Happy Summer, Clients and Friends!
What a difference a year makes! Paulette and I recently returned from a short vacation in the Florida Keys with our two grown daughters, Natalie and Nicole. This was a special trip to celebrate Natalie’s graduation from the University of Cincinnati and her upcoming move to Chicago to begin her career as an interior design architect. Normally, a getaway with family to relax and reconnect would not fall into the remarkable category, since this is something we have prioritized as a family for many years. However, the pandemic has made all of us take a closer look at the things we used to take for granted, especially the ability to gather with family and friends on a regular basis.
I hope you and your family are finding opportunities to reconnect in ways that are meaningful to you as states and businesses reopen, capacity requirements are dropped, and more people feel comfortable gathering safely. If we learned nothing else over the past year or so, it’s that technology, while helpful, will never fully replace our very basic human need to connect and socialize in person.
As we move into summer, the U.S. economy continues to recover remarkably fast, and the stock market remains near all-time highs. However, it’s important to keep in mind that a lot of the good news about the economy has already be priced into stock values. Many companies and businesses reopening at full capacity continue to have trouble finding workers, partially due to the need for skilled workers, as well as non-skilled workers choosing to temporarily remain on the sidelines due to government subsidies. In addition, higher inflation has many wondering whether this means the Federal Reserve is behind the curve and will need to quickly tighten monetary policy to stave off high inflation. Add into the mix expected higher taxes and more deficit spending from President Biden’s economic plans as just one more thing for investors to worry about. For more on these and other economic considerations, be sure to check out our Market & Economic Update below.
We remain grateful for the trust and confidence you continue to place in us. We look forward to seeing more of you in person in the months ahead and to continuing to serve your needs and the wealth and investment planning needs of the friends and associates you continue to refer to our talented and growing team.
What's In It for You?
At-a-glance guide to your 2nd Quarter 2021 Frank Talk newsletter:
- News & Events
- Recent Events
- Upcoming Events
- Your 2020-2021 Tax Planning Guide
- Complimentary Second Opinion Service
- Visit our Getting Frank Blog
- Market & Economic Update
New & Events
What's the Secret to Keeping Clients for Life?
On March 25, 2021, PFS president and founder, Frank Fantozzi, CPA, MST, PFS, CDFA, AIF®, hosted a live, interactive Zoom event featuring internationally recognized sales expert and best-selling author, Hal Becker. Mr. Becker shared strategies for business leaders seeking to attract and retain clients for life, including:
- The 3 rules of incredible customer service
- What is a ‘creative opportunity’ and why do you want it?
- The mistakes most companies make
- Why you lose customers and how to get them back
Those attending had an opportunity to participate in a live Q&A session following Mr. Becker’s presentation. If you missed the live event, you can access the recorded webinar at the link below.
Feel free to forward this link to business owners in your network who may also benefit from this information:
Customer Service: How to Keep Clients for Life
Why are Negotiations Different for Women and How Can You Use This to Your Advantage?
On June 3, 2021, PFS Wealth Advisor, Amy Valentine, CFP®, CFA®, hosted an exclusive webinar event, Women and Negotiation Today, featuring guest speaker Lindsay Troxell, Senior Director, Knowledge Labs® Professional Development at Janus Henderson Investors. Participants learned about ways to further enhance their negotiation skills to capture more of the opportunities they seek, during this interactive event. If you weren’t able to join the event, you can click on the links below to access the recorded webinar and the presentation slides at your convenience.
Feel free to forward these links to colleagues or friends that you feel may benefit from this information, as well:
Access the recorded webinar now: Women and Negotiation Today
Access the presentation slides
Save the date for our next webinar, Get Your Medicare Questions Answered, on August 17th from 11:00 am – 12:00 pm.
When it comes to Medicare, you have multiple options:
- Original Medicare (Parts A & B)
- Medicare Advantage Plans
- Prescription Drug Plans
- Medicare Supplement Insurance (Medigap) Plans
Determining which options are right for you and when you can enroll or change plans can be confusing. Please join us, along with guest speaker, Rodika Koloda, Life & Health Advisor at Insurance Systems Group, to take the guesswork out of Medicare planning. You’ll get the facts about Medicare, as well as answers to all your questions, including how health and/or prescription drug coverage from a current or previous employer could affect your choices. Don’t miss out! Watch for an email providing webinar details and registration instructions.
Mark your calendar! Our 13th Annual Cleveland Economic Summit Will Take Place on Thursday, September 30, 2021
We look forward to welcoming you and your guest to our 13th Annual Cleveland Economic Summit on September 30th at the Cleveland Botanical Garden. As you may recall, last year’s event was held virtually due to COVID-19 restrictions. Watch for a “Save the Date” email reminder in the coming weeks, which will provide more information about the event, venue and speakers.
