PWM - Financial & Investment Advisors in New Jersey | Private Wealth Management - Registered Investment Advisor, RIA | NJ, NY, PA, FL http://www.pwm-nj.com Wed, 21 Jan 2015 14:00:54 +0000 en-US hourly 1 http://wordpress.org/?v=4.0.1 Employment Continues to Grow at a Slow, Steady Pace http://www.pwm-nj.com/knowledge/investment/employment-growth http://www.pwm-nj.com/knowledge/investment/employment-growth#comments Wed, 21 Jan 2015 14:00:54 +0000 http://www.pwm-nj.com/?p=9997 more]]>

trees

Employment Growth Progressing

Media and financial news sources often report that the economy added an “x” number of jobs for a particular month. These monthly payroll numbers are polled by the Bureau of Labor Statistics and are published in a report called “Employment Situation” that is typically released on the first Friday of each month. The monthly headline numbers tend to be quite volatile and are often difficult to interpret. In the past two years alone, the number of jobs added varied between as few as 88,000 jobs in June of 2012 to as many as 280,000 in February of 2013. Wide fluctuations in the monthly payroll data occur because the monthly hiring and firing process itself tends to be unpredictable, and seasonal factors that aim to stabilize the data are extremely difficult to measure accurately.

Looking at these figures can usually create more confusion than insight, and that is why Morningstar’s Department of Economic Analysis looks at employment growth through a slightly different lens. When the same volatile monthly jobs data is analyzed not as a monthly net job addition or loss but as a year-over-year 3-month moving average growth rate, a different picture emerges. All of a sudden, it becomes clear that the U.S. jobs market has been incredibly stable despite its monthly ups and downs. As the chart shows, total nonfarm employment has been growing at around 1.7% since early 2011 and has picked up modestly to 1.9% in recent months. Excluding the poorly performing government sector, which constitutes around 16% of total employment, private-sector jobs have been growing at an even higher 2.0–2.1% rate. Combine these results with efficiency and productivity gains and it should come as no surprise that the U.S. economy, on average, grew 2.2% since 2011 based on full-year estimates.

Despite the rock steady growth, the pace of employment recovery has been slow and disappointing to say the least. Considering that the U.S. economy lost over 8.5 million jobs between 2008 and 2010, most economists expected a much faster recovery of the labor market. Instead, it took more than four years to get back the number of jobs lost during the crisis. Seeing those numbers bounce back to their pre-recession level is great news, but it is important to point out that the make-up of the new post-recovery labor force has drastically changed. Unfortunately, the growth in high-paying, long-hours jobs such as construction and manufacturing has been all but robust, and due to efficiency improvements, especially in manufacturing, many of these jobs may never come back. A majority of the labor market recovery has been made in the lower-paying sectors such as retail and leisure and hospitality, which has certainly contributed to slower consumption growth and to the near-anemic pace of the economic recovery in general.

 

This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. ©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/or the content providers; (3) is not warranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor the content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. “Morningstar” and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar Market Commentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Photo Credit: Hans

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Investment Outlook – Fourth Quarter in Review (Winter 2014) http://www.pwm-nj.com/knowledge/investment/investment-outlook-q4-2014 http://www.pwm-nj.com/knowledge/investment/investment-outlook-q4-2014#comments Tue, 20 Jan 2015 13:26:44 +0000 http://www.pwm-nj.com/?p=10045 more]]> image of mountains - tpsdave

Key Points

  • Divergence to be the theme of early 2015 as the US economy expands while countries overseas struggle
  • While the Federal Reserve moves towards monetary policy normalization, Central Banks around the world are likely to further expand their balance sheets which should help to support financial assets
  • The anticipated Fed rate hike is likely to pressure US equities – temporarily
  • The oil price drop is not all good news for the markets

2014’s Major Theme: Divergence

As 2014 drew to a close, the international economic indicators were strikingly different:

image of chart 1

These divergences are likely to continue through the first quarter of 2015 as the US economy enjoys its current momentum, the Fed is close to hiking rates for the first time in 7 years and US assets maintain their potential for reasonable appreciation.

