming.

Speaking of the time that goes into financial planning, the forces that drive the economy and the various financial markets constantly change and may necessitate subtle or significant changes to your long-term plan. Whether you’re retired or have a full-time job, staying on top of everything that could impact your finances can be difficult. When working with a financial advisor, you are

partnering with someone who has devoted their career to understanding and monitoring the markets.

2. Take the Emotion Out of Investing 

Watching the effects of stock market volatility in your portfolio can trigger emotional responses – it’s hard to avoid. When the markets are struggling, and your monthly financial statements show losses, it can lead to panic and the urge to sell, even if you’re an experienced and disciplined investor. But conversely, when the markets are flying high, it can be equally challenging to resist the temptation to buy more assets or increase the risk in your portfolio.

Short-term market movements shouldn’t cause you to lose sight of your long-term plan; an advisor can help you maintain that perspective. In addition, you can look to an advisor for encouragement and objectivity when the markets are unpredictable. They can help ensure that your finances are properly positioned to weather volatility and that you stay on track to reach your goals 5, 10, or even 20 years later. Investing doesn’t have to be like riding an emotional rollercoaster – an advisor can shoulder that burden for you.

3. Focus on More Than Just Returns 

Investing is about setting long-term goals and striking the right balance between risk and return based on your needs and time horizon. The process involves more than simply identifying investments that have recently yielded the highest returns – assets should be diversified across different sectors and asset classes to ensure your portfolio isn’t too vulnerable to movements in the market.

While an advisor is likely to recommend assets with a history of delivering strong returns, they’ll also help you develop a plan that enables you to meet whatever cash and other needs you have on the horizon while aiming to keep your investments growing steadily over the long term.

4. Provide Tax Management Strategies 

A lot goes into managing tax obligations; the more assets and accounts you have, the more you may have to consider. An advisor with expertise in tax planning can simplify this process for you and help you manage your obligations so that you don’t surrender more than you need to. This can be done through various strategies such as charitable planning, tax-loss harvesting, and allocating investments to tax-advantaged accounts.

Some investments and investment accounts provide more favorable tax treatment than others. Partnering with someone who specializes in securities and understands the nuances of their tax implications can save you money, particularly over the long run.

5. Incorporate Your Values Into Your Plan 

Are you interested in making an impact with your investment dollars? What about supporting charitable causes? An advisor can help you allocate your investments according to your interests and philanthropic goals so that you can do well by doing good.

For example, if you’re concerned about climate change, you can invest in ETFs supporting clean energy businesses. If you’re passionate about equality in the workplace, you can invest in companies with high scores for diversity and inclusion. Are you committed to your faith? Some advisors specialize in Biblically Responsible Investing. Further, a financial advisor can help ensure that your values-based investments fit within the context of your financial goals.

Getting Started 

If you want to start working with a financial advisor, the first step is identifying the right advisor. Truly independent advisors are able to put your needs first in every circumstance because they are not beholden to any one company, product, or service. One key question you can ask is how the advisor is compensated. If they are compensated for selling you various investments, there may be a conflict of interest. If they are paid based on your account balance, then they will have an incentive to maintain that balance and increase the account value. Different advisors have different areas of expertise and offer various services, so determine your needs and consider doing the research before committing to one. In addition, many advisors and advisory firms provide free consultations and portfolio reviews, which may help you decide who best to partner with.

In one of the hottest national real-estate markets in decades, the U.S. has seen home prices in many markets skyrocket to new heights before decelerating mid-year 2022. The Federal Reserves actions, to combat inflation by increasing interest rates, also increased mortgage rates and priced many buyers out of the market.

For those who need to track U.S. residential real estate prices, or who just want to be up-to-date with this information, there is the S&P CoreLogic Case Shiller home price indices. The indices are calculated monthly using a three-month moving average.

The index is based on a pricing technique developed
in the 1980s by economists Karl Case and Robert Shiller. The National Home Price Index (HPI) tracks the changes in the values of residential single-family houses in nine U.S. regions.

The S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index seeks to measures the value
of residential real estate in 20 major U.S. metropolitan areas: Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa and Washington, D.C.

The index is an economic indicator that measures the change in value of U.S. single-family homes
on a monthly basis. Within the S&P CoreLogic Case- Shiller 20-City index are contained separate indexes that focus on each of the 20 markets. For instance, the one-year return, ending in July of 2022 for the Phoenix Home Price NSA Index is 22.36 percent.

