Discover the keys to securing your legacy with effective estate planning. In this insightful video, learn essential strategies to protect your assets, minimize taxes, and ensure your loved ones are provided for, now and in the future.

2023 is in the books and the results were mostly encouraging. As we look forward to 2024, we’ve taken the time to outline some of our thoughts about both the past year and the coming months. You can watch Dean and me talk about our outlook for 2024 in the video above.

In 2024, we believe markets will make a definitive turn to a more recognizable place. Where the last two years had investors focused on inflation, market volatility, and striving for a sense of economic balance, we expect to see some return to the previous status quo, characterized by more familiar and steadier economic and market patterns. We’ve seen indications of this reset—receding inflation, rates stabilizing, more modest stock market performance, and go-forward economic forecasts that have been dwindling

It doesn’t mean that 2024 won’t have its own surprises or potential challenges. Reflecting on 2023, we certainly experienced our fair share of unexpected events. There were positives, such as the strength of the U.S. economy and the stock market, despite the Federal Reserve (Fed) raising interest rates. On the downside, we faced a regional banking crisis driven by interest rate risk and saw escalating conflict in the Middle East, reminding us that markets are seemingly constantly overcoming obstacles.

So where does that leave us for the first half of 2024? We do expect the economy to soften mildly, which is what the Fed has been looking for over the past two years. The uncertainty surrounding a potential recession may limit stock gains as 2024 begins, but it could also provide a silver lining if the Fed eases rates as a result.

I’ll end with an interesting perspective as we approach this year. According to Bloomberg news half of the worlds population (nearly 4 billion people) are eligable to participate in an election this year. This includes Elections in Young democracies like Pakstan and Tunisia, but also the UK, Mexico, India, and of course the USA.  We have emphasized before that market’s love certainty. As we face an election year, clarity can come as a new government takes shape and multi-year policy adgendas are put in place.

Dean, an accomplished finance professional, embarked on a new chapter as an educator, bringing his wealth of practical knowledge to the University of Washington Tacoma campus. In this dynamic Financial Principles class, Dean engages students with real-world examples, bridging the gap between theory and application. The video provides an insightful glimpse into Dean’s teaching philosophy, highlighting his passion for empowering students with essential financial skills.

As a seasoned practitioner in the financial industry, Dean enriches the learning experience with relevant case studies and industry insights. His commitment to fostering a supportive learning environment shines through as he encourages critical thinking and active participation. The University of Washington Tacoma campus becomes a hub of financial education under Dean’s guidance, where students not only grasp fundamental principles but also gain valuable perspectives for navigating the complexities of the financial landscape. Watch the video to witness the transformational impact of Dean’s teaching on aspiring financial minds.

Composting fuels your garden, and tax loss harvesting can help fuel your portfolio!

One of my favorite hobbies is gardening. For me, late fall involves winterizing the garden and building lots of compost piles.

I love composting. Composting takes things like dead plants, leaves, or unwanted pumpkins, and turns them into rich soil that fuels growth in next year’s garden. And that biological process of taking something seemingly worthless, and creating value, I just think that is incredible.

We can apply those same principles of growing a garden to growing a portfolio.

Within diversified portfolios, there are winners and losers. Too often an investor will hang onto a bad investment because selling at a loss can feel like admitting they were wrong.  While it’s always better to make money than lose money, those losses have value. Kind of like, those old pumpkins sitting on your porch.

By selling those depressed positions, you do 2 things.

First, you free up capital to invest in today’s best ideas

Second, taxable losses can be used to offset gains in other investments or can be carried forward to future years and future gains.

Now I don’t create waste, just so I can compost it. And I don’t necessarily advocate buying and selling position solely based on tax considerations.

But within the scope of your personal financial plan, underperforming positions in your portfolio may provide the nutrients to fuel next year’s growth.

And that’s what we are trying to accomplish for our clients with tax-loss harvesting. 

As my children grow older, their fascination with roller coasters at the State Fair has grown exponentially. Each year, it becomes increasingly evident that these heart-pounding, stomach-churning rides hold a special place in their hearts. However, as a parent, I couldn’t help but question the high price of admission and tickets as we embarked on another year at The Fair.

As I gazed up at these towering structures, new doubts began to surface. Chipped paint and rusty bolts adorning the rides made me wonder… Am I paying enough? Is this contraption regularly maintained and updated? And then there was the ride attendant, whose foam flip flops, unkempt hair, and khaki shorts left me questioning my choices even further. What had I signed up for?