Central Bank Balance Sheet Expansion to Continue Modestly

In the wake of the 2008 Financial Crisis, the response of the central banks was to purchase distressed debt by “expanding their balance sheets” with the benefit of adding fresh liquidity to the market. This liquidity, called quantitative easing (QE), helped to heal the financial system and encouraged the purchase of both real and financial assets. The Fed embarked on 3 distinct quantitative easing programs; each time that the Fed announced and implemented a program, equities, bonds and other risk assets traded well. Six years on, with the US economy showing improved signs of growth, the Fed has halted its balance sheet expansion with the ending of its third round of quantitative easing QE3, the purchase of long-dated US Treasurys and mortgage backed securities. Concerns have been expressed that the lack of additional liquidity will have a significant impact on the financial markets.image of chart 2

While the Fed does not intend to further expand its balance sheet, it does not intend to contract it significantly over the near term – that is, the liquidity that it has added will remain in the system as the proceeds of maturing bonds are reinvested in similar securities. And while the Fed and the Bank of England (BoE) have halted their expansions, the Bank of Japan (BoJ) and the People’s Bank of China (PBoC) continue theirs. The European Central Bank (ECB), to counter the deflationary concerns of its languishing economy, is preparing a quantitative easing program of its own, likely to be implemented in early 2015. Hence, on a global basis, the central banks are still active with expanding their balance sheets.

Implications of overall global balance sheet expansion:

  • Worldwide financial markets are likely to continue to be supported by the liquidity being added to the system.
  • Overseas equity markets may end their relative underperformance versus the US as their respective central banks become more aggressive with their own quantitative easing (e.g., the Bank of Japan buying Japanese equities.)
  • Bond yields are likely to remain at low levels as the liquidity from quantitative easing seeks a home and inflation is not yet a concern.
  • The US Dollar is likely to benefit from both higher anticipated US interest rates and the flow of international funds as Europe and Japan buy US assets.

BOTTOM LINE: Global financial assets will likely remain attractive as other countries’ qualitative easing programs replace the Federal Reserve’s stimulus. Based on each individual’s long term goals and risk tolerance, an allocation to international equities and bonds might be appropriate. In those instances, we believe currency hedged instruments are worth a closer look as they can provide the international exposure while reducing the effects of a strengthening Dollar.

Fed rate hike to pressure equities?

While history doesn’t repeat itself but often rhymes, recent experience suggests that the immediate reaction to the first Fed hike of the cycle is a mild short-term equity correction. Looking at the preceding three Fed hiking cycles, this correction has been followed by a relatively quick recovery and subsequent additional gains as the market digests the official higher rates and corporations continue to benefit from increasing revenue growth.image of chart 3

While we don’t think the market will follow this script exactly, it does offer some insight as to how the market may behave once the Fed takes the first step.

Bottom line: Increased market volatility, price corrections and consolidations should be anticipated as the Fed moves from its zero interest rate policy approach towards “normalization.”

image of chart 4

Oil Price Drop: The Good, The Bad, and The Ugly

The Good

  • Headline inflation should dampen in the developed and emerging world keeping prices low for consumers
  • Oil-importing countries should benefit as lower input costs allows them to more competitively price their exports.
  • Low gas prices will leave more money in the consumers pockets. This could motivate consumers to increase discretionary spending.

The Bad and The Ugly

While we all have been enjoying the lower prices at the pump, there are some downside consequences to lower oil prices:

  • The energy sector accounted for approximately 424,000 new, well-paying jobs over the past four years. Increased layoffs in the energy sector are likely to take the luster off the monthly US jobs reports.
  • The high yield (junk bond) market has been the funding mechanism for many energy projects which will likely be unprofitable at current oil prices. This increased default risk has hit the high yield and MLP markets.
  • Innovation will be delayed. The incentive to invest and develop renewable energy sources is reduced while efforts towards improved efficiencies are abandoned.
    Projections of the US becoming energy sufficient may be too optimistic as domestic off-shore wells and fracking projects are shutdown at considerable expense.
  • Geopolitical strains are likely to increase as the producers (Saudi Arabia, Russia, Iran, Iraq) — with the reduced oil revenues — may face domestic turmoil which could lead to political upheavals. It would also take some time to see if the Saudi’s intention of driving high-cost producers out of the market is effective.image of chart 5

BOTTOM LINE: While we will never be so bold to predict a bottom in the oil market, we will look for tactical opportunities to add to allocations in the sector through individual names, high yield bonds and MLP (Master Limited Partnership) investments.

Important Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group. [“PWM”] ), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from PWM. Please remember to contact PWM in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. PWM is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the PWM current written disclosure statement discussing our advisory services and fees is available for review upon request. Photo Credit: 

 

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Did the Devil Make You Do It? http://www.pwm-nj.com/knowledge/investment/did-the-devil-make-you-do-it http://www.pwm-nj.com/knowledge/investment/did-the-devil-make-you-do-it#comments Mon, 05 Jan 2015 14:00:13 +0000 http://www.pwm-nj.com/?p=10026 more]]> hands-holding

8 Retirement Miscues

We’re all human, and we all make mistakes. Yet some errors are worse than others, and it’s important to try to avoid the kinds of miscues that could derail your retirement.

