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2017: Record Breaking Year

By | 2018, Money Moxie, Newsletter | No Comments

Entering 2017, I was more optimistic about the potential growth in stocks. In fact, my expectations were higher than 13 of 15 major investment companies. This optimism became a basis for staying invested throughout the year whether the market went up or down. The results were very positive.

I also assumed that at some point in 2017 we would wake up to some major down days. This never happened. The market just continued to climb all year long.

The S&P 500 (with dividends) rose every month last year for the first time ever! A positive return in January 2018 would bring the streak to 15 months in a row. Second place goes to a streak of 10 months stretching from December 1994 to September 1995.

These are powerful trends, considering the probability of any month being positive is around 60 percent. Strong momentum like this typically continues even after the streak is broken.

A second record was set that began in the final days of December. The Dow Jones Industrial Average had its quickest 1,000 point gain ever!

For three consecutive years I have accurately predicted the major actions of the Federal Reserve. I wrote: “This year, I am going to try something new: accepting the Federal Reserve’s forecast that it will raise rates 3 times in 2017.” That is exactly what happened.

I believe that keeping an eye on the Fed this year will be even more important than it was in 2017. You can see my analysis for 2018 here.


*Research by SFS. Investing involves risk, including potential loss of principal. Dow and S&P 500 indexes are widely considered to represent the overall stock market. One cannot invest directly in an index. Diversification does not guarantee positive results. Past performance does not guarantee future results. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at any time, based upon changing conditions. This is not a recommendation to purchase any type of investment.

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Will You Benefit From the Recent Tax Cut?

By | 2018, Money Moxie, Newsletter | No Comments

Changes to the marginal tax-brackets will benefit those who are close to the threshold for the 10 percent thru 32 percent brackets. If your income is $400,000, you will hit the 35 percent marginal bracket with less income than in 2017. One notable change is the top bracket–now 37 percent–affecting those with income of $600,000 or more.

2018 Marginal Tax Rates

Contribution Limits

Retirement contribution limits for some plans have been increased while others remain the same.

Standard Deductions

By increasing the standard deduction, the government will effectively reduce the number of filers who itemize. The new married limit is $24,000 and the single limit is $12,000. Both are double last year’s limits.

Itemized Deductions

The new law contains limitations that change the value of itemizing deductions for many filers.

Alternative Minimum Tax

The number of filers affected by the Alternative Minimum Tax is expected to drop by 96%. And many filers may not have to pay AMT again. This is due to two big changes (below).

Higher exemption levels–the amount of income automatically exempt from AMT calculation has increased to $109,400 for married and $84,500 for single.

Higher exemption phase-out levels–the income level above which you gradually lose your income exemption. The phase-out levels increased to $1,000,000 for married and $500,000 for single.

*Smedley Financial and its employees do not provide tax advice; therefore it is important to coordinate with your tax advisor regarding your specific situation.

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2018: FOMO In the Stock Market

By | 2018, Money Moxie | No Comments

Protecting profit is profitable. Protecting fear is not. I keep this phrase on a sticky note below my computer to remind me that investment decisions based upon fear lead to mistakes. I have seen it during the major market meltdowns of 2000-2002 and 2008-2009. I have seen it in smaller drops, like January 2016.

There seems to be little fear of a market drop in 2018. I believe investors may now be protecting from another kind of fear and the consequences may again be surprising.

The Fear Of Missing Out (FOMO)—popular among youth today—describes investors worldwide. Stock markets have been so good people are asking, “Am I aggressive enough?”

Excitement and expectations have been rising and there has been a lot of money to be made. In just the first 10 trading days of 2018, the S&P 500 returned almost 5 percent! Worldwide averages were even higher! That is after returning over 30 percent over the last two years for U.S. large company averages. It is as though investors have accepted the massively positive moves as the new normal.

The market does not have to follow the economy perfectly. The market’s performance is also determined by how reality measures up to expectations. So, the most likely thing to go wrong this year may be a failure to meet lofty expectations.

Consider the awesome year-to-date returns. If the “5 percent in 10 trading days” were to continue for the rest of the year, then we would have a return in the S&P 500 of 217 percent! It’s not going to happen.

