Financial Planning - Archive

Inflation is High and Persistent

Financial Planner · Nov 19, 2021 ·

I hope you’re warm, well, and looking forward to some time with family and friends.

I wanted to drop you a quick email about a couple of things: infrastructure, inflation, and taxes.

And I’ve got a blue-sky question for you at the end. I’m really interested in hearing your thoughts.

President Biden just signed his much-debated bipartisan infrastructure deal.

What does that mean for the economy?

In the short term, some of the infrastructure funding will go immediately toward clearing port and transportation bottlenecks, so that might help improve supply chain issues.¹ Fingers crossed.

Though it could be years before you or I drive across a new bridge or highway funded by the bill, some of the maintenance funds could get used in spring construction blitzes.²

Since the job market is already tight, the economy isn’t likely to see an immediate surge in hiring due to infrastructure spending; however, multiple reports suggest ~800,000 new jobs could be added by 2030, though many of them will be temporary rather than long-term jobs.

Economists don’t think inflation is likely to increase due to the slow pace of spending, though the deal is projected to add $256 billion to the federal budget deficit over the next 10 years.

Bottom line, analysts project long-term benefits to the economy in lower business costs, increased labor force participation, and improved competitiveness.³

Inflation might not be as temporary as the Federal Reserve would like it to be.

Prices are up all over, and folks are understandably upset at paying more at the grocery store, gas station, and most everywhere else.

Many analysts hoped that data blips, supply chain clogs, and other pandemic-related disruptions were creating a temporary spike in inflation that would resolve soon.⁴

However, inflation has remained stubbornly high.

In the U.S., prices have increased 6.2% over the last 12 months — the biggest spike since November 1990. And you can see in the chart that some categories measured by the Consumer Price Index (CPI) have soared by much more.⁵

Since the Fed’s goal is to keep long-term inflation around 2% (and that’s what we’ve experienced this century), folks are concerned that “temporary” inflation is lingering longer than we want.

So, are prices going to continue to rise in 2022?

That’s likely, but how much, how fast, and for how long depend on a lot of global factors, including whether the Fed raises interest rates or takes other actions.

I’m keeping an eye on it.

Will your taxes go up in 2022?

That’s the question of the month on Capitol Hill as lawmakers debate the Build Back Better deal that could come with tax law changes.

We don’t know when (or if) the bill will be passed, but I’m watching closely and I’ll update you when we know what’s likely to happen.

Before I go, I’d like to wish you and yours a relaxing Thanksgiving with great food, great fun, and great memories.

Gratefully yours,

Goran Ognjenovic
Independent Investment Advisors
(971) 350-8068
www.independentadvisorsnw.com

P.S. It’s the time of year when the analysts start making predictions for 2022. What are your predictions for next year? What will be the big themes? Hit “reply” and let me know your thoughts!

¹https://www.washingtonpost.com/us-policy/2021/11/09/biden-supply-chain-ports/

² https://www.cnn.com/2021/11/09/politics/biden-infrastructure-bill-spending-economy/index.html

³https://www.moodysanalytics.com/-/media/article/2021/macroeconomic-consequences-of-the-infrastructure-investment-and-jobs-act-and-build-back-better-framework.pdf

⁴https://www.cnn.com/2021/11/13/economy/what-is-inflation-explainer/index.html

⁵https://www.bls.gov/news.release/cpi.nr0.htm

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific situation with a qualified tax professional.

The following posts and commentary are to be used solely as educational tools and do not contain investment advice. Investment advice must be tailored to a particular investor’s specific needs. None of the information contained should be construed to be investment advice. Individuals wishing to tailor a plan to their own needs should seek the help of a Registered Investment Advisor.

There is a high degree of risk in investing and trading. Independent Investment Advisors assumes no responsibility. Principles of Independent Investment Advisors may, at times, maintain directly or indirectly, positions in securities or derivatives mentioned in these comments.

Gratitude practice?