The year 2000 is used as the baseline for the index. This baseline allows the index to account for inflation.

A Deceleration

There is also a 10-city composite index, covering
10 metro areas of major cities. Those cities include Las Vegas, Washington, D.C., San Francisco, Denver, Los Angeles, San Diego, Boston, Chicago, New York and Miami.

The index hit a peak in 2006 and a trough in 2012. Each index employs a method that compares the sale price of a given property in successive transactions. For this reason, a new-build would not be included until it had been resold.

Foreclosures are excluded, as are sales between family members. If a property has been resold more than once in a six-month period, it is also excluded.

In June 2022, the 20-City Composite posted an 18.6 percent year-over-year gain, down from 20.5 percent in May. By July, the year-over-year gain had fallen to 16.1 percent. Price increases in all 20 cities had slowed even more than in June.

The cities with the highest year-over-year gains found Tampa in the top spot, followed by another Florida city; Miami. Dallas rounded out the top three. Although the Home Price Index was up year-over-year in April, 2022, it was still down from March.

What is causing the index to turn around? The inventory of available homes on the market has been increasing
as mortgage rates keep many buyers out of the market. This is leading to price reductions from the original listing price. This is in stark contrast to conditions in the hotter markets only months ago where sellers were receiving multiple offers over list price.

Despite this, CoreLogic HPI still forecasts reasonable home price growth through the end of 2022.

Everything about the stock market and individual stocks is tracked for the benefit of stock analysts and just the average investor. There are so many measures and indicators that could be applied to any individual stock that it is mindboggling.

All are key data points that allow investors to fully scrutinize a stocks volatility, quality, value and potential future movement.

Some of these measures include the stock’s price to earnings (P/E) ratio, its price to book (P/B) ratio, the dividend yield, the earnings per share (EPS) or the price to earnings ratio to growth ration (PEG),
just to name a few.

Many measures illustrate the stock’s true worth compared to similar stocks and other measures indicate
its volatility compared to similar stocks and the broader market. There are other indicators that can show investor’s interest in the stock, how it is valued and whether or not it is fairly valued.

One technical indicator that is very useful to investors and market analysts is the 200-day moving average. It can be plotted on a chart and tracks the price movement of the stock over the previous 200 days.

A Useful Tool for Decision Making

Analysts and investors look for trends in a stock and the 200-day moving average can give them an indication that can aid them in buying or selling decisions. They often combine the 200-day moving average with the 50-day moving average for more indications of a trend; looking for where the two might intersect and the direction of both.

The longer-term average allows an investor or analyst to filter out the variables that influence short-term
price movements, which may be caused by temporary conditions.

Analysts can look at any time frame, when determining the appropriateness of a stock for long or short-term investors. They can choose averages based on 10, 20, 50, 100 or 200-day periods and break out price movements into just five-minute intervals or daily or weekly snapshots on a chart. The time frame chosen is called the “look-back period.”

Two levels that traders or investors key in on are the support and resistance levels. They focus on when the stock might be above or below these levels.

For instance, the 200-day moving average can sit just below more recent price movements during an uptrend in the stock’s price. In this instance, the average acts as a “support” level or floor.

Conversely, the moving average may sit just above the recent stock prices in a downtrend and the moving average acts as a ceiling or resistance level. In many cases, analysts look for the price to break through the average in an uptrend as a sign of further upward movement.

In a downtrend, breaking through the moving average could indicate further weakness in the stock price
and further drops in price. The bottom line is that the 200-day moving average, along with a number of other technical indicators, can prove to be useful tools in evaluating a stock for purchase or to sell.

5.9% is the biggest COLA increase in decades.

On October 13, 2021, the Social Security Administration (SSA) officially announced that Social Security recipients will receive a 5.9 percent cost-of-living adjustment (COLA) for 2022, the largest increase in four decades. This adjustment will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2022. Additionally, increased payments to more than 8 million Supplemental Security Income (SSI) beneficiaries will begin on December 31, 2021.1

Biggest COLA Increase in Decades? While many predicted a bump of as much as 6.1% given recent movement in the Consumer Price Index (CPI), the announced 5.9% increase is still substantial. Some fear that rising consumer prices may dilute the impact of the increase with inflation currently running at more than 5 percent. While this remains to be seen, Social Security beneficiaries will no doubt welcome the largest adjustment in many years.1

How You Will Be Notified. According to the Social Security Administration, Social Security and SSI beneficiaries are usually notified about their new benefit amount by mail starting in early December. However, if you’ve set up your SSA online account, you will also be able to view your COLA notice online through your “My Social Security” account.¹

Next Steps? If this increase surprises or concerns you, it’s always a good idea to seek guidance from your financial professional about changes to any of your sources of retirement income. I welcome a chance to talk with you about this.