The best way to prevent a mistake is by not getting caught up in the FOMO. Don’t get too aggressive right when things could slow down.

While I believe a few surprises may cost those throwing caution to the wind, the market is unlikely to experience a major hiccup while the economy is still growing. That leaves us with plenty of reasons to stay invested in 2018.

*Research by SFS. Investing involves risk, including potential loss of principal. Dow and S&P 500 indexes are widely considered to represent the overall stock market. One cannot invest directly in an index. Diversification does not guarantee positive results. Past performance does not guarantee future results. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at any time, based upon changing conditions. This is not a recommendation to purchase any type of investment.

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2017 A Banner Year! Where to from Here?

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The following is quoted from WealthTrack with Consuelo Mack.

“For answers about the 2018 stock market (S&P 500) we turn to Ed Hyman, Founder, Chairman, Head of Economic Research at Evercore, ISI, a top-ranked macro and investment firm. Hyman was voted #1 Wall Street Economist by Institutional Investor’s survey of professional investors for an incredible 37 years. His comprehensive, but succinct and easily digestible daily macro research is considered a must-read by professional investors.”

“To understand where we are growing, it helps to understand where we have been. A central thesis of Hyman’s is that the stock market drives economic activity. Since 1968–that’s a 50-year stretch–the S&P 500 has increased 20 percent or more only 12 times. Last year (2017) it came within a hair of doing so with its 19.4 percent gain.”

“In 10 of those 12 times, the economy was strong the following year. Taking out the effects of inflation, real GDP increased 2.7 percent or more. So 83 percent of the time economic activity was robust. The average for the 12 years after market advances of 20 percent or more was 3.4 percent real GDP growth.”

“The S&P 500 last year had another distinction. According to Hyman’s team, 2017 was the first year ever that the S&P 500 posted positive total returns–that’s including dividends–every month. The previous closest perfect year was 1995, which had only one down month. The market that year (1995) was up 34 percent. The following year (1996) it gained 23 percent, dividends included, and real GDP was a gang buster 4.5 percent.”

Bullish Best Wishes in 2018,

Roger M. Smedley, CFP®

The S&P 500 is widely considered to represent the U.S. stock market. One cannot invest directly in an index. Investing involves risk, including potential loss of principal. Past performance does not guarantee future results. The opinions and forecasts expressed are those of
the author and may not actually come to pass. This information is subject to change at any time, based upon changing conditions. This is not
a recommendation to purchase any type of investment.

Source: WealthTrack, Episode #1429, Broadcast January 5, 2018

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When Do You Need a Financial Advisor?

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Last week I attended the Silicon Slopes Tech Summit that celebrates the booming Tech sector along the Wasatch Front. As I spoke with vendors and attendees, a consistent theme came up: “When do I need an advisor?”

Here are my thoughts on this and other similar questions I was asked.

Do I really need an advisor? You may not always need an advisor, but you always need a plan. If you don’t have a roadmap, how do you know if you have reached your destination? Many people have vague ideas in their heads of what success looks like. Maybe it’s retiring at the age of 50 and sitting on a beach drinking lemonade. Maybe it’s starting up your own company. Maybe it’s giving back to the community.

It is important to sit down and write out your ideas of success. Then take one more step by defining the path that will take you there. Without creating the stepping stones, your ideas will only remain wishful dreams.

Do you need an advisor to create that plan? No, as long as you are willing to do the research. Nowadays there is so much information available on the internet that you can become an expert in any area…as long as you are willing to do the research. As our CEO Roger Smedley puts it, “You don’t know what you don’t know.” Even more dangerous may be the things you think you know with certainty.

So, if you want to create your own plan, but fear you are missing something, consult with a professional that can identify potential pitfalls and help turn your stepping stones into concrete, actionable ideas.

Don’t advisors cost a lot? At SFS, our initial consultation is free. I love to see young college graduates come in who are ready to conquer the world. I give them some time to help create a plan. I know that if I help guide them in the right direction, they will be more financially secure, and who knows, they may even become one of my top clients in the future.

