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The Economy

The War on Oil Prices

As with any major global conflict, we learn things. The pandemic taught the U.S. the importance of reshoring manufacturing jobs, so we aren’t beholden to other nations, like China, for many of our consumer goods, from medicines to electronics.1

One of the key lessons emerging from the Russia-Ukraine conflict is self-reliance for energy sources, such as oil and gas. Fortunately, the U.S. is the top oil-producing country, accounting for 20% of the world’s supply.And yet, although we are not reliant on Russia for our oil supply, crude oil prices — even here in the U.S. — are determined by global fundamentals.3

In fact, OPEC (the Organization of the Petroleum Exporting Countries), an intergovernmental organization of 13 countries that represents the largest combined suppliers of oil globally, uses supply quotas (the decision to increase or decrease oil reserves) in order to control long-term prices. Since the process from increasing production to refinement to delivery can take up to six months, today’s prices are generally determined from decisions made last fall.4

Market forces such as supply and demand, inventory, seasonality, natural and man-made disasters, financial market considerations and expectations all play a hand in the rise and fall of oil prices. It is worth noting, too, that only about 60% of the price of a gallon of gas is determined by crude oil prices; refining costs represent 14%, distribution and marketing costs account for 11%, and federal and state taxes represent about 14%.5

With that said, Russia’s invasion of Ukraine has sparked legitimate fears over the loss of oil supply worldwide. Emotions and expectations, much like they affect the stock market, can lead to higher prices. There is good news for investors, however. Although oil prices were trading near a seven-year high in January, the war in Europe, embargoes and the ongoing pandemic could lead energy stock prices to increase further.6 We advise investors to speak with their financial professional before making any significant moves, because it is important to maintain an asset allocation strategy designed to achieve long-term goals, not just short-term gains.

On the flip side of the energy coin, the Ukraine conflict has increased interest, both in the U.S. and throughout the world, in renewable energy sources to cut gas dependence. Even though the U.S. is relatively oil-independent, based on shale production, the Energy Information Administration (EIA) predicts that our crude oil production will peak sometime between 2030 and 2035.7

The European Union (EU), which currently relies on Russia for 40% of its gas, recently established a plan to cut reliance on Russian oil by two-thirds within one year. Initially, more gas will be sourced from the U.S. and Africa. But longer term, the EU is stepping up its investments in renewable energy sources, biogas (a mixture of gases produced from agricultural waste, manure, municipal waste, plant material, sewage, green waste and food waste), and hydrogen. The goal is for Europe to no longer have to rely on Russian fossil fuels by 2030.8

David Payne. Kiplinger. March 26, 2020. “10 Products in Short Supply Due to the Coronavirus.” https://www.kiplinger.com/slideshow/business/t062-s010-products-in-short-supply-due-to-the-coronavirus/index.html. Accessed March 8, 2022. U.S. Energy Information Administration. Dec. 8, 2021. “What countries are the top producers and consumers of oil?” https://www.eia.gov/tools/faqs/faq.php?id=709&t=6. Accessed March 8, 2022. American Petroleum Institute. March 2022. “Gas Prices Explained.” https://www.api.org/oil-and-natural-gas/energy-primers/gas-prices-explained. Accessed April 6, 2022.Natasha Turak. CNBC. Nov 4, 2021. “OPEC+ agrees to stick to oil production plan, defying U.S. pressure.” https://www.cnbc.com/2021/11/04/opec-agrees-to-stick-to-oil-production-plan-defying-us-pressure.html. Accessed March 8, 2022. American Petroleum Institute. March 2022. “Gas Prices Explained.” https://www.api.org/oil-and-natural-gas/energy-primers/gas-prices-explained. Accessed April 6, 2022. JJ Kinahan. TD Ameritrade. Jan. 27, 2022. “February Outlook: Stocks Are Seeing the Most Energy in Energy.” https://tickertape.tdameritrade.com/market-news/february-outlook-energy-18939. Accessed March 8, 2022. Rakesh Sharma. Investopedia. March 2, 2022. “OPEC vs. the US: Who Controls Oil Prices?” https://www.investopedia.com/articles/investing/081315/opec-vs-us-who-controls-oil-prices.asp. Accessed March 8, 2022. Matt McGrath. BBC. March 8, 2022. “Climate change: EU unveils plan to end reliance on Russian gas.” https://www.bbc.com/news/science-environment-60664799. Accessed March 8, 2022.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
 The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

 

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What’s Up with Inflation?