Financial Planner · Nov 15, 2021 ·

< back to Market Insights Blog

The last few weeks and months have had a lot of stress and uncertainty.

So, instead of writing to you about politics, or the economy, or the supply chain, I figured I’d change the script and write about something completely different.

Let’s talk about gratitude.

Is gratitude a practice for you?

In my role as a financial professional, I’ll tell you that it should be.

Why?

Let's talk about gratitude! — Gratitude reminds you of what really matters.

Gratitude reminds you of what really matters.

Not the lines at the store.

Not the traffic.

Not what happens on Capitol Hill or Wall Street.

But, what really, truly matters.

I am deeply, abundantly grateful today.

For the food in my fridge.

For the roof over my head.

For my health.

For my circle of family and friends who love me.

For my community that has given me a home.

For my amazing clients and partners who have given me a vocation.

I’m grateful for you.

Taking inventory of all my blessings gets me through the minor irritations.

It also helps me reset when something major happens.

Gratitude calms me when things get stressful and overwhelming.

What are you grateful for?

Has it changed over these crazy couple of years?

Do you have any rituals around gratitude?

Please write back and let me know. I’m excited to hear from you.

With gratitude,

Goran Ognjenovic
Independent Investment Advisors
(971) 350-8068
www.independentadvisorsnw.com

P.S. Can I ask you to do something with me? Would you send an email or text to three people you are grateful for? I bet you’ll make their day. I wrote to you, so now I’ve just got two more :). Hit “reply” and share any responses you get.

P.P.S. Want some insight into the relationship between gratitude and happiness? Here’s a great TED talk on the topic by Benedictine monk David Steindl-Rast. If you watch it, will you send me your thoughts?

7 Little Upgrades that Can Make Life Better in Big Ways

Financial Planner · Aug 19, 2021 ·

< back to Market Insights Blog

What would make your life better?

A new house or car? A bigger paycheck or bank account?

It’s easy to want more when you think of being happier and living better.¹

And there’s little doubt that money can buy some (more) happiness.²

But the happiness we get from money is fundamentally limited.³

It leaves us wanting more, and it’s not enough on its own to enjoy a truly satisfying life.

The reality is a lot of the things that can make us happy and enrich our lives have nothing to do with money.⁴

And some of the things that may bring us the most joy could already be within our reach.⁴

What are they and how can they improve our lives?

Find out the answer with these simple life upgrades. They can transform the way you experience and enjoy life.

Read Our August Newsletter Here!

Getting it wrong?

Investment Advisor · Jun 24, 2021 ·

< back to Market Insights Blog

What happens when the predictions are wrong?

Is it time to panic?

Is it time to ditch our strategy?

It’s a fascinating question because it cuts right down to the question of what it means to live in an uncertain world.

Humans are wired to dislike uncertainty.¹

And we’re used to a fair amount of (often unwarranted) certainty in the models and paradigms we use to make sense of the world around us.

We’re so attracted to certainty that when economic forecasts and reports come back with “surprises” (also known as being wrong) we tend to freak out.

Especially when the news trumpets every weird bit of data like it’s a huge deal.

Over the last few weeks and months, we’ve had a lot of “surprise” reports.

Inflation surprises.

Job market surprises.

Housing market surprises.

Economic growth surprises.

Why are we so surprised?

In a year like 2021, the margin for error is greater than ever.

Predictions, forecasts, and expectations that are based on averages, trends, and other backward-looking methods are ill-equipped to handle the outliers and oddities of a year that’s unlike anything that has come before.

When in history has an entire global economy simply come to a halt?

And then arthritically restarted with many creaks and groans.

To my knowledge, it’s never happened before.

Of course the data is going to have surprises.

We’re probably going to get a lot of things wrong.

I can’t wait for the best-sellers written about all the ways we could have done things better.

So. What does that mean for you and me?

Crystal balls are out of commission.

Surprise is the order of the day, the week, and the year.

The models haven’t caught up yet (though that’s not stopping anyone from issuing very confident predictions).