If a person becomes a client, then there are fees that vary depending on the services provided. Comparing our fees and our in-depth planning, we are a far better value than our competition. I have had people question our cost, but I have never had them question our value.

What you don’t want to do is to get your advice at the water cooler. While good advice may not be cheap, bad advice will always cost you dearly no matter how little you pay for it.

Is it best to talk to an advisor before or after my company goes public? Anytime you are dealing with a potential windfall, you should talk to an advisor. As human beings we constantly overestimate how much something is worth. When I was young, I thought $100,000 for retirement was a lot of money. Now, I know it could disappear in a heartbeat.

So, if you get a windfall, reward yourself by using some of the money to take a trip or do something fun. Just don’t blow it all in one place. The world is full of once-rich people that are now broke.

Make sure your money helps you accomplish your goals according to your plan. And if you don’t get the windfall you were expecting, still talk to an advisor. We can help you reach your goals.

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What’s Up with the Stock Market?

By | 2017, Executive Message, Money Moxie, Newsletter | No Comments

Dear Friends and Financial Partners!

In spite of turmoil, tragedy, and terror, the U.S. stock market has not been suppressed during the last 12 months. Rising jobs and wages continue to support strong economic growth. In the U.S. we are experiencing the lowest unemployment in 17 years, according to the Bureau of Labor Statistics. Simultaneously, we have the highest consumer confidence in 17 years, according to The Conference Board Consumer Confidence Index®. Keep in mind that seventy percent of the U.S. economy is driven by consumer spending.

This rise in the stock market is not limited to the United States. It is a global phenomenon. The stock markets of Britain, France, Germany, and a host of other countries are also performing well.

Here’s how the S&P 500 has performed in the last two years. In 2016, the S&P 500 reached 18 new highs and was up 9.54 percent. This year, through November 30th, there have already been 57 record highs for a return of 18.26 percent. The Dow Jones Industrial Average and the NASDAQ have also set new record highs this year.

Dealing with the Wall of Worry
Many of us will readily recall Black Monday, October 19, 1987 when the Dow Jones Industrial Average (DJIA) dropped 508 points and finished the day at 1,738.74. That’s a decline of 22.61 percent. Thirty years later, on October 19, 2017, the DJIA finished the day at 23,557.99 points. That’s a compounded interest rate of 9.08 percent per year. (By the way, most people forget that even with that large of a drop in 1987, the year finished up a positive 2.26 percent.)

Gross Domestic Product (GDP) is one of the most important indicators used to gauge the health of our economy. GDP is the value of all finished goods and services produced by the U.S. Here’s the GDP by quarter in 2017: 1st Quarter—1.6 percent, 2nd Quarter—3.1 percent, and 3rd Quarter—3.3 percent. Wow! It has been several years since GDP has been this high. Researching money managers around the country, most managers believe that this climb in the stock market can continue and, yes, that there may be a Santa Claus rally in the works.

Bullish Best Wishes in 2018,

Roger M. Smedley, CFP

*Consumer Confidence Index is a registered trademark of The Conference Board.
**The S&P 500, NASDAQ and Dow Jones Industrial Average indexes are widely considered to represent the U.S. stock market. One cannot invest directly in an index. Investing involves risk, including potential loss of principal. Past performance does not guarantee future results. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at any time, based upon changing conditions. This is not a recommendation to purchase any type of investment.

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How Proposed Tax Changes Might Impact You

By | 2017, Money Moxie | No Comments

First a disclaimer–As this article went to print in late November, the tax overhaul bill had not been finalized. That being said, here are some areas that both the House and Senate agree on in some aspects and will likely make it to the final cuts.

In an effort to reduce the number of filers that itemize, both the House and the Senate are pushing to double the standard deduction, $24,400 and $24,000 respectively. At first glance this looks good. However, there is a caveat. Both want to repeal the personal exemption for each family member, which is $4,150 in 2018. This could have a big impact on large families.

Other items that will impact tax payers: state and local taxes would no longer be deductible. Alternative Minimum Tax (AMT) would be repealed. The estate-tax exemption would be increased from $5 million per individual to $11.2 million per individual and $22.4 million per married couple.