Inflation was already on the rise before we learned about the omicron variant. Now on top of supply-chain shortages and transportation disruptions, Federal Reserve Chairman Jerome Powell recently observed that a resurgence of COVID-19 cases could reduce the consumer-driven boom we’ve enjoyed for the past few months. Concerns about safety could result in more workers being sent back home to work and small businesses needing to cut back staff after the holidays, further slowing economic progress.1

To date, much of the blame for higher inflation has been attributed to supply disruption. In the past, when inflation reared its ugly head, the Fed could douse rising prices by reducing interest rates.2 Unfortunately, supply shortages and COVID-influenced employment rates are not easily resolved by adjusting interest rates.

Perhaps the greatest lesson we can learn from these trying times is that we can’t always rely on the government, employers or the stock market to resolve our financial troubles. The best we can do is create a plan based on our wants, needs and long- and short-term goals, and stick with it. That can be tough to do whenever the market drops on news of a newly identified variant or soars when a vaccine is announced. While these events may create opportunities, just remember that few people ever get rich by timing the market. If you’d like us to take a look at your financial plan and make recommendations to keep you positioned to meet your goals, please feel free to contact us.

Alas, it is important to recognize that rising inflation isn’t just a domestic issue; it’s happening all over the world. Countries in Eastern Europe are experiencing some of the highest inflation rates in recent years, and in many cases, people are struggling to buy food or fuel their cars. With another surge of infections during the winter season, we may see more countries close or tighten their borders, further hampering global economic recovery. As supply chains get cut off, we can expect higher inflation here in the U.S.3

There is also some debate as to whether companies are taking advantage of rising inflation to boost their profit margins. In fact, nearly two out of three of the largest U.S. corporations have reported higher profits this year than pre-pandemic. And yet, perhaps due to increased consolidation and the power that gives large companies to set prices, inflation continues to rise.4

In recent months, the Biden administration has attempted to address inflation through various means, from negotiating changes with ports and container companies, to improving government benefit programs, to launching investigations into price gouging. One tactic he has yet to implement is easing the current tariffs on goods imported from China, which Treasury Secretary Janet Yellen says could have a “disinflationary” effect.5

Thomas Franck. NBC News. Nov. 29, 2021. “Omicron variant means ‘increased uncertainty for inflation,’ Fed Chair Powell says.” https://www.nbcnews.com/business/economy/omicron-variant-means-increased-uncertainty-inflation-fed-chair-powell-rcna7004. Accessed Nov. 29, 2021. Kimberly Amadeo. The Balance. Nov. 11, 2021. “How the Federal Reserve Controls Inflation.” https://www.thebalance.com/what-is-being-done-to-control-inflation-3306095. Accessed Dec. 10, 2021. Justin Spike, Paul Wiseman and Vanessa Gera. AP News. Nov. 29, 2021. “Food, gas prices pinch families as inflation surges globally.” https://apnews.com/article/coronavirus-pandemic-lifestyle-health-business-poland-f559465c6a822d12b2dd513f122d5a31. Accessed Nov. 29, 2021. Dominick Reuter and Andy Kiersz. Business Insider. Nov. 16, 2021. “Corporations are using inflation as an excuse to raise prices and make fatter profits — and it’s making the problem worse.” https://www.businessinsider.com/corporations-using-inflation-as-excuse-to-reap-fatter-profits-reich-2021-11. Accessed Nov. 29, 2021. Reuters. Nov. 19, 2021. “Factbox: To battle inflation, Biden targets supply chains, gas, meat packers.” https://www.reuters.com/markets/commodities/battle-inflation-biden-targets-supply-chains-gas-meat-packers-2021-11-19/. Accessed Nov. 29, 2021.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. 
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America’s Seesaw Wealth