Net Unrealized Appreciated Gains

Did you know that there is a way to save thousands if not tens of thousands in taxes if you own your company’s highly appreciated stock inside your 401K?

I recently began working with a prospective client who owned his companies’ stock in his 401K. As we were getting to know each other, he mentioned how well the company stock was doing. As I began to look through his statement, I realized not only was the stock doing well, but he had over $600,000 of appreciation.

To provide a little context, we were in the beginning stages of creating a financial plan as he was thinking of retiring in the next couple of years.

He came in with the question that many people have when thinking of retiring. Have I saved enough to retire comfortably without running out of money or changing my lifestyle too much? One of the five key points of our Retirement Compass is tax planning. The others are income planning, investment planning, health care planning, and legacy planning. We believe, and history has shown, that proper planning in these five areas provide our clients with peace of mind as they enter their retirement years.

The Retirement Compass tax planning process includes strategies for decreasing tax liabilities by assessing the taxable nature of current holdings. We also look for ways to have tax-deferred or tax-free money. Determine which accounts to withdraw cash from first to reduce the tax burden. Then, we look at ways to leave tax-free dollars to beneficiaries.

Upon the realization of the significant appreciation in the company stock, I knew the special treatment of Net Unrealized Appreciation (NUA) of company stock in a 401K may be an option.

What is NUA, and how can you apply it to your 401K?

NUA is simply the gain above your cost basis of a particular investment.
Doesn’t seem like a big deal, right?

Why is this a powerful tool for you?

Simply put, NUA changes the way the appreciated stock is taxed from ordinary income to long-term capital gains. Internal Revenue Code Section 402(e)(4) provides the rules for how you can receive special tax treatment of company stock held in your employer-sponsored retirement plan. Keep in mind, distributions from your tax-deferred accounts are taxed as ordinary income. When you reach age 72 (under current tax law), you are required to take required minimum distributions (RMDs) from tax-deferred accounts regardless of if you need the income or not.

Here’s an example. Jimmy works for ACME Inc. that offers a 401(K) profitsharing plan. Jimmy has contributed $200,000 to his account in which he buys company stock. ACME has grown significantly over the years, and the
stock has done well, increasing the value to $800,000.

Under standard distribution rules, all distributions would be taxed as ordinary income whenever Jimmy takes a distribution. Most likely, Jimmy would take distributions over time as needed.

Instead of taxing the entire amount as ordinary income, the government allows Jimmy to take money out of the plan and have the NUA taxed at long-term capital gains rates instead of ordinary income tax rates. In this case, the NUA would be $600,000 (current market price $800,000 minus his basis of $200,000).

The basis will still be taxed as ordinary income in the year of the distribution. It could be subject to the 10 percent early withdrawal 72(t) penalty tax if the withdrawal occurs before Jimmy turns 59 ½. The NUA portion, $600,000, would be taxed at long-term capital gains rates when the stock is sold.

In this case, Jimmy’s ordinary income rate is assumed to be an effective rate of 24 percent. His long-term capital gains rate is 15 percent. He would pay a total of $192,000 in taxes on the $800,000 account at ordinary income tax rates. Jimmy would pay $138,000 (.24 x $200,000 plus .15 x $600,000) with the NUA strategy. That’s a tax savings of $54,000 –pretty significant savings, nearly 7 percent of his retirement portfolio. This example simplifies the tax situation a lot. Still, it does demonstrate how significant tax savings can be under the strategy.

Each situation is different and there are several variables that need to be taken into account to determine if this strategy is appropriate for you. Give us a call and we will help you chart the best course of action.

Social Security Income Taxes Phase Out

When asked, most Nebraskans would say their biggest complaint about Nebraska is high taxes. For all of you seniors receiving Social Security income, the State Legislature has good news for you.

Lawmakers passed legislation to phase out income taxes on Social Security by 2030. The legislation is now on Gov. Pete Ricketts’s desk, who is expected to sign it.