The above chart provides insight into the impact on taxpayers should current proposals play out. For now, all we can do is sit on the sidelines, watch the show, and hope for a practical solution for everyone.

*Smedley Financial and its employees do not provide tax advice; therefore it is important to coordinate with your tax advisor regarding your specific situation.

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Women Bridging the Retirement Gap

By | 2017, Money Moxie, Newsletter | No Comments

It’s true that women average longer life spans than men. What is often unknown, or in some cases marginalized, is that we will need a larger nest egg to provide income for those additional years. This requires creative planning. Not necessarily more risk; rather a more defined plan for using the money we have saved for retirement.

As women, we also tend to focus on quality of life. We value things that give us purpose and enjoyment: traveling, giving back to our community, or creating memories with our children and grandchildren. These ideals drive our financial goals and decisions while money helps us achieve them.

Women often feel insecure about their financial
decision-making abilities. Building financial confidence is important. We need to be educated and have a better understanding of the decisions that need to be made and the options available to meet our needs. Once we have financial confidence, we are committed to our plans. We have a real desire to stay on track to attain what we consider to be financial success.

Developing financial confidence is the foundation to financial success. This comes naturally from our financial experiences – good and bad. It can also come through an exerted effort and a desire to have more knowledge and a greater understanding. Here are three ways you can take control:

Get Educated: Rather than wait for the life lessons to take shape, make an effort to learn more. You can attend educational seminars in the evening. Caution advised, most seminars offering free meals etc. focus on selling you a product. Our seminars are designed to educate you regarding specific topics and concerns. If you are busy at work, watch an educational webinar while you have lunch or in the evening from home. Our website has a collection of resources focusing on women and their unique needs. You can find it by clicking on Women and Wealth from our home page at SmedleyFinancial.com. If you have additional questions or want information on a specific topic, give us a call. We have a library we can draw from to provide you with the resources you are looking for.

Create a Financial Plan: A financial plan focuses on your personal financial needs, goals, and current circumstances. No matter where you are financially, you need a plan to move forward. Women often start a financial meeting by saying, “I don’t have very much….” The truth is, the less you have, the more important every dollar becomes. A plan will help maximize the assets you have available, creating a clear path to your financial goals and direction that will help you circumvent potential roadblocks.

Design a Retirement Income Plan: Most women want to know, “How will I replace my paycheck when I retire?” A retirement income plan is just as important as, if not more important than, a financial plan. Making sure that our money lasts throughout our retirement years is essential. By the time we retire, few of us will have the luxury of picking up another job to provide additional income. If we overspend in the early years of retirement, we may impede the success of our plan long-term. The same can be said about taking too much or too little risk; the results can be devastating. An income distribution plan must be updated each year to evaluate our ability to maintain our desired lifestyle.

You have the resources and ability to take control of your financial future. I understand you are very busy. Still, I challenge you to take the next step. Find one topic you want to know more about. Visit our website, give us a call for resources, or attend a seminar or webinar to learn more. There is never a better time to begin a financial journey than today!

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How Financially Disastrous Are Natural Disasters?

By | 2017, Money Moxie, Newsletter | No Comments

Since our last Money Moxie®, we have seen two massive hurricanes lash the U.S. coast. In spite of these and other risks, the stock market has continued to add to its 2017 gains. What’s going on? Is the market’s response rational?

Counting on rational behavior —or even reasonable behavior—from investors during a crisis could be costly. So, even if you don’t expect to be directly impacted by a hurricane or other disaster, you may still feel some financial fallout.

Gas Prices: Hurricane Harvey pushed gasoline futures up 10 percent in trading on the New York Mercantile Exchange as investors anticipated refineries would shut down. The increase soon spread. According to AAA, the national average rose from $2.35 to $2.66 a gallon—a 13 percent increase.

Employment: Economic suffering is also evident in employment. Following Hurricane Harvey, the Labor Department reported the largest one-week jump in initial jobless claims since superstorm Sandy. Two weeks after Sandy (2012) and Katrina (2005), jobless claims soared higher by 23 percent and 30 percent, respectively. So, the full impact of Hurricane Irma on this measurement is still coming.