What sort of mistakes? Of course, these will vary from person to person, but here are eight common foul-ups that often bedevil soon-to-be retirees:

Mistake #1 – You have no financial plan for retirement.
Although your plan doesn’t have to be carved in stone – and in fact it needs to be flexible – it at least should provide some basic guidelines for your future. A bare-bones plan will look at your potential sources of retirement income and approximate what you can expect to spend – and rough estimates are better than no estimates at all. Figuring out what it may take to live comfortably during retirement is the first step toward getting there.

Mistake #2 – You have too much debt.
Perhaps nothing can be more damaging to successful retirement than crushing debt. Avoiding high-interest-rate credit card charges can help you head off the problem. If you spend within your means and borrow judiciously you’ll be able to save more for retirement and won’t be burdened by the need to pay off compounding debt.

Mistake #3 – You sacrifice retirement planning for education planning.
Saving money for your children’s college education is obviously a lofty and worthwhile goal, and starting early can help ease your financial burden when tuition bills come due. But you may not want to make education saving your primary financial priority. Often, parents are able to help pay college bills while still putting away money for retirement, and your kids can help by taking low-interest loans to cover part of their costs.

Mistake #4 – You don’t keep an emergency fund.
Even if you’ve been diligent about saving for retirement, remember to expect the unexpected. You might lose your job or face another financial or medical emergency, and having a cash cushion to fall back on can help you avoid dipping into retirement funds – an option that could have short- and long-term tax and financial consequences. The usual rule of thumb is to try to set aside at least six months worth of salary in a rainy day fund.

Mistake #5 – You don’t have a long-term investment strategy.
You’re likely to fare better if you establish a long-range investment plan for retirement rather than trying to boost your portfolio by chasing hot stocks. Time-tested principles such as asset allocation and diversification can help you make steady progress toward your goals, whereas playing investment hunches is likely to produce more losers than winners. And taking a smart, deliberate approach is as important for investing the assets in tax-sheltered retirement plans, such as 401(k)s and IRAs, as it is for taxable accounts.

Mistake #6 – You underestimate health-care costs.
As people live longer and longer – and as growth in health-care costs continues to outpace overall inflation – you’ll need to allocate a healthy portion of your savings to personal care. Often, health insurance plans and Medicare will cover much less than you’ve counted on and you’ll need to use your savings to make up the difference. What’s more, an extended stay in a nursing home could destroy your retirement nest egg. Consider buying long-term-care insurance to help ward off future disasters.

Mistake #7 – You don’t factor in taxes.
People often disregard the impact that federal and state taxes can have on their retirement savings. For instance, if you’ve been accumulating funds in a 401(k) plan and traditional IRAs, when you withdraw money from those accounts to pay your retirement expenses those distributions normally will be taxed at ordinary income rates. In addition, whether you want to or not, you’ll have to start taking money from those accounts after you turn age 70½. Your long-term plan for retirement needs to take these taxes into account.

Mistake #8 – You count too heavily on Social Security benefits.
After you’ve paid into the Social Security system during your working career, it’s only fair that you reap the benefits. But those monthly payments usually aren’t enough to live on comfortably, not by a long shot. It’s important to view Social Security as only a supplement to other sources of retirement income – from your investments, company retirement plans, and IRAs.

Making any of these mistakes could cause trouble when it’s time to retire. But if you know what to look out for you may be able to avoid problems – and the best time to start fixing things is now.

Please note that various factors such as changes in tax laws, inflation, and the uncertainty of social security can have a significant impact on the results of the study discussed in this section.This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. ©2012 Advisor Products Inc. All Rights Reserved. Photo Credit: debowscyfoto

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A Disciplined Approach to Investing and Why it Works http://www.pwm-nj.com/knowledge/investment/timing-the-market http://www.pwm-nj.com/knowledge/investment/timing-the-market#comments Wed, 17 Dec 2014 14:00:43 +0000 http://www.pwm-nj.com/?p=9999 more]]> watch

| Featured Author: Laura Ferguson |

Time in’ the Market vs. ‘Timing the Market’

The verdict is in. ‘Time in’ the market is more efficient at building wealth than ‘timing the market’. Investors do not like to lose money. Not ever. We all have an emotional attachment to wealth. We worked hard for it so who could blame us? With that in mind, if someone told you market timing was the best defensive strategy, we would beg to differ. Timing the market is difficult and based on predictions. The problem with predictions is that none of us truly know what will happen tomorrow. And each buy or sell will require a future sell or buy making market timing nearly impossible. By timing the market, you are more likely to miss an opportunity to then capitalize on market volatility.Photo of Laura Carcich

Investors tend to allow emotions to drive many of their investment decisions. Therein lies the main culprit for drastic changes in a portfolio when patience will generally provide the best long term outcome. “Corrections are part and parcel of the investment process, they come and go, and it is imperative to take a deep breath and realize that what is most important for building wealth is not ‘timing’ the market but rather ‘time in’ the market,” David Rosenberg, chief economist and strategist at Gluskin Sheff, said on October 14.