The legislation phases out income taxes on Social Security income gradually each year. For 2021 it is reduced by 5%, 20% in 2022, and 30% in 2023. The exemption continues to grow to 100% by 2030.

Eliminating taxes on Social Security makes Nebraska more competitive with neighboring states like Iowa who do not tax Social Security income now. I am glad to see the change because I believe it honors you Seniors who have contributed to Nebraska for many years and makes it easier financially to stay in Nebraska in your retirement years.

If you have additional questions relating to Social Security or other financial inquiries, reach out to me at (402) 805-4660.

Are your Beneficiaries Up To Date?

Like many Americans, you have worked hard, scrimped, and saved to have the same lifestyle you lived while working in your retirement years.  You planned for retirement and put a will in place.  You have worked with your financial advisor to make sure your investments match your objectives and risk profile.  You are up to speed on recent tax law changes and how they affect your retirement accounts and financial plan.  In short, you have done everything right and have left nothing to chance.

Except…

It has been several years since you last checked the beneficiaries on your IRAs, brokerage accounts with transfer-on-death (TOD) designations, annuities, or life insurance.  Have you named your estate as a beneficiary on any of these accounts?  What about a trust as a beneficiary?  Have you committed one of the all-too-frequent mistakes in beneficiary designation that could expose those assets to taxation, litigation, or both?

I work with many people who believe they have a will in place, and it will establish their wishes when they pass.  They fail to recognize that named beneficiary designations override wills.

Most financial companies allow you to name beneficiaries on non-retirement accounts, such as brokerage accounts, checking/savings accounts, etc.  These are known as TOD (transfer-on-death) and POD (pay-on-death) accounts.  You may also want to name beneficiaries differently on life insurance policies versus retirement accounts because of the different tax ramifications for each.

As we walk through common beneficiary mistakes, it might help to provide some definitions of the terms used here and in the financial services world.

Beneficiary- a beneficiary is any person who gains an advantage and/or profits from something.

Primary Beneficiary- the individuals or entities named to receive the money upon your passing.

Contingent Beneficiaries- the individuals or entities named to receive the money in the event one or more primary beneficiaries pass before the account owner.  Should a primary beneficiary refuse the proceeds, then the contingent beneficiary will receive them.

When naming beneficiaries, it is essential to be clear and concise.

Avoid the following mistakes:

1) Not naming a beneficiary.

If you do not name a beneficiary, by default, your estate becomes the beneficiary.  Then it becomes part of the lengthy, expensive, and cumbersome probate process.  This means the money may not be available for your beneficiaries when they need it.

2) Naming your estate as beneficiary.

The probate process will have to be initiated to determine who should receive the inheritance according to the Will or Trust.  This process will slow down, getting money to the people you want it to go to.

3) Failure to list contingent beneficiaries.

Suppose your primary beneficiary dies first, and there is no contingent. In that case, it is as if there was no beneficiary named.  If the primary beneficiary does not want the assets because of tax implications or some other reason, it would be as if there was no beneficiary.

4) Not being specific.

Listing “all my children” is not specific enough.  What happens in the event one of your children passes before you?  This is especially bad if they had kids.  Their kids, your grandkids, are left out.

5) Not naming everyone you want money to go to.

Just naming one of your three children with the expectation they will give their siblings their share of the money is not a good idea.  If the child wanted to follow your wishes and get the funds to their siblings, the IRS might get involved and levy taxes on the amounts redistributed.  The named child would not be required to provide the funds to the other children under the law.

6) Naming a minor as a beneficiary.

Children not considered adults (older than 18) will not be able to receive their proceeds.  A conservatorship would be established, which can be costly until the child turns 18.

7) Naming a person with special needs as a beneficiary.

Individuals with special needs can lose valuable government benefits because they may own to many assets to qualify once they receive the inheritance.  There are ways that you can provide for their care without creating these issues.  A qualified financial advisor should be able to point you in the right direction.

8) Not updating beneficiaries over time.

Who you want to or should name as beneficiaries will most likely change over time.  Just as your financial plan changes over time, so should your estate plan.  For example, have you been divorced?  If so, you probably want to update beneficiaries.

9) Not reviewing beneficiary designations with legal and financial advisors.

By naming beneficiaries, you are choosing who gets money as well as how much.  Make sure the beneficiary designations follow your estate planning strategy.

10) Allowing for beneficiary designations to be completed in a “default” manner.