Consumer Spending: Nearly 70 percent of the U.S. economy is driven by stable consumer spending. When gas prices rise nationally and employment falls locally, there is less money for discretionary spending. The city of Houston, for example, has nearly 3 million workers and contributes around $500 billion to the economy. (Internationally, that places Houston’s economic value above that of the entire country of Sweden.)

Destruction and Reconstruction: Destruction is not counted in economic output. It shows up only as falling wealth. Reconstruction, often financed by debt, will eventually have a large impact on growth and cause a bump for inflation.

The overall impact could subtract around one half of a percent from U.S. growth. Fast forward 6 months and there should be a boost that approximately evens things out.

Investors concerned with natural disasters would be wise to maintain perspective. The lasting impact will be evident in the higher debt and human costs. Ultimately, this impact on individual lives is the most devastating.

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Medicare Open Enrollment

By | 2017, Money Moxie, Newsletter | No Comments

Medicare open enrollment is right around the corner. If you are already using a Medigap plan or a Medicare Advantage plan, now is your time to move if you want to change your carrier.When is the open enrollment period?
October 15th through December 7th of every year.

Who needs to pay attention?
Those using a Medigap plan, Medicare Advantage plan, prescription drug plan, or if during your initial enrollment period you opted not to purchase additional coverage above traditional Medicare parts A & B.

What is traditional Medicare?
Traditional Medicare is composed of three parts: A, B, and D. Part A is coverage for hospitals and doesn’t have monthly premiums. Part B is coverage for doctor visits, etc. and the base cost is $134 per month for most people. This typically comes out of your monthly Social Security check. Part D is prescription drug coverage purchased from a third party.

What is the difference between a Medigap and Medicare Advantage plan? Medigap is an additional insurance that complements traditional Medicare. It covers most of the “gaps” or holes that are not covered by parts A & B. You can go to any doctor that accepts Medicare.

Medicare Advantage plans combine parts, A, B, D, and Medigap into one nice package. They operate more like traditional insurance where they have a service provider and you are tied to their network.

What else should I know about Medigap? Medigap plans are lettered from A to N with costs that vary depending on the benefits provided. The most popular plan is F as it is the most comprehensive and covers things like the Part B deductible and foreign travel emergencies. Because it is the most comprehensive, it is usually the most costly. However, by rule, any Medigap plan has the same benefits regardless of the service provider, even though the costs can vary significantly.

The only differentiator between companies is the level of service. Price then is a driving factor, but you should use a provider that is reputable. People that have comprehensive Medigap plans may pay more on a monthly basis, but typically don’t have to pay very much out of pocket. If your health is ok to poor and you see a doctor regularly, then this may be a good option for you.

What else should I know about Medicare Advantage plans? Medicare Advantage plans, also called Part C, will often cost less than Medigap plans. They will typically have deductibles and co-insurance like traditional insurance through an employer. They work by Medicare giving an insurance provider a certain amount per year to manage your expenses. If the insurance provider manages your expenses for less, then they make money. Because of that, monthly costs vary significantly with some plans as low as $0 per month.

People that use Medicare Advantage plans usually pay less on a monthly basis, but typically have more out of pocket expenses. If you are in good health and don’t regularly see a doctor, then this may be a good option for you.

What are some small facts that have big impacts? When you originally sign up for Medicare, you can choose either Medigap or Medicare Advantage without being denied. If you are on a Medicare Advantage plan and then try to go back to a Medigap plan, you could be denied based on health. You will never be denied access to a Medicare Advantage plan.

Are there any differences between prescription drug providers? Yes, costs can vary significantly. Shop around to find the best deal for your specific medication regimen. You can also go to Medicare.gov, enter the prescriptions you take, and it will screen for the best providers. To get there, visit Medicare.gov and click on Drug Coverage (Part D), then click on Find Health & Drug Plans.

What resources are out there to help me research my options? The website www.medicare.gov has a plethora of information. You can use it to sign up for Medicare or any of its parts A, B, C, or D. You can also find contact information for Medigap providers. If you would like to speak to a person you can call 1-800-Medicare (1-800-633-4227).

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