Lorie, Author at Fidelis Wealth Advisors

By: Jeff Bullock

The stock market is off to a rough start this year. Geopolitical unrest, supply chain issues, the highest inflation we’ve seen in 40+ years, and elevated market volatility are just a few of the issues markets are dealing with. The equity market is considered forward-looking mechanism, meaning, it is trying to price in future expectations based on information today. The price changes daily because, every day, in theory, there is more clarity regarding expectations and markets promptly adjust. Sometimes you might see that the stock market will increase on bad news or decrease on good news. This happens because it is reacting to a past expectation; perhaps the news wasn’t as bad or as good as previously expected.

With everything that has happened this year, here are a few expectations I have heading into the summer:

Aggressive Fed: The Federal Reserve needs to stomp out inflation. They plan to do this by increasing interest rates much more aggressively than previously expected. One year ago, the market expected the Fed to raise interest rates once in 2022; now the expectations are 8-10 times. This change in expectations has been a primary driver of the market volatility.
Choppy Markets: I expect choppy markets into the summer. Inflation, China’s economy, the war, and supply chains will all print new headlines, undoubtably some good and some bad. The markets will digest the news in real-time and I expect more volatility and choppy markets for the rest of Q2.
Growth Fears: Last week we found out that Q1 GDP was negative. This was highly unexpected, and as such, everyone is on watch since the definition of a recession is when we see two consecutive quarters of negative GDP. I expect recession and stagflation fears to heighten into the summer due to this unexpected negative print.

Our portfolio positioning reflects this current view of the markets. We’ve been tactically overweight value stocks and low duration bonds since last year and continue to hold this positioning, which has been a winning relative trade so far. Our equity position has a focus on income allowing us to be patience since we are being paid to wait if markets go sideways.

This blog is general communication being provided for informational purposes only. This information is in no way a solicitation or offer to sell securities or investment advisory services. It is educational in nature and not to be taken as advice or a recommendation for any specific investment product or investment strategy. This does not contain sufficient information to support an investment decision. Any investment or investment strategy mentioned may not be suitable for all investors or in their best interest. Statistical information, quotes, charts, references to articles or any other quoted statement or statements regarding market or other financial information is obtained from sources which we believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. All rights are reserved. No part of this blog including text, graphics, et al, may be reproduced or copied in any format, electronic, print, et al, without written consent from Fidelis Wealth Advisors, LLC. Fidelis Wealth Advisors does not provide legal or tax advice. Please be advised to consult with your investment advisor, attorney or tax professional before making any investment decisions.

By: Jeff Bullock

A few of my brothers and I had a small venture for a number of years in the sports analytics industry. As part of our business, we developed a phone app to help basketball coaches track team statistics. One of my jobs during the development was to test the app over and over. I needed to not only make sure the key features were working properly, but also find any bugs that would be detrimental to the experience, or worse, make the app unusable. The key with any consumer product is to enhance the features and limit the bugs to create a great user experience.

How was the user experience for investors in the stock market the past few months?!

January, February, and March saw some of the biggest swings in recent market history. It wasn’t just that the market drifted down for a period, but we often saw multiple intra-day swings of over 1% in a single trading session. Whether it was the constant barrage of news coming out of Ukraine, or the Federal Reserve turning more hawkish due to runaway inflation, the market reactions were quick and sharp.

Reflecting on my basketball app experience, and looking at the high levels of volatility the stock market sometimes gives, it made me ask the following question:

Is stock market volatility a feature or a bug in the investing experience?

Below are a few key points to explore that may help us answer this question:

Price Discovery: Markets move every day as they digest news and try and figure out how economic growth will affect individual companies. Since every investor has a different thesis on what will happen in the future, prices bounce around based on these outlooks. This natural volatility is called price discovery, and for long-term investors, can provide great buying opportunities. With this understanding, it’s more likely that volatility is a feature, not a bug in the investing experience.
Pullbacks Are Healthy & Normal: The S&P 500, on average, experiences a 10-15% pullback at least once each year. Why? Because markets are always trying to predict future growth and are adjusting to the latest economic news. A pullback is the market’s way of cooling off if prices have risen too fast. What happened in January and February fits this profile exactly. In other words, what we just experienced is normal! Pullbacks are a feature, not a bug in the investing experience.
Zoom Out: Did you know, after all that has happened in this first quarter, the S&P 500 is only down a little over 5% this year? That’s it! Did you know it is up 15% in the last 12 months? Did you know it is up nearly 100% in the last 5 years? Time is your friend with investing. Zoom out, look at the big picture.

