CAPITAL MARKETS SUMMARY
Investors across all sectors continue to remain on edge after another volatile quarter comes to a close. Several factors have contributed to the perceived skittishness, namely the continued tightening of monetary policy and the current trade war. The Federal Reserve has scaled back its mountain of Treasury and mortgage debt by almost $112B since announcing its policy move in September, with more than half of this reduction taking place since the end of March. This move has exacerbated the declines in prices of risky assets experienced in the first quarter.
The trade war between the United States and China has since spread to our allies in North America and Europe, further worrying investors that these tariffs will have negative implications on domestic economic growth and corporate earnings. With no concessions from Washington, it does not appear that an end is in sight and that the trade war will continue, if not further escalate, throughout the third quarter and beyond.
Within fixed income markets, the yield curve continues to flatten, with the spread between 6 month and 2 year notes being equivalent to the spread between 2 year and 30 year rates, while spreads continue to narrow between the 2 year and 10 year rates. A flattening yield curve typically indicates that investors are worried about the macroeconomic outlook and is often precedent to an inverted yield curve, usually associated with recessions. While a flattening yield curve does not in itself indicate a recession is imminent, it does reiterate the nervous sentiment felt by fixed income investors.
The key indicators to watch for in the third quarter will continue to be geopolitical and monetary policy indicators. Continual tightening by the Fed in conjunction with flattening yield curves and persistent trade war aggressions will likely lead to continued volatility and an adverse environment for “traditional” equity and fixed income investors. It is in times like these that a prudent, balanced approach with allocations to alternative assets, as employed by TS Prosperity Group, will be increasingly important to sustained financial success.
NEWS FROM THE INVESTMENT COMMITTEE
The Investment Committee has designed a new portfolio that is intended to help clients diversify away from traditional asset classes. We call these portfolios, “Explore” as they are meant to focus on nontraditional approaches to the market. The portfolios have the three main focuses of our core portfolio’s; Alternatives, Fixed Income, Equities. However within each asset class, it has higher concentration in sub sectors, such as small cap stocks in the Equity asset class with no exposure to the traditional Large Cap asset class. As another example the portfolio has a higher concentration to Currency Pair Trading in the Alternative Section. Due to the nature of these portfolios, there is a minimum investment of $500,000. There is also another requirement that this cannot be the majority of the client’s overall liquid net worth. For more details and to find out if the Explore portfolios fit into your overall financial picture, please call your Fiduciary Officer or call Cody Forbush, Investment Portfolio Strategist at 712-487-0369.
NEWS FROM THE FIDUCIARY OFFICERS
Summer has officially arrived and the year is halfway over. What better time than the present to check-in on your estate and tax planning to ensure a smooth transition into the new reality brought forth by the Tax Cuts and Jobs Act of 2017. Some of the highlights to remember include: lowered tax rates; a doubling of the standard deduction; the elimination of personal exemptions; a doubling of the estate tax exemption; to name a few. Consider checking-in with your CPA or schedule a meeting with your fiduciary officer to review your plans.
Don’t forget to take your RMD! Remember, for clients over age 70 ½ with IRAs, your RMD must be taken by December 31st. Contact your fiduciary officer to get the process started to avoid any penalty from the IRS. Also, for those still contributing to your IRAs, the 2018 annual limit for both Traditional and Roth accounts is $5,500 ($6,500 if you're age 50 or older). Be sure to take full advantage of these accounts to maximize your retirement savings.
TS Prosperity Group Events – July 2018
Basics for Beginning Savers: IRA, 401K, CD's
July 18 2018, 5 - 6:00 p.m.
Join TS Prosperity Group to learn how to get started on the road to retirement savings and long term investing. This session is focused on how to get started with retirement savings, basics of investments and learning different ways to invest your money for long term financial goals. Understanding what IRA and 401K accounts are and what sets you up to be prepared for a successful retirement plan.