It is interesting to evaluate how various economic events throughout time affect different demographics. For example, the 2007-2009 Great Recession saw higher losses in male-oriented jobs, such as construction and manufacturing. The pandemic-induced recession of 2020 was quite the opposite, affecting women to such a degree that the event spawned the term “she-cession.”1

There is no question that the COVID-19 pandemic has had a tremendous effect on a wide variety of sectors, leading to millions of job losses. What is remarkable is that while some industries – such as travel, hospitality, entertainment, and restaurants – have been sorely affected, others have gone largely unscathed. In fact, the quick transition from in-office work to working from home enabled some companies – and households – to actually save money. Couple those savings with a quick stock market recovery and impressive performance since the initial onset of the pandemic, and many Americans have actually flourished during this difficult period.

Regardless of whether your household has experienced negative or positive effects during the past year and a half, the pandemic has driven home a very important lesson: Be prepared. For many, having a three, six or 12-month emergency savings fund has been crucial to saving them from plundering retirement portfolios. Many investors have an impressive investment portfolio but few liquid assets. This is important – we can help you discover ways to remain invested but position certain assets to access if necessary. Contact us to learn more.

On the privileged side of the spectrum, Boston Consulting Group reports that in 2020, financial wealth worldwide reached a record high of $250 trillion. One of the biggest areas of growth was lending among investment portfolio brokerages. In other words, individual investors borrowed against their portfolios to spend money. As their investments increased, so did their securities-based loans or lines of credit. Be aware that this can be a risky endeavor, and that these loans generally cannot be used to purchase additional securities.2

A recent study by the National Bureau of Economic Research (NBER) revealed that between 2001 and 2016, the top 1% of U.S. households increased wealth by 49%, from $7.7 million to $11.5 million. At the top of the wealth spectrum, 0.01% of wealthy Americans gained 40% of their wealth from corporate equity and another 29% from the pass-through businesses such as partnerships, limited liability companies, and sole proprietors.3

That report was reiterated by the Spectrum Group’s newly released Market Insights 2021 Report, which found that the number of U.S. households with $1 million to $5 million in net worth (not including the value of their primary residence) increased by 600,000 in 2020. The number of households with a net worth between $5 million and $25 million increased by 324,000. And yet, despite these impressive increases in net worth, that same survey found that 30% of investors are still concerned that they may need to delay retirement.4

On the other end of the scale, the NBER reports that between 2001 and 2016, average wealth for the bottom 90% of American households grew by only 17% (compared to 49% of the top 1%). Their wealth is largely driven by pension income (63%) and home equity (23%).3

Titan Alon, Matthias Doepke, Jane Olmstead-Rumsey and Michèle Tertilt. VoxEU. Sep. 22, 2020. “The shecession (she-recession) of 2020: Causes and consequences.” https://voxeu.org/article/shecession-she-recession-2020-causes-and-consequences. Accessed Oct. 22, 2021. 2 Elizabeth Dilts Marshall. Reuters. Oct. 8, 2021. “U.S. banks see wealth management boom on borrowing, new assets.” https://www.reuters.com/world/us/us-banks-see-wealth-management-boom-borrowing-new-assets-2021-10-15/. Accessed Oct. 18, 2021. 3 Andrew Keshner. MarketWatch. Oct. 18, 2021. “How America’s 1% build their wealth.” https://www.marketwatch.com/story/how-americas-1-build-their-wealth-11634580173. Accessed Oct. 18, 2021. 4 InsuranceNewsNet.com. March 15, 2021. “Spectrem Study: Household Wealth Hit Record Levels In 2020.” https://insurancenewsnet.com/oarticle/spectrem-study-household-wealth-hit-record-levels-in-2020. Accessed Oct. 18, 2021.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
 The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions
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The Rise of the Unicorn

