Things to Consider Going into “The New Year" (Year-End Planning Checklist)

The end of the year is necessary to reflect on your financial picture, review the last 12 months, and plan for the future. With all that is involved, it can seem overwhelming.

There’s no question that November and December are the biggest times of year for shopping. But this year, it’s more important than ever to shop small and benefit your community.

Supporting local businesses means you’re supporting your friends and neighbors. And you’re likely to find unique items in mom-and-pop shops that you can’t find anywhere else.

For many of us, a new year is an opportunity for fresh starts and discovering the best versions of ourselves, but some things—like tax contributions and retirement deadlines—don't change much, if at all. And with that shiny new year right around the corner, meeting end of year deadlines and getting tax efficiencies in place now may prepare us for a smoother transition.

The final quarter of the year started well for stocks as the S&P 500 rallied about 8% in October.  While the reprieve was welcomed by investors the S&P 500 is still down about 19% for the year.  Interest rates continued to march higher during the month as the 10 Year Treasury closed the month yielding over 4%, and the 30-year mortgage rate over 7%.  (YCharts)

Concerns are still centered on inflation, Fed policy and the increased chances of recession.  Our economic dashboard once again showed further deterioration with the inversion of our yield curve indicator.  This is reflective of the increasing recession risk we’ve seen throughout the year.  As such, we have been defensively positioned with a portion of our growth portfolio throughout much of this year.  This defensive positioning has been beneficial, and we are now thinking about how to take advantage of the cash we have on the sidelines by looking for potential opportunities to put our defensive allocation back to work.    

September was another difficult month for stocks as the S&P 500 fell into bear market territory once again closing down roughly 9% for the month and 5% for the quarter. (YCharts) The main drivers once again were inflation, the Fed, and interest rates as investors continued to worry about the impact of each of these on economic growth. 

The odds of a recession have steadily increased throughout this year which has been reflected in the deterioration of our economic dashboard. The dashboard helps guide our portfolio positioning. As such, the deterioration in the dashboard led us to be defensively positioned for most of the year with a portion of our growth portfolio.

July’s stock market rally continued in the first half of August; however, volatility picked back up over the last two weeks of the month and the S&P 500 finished down about 4% for August.  That leaves the index down roughly 17% for the year. (YCharts) 

Once again it was inflation and the Fed that moved markets throughout the month with  better-than-expected inflation numbers driving the early rally, before concerns over a slowing economy were driven by Fed Chair Jay Powell’s speech later in the month. Next month, investors will again be watching inflation data carefully, and what it means for Fed policy, as the Fed is poised to raise rates in September: currently expectations are for a hike of 0.75%. (CME FedWatch Tool)

The second half of the year is off to a good start as the S&P 500 rallied roughly 9% in July.  While this rally was welcomed by investors there is still a lot of work to be done as the S&P 500 closed the month down about 13% for the year. (YCharts)

For many investors the two most important drivers this year have been inflation and The Fed.  The June CPI reading came in at 9.1%, the highest in 40 years, and the Fed responded by raising rates another 0.75%.  While headline grabbing, neither of these developments were particularly surprising.  Future inflation readings are likely to impact consumer sentiment and monetary policy for the rest of the year.

The challenging first half of 2022 is now in the books as the S&P 500 dropped roughly 8% in June bringing the year-to-date return to about -20.5%.  While stocks struggled, they were not alone, as most asset classes have been negatively impacted this year, including fixed income, with the US Aggregate bond market down about 11% for the year.

The good news is that we made changes to portfolios in April to manage risk due to the fact that we felt the chances of recession were rising.  Thus far, that change has been a good one for portfolios and we continue to have a portion of our growth portfolios defensively positioned today. 

The volatility we’ve seen since the beginning of the year continued in May as stocks alternated between strength and weakness, with the S&P 500 closing the month almost unchanged.  One piece of positive news for many investors was that the bond market stabilized with the Bloomberg Aggregate Bond Index up roughly 1% for the month after seeing losses in the first four months of the year. (YCharts)

We made changes to our portfolio positioning in mid-April in an effort to reduce risk within the growth portion of accounts.  While this defensive shift has worked well so far, we continue to monitor current economic and market conditions for potential changes.  As we look to the next 6-12 months, recession risks have risen but our economic dashboard does not yet signal that a recession is imminent.

ENZO T. PELLEGRINO, CFP®  RECOGNIZED IN FORBES

AS A 2022 BEST-IN-STATE WEALTH ADVISOR

--Named the 24th Advisor in Texas--

San Antonio, TX - April 14^th, 2022 - Enzo T. Pellegrino, CFP® of TLWM Financial was recently ranked No. 24 in Texas in Forbes’ 2022 Best-In-State Wealth Advisors list.  

According to Forbes, the annual ranking spotlights the nation’s top-performing advisors, evaluated based on criteria* that includes industry experience, client retention and assets under management. View the full list.

“On behalf of LPL, I’m thrilled to congratulate Enzo for this distinguished industry recognition from Forbes,” said Angela Xavier, LPL executive vice president, Independent Advisor Services. “With more than 20 years in the financial service industry, Enzo has become an experienced source of knowledge and support for their clients. As a top advisor in Texas, Enzo is harnessing the value of the independent model to provide a differentiated client experience and most importantly, help make a meaningful impact on the lives of his clients.”