But then something interesting happened. As I fastened my seatbelt (And khaki shorts gave it a tug) I realized the essence of what makes roller coasters exhilarating: confidence in a successful journey. For me, the best part of the ride was not the initial plunge or the hairpin turns. It was the moment when I stepped off the ride, looked at the photos taken during our journey, and remembered the thrill—all while knowing that I had remained securely on track.

The Stock Market is often called a roller coaster. Rightfully so. There are exhilarating highs and stomach-churning lows.  And just like on a roller coaster, it is a lot more fun if we have confidence that we are firmly on track.  

The best way to build confidence in your financial picture is to have a plan, and revisit it often.

When serving our clients, we have 3 steps to our planning process. We use these steps to help clients know where they stand, and consistently check if they remain on track for their goals.

Step 1: FACTS

Before the journey, we need to take inventory of where you are to start. This is everything from account balances, to life goals, to insurance coverage, to family relationships. By assembling and organizing all relevant facts, a client knows where they stand today.

Step 2: PLANS

Here is where we move from Facts to Assumptions.  We assume things like how long you will live, how fast your investments will grow, what you will spend each year, if inflation will be high or low, the potential cost of your daughters wedding in 7 years, where you will travel, what you health might be, or any other scenarios that are personalized and important to you. The Assumptions allow us to envision a future and determine you are on track to a successful outcome. 

Steps 3: “WHAT IF…”

If we build a plan and everything looks on track, we can model What If scenarios to check the strength of the plan and build confidence in our assumptions.  Questions like, what if market returns are below average or inflation runs high? What if Long Term Care is needed or an untimely death occurs?

If the initial plan indicates a client is NOT on track, What if modelling can help develop solutions for success. What if spending decreased or savings increased? What if you downsized a home or adjusted investment allocations?

The most important thing to remember is that planning is a process. Just like a regular maintenance on a roller coaster improves my confidence in a successful outcome, regular updates to a financial plan make it more likely that you can stay on track. 

We have recently completed our semi-annual Fall Rebalance and Portfolio review. We largely felt comfortable “staying the course” with most of our holdings. However, the economic landscape is ever changing. And with those changes come opportunities for strategic adjustments, and careful risk controls.

Because you may notice some activity in your account, we wanted to provide you with a brief overview of our market outlook as well as some core investment themes we are addressing on your behalf.

There are plenty of reasons to be optimistic about where we’re headed:

·         The labor market shows signs of moving in the right direction, with more balance between the supply and demand for workers.

·         Inflation is coming down. The Fed is most likely done with its aggressive rate-hiking campaign, which is good news for investors and policymakers alike.

·         The fourth quarter is historically the best quarter for the S&P 500, with average gains of around 4.2%.

While we are optimistic by nature, we need to acknowledge the challenges and unknows the investment markets are currently wrestling with:

·         Geopolitical conflicts in Ukraine, The Middle East, and the risk that these conflicts spread to neighboring regions. 

·         Potential for slowdowns in the US economy as consumers and businesses grabble with the likelihood that interest rates will stay higher for longer.

·         Weakening foreign trade as China’s economy slows and the U.S. dollar strengthens.

Our aim is to keep you positioned in holdings that are appropriate for your goals, control risk, and can participate in growth and innovations.

Here are 3 core themes are addressing with our revisions:

Bonds– Short- and intermediate-term bond yields are at multi-year highs due to an aggressive rate hiking effort by the Federal Reserve. As we are likely approaching the top of the rate hiking campaign, we want to add more intermediate-term bond holdings at these higher yields. Bonds are useful components of a balanced portfolio and can provide a hedge against recessions or geopolitical events.

Valuations Matter– Positive market growth in 2023 has largely been driven by a select few large companies. We continue to have a positive view on many of these companies, and also feel there are mid-sized and small-sized companies that are inexpensive relative to the current price of some market leaders. We want to make sure we have a balanced exposure to take advantage of value today. 

Tax Efficiency– Because much of the market gains this year have come from a few companies, there is an opportunity to shelter current or future gains through tax-loss harvesting. Furthermore, we have identified several opportunities to utilize tax-efficient ETF investments which are less likely to create capital gains distributions (these can increase your tax bill). 

If you are interested in hearing more about the changes we have made, and why we are making them, we have posted a short video discussing these updates, which you can view on our website.

It is often in times of mounting market concerns that we see the resiliencies of companies take over. Addressing our bond exposures, and continuing to monitor equity opportunities, should help your investments stay competitive and balanced in 2023 and beyond. 

As the fourth quarter continues, we will hope for continued clarity but plan for uncertainty. In the meantime, these model adjustments will continue to support the diverse approach we take with every strategy.