Remember, price discovery and pullbacks are healthy and normal. These are features not bugs.

My best advice when experiencing price volatility: Zoom out and embrace it as a feature of long-term investing because it’s not a bug!

By: Jeff Bullock

In Star Wars: Return of the Jedi, one of the great scenes, and oft quoted lines in pop culture occurs when General Ackbar, the Rebel commander, is leading his fleet into battle against The Empire. Shortly into the attack he realizes they miscalculated one aspect of their plan and have unknowingly fallen right into the hands of their foe. It’s at this moment that General Ackbar exclaims, “It’s a trap!”

Many traps exist when you set out to invest your money. One trap, in particular, can be found when choosing an equity dividend strategy. Many investors who want income, while still maintaining equity exposure, turn to dividend strategies to fill this need.

As an investor, we believe you need to be careful, however, to find the right dividend strategy because many of these that look appealing on the surface, may actually have subtle traps under the hood. Below are three approaches to be aware of:

High Dividend Yield but Low Dividend Growth: This approach is the biggest “gotcha”. They look great on the surface with a high dividend yield, but the underlying companies generally have a poor history of growing their dividend at any substantial growth rate. A strategy like this feels good at the outset, but often disappoints over the long run.

Average Dividend Yield and Average Dividend Growth: To use a worn-down cliché, these strategies are a dime-a-dozen. An approach like this will bundle together a bunch of average dividend-paying companies that have an average dividend growth history. The results for the asset class are usually, average.

Above Average Dividend Yield and Above Average Dividend Growth: Welcome to the land of dividend unicorns. These are the highly disciplined strategies that focus on cash-heavy, low debt companies, who have a long history of not only paying dividends (think decades), but also increasing those dividends every year. There is no instant gratification with these strategies, but years down the road they pay off due to their high dividend growth rate. This is where you want to be.

In the epic words of General Ackbar, “It’s a [dividend] trap”! Not all dividend strategies are created equal, but finding the right one, can make all difference years down the road.

Created by: Sam Tenney

Watch our 2022 economic and investment outlook to get our thoughts on the coming year. With the Fed looking to raise interest rates and the economy grappling with inflation, tune in to see how we are positioning portfolios in this environment.

Please note by using any of the links provided for your convenience, you will be leaving Fidelis Wealth Advisors website. The hyperlinks are to websites and servers maintained by third parties. We do not control, evaluate, endorse, or guarantee content found in those sites. Your use of such sites is at your own risk.

Created by: Sam Tenney

Despite some of the largest inflation increases in decades, the yield curve on long term bonds has flattened, with the 30-year treasury yield going down to 1.69 as compared to the 20-year bond’s 1.77 yield. This could signal lower growth in the future as the federal reserve reduces quantitative easing.
Goldman Sachs has pushed up its projections for future rate hikes from the federal reserve by a large margin, now expecting the first rate hikes to happen in June of 2022, as compared to once in 2023. This could signal bank economists changing their view on the transitory nature of current inflation.
A recent ransomware attack on the US’s largest cream cheese manufacturer, Schreiber Foods, has led to nationwide shortages of the product and has brought unfulfilled demand to 45-year highs. This attack shows many similarities to supply chain breakdowns during the pipeline attacks earlier this year, showing how many national and global supply chains face similar fragility.

SOURCES

By: Jeff Bullock

Winston Churchill is quoted as saying, “We make a living by what we get, but we make a life by what we give.”

The holiday season is marked with fun events, festive traditions, and a greater emphasis on kindness and giving. Many studies show that over 30% of annual giving occurs in December. If you find yourself giving to any causes this year, take a minute to make sure you are doing it in a way that helps both your charity and yourself.

Three ideas to make charitable giving more flexible and efficient:

Donor Advised Fund: Using a Donor Advised Fund (DAF) can give you flexibility and convenience. With a DAF you can contribute now, but donate later, which may make sense for your tax situation. Also, a DAF provides ultimate convenience if you give to multiple causes because all of your donation documents are recorded and consolidated in one spot. Flexible and convenient.
Low-Cost Securities: Forget cash, donate investment securities that have embedded gains to your charitable causes. As long as you’ve held the position for over a year, you can receive the full tax benefit of donating plus you never take a realized gain on the position. If you liked the security you donated, simply buy it again and you’ve reset your cost basis with no tax consequence.
Required Minimum Distributions: If you are currently being forced to take Required Minimum Distributions (RMDs) from your IRA, but don’t need the money, earmark this money for your charitable causes and avoid the tax hit. Even if you don’t itemize your deductions, this may help bypass the distribution counting as income.

