January 2022

Greetings!

Happy New Year!

The past year was tough in the markets, leaving some investors anxious about their finances. On this one-year anniversary of the S&P 500 hitting its all-time closing high, many investors are contemplating what such market volatility means for their investment strategies. 
 
One way to look at turbulent 2022 is as a cleansing of exuberance from the financial system. Yes, it’s been painful, but from this rubble, we are reestablishing a sense of normalcy in the financial system. Despite gloomy predictions regarding the economy and the markets in 2023, I want to share a more positive tone and reasons for some optimism in the articles below.
 
Borrowing the words from Donna Ashworth’s poem: when I say ‘happy new year,’ I’m wishing you a baseline of peace and gratitude; I’m hoping you will experience many more joys than sorrows, more laughter than tears and the wisdom to accept that happiness must come and go, like the tides and the winds, just as sadness, and all emotions in-between. 

Happy New Year!
DO DOWNTURNS LEAD TO DOWN YEARS?
A broad US market index had positive returns in 17 of the past 20 calendar years, despite some notable dips in many of those years. There is not a single year when the market was always positive. Most years still end up positive, and even though some end up negative, we believe you are better off staying invested rather than panicking because of a drop.

MARKET RETURNS THROUGH A CENTURY OF RECESSIONS
The potential for a recession captured the minds of financial professionals and investors alike in 2022 and continues to be a hot topic going into the new year. This interactive chart emphasizes the forward-looking nature of markets as it examines how stocks behaved during the US economic downturn. Ultimately, the piece shows that markets worldwide often reward investors even when economic activity has slowed. 

The exhibit also captures the uniqueness of recessions. Each one looks different. There is no cookie-cutter recession nor absolute signal of when to get in or out of the market. 

WHEN BAD THINGS HAPPEN TO GOOD STOCKS
After more than a decade of underperforming growth stocks, value stocks bounced back over the past couple of years. The investors who could balance their enthusiasm for higher expected returns with their tolerance for underperformance are reaping the rewards. Value investing is based on the premise that paying less for future cash flows is associated with a higher expected return. That’s one of the fundamental tenets of investing. Combined with lengthy historical data on the value premium, our research shows that value investing continues to be a reliable way for investors to increase expected returns.

THREE ACTIONS YOU CAN TAKE IN 2023 TO LOWER 2022'S TAX LIABILITY
Even though 2022 is in the rearview mirror, you can still act now to lower last year’s tax liability. Here are three strategies you can implement now to save money on last year’s returns. 
 
  • Action #1: Make your annual retirement account contributions in 2023 for the 2022 tax year.  
  • For IRAs, Roth IRAs, and similar accounts, you have until April 15, 2023, to do so. 
  • If you’re a business owner making contributions in a SEP IRA, a simple IRA or 401k profit-sharing plan, you can make those payments up to the tax filing deadline as late as October 15, 2023. 
  • Action #2: Make HSA contributions before the April 15, 2023 deadline.  
  • This works similarly to IRA contributions to reduce your income from the prior year. 
  • In order to contribute, you have to have been enrolled in a high-deductible HSA plan in 2022. 
  • Action #3: Make special elections on your tax return  
  • Talk to your financial advisor or a CPA to get their thoughts on what elections could be of benefit, especially if you are a business owner. 
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