 What the Fed’s new policy may mean for you.
Most recently, you may have read that Federal Reserve Chair Jerome Powell announced a change in how the Fed views inflation. In the past, the Fed said it would consider adjusting short-term rates when inflation approached 2 percent. But in light of 2020’s many challenges, the Fed’s new policy may allow inflation to run above 2 percent for a period of time before any shift in monetary policy is considered.1 For many, bonds are a critical component of their overall investment strategy. So any change in Fed policy regarding inflation may influence a portfolio. That's why it’s so important to understand that the market value of a bond will fluctuate with changes in interest rates. In other words, when interest rates rise, the value of existing bonds will typically fall.2 There’s no doubt this will be a subtle change for many. But for bond investors, the policy shift may indicate that the Fed has given itself more flexibility in the future. But, what does that mean for the outlook for the bond market as a whole? It’s unclear. However, lower levels of unemployment in recent years have not led to higher inflation. This new phenomenon runs counter to the Phillips curve, a concept which states that inflation and unemployment have a stable and inverse relationship. With this data in mind and the changes announced by Chairman Powell, it could be argued that the Fed believes the relationship between unemployment and inflation has changed.3 Keep in mind that if an investor sells a bond before maturity, it may be worth more or less than the initial purchase price. By holding a bond to maturity, an investor will receive the interest payments due plus your original principal, barring default by the issuer. Investments seeking to achieve higher yields also involve a higher degree of risk. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. Citations. 1. Schwab.com, August 27, 2020 2. Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss. 3. Investopedia.com, May 19, 2019  Looking ahead can help you conquer these unique obstacles.
When it comes to retirement, some women face obstacles that can make saving for retirement a challenge. Women typically earn less than their male counterparts and often take time out of the workforce to care for children or other family members. Added to the fact that women typically live longer than men, retirement money for women may need to stretch even further.1 Despite these challenges, there are a lot of reasons to be hopeful.2 Review your existing situation. Do you want to spend your years traveling together, or do you envision staying closer to home? Are you seeing yourself moving to a retirement community, or do you want to live as independently as you can? Sit down with your spouse, if you’re married, to discuss your visions for retirement. You can't see if you're on track for your goals if you haven't defined them. And if you find you’re falling short of where you want to be, you can work together to strategize about how you can either get to where you want to go or to adjust your strategy so that it fits your existing situation.1 Get creative. These challenges don’t have to stop you from saving for retirement if you’re willing to get creative. If you plan to or have taken off time from the workforce, try and increase your contributions to your retirement accounts while you are working. If you’re staying home while your spouse works, you may be able to contribute to an individual retirement account.3 Under the SECURE Act, once you reach age 72, you must begin taking required minimum distributions from a Traditional Individual Retirement Account and other retirement plans in most circumstances. Withdrawals from Traditional IRAs are taxes as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Under the CARES Act, the 10% penalty may be waived in 2020. Traditional IRA may be fully or partially deductible, depending on your adjusted gross income. If you’re caregiving for an elderly relative, there are ways to be paid for your time. According to AARP, the Veteran’s Administration or Medicaid may be a potential source of income. Working with a professional who has expertise in this field can help you navigate the complicated medical structure while also helping you earn income for work that you’re doing.3 Get involved. One of the best things you can do is to get involved in conversations about finances. Many women undervalue their knowledge in this area and having regular conversations with your spouse, family, and financial professional can help ensure that you always know where things stand.3 While women may face additional challenges, careful preparation with your financial professional may help you to live a fulfilling retirement. This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. Citations 1. CNBC.com, March 6, 2020 2. Entrepreneur.com, August 13, 2020 3. MarketWatch.com, March 6, 2020  In this month’s recap: Stocks prices surged in August as investors cheered positive news of a potential COVID-19 treatment and welcomed a month-long succession of upbeat economic data.  U.S. Markets Stock prices surged in August as investors cheered positive news of a potential COVID-19 treatment and welcomed a month-long succession of upbeat economic data. The Dow Jones Industrial Average rose 7.57 percent, the Standard & Poor’s 500 Index climbed 7.01 percent, and the Nasdaq Composite soared 9.59 percent.1 Solid Foundation The month’s foundation was set by a series of strong economic reports, including an increase in manufacturing activity, better-than-anticipated factory orders, and a lessening of new jobless claims.2,3,4 Notching Highs The S&P 500 index finally broke through resistance, ending the third week of August at a record high and completing the fastest bear market recovery in history. The Nasdaq Composite, having set multiple record highs during the same week, also ended the month at a record high.5,6 Strong Close to the Month The final full week of trading was remarkable. Investors were encouraged by news of a potential COVID-19 treatment and a report suggesting U.S. and China negotiators had met to discuss trade issues. Stocks pushed higher still following announcement of the Fed’s inflation policy shift, suggesting that interest rates may remain low for longer than expected. Sector Scorecard The majority of industry sectors closed higher in August, with gains in Communication Services (+12.02 percent), Consumer Discretionary (+11.48 percent), Consumer Staples (+4.95 percent), Financials (+5.62 percent), Health Care (+2.11 percent), Industrials (+9.98 percent), Materials (+4.89 percent), Real Estate (+1.81 percent), and Technology (+16.62 percent). Energy (-1.27 percent) and Utilities (-2.28 percent) lost ground.7 What Investors May Be Talking About in September The election season is moving into high gear as November draws near. Will uncertainty about the elections be reflected in the stock market? Since 1992, the S&P 500 has lost an average of 2 percent in the three months leading up to the presidential election but has been higher 43 percent of the time.8 Keep in mind that the 2 percent average includes the 20 percent drop prior to the 2008 election that was the result of the ongoing credit crisis.9 While past performance is no guarantee of future results, the lesson may be evident: Prepare for some short-term volatility, without losing sight of your overall investment strategy.   