The key is to have a plan and stick with it.

We believe it is beneficial for clients to stay invested. Trying to time the market is extremely difficult to do consistently. Market lows often result in emotional decision making. Investing for the long-term while managing volatility can result in a better outcome.

As the chart below illustrates, a $10,000 investment made December 31, 1993 grew to $58,332 for the investor that remained invested at all times, and to $29,111 for someone attempting to time the market, and missing the top 10 days over a 20-year period. This represents a reduction in average annual returns from 9.2% to 5.5%!

markets-chart-of-the-day

On October 28th Barrons published an article, “The Timeless Allure of Stock Market Timing.” The article denotes the use of market timing as an unpredictable method to manage a portfolio. More importantly, the article highlights the use of asset allocation and other contributing factors, such as lifestyle circumstances, as the best method to methodically manage a diversified portfolio. By building out the portfolio with long term goals in mind, investors are better prepared to endure the market volatility. By focusing on your long term goals, time horizon and risk tolerance during the most volatile times, you more effectively protect your future wealth. You cannot avoid the market swings, but staying invested offers a greater chance you will not miss the best days in the market.

The allure of possibly missing the “ten worst days” of the market will encourage many investors to attempt to time the market. From our experience, an individual investor is more likely to harm then help themselves while attempting to time the market. Therefore, we continue to support a disciplined approach to investing while focusing on your long term goals, time horizon and risk tolerance.

For educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Broadridge Investor Communication Solutions, Inc. Copyright 2013.Photo Credit: SplitShire

 

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Inflation Can Vary by Category http://www.pwm-nj.com/knowledge/investment/inflation-can-vary-by-category http://www.pwm-nj.com/knowledge/investment/inflation-can-vary-by-category#comments Tue, 16 Dec 2014 13:53:57 +0000 http://www.pwm-nj.com/?p=9995 more]]> image of a hot air balloon - LFitts

Keep Inflation in Mind When Planning Your Investment Goals

The general inflation number (the “All items” category) may be a good measure for the economy at large, but the cost of certain goods and services could rise much faster than the average cost of living.

For the past year, tuition, food, housing, and medical care have all experienced much higher inflation rates than the headline number. Gasoline prices, on the other hand, have been declining and are now near four-year lows.

People who need to focus on savings for college or medical care may be left short, as the cost for such items often tends to rise at a faster rate than the average cost of living. Those investors might not be able to keep pace with rising costs if they do not take their real inflation rate into account when planning their investment goals.

This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. ©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/or the content providers; (3) is not warranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor the content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. “Morningstar” and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar Market Commentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Photo Credit:  LFitts

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Want to Donate but Don’t Want the Hassle? Consider a Donor Advised Fund http://www.pwm-nj.com/knowledge/investment/donate-daf http://www.pwm-nj.com/knowledge/investment/donate-daf#comments Tue, 18 Nov 2014 14:00:58 +0000 http://www.pwm-nj.com/?p=9970 more]]> image of seagulls

| Featured Author: Alyssa Monush |

An Easier Way to Donate to Your Favorite Charities

A donor-advised fund (DAF) is a philanthropic account established through a public charity. It offers you an easy way to make charitable gifts over an extended period of time while receiving an immediate tax benefit. A donor-advised fund is much like a charitable savings account where you can contribute as much as you want, when you want with the ability to make ongoing recommendations regarding charitable grants.

When you contribute to a donor-advised fund, you are making an irrevocable image of Alyssa Monushcontribution that must be used exclusively for charitable purposes. You receive an immediate tax deduction and can recommend grants to your favorite charities at any time. A donor-advised fund also creates a perfect opportunity to pass down charitable values to future generations.

Under current tax laws (2014), donor-advised fund participants can take a federal income deduction up to 50% of adjusted gross income for cash contributions and up to 30% of adjusted gross income for appreciated securities.* Furthermore, by contributing appreciated securities with unrealized capital gains, you can avoid capital gains taxes on the sale of the securities and use that money to increase your donation. Plus, any additional investment growth in your donor-advised fund is tax-free, and you can take your time choosing the charities you want to support.