There are good ways to donate to your causes and passions and there are great ways. Before you pull out your checkbook or donate online via your checking account, take a minute to see if there is a better way. Be efficient; maintain flexibility. Don’t pay unnecessary taxes if there is a better way.

Happy Holidays!

This is not tax advice. Please consult with your tax advisor before implementing any of these strategies. Every situation is different and not all strategies work for every situation. While we believe this information is correct, we cannot guarantee its accuracy. This blog is general communication being provided for informational purposes only. This information is in no way a solicitation or offer to sell securities or investment advisory services. It is educational in nature and not to be taken as advice or a recommendation for any specific investment product or investment strategy. This does not contain sufficient information to support an investment decision. Any investment or investment strategy mentioned may not be suitable for all investors or in their best interest. Statistical information, quotes, charts, references to articles or any other quoted statement or statements regarding market or other financial information is obtained from sources which we believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. All rights are reserved. No part of this blog including text, graphics, et al, may be reproduced or copied in any format, electronic, print, et al, without written consent from Fidelis Wealth Advisors, LLC. Fidelis Wealth Advisors does not provide legal or tax advice. Please be advised to consult with your investment advisor, attorney or tax professional before making any investment decisions.

Created by: Sam Tenney

The Federal Reserve “financial stability” biannual report for 2021 outlines markets as likely overvalued compared to cash flows, and notes a huge increase in housing prices since earlier in the year however does not see any excessive leverage in the housing sector. The market remains vulnerable to significant declines if investor sentiment deteriorates, the Fed has noted.
The 10-year breakeven rate, the rate of 10-year inflation protected bonds minus the 10-year constant treasury bond, has risen to a decade high, with the spread between these two assets reaching 2.73%. This signals intense predictions by the market for the rate of inflation over the next decade.
JP Morgan believes the disconnect between the Fed beginning to taper, and the continued surge in Core Product Inflation (CPI), shows that not all inflation we are seeing may be transitory. This is compared to the Federal Reserve’s stance that current inflation is being caused by the continued reopening of world economies after Covid, and not necessarily due to the large amounts of stimulus injected into the economy.

SOURCES

Created by: Sam Tenney

The third largest real estate developer in China, Kaisa, has missed a payment on its 2022 bonds, which are currently trading at around 50% of par. The firm has listed $13 Billion worth of Shenzhen city real estate in a “fire sale”, citing immediate liquidity needs.
Job hiring’s for non-traditional work hours, the “night shift” hours of 12am – 8am, have increased 1400% since the start of the year according to data from popular online job sites. These positions now make up 15% of all available hiring. This is likely due to many companies, notably major retailers like Walmart, increasing hours of operation to meet the ongoing surge in demand from consumers.
Hourly wage earnings for US workers are up 4.9% year over year as of October, according to JP Morgan, a significant increase in wages given low wage growth for the preceding decade. This has been largely driven by hiring in the hospitality and leisure sectors.

SOURCES

By: Jeff Bullock

Have you ever gone to a go-kart track to race against family or friends? If you’re like me, as you wait in line, you are watching intently to find the fastest go-kart. In theory, all of them should go the same speed, but we all know that some are faster than others. If you choose unwisely, it doesn’t matter how hard you try, or how firmly you push down on the pedal, you are destined to lose against a faster machine. Perhaps you have a few tricks up your sleeve that can stave off a speedier kart for a short amount of time, but ultimately, you need a bigger engine if you want to compete. The outcome of a scenario like this is inevitable before the race even begins.

This same outcome occurs every day when the cash in your bank account tries to keep up with inflation. Cash is destined to lose every time in our current environment. The engine in your checking account will not keep up with the engine of inflation. The outcome of the cash vs. inflation scenario is known before the race even starts.

It’s important to remember that price and value can be different. Price simply refers to the amount something costs in terms of a given currency. Value refers to the worth, usefulness, or utility you get out of it. Price and value don’t always line up perfectly.

Think of it this way, would you rather have something that fluctuates in price, and has the potential to appreciate in value, or something that is stable in price but will slowly lose its value over time? Cash may feel safe because the price is stable, but in our current environment, it is no different than an ice cube sitting on your deck on a warm spring day – its value is continuously melting away.

How do we change the outcome?

There are many ways to try and beat inflation and, at minimum, maintain your value, but all require the willingness to accept price fluctuations along the way. One thing we know with high probability is the engine on the cash go-kart is losing every minute to the engine on the inflation go-kart