If you have a son or daughter graduating from college next year, remind them to try and build an emergency fund. Those with the least seniority can be the first to be laid off in the workplace, and sometimes that first job after college doesn’t work out.  World Markets Markets overseas generally trended higher with the MSCI-EAFE Index rising 4.98 percent in August.10 European markets rose in hopes of a COVID-19 vaccine and another round of economic stimulus. Major markets ended higher, with France gaining 3.42 percent and Germany advancing 5.13 percent. The U.K. lagged a bit, tacking on just 0.70 percent.11 Pacific Rim stocks turned higher, with Australia picking up 2.24 percent and Hong Kong climbing 2.37 percent. Japan had a strong showing, adding 6.59 percent.12 Indicators Gross Domestic Product: Second-quarter GDP contraction was revised from 32.9 percent to 31.7 percent.13 Employment: The labor market continued to improve, albeit at a slower pace. Employers added 1.8 million jobs in July, and the unemployment rate fell to 10.2 percent.14 Retail Sales: Consumer spending rose a lower-than-expected 1.2 percent in July. Slower sales of electronics and appliances were offset by an increase in restaurant and bar sales.15 Industrial Production: Output by the nation’s manufacturers, miners, and utilities rose 3.0 percent. To put that number in perspective, industrial production hit 8.4 percent in February.16 Housing: Housing starts surged in July, increasing by 22.6 percent.17 Existing home sales soared 24.7 percent, representing the biggest monthly gain since 1968, when tracking of existing home sales began.18 New home sales jumped by 13.9 percent, reaching their highest level in over 13 years.19 Consumer Price Index: Prices of consumer goods rose 0.6 percent in July, with gasoline prices contributing to the increase.20 Durable Goods Orders: Orders for products designed to last three years or longer gained 11.3 percent, rising for the third consecutive month, as defense aircraft and motor vehicle orders led the way.21   “You’ve got to get up every morning with determination if you are going to go to bed with satisfaction.” GEORGE LORIMER  The Fed Minutes from July’s meeting were released on August 19. The Federal Open Market Committee (FOMC) appeared to favor more monetary accommodation, though Fed officials were unclear as to the timing or triggers for taking further policy action. In a prepared statement, the FOMC said, “The path of the economy would depend significantly on the course of the virus.” In addition, FOMC members believe that the “...ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term...” causing members to maintain the target range for the federal funds rate at 0 to ¼ percent.22  Sources: Yahoo Finance, August 31, 2020 The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.  Gary G. Blom CRPC | Financial Advisor Michael Howell MBA | Financial Advisor Address: 3340 Tully Rd. Ste B4, Modesto, CA 95350 Website: www.blomandhowell.com Office: (209) 857-5207 | Fax: (209) 857-5098 Know someone who could use information like this? Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)  CA Insurance License #0C95684. Securities offered through SCF Securities, Inc. – Member FINRA/SIPC. Investment Advisory Services offered through SCF Investment Advisors, Inc. 155 E. Shaw Ave. Suite 102, Fresno, CA 93710 | (800) 955-2517 | Fax (559) 456-6109 SCF Securities, Inc. and Blom & Howell Financial Planning are independently owned and operated. www.scfsecurities.com CITATIONS: 1. The Wall Street Journal, August 31, 2020 2. Barrons.com, August 6, 2020 3. MarketWatch, August 3, 2020 4. MarketWatch, August 27, 2020 5. The Wall Street Journal, August 18, 2020 6. The Wall Street Journal, August 31, 2020 7. FastSet Research, August 31, 2020 8. CNBC.com, August 10, 2020 9. CNBC.com, August 10, 2020 10. MSCI.com, August 31, 2020 11. MSCI.com, August 31, 2020 12. MSCI.com, August 31, 2020 13. CNBC.com, August 27, 2020 14. The Wall Street Journal, August 7, 2020 15. CNBC.com, August 14, 2020 16. APNews.com, August 14, 2020 17. CNBC.com, August 18, 2020 18. The Wall Street Journal, August 21, 2020 19. FoxBusiness.com, August 25, 2020 20. The Wall Street Journal, August 12, 2020 21. The Wall Street Journal, August 26, 2020 22. The Wall Street Journal, August 19, 2020 This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs, or expenses. Investors cannot invest directly in indices. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The Nasdaq Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The FTSEurofirst 300 Index comprises the 300 largest companies ranked by market capitalisation in the FTSE Developed Europe Index. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. Established in January 1980, the All Ordinaries is the oldest index of shares in Australia. It is made up of the share prices for 500 of the largest companies listed on the Australian Securities Exchange. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The FTSE TWSE Taiwan 50 Index is a capitalization-weighted index of stocks comprises 50 companies listed on the Taiwan Stock Exchange developed by Taiwan Stock Exchange in collaboration with FTSE. The MSCI World Index is a free-float weighted equity index that includes developed world markets and does not include emerging markets. The Mexican Stock Exchange, commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The U.S. Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
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