 

daf flow chart

 

 

A donor-advised fund is similar to a private foundation but requires less money, time, legal assistance, and administration to establish and maintain. Because donor-advised funds are public charities, they also enjoy greater tax advantages than private foundations and allow for greater privacy of your personal information.
Setting up a donor-advised fund is a cost effective way for you to receive tax benefits while supporting your favorite charities.

  • Some advantages to having a DAF:
    • Low contribution minimums
    • Easier and less costly to set up and maintain than private foundations
    • Donors may receive immediate income tax deductions
    • Can reduce or eliminate capital gains and estate taxes
    • No excise tax or payout requirements
    • Donations can be personalized or donors can give anonymously
    • Accounts may be transferable to the next generation
  • Contributions to DAF are not limited to cash and publicly traded securities. On a case by case basis, it could receive other appreciated assets such as privately held and restricted stock, real estate, collectibles to name a few:
    • Restricted and controlled stock
    • Privately-held stock
    • Real estate
    • Proceeds from life insurance or from a full-paid policy
    • Private foundation grants or terminations
    • Bequests
    • Named beneficiary of charitable remainder trust
    • Named beneficiary of an IRA, 401(k), or other retirement account
    • Tangible personal property

Interested in setting up a Donor-Advised Fund? Give us a call today at 732-450-0147.

For further insight into donor-advised funds, check out the posts listed below from Charitable-nation.com:

* Tax deductibility limits are different by asset type. Contributions that exceed AGI limitations may be carried forward and deducted for five years. Your ability to claim itemized deductions may be subject to further limitations depending upon your specific tax situation. Please consult your tax advisor. Keep in mind tax law is subject to change.
For educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Broadridge Investor Communication Solutions, Inc. Copyright 2013.Photo Credit: Andre_Rau

 

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Investment Outlook – Third Quarter in Review (Fall 2014) http://www.pwm-nj.com/knowledge/quarterly/q3-2014 http://www.pwm-nj.com/knowledge/quarterly/q3-2014#comments Wed, 29 Oct 2014 13:09:34 +0000 http://www.pwm-nj.com/?p=9944 more]]> image of mountains

The Quarter in Review

Global equity markets showed increasing signs of fatigue as a result of the ongoing geopolitical headwinds, concerns about global growth and the burgeoning Ebola situation. For the quarter, the S&P 500 advanced 1.1% while the FTSE All World ex US Index lost 5.1%.

Domestic fixed income, as measured by the Barclays US Aggregate Fixed Income Index, continued its positive performance, gaining 0.17% for the period.

U.S. Economy

U.S. Economic data released at the end of the quarter was mostly positive. The final revision for second quarter Gross Domestic Product (GDP) showed a healthy 4.6% annual rate of growth, revised upwards from a previous read of 4.2%. While the economy appears to be heading in the right direction, the current expansionary period (2010-2014) has only averaged 2.2% a year, well below the 50 year average GDP growth rate of 3% (see “Real GDP” chart below). Business spending, or the lack there of, is a contributing factor to our current slow growth environment (see “Corporate Cash as a % of Current Assets” chart on the following page). As confidence in the business climate improves however, anticipated capital expenditures should rise as companies start to replace depreciating equipment and spend down some of the high cash balances on their books. The eventual realization of this deferred spending will likely help towards pushing GDP growth closer to its historical average.image of real gdp

The September jobs report, reflecting the creation of 248,000 new jobs, was another indication the economy is headed in the right direction, albeit at a slower than desired pace. The unemployment rate for September dropped to 5.9% for the first time since July 2008. Although we are encouraged by these numbers, the decrease in the labor force participation rate to 62.7%, a 36 year low, and lackluster wage growth should not be ignored. We attribute some of the drop in the labor force participation to structural factors. The main structural factor affecting the labor force participation is demographics, as baby boomers enter retirement permanently leaving the labor force. Unusual growth in disability benefits could also be a distorting factor within the labor force participation dynamics, as workers permanently collecting disability insurance have little incentives to return to the labor force. Over the long run, these dislocations need to be addressed, as labor growth and wage increases are an important component to long term growth and prosperity.

Another important trend witnessed in the third quarter was a strengthening dollar (see “US Dollar Index” chart on the following page). A strong dollar has both positive and negative implications:

On one hand, it should help keep inflation in check as foreign imports become more competitively priced versus items manufactured in the US, thus helping foreign exporters. A strong dollar also drives down dollar-denominated commodities such as oil, which means additional savings for the US consumer in the form of lower gasoline prices and higher disposable income. This disinflationary effect could reduce some of the pressure for the Federal Reserve to raise rates sooner.

image of corporate cash

On the other hand, a higher greenback could negatively impact the value of foreign earnings to U.S. multinational companies and also hurt US exporters. As the third quarter earnings season progresses, we will be able to better gauge how this currency translation issue impacts corporate profitability for multinational companies, as well as its effects on domestic exporters. The recently released Fed minutes indicate concerns about global growth and the economic impacts of a stronger dollar. This represents a meaningful development in the Fed’s running debate about when to raise short term interest rates from near zero.