Many bank tellers and financial advisors complete paperwork in a certain way or out of habit, not considering your specific situation.  They often neglect to ask you about “Per Stirpes,” which will include your beneficiary’s children should the beneficiary predecease you.  Or they may input just enough information to get the account open rather than including clarifying points that would leave no doubt about who the beneficiary is.  Another common mistake is not making sure that the whole account has an identifiable beneficiary.  For example, naming 3 beneficiaries at 33% each, leaving 1% unaccounted for.

A vital component of any thorough financial plan is legacy planning.  It is essential to ensure your hard-earned assets go to your beneficiaries in the most tax-efficient manner.  I encourage you to talk to an advisor who is well versed in the laws governing the taxation and distribution of retirement plan assets and life insurance proceeds.  They will be able to make sure the beneficiary designations work in tandem with your estate plan.

Surviving A Layoff In Unprecedented Times

If you have been laid off, you’re not alone.  This year has been one for the record books.  The American Economy was shut down almost overnight because of fear and panic related to COVID-19. The week ending March 28, 2020, a record-breaking 6.6 million Americans applied for unemployment benefits caused by the virtual shutdown of our nation.  Worse yet, this was the second consecutive week of record-setting unemployment claims. (Carmen, 2020)  Before that, the record was just under 700,000 claims filed in a single week in October 1982. (Cox, 2020)

The unexpected stress of dealing with a layoff combined with the issues of COVID-19 may have you feeling overwhelmed. Much of the anxiety stems from unknown or undetermined variables. The good news is that there are steps you can take to help you survive and set yourself up for future successes.

Take One Step At A Time

Do not make rash decisions.  Leave your job gracefully and with respect for your employer.  Everyone is dealing with the shock of these unprecedented times.  Your employer could not have foreseen COVID-19 coming, and no business is immune to its effects.  Your old boss can be a valuable resource when you are looking for a new job.

Determine Your Living Expenses

Tough times require us to make difficult decisions.  Stress and anxiety decrease when you have accurate and timely information, so you can make educated decisions.  Knowing what your expenses are will help you determine how much income you need each month to survive.  Now you can decide whether you need to find a temporary job while you search for employment in the field you are qualified for.

Take An Inventory Of Your Resources

Create an inventory of the assets you have available that can help you meet your monthly financial obligations.  Include things like savings, CDs, checking, 401(k), and any other investment accounts.

Keep in mind that through the CARES Act economic relief plan, you can withdraw up to $100,000 out of an IRA or workplace retirement plan in 2020. Usually, such a withdrawal before turning 59 ½ would carry a 10% penalty for early withdrawal.  However, the CARES Act has removed that penalty if you, a spouse or a dependent, tested positive for COVID-19 or experienced negative economic consequences related to the pandemic. (Cares Act Update: More Investors Qualify for Relief, 2020)

Understand How Unemployment Benefits Work

Unemployment benefits may be available to you if you lose your job through no fault of your own such as being laid off.  The amount and duration of unemployment payments vary from state to state.  On average, unemployment benefits replace about 40% to 45% of your weekly income.  The maximum number of weeks you can receive benefits can range from 12 weeks to 26 weeks. (FileUnemployment.org, 2020)

What Are Your Health Insurance Options?

When you lose your job, your health insurance benefits are probably gone as well.  You may be eligible for COBRA benefits.  COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act, which provides eligible employees and their dependents the option of continued health insurance coverage following the loss of a job.  COBRA extends coverage for a limited time, ranging from 18 months to 36 months, depending on circumstances.  COBRA may not be the best option because the cost can be high.

The CARES Act also provides a health insurance option by opening a “special enrollment” period for the federal health care exchange website (www.healthcare.gov). Act quickly because the window is only open for 60 days following the loss of your job.  Other forms of health insurance may provide you a more affordable option than COBRA.

We see people in the office every week who want to retire but need to keep medical coverage, so they keep working until they are 65.  Health insurance can be expensive when filling in the gap until you reach age 65 when you are eligible for Medicare.

Social Security

If you are in your 60s, now is an excellent time to get an update from the Social Security Administration about your potential benefits.  Most people begin taking Social Security at age 62, which is often the wrong decision.  The difference between taking benefits at 62 and 66 or 67 depending on when you were born can be substantial.  If you wait until age 70 from 66, it can add 32% to your monthly income.  Comprehensive planning can help you make an efficient overall decision.