So we’re being careful and looking out for the opportunities (as well as the hidden pitfalls) in these uncharted waters.

We’re cultivating patience, gratitude, and our ability to make good decisions with incomplete information.

To staying frosty,

Goran Ognjenovic
Independent Investment Advisors
(971) 350-8068
www.independentadvisorsnw.com

P.S. So many folks are making big life changes. Are you? Anything you’re excited to share? Hit “reply” and let me know.

¹_{https://www.psychologytoday.com/us/blog/the-right-mindset/202002/why-uncertainty-freaks-you-out}

Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.

Tax worries? Info inside…

Investment Advisor · Jun 15, 2021 ·

< back to Market Insights Blog

Tax worries? Info inside…

Are you tired of hearing about taxes?

Me too! But here we are. Let’s dive in.

So, we’ve got dueling infrastructure bills, plus a big proposed budget with lots of spending (and higher taxes inside).

That’s a lot of expensive legislation on the table.

What’s going to happen next?

The Democrats and Republicans seem pretty far apart on their respective infrastructure deals, which opens up the possibility that Democrats could go it alone and try to pass a package entirely without Republican support.¹

That would be very difficult to accomplish.

It’s also possible that both parties could align around a smaller bill and then the Democrats attempt to pass any extras through budget reconciliation.

Bottom line, we don’t have enough clarity to know what a final infrastructure deal will look like. Given the political hurdles, the debate might drag on through summer.²

How likely are taxes to go up?

Well, my crystal ball’s about as clear as mud right now, but let’s break down what we see on the table.

President Biden’s $6 trillion proposed budget offers a lot of spending and higher taxes to pay for it.³ None of these tax hikes are a surprise as they are in line with what Biden has promised before.

Wealthy taxpayers are looking at a higher top income tax rate, higher capital gains taxes, and the loss of the step-up basis on inherited assets.

Corporations are also in the line of fire, facing an increase in corporate tax rates, which could affect profitability.

That’s currently what’s on the table.

However, Biden’s desire to raise taxes faces major headwinds (even inside his own party). His proposed budget is very much a wish list and will face challenges getting approved by legislators.⁴

It’s very possible that some (or all) of these proposed tax hikes will get axed during negotiations.

How likely is it that any tax hikes will be retroactive?

One of the big shockers coming out of recent tax news is that the higher capital gains taxes could be made retroactive to April 2021.⁵

There is historical precedent for this as it has happened a number of times before.⁶ However, retroactive tax changes are often for tax decreases.

I think it’s very unlikely for an increase to be retroactive. There is too much opposition from both sides of the aisle.

Bottom line, I do think that higher taxes are coming. But I’m not sure that they will be as big or far-reaching as the Biden administration wants.

With so much uncertainty around taxes, now is not a time to panic, but to think carefully and make adjustments where needed.

I’ll reach out if there’s anything specific we need to discuss.

Yours in tax uncertainty,

Goran Ognjenovic
Independent Investment Advisors
(971) 350-8068
www.independentadvisorsnw.com

P.S. There’s a lot going on in the economy and Washington. I’ll keep you updated along the way, but if you have any questions or concerns, please reach out. That’s why I’m here.

¹https://www.usatoday.com/in-depth/news/politics/2021/05/30/biden-infrastructure-plan-sides-odds-social-infrastructure/7451554002/

²https://www.rollcall.com/2021/05/28/budget-release-starts-a-process-that-will-run-through-summer/

³https://www.cnbc.com/2021/05/28/biden-budget-reiterates-top-capital-gains-tax-rate.html

⁴ https://www.foxbusiness.com/politics/bidens-capital-gains-tax-hike-proposal-faces-democratic-headwinds

⁵ https://www.marketwatch.com/story/biden-plans-retroactive-hike-in-capital-gains-taxes-so-it-may-be-already-too-late-for-investors-to-avoid-it-report-11622133899

⁶ https://www.natlawreview.com/article/capital-gains-rate-historical-perspectives-retroactive-changes

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.