International

The turbulent quarter was characterized with a continuation of the ongoing crisis in geopolitical hotspots (Ukraine & Russia, Hamas & Gaza, Iraq & ISIS), civil unrest around the globe and a vote for independence. In China, a group of pro- democracy students took to the streets of Hong Kong demanding public nomination for Hong Kong chief executive, the city’s top post. In Scotland, voters took to the polls to vote on a referendum to decide whether Scotland should remain part of the United Kingdom. The outcome of the referendum was that Scotland was to remain part of the U.K, alleviating a whole set of unknowns related to the potential break up. On top of the previously mentioned civil and military conflicts, Western Africa is battling an Ebola outbreak that, according to the World Health Organization (WHO), has already killed over 4,000 people mainly in Liberia, Sierra Leone and Guinea.image of US Dollar Index

A string of weak economic data has increased concerns that the Eurozone’s recovery could be losing steam. Germany, Europe’s biggest economy, has shown increasing signs of a slowdown. A drop in German exports came after poor readings for manufacturing orders and factory output in the country. To stimulate growth and battle falling inflation concerns, the European Central Bank is embarking on a series of measures, on top of interest rate cuts, intended to spur bank lending. European Central Bank president Mario Draghi stated: “We are accountable to the European people for delivering price stability, which today means lifting inflation from its excessively low levels. And we will do exactly that.” He also added “We are ready to alter the size and/or the composition of our unconventional interventions, and therefore, of our balance sheet, as required.” During his speech, Mario Draghi also stated that the ECB’s easy money policies would have limited effects without structural economic overhauls in Europe: “I am uncertain there will be very good times ahead if we do not reform now,” he said, adding those that are able should “exploit the available fiscal space” in European Union rules. As we have indicated previously, we believe the European countries should continue taking steps towards a more fiscally integrated European Union.

A Look Ahead

The wall of worry seems to be getting taller as the year progresses. The geopolitical issues do not seem to abate; the Ebola virus continues to wreak havoc in Western Africa & concerns about global economic growth are on the rise. In the US, uncertainty surrounding the timing of the first rate hike by the Federal Reserve, coupled with the fact that we are in the heels of a midterm election have dented investor confidence and increased volatility. Market valuations have increased and the U.S stock market has not had a 10% correction since March 2009.

Even though global fears have increased we do not want to lose sight of the longer term picture. The United States economy is improving and the Federal Reserve is paying close attention to the effects of weaker global growth and a stronger dollar before making changes to their monetary stance. The ECB and Japanese Central Bank are increasing their monetary easing actions; which should help pick up the slack from the removal of the Fed’s policies when the time comes.

While market volatility has escalated, we do not deem market timing as a reliable strategy. A Charles Schwab study using Standard and Poor’s data shows that between 1994-2013, missing the top ten up days in the market would have resulted in a reduction in average annual returns from 9.2% to 5.5% per year*. Fear, greed and the short term movements of the market should not drive investment decisions. Rather, we continue to advocate a disciplined approach to investing that is consistent with your long term goals, time horizon and risk tolerance.

DEFINITIONS:

EBOLA: A rare and deadly disease caused by infection with one of the Ebola virus strains. Ebola can cause disease in humans and nonhuman primates (monkeys, gorillas, and chimpanzees).Ebola was first discovered in 1976 near the Ebola River. Since then, outbreaks have appeared sporadically in Africa. On the basis of evidence and the nature of similar viruses, researchers believe that the virus is animal-borne and that bats are the most likely reservoir. (cdc.gov)

CAPEX: Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. This type of outlay is made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building a brand new factory. (investopedia)

NET EXPORTS: The value of a country’s total exports minus the value of its total imports. It is used to calculate a country’s aggregate expenditures, or GDP, in an open economy.(investopedia)

DEPRECIATION: A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes. (investopedia)

LABOR FORCE PARTICIPATION: A measure of the active portion of an economy’s labor force. The participation rate refers to the number of people who are either employed or are actively looking for work. The number of people who are no longer actively searching for work would not be included in the participation rate. During an economic recession, many workers often get discouraged and stop looking for employment, as a result, the participation rate decreases. (investopedia)

MARKET TIMING: The act of attempting to predict the future direction of the market, typically through the use of technical indicators or economic data. (investopedia)

Important Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group. [“PWM”] ), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from PWM. Please remember to contact PWM in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. PWM is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the PWM current written disclosure statement discussing our advisory services and fees is available for review upon request. Photo Credit:FrankWinkler

 

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Do You Know The Basics Of 401(k) Retirement Plans? http://www.pwm-nj.com/knowledge/investment/401k-retirement-plans http://www.pwm-nj.com/knowledge/investment/401k-retirement-plans#comments Tue, 28 Oct 2014 13:00:31 +0000 http://www.pwm-nj.com/?p=9325 more]]> image of a flower

How much do you know about your 401(k) plan?