Pension

If you have a pension available to you in the future but have are not old enough to start it now, a lump sum distribution may be the way to go.  Figure out when you can start your pension and the income that it will provide.  You could roll over your pension funds as a lump sum now through an IRA rollover.  Instead of waiting a few years until your pension income can start, the lump sum would give you access to those funds now, helping you out in the short term. At the same time, you take appropriate steps to get back on your feet.  Again, comprehensive planning can help you determine the best course of action.  Obtaining a professional opinion on this matter is highly recommended.

Learn From The Past

When you took inventory of assets you have, did you uncover things that you could sell?  For example, do you have an extra vehicle or stuff in storage that could bring in some cash to help you pay down debts you have?  Once you can get back on your feet, set up an emergency fund or replenish the one you had to tap into during this difficult time.  Strive to pay down debt.  Unfortunately, there will be more difficult times ahead.  Hopefully, not this severe, but you never know.  A good financial plan will help you pay down debt, save for emergencies, and save for your retirement.

Do You Want To Go Back To Work?

We have had many meetings with clients who believe they must work for several more years when in actuality, they could retire now if they chose to.  Many people who are capable of retiring do not believe they can because they have not created a plan.

Seek Professional Help

You can survive a layoff.  It requires some planning and perspective.  Putting all the pieces together in a financial plan can be very freeing.  You may realize that you do not have to go back to a stressful job with long hours if you do not want to.

Do not wait.  Seek professional help from a financial advisor who can help you create a written income strategy to determine how far off you are from retirement.  It might be closer than you think!

Works Cited

Cares Act Update: More Investors Qualify for Relief. (2020, June 26). Retrieved August 27, 2020, from Vanguard: https://investornews.vanguard/what-the-cares-act-means-for-you/

Carmen, R. (2020, April 2). US jobless claims skyrocket to 6.6 million, doubling last week’s record, as coronavirus layoffs persist. Retrieved August 27, 2020, from Business Insider: https://www.businessinsider.com/us-weekly-jobless-claims-unemployment-filings-record-labor-market-coronavirus-2020-4

Cox, J. (2020, March 26). Jobless claims soar past 3 million to record high. Retrieved August 27, 2020, from https://www.cnbc.com/2020/03/26/weekly-jobless-claims.html

FileUnemployment.org. (2020, August 4). Unemployment Benefits Comparison by State. Retrieved August 27, 2020, from FileUnemployment.org: https://fileunemployment.org/unemployment-benefits/unemployment-benefits-comparison-by-state/

U.S. Markets: U.S. stocks continued to grind higher on largely positive news flow about potential vaccines and treatments for COVID-19.  Continuing the recent prevailing trend, higher-valuation growth stocks outperformed lower-priced value companies and large-cap companies easily outpaced small-caps.  The Dow Jones Industrial Average added 724 points finishing the week at 28,654, a gain of 2.6%.  The technology-heavy NASDAQ Composite rose for a fifth consecutive week, gaining 3.4%.  By market cap, the large cap S&P 500 added 3.3%, while the mid cap S&P 400 and small cap Russell 2000 indexes finished up 1.9% and 1.7%, respectively.

International Markets: Canada’s TSX rose 1.1%, while the United Kingdom’s FTSE 100 finished down for a second week, giving up -0.6%.  On Europe’s mainland, France’s CAC 40 and Germany’s DAX gained 2.2% and 2.1%, respectively, while Italy’s Milan FTSE added 0.7%.  In Asia, China’s Shanghai Composite rose 0.7%.  Japan’s Nikkei declined for a second week, finishing down -0.2%.  As grouped by Morgan Stanley Capital International, developed markets rose 1.6%, while emerging markets rose 2.9% – the fifth consecutive week of gains for emerging markets.

Commodities: Precious metals finished the week to the upside.  Gold rose $27.90 to $1974.90 an ounce, a gain of 1.4%.  Silver had its second week of gains, rising 4% to $27.79 an ounce.  Oil rose for a fourth consecutive week, rising 1.5% to $42.97 a barrel for West Texas Intermediate crude.  The industrial metal copper, seen by analysts as a barometer of global economic health due to its wide variety of uses, rose 3.5% – its third consecutive week of gains.