Tax Planning is an Integral Part of Financial Planning
While it can be easy to forget about taxes after filing your return, managing your tax exposure throughout the year can help you keep more of what you earn now. To learn more: View or download your PFS 2020 - 2021 Tax Planning Guide now.
Reminder…Our Complimentary Second Opinion Service is Available to Your Family, Friends and Colleagues
Our complimentary Second Opinion Service continues to be well-received among the friends, family members and colleagues of our clients and associates. This valuable service provides the people you care about with an opportunity to benefit from the same expertise and guidance that you have come to expect as a valued client of Planned Financial Services.
In many cases, a second opinion will simply provide confirmation, and the confidence that those you care about are on track to fulfill their values and achieve their goals with their current financial provider or strategy. However, if needed, we are happy to suggest ways in which we can help, including recommending another provider if we are not a good fit for their needs. Either way, following a Discovery Meeting and Investment Plan Meeting with our experienced team, they will receive a Total Client Profile and a Personalized Financial Assessment of their current situation. To learn more about the Planned Financial Services Second Opinion Service, click here to access or download a full description of this service and the benefits it offers to the people you care about most.
Don’t Miss Out On the Topics That Are Important to You: Visit Our Getting Frank Blog
Plan to visit us weekly as we post new articles and opinions.
Market & Economic Update
Inflation has been on the rise, but there are good reasons to think it will be transitory
Investors are not as interested in what’s happening now as they are in what’s happening next. Meanwhile, the Federal Reserve (Fed) shared its views at the conclusion of its last policy meeting on Wednesday, June 16. And while the Fed’s position that inflation is likely to be transitory has become stronger, not weaker, Fed members have seemingly different opinions on the future path of monetary support.
Inflation has been on the rise. Everyone knows it and feels the impact with every purchase. The Consumer Price Index (CPI) spiked to 5.0% year over year in May, the most since 2008, while core CPI (excluding food energy) hit 3.8%, the highest since 1992. Inflation has been rising and the Fed is watching. How will markets react to any potential inflation over the next year?
We do know this: Markets will be looking forward, not backward. By the time something becomes a “thing,” a meme, or makes a magazine cover, market participants are often past it. Markets are no longer watching to see if inflation will spike. It already has. In fact, since the big upside surprise in the April inflation data, released May 12, many inflation-sensitive assets have been underperforming. Copper? Down. Lumber? Down. The 10-year Treasury yield? Down. Market-implied inflation rates? Down. Gold? Down.
At the conclusion of its last policy meeting on June 16, the Fed shared its view on what may be coming for inflation. In its updated forecasts, the Fed acknowledged it had missed on inflation expectations, upgrading its preferred core inflation forecast for 2021 from 2.2% all the way up to 3.0%. That’s a large jump, but that’s based on what’s behind us. The forecast for the same index in 2022 and 2023 scarcely moved, at 2.1% for both years.
Inflation is certainly still capable of coming in hotter than expected. The difference between now and earlier this year is that inflation expectations are already elevated. In order to see inflation assets really perk back up, we would probably need to see stronger signs that higher inflation may be persistent. To get a read on that, it may be better to look at prices that tend to be more stable. We know there are areas where we’re seeing extreme price moves, which is impacting broader measures of inflation. But what about prices that tend not to move? There is such a measure, developed by the Federal Reserve Bank of Atlanta, called sticky core inflation.
Unlike CPI and even core CPI, sticky core prices are not setting multi-decade or multi-year highs. Sticky core CPI is up 2.6% year over year. The last time it was that high was…2020. There are still some warning signs though. While you have to be careful annualizing monthly data because it multiplies small, potentially meaningless, moves, annualized sticky CPI in each of the last two months was over 4% and that hasn’t happened since 1992. But even sticky core CPI has had some price idiosyncrasies in the current environment. If you take just the median move of the CPI components, the middle change for any given month, 12-month price changes have actually been declining. And the last two months? Somewhat elevated but nothing special.
We’ll be watching both sticky core CPI and median CPI to help monitor the likelihood that inflation will become persistent. We do think inflation will be elevated over the rest of 2021—and possibly into 2022—before it really starts settling down, but that’s still consistent with inflation being transitory. And it may remain somewhat higher after that compared to the last cycle as deglobalization and a potentially weaker dollar offset some of the structural forces that we think will continue to weigh on inflation. If inflation does start to look more persistent, it will certainly be felt on Main Street. For Wall Street, the immediate fear wouldn’t be the inflation itself, but rather its ability to force the Fed’s hand and accelerate policy tightening. But, based on how markets have been responding recently, the Fed’s position that inflation is likely to be transitory has become stronger, not weaker.