Often, even though employer-sponsored retirement plans may make up the bulk of employees’ retirement savings, participants understand less than they need to about how this savings vehicle works. Here’s a primer covering 10 crucial facts:

1. You benefit from tax-favored treatment. For starters, contributions to your account are made on a pre-tax basis. For example, if you earn $100,000 a year and elect to defer $10,000 to the plan, you’re taxed on only $90,000. What’s more, the money you’ve contributed will grow, without taxes, inside the plan until you withdraw it.

2. There’s an annual limit on how much you can contribute. The normal ceiling, adjusted each year for inflation, remains $17,500 for 2014. Plus, you can sock away an extra $5,500 a year (also adjusted for inflation) if you’re age 50 or older. That adds up to as much as $23,000 for 2014. However, other tax law limits could affect your overall contribution.

3. Your employer may choose to match part of your contribution. Obviously, you’re reducing your take-home pay when you defer part of your salary, but companies often help offset that deduction. You might get a matching contribution with your employer kicking in, say, 50 cents for each dollar you put in for up to 6% of your pay. If you earn $100,000 and contribute $10,000 annually, that could add an extra $3,000 to your account each year (half of the first 6% of salary that you contribute).

4. Participation may be automatic. Increasingly, employers use an automatic enrollment feature that adds you to its 401(k) plan unless you opt not to participate. That encourages you to save for retirement and helps companies avoid penalties that may be applied if too few lower-paid employees sign up. The initial default-deferred amount might be 3% of your salary, and some companies now add an “escalator clause” that automatically increases later deferrals.

 Interested in a 401(k) plan for your company? Contact Carmine D’Avino today. »

5. You have a wide array of investment choices. How should you invest the funds in your 401(k)? You’ll normally be able to choose from among a dozen or more standard options that may include several “target date” mutual funds, which adjust their allocations as you get nearer to retirement. If you don’t make your own selections, a default option may be triggered.

6. You’re penalized if you take out money early. You’ll generally have to pay a 10% penalty on withdrawals you make prior to age 59½, unless a special tax law exception applies. That’s in addition to the regular income tax that applies to all withdrawals.

7. You’re penalized if you take out money too late. You must begin taking “required minimum distributions” (RMDs) from your 401(k), based on life expectancy tables, in the year after the year in which you turn age 70½. The penalty for not doing that is stiff—50% of the amount you should have taken. But you may be able to postpone RMDs if you’re still working full-time and you own less than 5% of your employer.

8. You may be able to “Rothify.” Some company plans now offer the opportunity to use a Roth 401(k). Just as with a Roth IRA, you make contributions on an after-tax basis, but withdrawals during retirement normally won’t be taxed. At companies that offer this option, you can divide your contribution between regular and Roth accounts as you choose.

9. You have several options when you leave the company. When you leave your job, you can take a lump-sum payout from your account—which will trigger income tax and a penalty if you’re under 59½—leave the money where it is, or roll it over to another company’s plan or to an IRA. With a rollover, you won’t owe any tax as long as the transfer is completed within 60 days of leaving. To avoid 10% withholding, make a trustee-to-trustee rollover.

10. You’ll owe fees that may vary widely from plan to plan. If your 401(k) charges high administrative or investment management fees, those could siphon off a significant portion of your investment earnings. The lower the “expense ratio” of the mutual funds you select, the less you’ll pay in fees. Index funds that passively track market benchmarks can be especially inexpensive.

Make sure you have all of the information you need to make smart choices about your account.