U.S. Economic News: The number of Americans seeking first-time unemployment benefits fell last week, resuming its downward trend.  The Labor Department reported initial jobless claims declined by 98,000 to 1 million matching the consensus forecast.  Continuing claims, which counts the number of Americans already receiving benefits, dropped by 223,000 to 14.54 million—another pandemic low.  It was its fourth straight decline.  Rubeela Farooqi, chief U.S. economist at High Frequency Economics wrote in a note to clients, “The risk of permanent damage to the labor market remains high, which will slow the pace of recovery.  The return to pre-pandemic levels of prosperity is set to be an uncertain and prolonged process.”

Home prices continued to rise at a steady clip in June, according to the latest data from S&P Case-Shiller.  The S&P CoreLogic Case-Shiller 20-city price index is up 3.5% compared to the same time last year.  That’s down a tick from the previous month.  On a monthly basis, the index increased 0.2% between May and June.  Separately, the national index showed a 4.3% increase in home prices across the country over the past year.  That remained unchanged from the rate of price growth in May.  In the report, Phoenix continued to lead all nationwide with a 9% annual price gain in May, followed by Seattle (up 6.5%) and Tampa (up 5.9%).  Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices, wrote in the report, “As has been the case for the last several months, prices were particularly strong in the Southeast and West, and comparatively weak in the Midwest and (especially) Northeast.”

The number of homes in which a contract has been signed but not yet closed rose last month according to the latest data from the National Association of Realtors (NAR).  The NAR reported pending home sales rose 5.9% in July compared to June.  It was the third consecutive increase in pending home sales.  Furthermore, home sales are going under contract in record time, the trade group reported.  Compared with a year ago, contract signings were up 15.5%.  “We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” Lawrence Yun, the National Association of Realtors’ chief economist, said in the report.

Sales of new single-family homes increased for the third consecutive month, the U.S. Census Bureau reported.  New single-family home sales rose 14% in July to a seasonally-adjusted annual rate of 901,000.  Compared with the same time last year, new home sales were up 36%.  Economists had expected a median pace of new home sales of 790,000.  The surge in sales was driven by a nearly 59% increase in the Midwest month-over-month.  Sales also increased on a monthly basis in the South and the West, but fell by 23% in the Northeast.  The median sales price in July was $330,600, up 7% from a year ago.  The inventory of new homes fell to just 299,000, representing a 4-month supply.  That’s down from a 4.6-month supply in June.  A 6-month supply is generally considered a balanced housing market.

Confidence among the nation’s consumers fell to a new pandemic low following a resurgence of coronavirus cases.  The Conference Board reported its index of Consumer Confidence sank 6.9 points to a six-year low of 84.8 this month.  Economists had expected the index to rise to 93.0.  Analysts believe the unexpected plunge may be due to the expiration of the $600 per week federal unemployment stipend.  President Trump has since authorized temporary $300 payments, but not every state is providing the money.  A pair of other consumer surveys, meanwhile, seem to suggest confidence is starting to mend again.  The consumer sentiment index produced by the University of Michigan edged up slightly in August, though it was still quite low. And the daily tracker by Morning Consult has been creeping higher in the past two weeks.

Orders for goods expected to last at least three years, so-called “durable goods”, surged last month on strong demand for cars and trucks.  The Commerce Department reported Durable-goods orders rose 11.2% in July due to strong consumer demand for cars and trucks.  However, analysts noted spending outside the auto industry was softer and the pace of investment slowed.  The increase easily topped economists’ forecasts of a 4.8% increase.  New orders ex‑transportation orders rose a smaller 2.4%.  Auto sales have been surprisingly strong during the summer as Americans took advantage of low interest rates and discounted pricing.  Bookings in July were actually higher last month compared to July 2019.

Data from the Chicago Fed showed that economic activity across the country fell last month, from a revised record high in June.  The Chicago Federal Reserve reported its National Activity Index declined to 1.18 in July, although its three-month moving average rose into expansion to 3.59 from -2.78 the prior month.  The index is designed so that a zero value indicates the national economy is expanding at its historic trend rate of growth.  The Chicago Fed index is a weighted average of 85 economic indicators.  In the report, fifty-six made positive contributions in July.  Production-related indicators contributed 1.09 to the overall index in July, down from 2.21 in the prior month while employment-related indicators added 0.38, down from 1.94 in June.