Speaking Of The Fed
The Fed ended its two-day Federal Open Market Committee (FOMC) meeting last week and, as expected, there were no changes to its current interest-rate or bond-purchasing policies. However, signaling on the future path of short-term interest rates seemingly surprised markets because the number of Fed members who now expect interest-rate hikes in 2023 changed dramatically, relative to the last FOMC release. While an initial rate hike was once thought of as a 2024 event at the earliest, as seen in chart below, the majority of members now expect at least two quarter-point interest-rate hikes to take place in 2023. Additionally, seven members (out of 18) expect at least one rate hike in 2022.
These “dot-plot” projections are not voted on—nor do they represent official policy, but they do show the divergent opinions by some of the committee members. In fact, the market may have interpreted the changing projections as a shift in the way some committee members are interpreting the Fed’s new Average Inflation Target (AIT) mandate. That some members think interest rates should move higher next year is a notable difference from what some Fed members have repeatedly said: that they want inflation to run above 2% for some time before they raise interest rates.
What Do Hawks and Doves Have to do With Monetary Policy?
While Jerome Powell is the chairman of the FOMC and likely the most recognizable member, there are 18 other members within the committee (and also one vacant position). Anyone who has been part of a big group setting knows that getting everyone in total agreement is nearly a Sisyphean task. Since 2014, though, there has not been a single dissenting, recorded vote cast by any voting member. However, some recent public comments and the recently released dot-plot may show that not everyone is in total agreement with the direction of current monetary policy. For example, Dallas Fed President, Robert Kaplan, often thought of as one of the most hawkish members of the committee, has repeatedly stated that the Fed should start to reduce or even eliminate its purchases of mortgage securities “sooner rather than later.” Others on the committee, including Powell, continue to defend the mortgage purchases. While Kaplan is not a voting member, he does provide input into policy decisions.
What does it mean to be “hawkish” or “dovish”? Hawkish Fed members are generally concerned about inflation first and want to start to tighten monetary policy through interest-rate increases and/or the tapering of bond purchases. Doves are those members who want to continue to provide accommodative monetary policy to support the economic recovery. Of the 19 current members, seven can be classified as dovish, eight as neutral, and four as reliably hawkish. Not all 19 current members are voting members. There are currently 11 voting members (there is one vacant voting position) and of those 11, five members are reliably dovish—including Chairman Powell and Vice Chair Richard Clarida—and six members are rated as neutral. So, given the tendencies of the group broadly, the likely cause of the negative initial reaction in the bond market last week is that so many participants now think raising interest rates should occur in 2023. That the overall committee may have become more hawkish is notable. The concern now is that the Fed may speed up the removal of accommodative monetary policy and react sooner than markets are anticipating.
Inflation has certainly been the word of the year. Consumers and investors have seen and felt the impact of inflation. But the structural headwinds that have kept inflationary pressures at bay for decades are still in place. We do think inflation will be elevated over the rest of 2021 and possibly into 2022 before it really starts settling down, but that’s still consistent with inflation being transitory. How the Fed reacts to the data will be interesting, though. We continue to watch closely the risk associated with the Fed acting out of concert with what markets are expecting. Over the next few weeks we’re likely to hear from a number of Fed officials, so we’ll get more clarity on how thinking has changed recently. As such, it will be important to see who on the committee has become more hawkish. If it’s actual voting members, then markets may start to get more concerned.
As market and economic conditions evolve in the weeks and months ahead, you can rely on your PFS team to continue to monitor and adjust our portfolios and keep you up to date on these and other developments. We also want to remind you that our office is open for clients who would like to meet in person. For those who prefer to meet virtually, we continue to use Zoom for virtual meetings, and are always available via phone. Just let us know how you prefer to meet, and we’ll make it happen!
We are always honored to help our clients’ friends and business associates take greater control of their future with guidance from the PFS team. We welcome and are grateful for the many introductions our clients continue to provide. If you, or someone you know, has questions or concerns about your personal investment strategy or business finances, please don’t hesitate to share information about our complimentary Second Opinion Service and reach out to your experienced team of wealth advisors at 440.740.0130.
Click here for a summary of the material changes made to our ADV Part 2A between April 2020 and March 2021.
You may also request copies of these current brochures by contacting Ashley Benton-Cooper at Ashley@PlannedFinancial.com or 440.740.0130 ext. 231.
Real People. Real Answers.
Health, Happiness, and Good Fortune,
CPA, MST, PFS, CDFA, AIF®
President & Founder
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
S&P Energy Index: A market capitalization weighted index that tracks the performance of energy companies.
Some research was provided by LPL Financial, LLC, June 2021. PFS nor LPL make no representation as to its completeness or accuracy.
Planned Financial Services, LPL Financial, Hal Becker, Lindsay Troxell, Knowledge Labs®, Janus Henderson Investors, Rodika Koloda and Insurance Systems Group are all separate, unaffiliated entities.
Investment advice offered through Planned Financial Services, a Registered Investment Advisor.