 

Please note that various factors such as changes in tax laws, inflation, and the uncertainty of social security can have a significant impact on the results of the study discussed in this section.This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. ©2012 Advisor Products Inc. All Rights Reserved. Photo Credit: @Doug88888

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The Encouraging Trend in Corporate Responsibility http://www.pwm-nj.com/knowledge/investment/corporate-responsibility http://www.pwm-nj.com/knowledge/investment/corporate-responsibility#comments Wed, 22 Oct 2014 12:44:31 +0000 http://www.pwm-nj.com/?p=9933 more]]> image of fingers touching

|Featured Author: Monica Jalife|

Responsible Culture & Supply Chain

Photo of Monica Jalife, CFA, MBA

Monica Jalife

Last week I attended the “COMMIT! To A Responsible Culture & Supply Chain” conference in New York City. This year’s conference, organized by Corporate Responsibility magazine, focused on the people aspect of corporate responsibility, namely employees and other stakeholders. It contained tracks related to sustainability of the workforce and programs to promote literacy, education & employee engagement, as well as voluntarism and community and employee well-being. The second main theme revolved around procurement and supply chain related issues. We heard from a panel of CEOs about what they are doing to drive the vision of corporate responsibility throughout their organizations, and also from Chief Human Resources officers as to the challenges and opportunities within this area. Over 500 companies were in attendance and it was very encouraging to see so many corporate leaders in a room discussing their current initiatives and the need to continue moving forward and engaging employees, partners and the communities in which they operate.

My key takeaways:
A diverse, conscious & connected workforce is critical not only to a company’s business strategy, but also the biggest driver of successful, authentic engagement within the community. I learned about programs companies such as Fidelity and John Hancock have developed to motivate their employees while addressing some of the most pressing educational challenges in the regions in which they conduct business. The common denominator in many of these engagement programs is that businesses, non-profits and employees of all backgrounds need to collaborate to address community challenges.

Philanthropy is evolving. The landscape is shifting towards a new model of collaboration. IBM discussed how it partnered with 850 nonprofits, small businesses and government agencies in some of the world’s most remote regions to provide $65 million in pro bono services. Several of these partnerships yielded valuable insights into new markets and led to assignments that are now increasing access to education, healthcare and ultimately, generating jobs. A panel including members from the Rockefeller Foundation, Social Finance and Center for Employment Opportunities (CEO) discussed a new model for funding social change in which public, private and non-profit sectors worked together to achieve social outcomes through a pay for success program.

At PWM we believe that positive financial performance and corporate responsibility are not mutually exclusive and we were happy to confirm many companies operate within those beliefs. Even more encouraging is the fact that awareness in the field of sustainability seems to be growing every day. It is our belief that companies can Do Good and Do Well and we hope to see more and more corporate leaders embrace this idea. On our end, we remain committed and involved with our community. We recently established a Donor Advised Fund and continue to support charities within our community.

 

Important Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group. [“PWM”] ), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from PWM. Please remember to contact PWM in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. PWM is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the PWM current written disclosure statement discussing our advisory services and fees is available for review upon request. Photo Credit: PublicDomainImages

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]]> http://www.pwm-nj.com/knowledge/investment/corporate-responsibility/feed 0 Get a Tax-Smart Plan for In-Retirement Withdrawals http://www.pwm-nj.com/knowledge/investment/tax-smart-plan http://www.pwm-nj.com/knowledge/investment/tax-smart-plan#comments Wed, 08 Oct 2014 13:00:11 +0000 http://www.pwm-nj.com/?p=9922 more]]> image of snack stand on beach

Tax-Smart Planning

The following sequence may make sense for retirees to preserve the tax-saving benefits of tax-sheltered investments for as long as possible.

1) For retirees over age 70 1/2, the first stop for withdrawals are those accounts that carry required minimum distributions, or RMDs, such as Traditional IRAs and company retirement plans such as 401(k)s (to avoid paying penalties).

2) For retirees who are not required to take RMDs or have taken their RMDs and still need cash, turning to taxable assets may be an option. A good start may be selling assets with the highest cost basis first and then moving on to those assets where cost basis is lower (and the tax hit higher). Relative to tax-deferred or tax-free assets, these assets have the highest costs associated with them. However, taxable assets could also be valuable to tap in later retirement years because retirees will pay taxes on withdrawals at their capital gains rate, which is generally lower than the ordinary income tax rate.

3) Finally, after taking RMDs or tapping taxable assets, retirees still in need of cash may want to further tap company retirement-plan accounts and IRAs (Roth IRA assets last.)

401(k) and IRA plans are long-term retirement-savings vehicles. Withdrawal of pretax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Direct contributions to a Roth IRA are not tax-deductible but may be withdrawn free of tax at any time. Earnings may be withdrawn tax and penalty free after a 5 year holding period if the age of 59 1/2 (or other qualifying condition) is met. Otherwise, a 10% federal tax penalty may apply. Please consult with a financial or tax professional for advice specific to your situation.

 

This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by PWM Advisory Group, LLC [“PWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from PWM. PWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the PWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. ©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/or the content providers; (3) is not warranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor the content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. “Morningstar” and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar Market Commentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. Photo Credit: Greyerbaby

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