At its latest Jackson Hole conference, the Federal Reserve laid out a new strategy that allows inflation to run higher than traditional levels, a move widely seen as leading to an easier monetary stance over time.  In its new policy framework, agreed to by all 17 top officials, the central bank stated, “The Committee seeks to achieve inflation that averages 2% over time and therefore judges that, following periods when inflation has been running persistently below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time.”  The Fed also removed its bias against strong labor markets.  In his speech, Powell announced the changes, saying “a robust job market can be sustained without causing an outbreak in inflation.”

(Sources:  All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat, Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, FactSet.)

U.S. Markets: The major indexes posted gains for the week, lifting the benchmark S&P 500 index to within roughly 0.2% of its all-time high from February.  The Dow Jones Industrial Average added almost 500 points, rising 1.8% to 27,931.  The technology-heavy Nasdaq Composite ticked up just 0.1% to 11,019.  By market cap, the large-cap S&P 500, mid-cap S&P 400, and small-cap Russell 2000 all coincidentally finished the week up 0.6%.

Commodities: Gold had its first down week in more than two months closing at $1949.80 an ounce, a decline of ‑3.9%.  Silver declined an even steeper -5.3% to $26.09 per ounce.  Crude oil finished up for a second week.  West Texas Intermediate crude oil finished the week at $42.01 per barrel—a gain of 1.9%.  The industrial metal copper, viewed by some analysts as a barometer of world economic health due to its wide variety of uses, rebounded 2.4% last week.

U.S. Economic News: The number of Americans filing for first-time unemployment benefits fell by 228,000 last week to 963,000.  Economists had expected 1.1 million new claims.  This was the lowest level since March when the economic shutdown from the coronavirus took hold.  While still far from normal, the decline in initial claims suggests a gradual improvement in labor market conditions.  It also implies that the economic recovery that had stalled in July is getting back on track.  Continuing claims, which counts the number of Americans already receiving benefits, fell by 604,000 to 15.486 million.

The number of job openings rose by over half a million in June, according to the latest data from the Labor Department.  The Job Openings and Labor Turnover Survey, known as the JOLTS report, showed job openings rose by 518,000 to 5.9 million at the beginning of summer.  The reading was above the median forecast of 5.3 million.  The increase followed a gain of 375,000 in May.  The most significant gains in openings came from accommodation and food service, other services, and arts.  The most significant declines were in construction and state and local government education.  The number of people who voluntarily left their jobs, known as the “quits rate,” rose to 1.9% from 1.8% in May.  That reading remains significantly below its peak of 3.2% before the pandemic hit.

Confidence among the nation’s small business owners slipped last month as cases of the coronavirus continued to surge across the country.  The National Federation of Independent Business (NFIB) reported its Small Business Optimism Index came in at 98.8 in July, a 1.8 point decline from its June reading.  Economists had expected a reading of 99.9.  The NFIB is a monthly snapshot of small businesses in the U.S., which account for nearly half of private-sector jobs.  Economists look to the report for a read on domestic demand and to extrapolate hiring and wage trends in the broader economy. NFIB’s chief economist Bill Dunkelberg stated, “This summer has been challenging for many small business owners who are working hard to keep their doors open and remain in business.”

Prices at the wholesale level posted their largest increase in nearly two years last month, but inflationary pressures were still largely invisible in the economy analysts said.  The Producer Price Index (PPI) for final demand jumped 0.6% in July, the most since October 2018, and double the consensus of 0.3%.  Core PPI, or PPI ex-food and energy, rose 0.3%, also the most since October 2016, and above the consensus of 0.1%.  On an annual basis, the PPI for final demand was still down 0.4%, indicating inflation doesn’t appear to be an issue anytime soon.  Scott Brown, chief economist at Raymond James, stated, “Figures have been choppy in recent months, but there is no significant upward pressure on wholesale prices.”

At the consumer level prices jumped for a second month in a row, but as with prices at the producer level, overall inflation remains low.  The consumer price index rose 0.6% in July.  Economists had forecast a 0.4% advance.  The increase in consumer prices over the past 12 months, meanwhile, rose to 1% from 0.6% in June.  Just seven months ago, at the start of 2020, the yearly pace of inflation had climbed to as high as 2.5%.  Another closely watched measure of inflation that strips out food and energy also shot up 0.6% last month.  The increase in the core rate was the largest since 1991, but it follows a record decline.  The yearly increase in the so-called core rate moved up to 1.6% from 1.2%.

(Sources:  All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat, Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, FactSet.)