YOUR WEALTH CONNECTION
As we pass the midway point of 2022 and look forward to the adventures that Summer brings, the Hilltop team is excited to deliver the June edition of our e-newsletter Your Wealth Connection. As always, we are hopeful that you will find useful information on retirement planning, tax strategies, the economy and what is new at Hilltop.
We encourage you to visit our website, HilltopWealthTax.com, to learn more about our services, our team and upcoming events for clients and friends.
Happy Father’s Day! – Let’s meet the Hilltop Dads.
• Creating a Retirement Strategy
• The Behavior Gap and Your Financial Health
• Estate Planning and Gift-Giving Taxes & Strategies
• Information about the Capital Markets and what is going on with our current economic conditions.
• Learn more about one of our Private Wealth Advisors, Bill Davis.
• Read about our full Bookkeeping and Accounting Services.
• The greatest compliment we can receive is your referral.
As always, we are honored and humbled that you have given us the opportunity to serve as your financial advisor.
From the entire Hilltop team, we hope you enjoy the information!
Erik W. Brenner CFP® NSSA®
CEO, President and Private Wealth Advisor
Allow us the opportunity to build you a custom Retirement Roadmap and we’ll send you a $100 Gas Card.
While we celebrate all those who are called Dad on June 19th, we would like to give special attention and thanks to the Dads of Hilltop. We hope you enjoy a few pictures of these special guys and their family!
Hilltop President & CEO, Erik Brenner, with his wife, Lana, and their four wonderful children – Clark, Marla, Grant and Jack. Many of you know Marla, who works closely with our advisory team as the Hilltop Paraplanner.
Private Wealth Advisor, Bill Davis, with all the kids and grandkids over the Easter holiday!
Private Wealth Advisor, Cliff Hawkins, and his daughters Nola and Devin – *Devin works alongside her dad as an Intern with Hilltop!
Director of Operations, Shaun Fedder, with his wife Natalie, their daughters Sadie & Madelynn and family pooch, Chewbacca – aka Chewy.
Allow us the opportunity to build you a custom Retirement Roadmap and we’ll send you a $100 Gas Card.
Creating a Retirement Strategy
The Behavior Gap and Your Financial Health
Estate Planning and Gift-Giving Taxes and Strategies
We were treated to one of the greatest bull markets in modern history during the last decade. It’s not that we didn’t experience sell-offs. We did. During 2011 and 2018, the S&P 500 Index came very close to entering a bear market, which is typically defined as a 20% or greater pullback in the broad-based S&P 500 Index.
From its closing peak of 4,796.56 on January 3, the S&P 500’s most recent closing bottom of 3,900.79 on May 19 translates into a peak-to-trough loss of 18.68%.
As we moved into the final days of May, a sharp rally helped minimize losses for the month, as illustrated in Table 1. The peak-to-date loss for the S&P 500 Index through May 31 is 13.85%.
Source: Wall Street Journal, MSCI.com, MarketWatch, Morningstar
MTD returns: Apr 29, 2022-May 31, 2022
YTD returns: Dec 31, 2021-May 31, 2022
*In US dollars
What fueled the rise in stocks over the last decade and what has changed today? We believe there has been a shift in the economic fundamentals.
During the 2010s, interest rates were extremely low; the Fed was buying Treasury bonds during the early part of the decade (popularly called quantitative easing or QE); inflation was low; and the economy was expanding at a modest, if unimpressive, pace. That economic expansion fueled a rise in corporate profits.
When the Fed began to raise rates, the shift in policy was gradual. While stocks never rise in a straight line, the economic fundamentals created a strong tailwind for equities.
A brief review of the data from Yahoo Finance shows that on December 31, 2009, the S&P 500 Index closed at 1,115. Ten years later, the S&P 500 had nearly tripled to 3,231. On May 31, it closed at 4,132.
On December 31, 2009, the Dow Jones Industrial Average closed at 10,428. It ended the decade at 28,538. On May 31, the Dow closed at 32,990.
What’s going on today
Today, the economy is expanding, and corporate profits are rising, according to Refinitiv. But an upbeat Q1 profit season failed to stem the latest slide in stocks. Why? We believe you can point to a shift in the once-favorable fundamentals.
First, let’s start with the Federal Reserve. During prior rate-hike cycles, such as the early 2000s and the second half of the 2010s, the Fed took great pains to reassure investors that increases would be “measured” or “gradual.”
The investor-friendly language has been jettisoned.
In hindsight, the Fed should have started tightening the monetary screws with rate hikes last year. It didn’t. It insisted that last year’s rise in inflation was “transitory.” It wasn’t.
In response to the sharp rise in inflation, the Fed is being forced to play catch-up.
In May, the Fed hiked its key lending rate, the fed funds rate, by 50 basis points, which was the first 50 bp rise in over 20 years. The 75 bp raise for June was the highest since 1994 and it is anticipated that a 50 bp, or larger, increase could be in store for late July.
In a recent interview, Fed Chief Powell said, “What we need to see is inflation coming down in a clear and convincing way, and we’re going to keep pushing until we see that.” It’s tough talk.
We want a return to price stability, and comments like that strongly suggest job #1 at the Fed is price stability. But over the shorter term, an aggressive policy to rein in inflation increases economic uncertainty and angst among investors.
In addition to rate hikes, the Fed will also let some of the maturing bonds it holds run off its balance sheet without replacing them. It’s the opposite of QE, and it’s called QT—quantitative tightening. As with rate hikes, it’s a shift away from the Fed’s easy money policy.
While the Fed should take some responsibility for today’s high inflation, we won’t blame it entirely on them. Excessive fiscal stimulus encouraged a consumer-led buying binge (and a fast return to full employment), and supply chain woes that limited the availability of some goods are part of the problem, too.
Further, severe labor shortages have lifted wages, and businesses are passing along the higher costs.
Market volatility is also being exacerbated by Russia’s invasion of Ukraine, which has pushed up energy prices and appears poised to slow global growth. Recent lockdowns in China have aggravated supply chain issues.
Lastly, whether it is warranted or not, odds of a recession have risen, which is adding to uncertainty.
MEET PRIVATE WEALTH ADVISOR
As a member of Hilltop’s Advisory Team, Bill provides critical financial guidance to his clients on their retirement planning, tax strategies, positioning their portfolios to best meet their needs & goals and everything in between. We caught up with Bill just as he finished walking a client to their car after a meeting.
Hilltop: Good afternoon Bill – thank you for taking a few minutes to chat with us and allowing others to get to know you as well as we do. Let’s jump right in – If you could meet any person in the world, past or present, who would it be?
Bill: I’d have to say the legendary lead guitarist for the Grateful Dead, Jerry Garcia. To those who know, he was much more than the frontman for a rock band – he was a composer, an artist, an icon for a generation and also a deeply caring individual who gave more than he could ever take.
Hilltop: Agreed. Jerry is missed, but his legacy and music live on. I know you’ve seen the Grateful Dead a few dozen times and those, I’m sure, are great memories. Bill, tell us – what is one thing many people don’t know about you?
Bill: I really love to cook. My family know this, but on most summer weekends, you’ll find me prepping and overseeing my grill and smoker.
Hilltop: Oh yeah. The office has been treated to that on a several occasions. Bill, can you share with us who would you consider your hero, and why?
Bill: Abraham Lincoln for his courage to do the right thing even if it was not the most popular. Integrity and knowledge is an incredible combination.
Hilltop: Indeed. Let’s talk a bit about guilty pleasures. What is one tv show or movie that you are ashamed to love?
Bill: Okay, I must admit I really do enjoy Swamp People. It’s a show on the History Channel that tracks a group of alligator hunters living in a river basin down in southern Louisiana.
Hilltop: I’ve heard of that show, but never watched it. That may have to change. One final question and we’ll let you get back to work. How many siblings do you have and are they older or younger?
Bill: I have a sister and I am older, but just by one year.
HILLTOP TAX SOLUTIONS
Did you know?
Did you know that our seasoned tax professionals can help beyond just preparing and filing your Federal and State Income Tax Returns? If you are in need of bookkeeping or accounting services, Hilltop Tax Solutions offers a flat monthly or quarterly fee to help streamline your business.
JUNE TRIVIA: As always, please submit your responses to Marla Brenner and those who answer all three questions correctly will be entered into a drawing to win this month’s prize. Good Luck!
1. Who’s daughter works for Hilltop as an Intern?
2. How much did The Fed raise the Federal Funds Rate at their June meeting?
3. Who does Bill Davis consider to be his hero?
This letter is not intended to be relied upon as forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date noted and may change as subsequent conditions vary. The information and opinions contained in this letter are derived from proprietary and nonproprietary sources deemed by Hilltop Wealth Solutions to be reliable. The letter may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projection and forecasts. There is no guarantee that any forecast made will materialize. Reliance upon information in this letter is at the sole discretion of the reader.