This past August, close to 4.3 million Americans quit their jobs — the most ever in just one month (since the government began collecting data two decades ago).1 But there isn’t just one reason people are quitting their jobs. There are dozens. Some who had to juggle care for children or elderly relatives have chosen caregiving over a second income in the household. Many people reevaluated their lifestyles amid the safety concerns and loss of loved ones and decided to focus on a better quality of life rather than a higher salary. Many in those essential service industries — from food and retail to healthcare professionals — suffered from burnout and determined that the risk wasn’t worth the wage.

For all these reasons and more, the United States is experiencing what one psychologist and professor at Texas A&M termed the “Great Resignation.”2

With the advent of the Great Resignation, there has been a dramatic increase in new business filings. Could this be the start of a rise in “unicorns?”3 In business, a unicorn — a phrase coined in 2013 — is a privately held startup company valued at over $1 billion. It refers to a successful startup, which traditionally has been considered as rare and far-flung as the mythical creature itself. However, there is evidence that in pure numbers alone, the rise of startups could see higher rates of success in the future.4

That’s because in the past, only about four unicorns reached fruition each year. And yet, already in 2021, there have been 264 that have reached that status. In fact, venture capitalists (VCs) are more interested than ever in investing in startups — to the tune of $240 billion invested so far this year alone. The largest investors tend to be private equity, hedge funds and corporations.5

If you don’t know the difference between an “accelerator” and an “incubator,” you can brush up on your startup jargon online at webpages such as The Glossary of Startup Jargon.6 Be aware, however, that this is not the first time startups have gained momentum only to suffer significant losses. The dot-com bubble of 1999 and 2000 comes to mind. Investors considering these high-risk ventures often hedge their risk by investing in several startups simultaneously, hoping that one good bet will compensate for other losses. If you’re interested in this type of investing, consult with us. We can help determine if this type of speculative investing would be an appropriate allocation for your portfolio.7

The United States is not the only country with an entrepreneurial streak. Globally, there are currently 817 unicorn startups. One of the most well known is TikTok, owned by Bytedance in China. India currently has nearly 70 unicorns, which makes it the third-largest startup ecosystem in the world.8

Even Japan, which is not known for its venture capital and startup success, is encouraging the entrepreneurial spirit via tax breaks and other government-sponsored initiatives. Much like in the United States, young Japanese are leaving traditional corporate jobs to start up their own ventures, with many receiving interest from major western VCs and other institutional investors.9

Knowledge@Wharton. Oct. 25, 2021. “Is the Great Resignation Giving Rise to the Entrepreneur?” https://knowledge.wharton.upenn.edu/article/is-the-great-resignation-giving-rise-to-the-entrepreneur/. Accessed Oct. 25, 2021. 2 Juliana Kaplan. Business Insider. Oct. 2, 2021. “The psychologist who coined the phrase ‘Great Resignation’ reveals how he saw it coming and where he sees it going ‘Who we are as an employee and as a worker is very central to who we are.” https://www.businessinsider.com/why-everyone-is-quitting-great-resignation-psychologist-pandemic-rethink-life-2021-10. Accessed Oct. 25, 2021. Knowledge@Wharton. Oct. 25, 2021. “Is the Great Resignation Giving Rise to the Entrepreneur?” https://knowledge.wharton.upenn.edu/article/is-the-great-resignation-giving-rise-to-the-entrepreneur/. Accessed Oct. 25, 2021. Arielle Pardes. Wired. Oct. 14, 2021. “Earth’s Unicorn Population Is Exploding.” https://www.wired.com/story/earths-unicorn-population-is-exploding/. Accessed Oct. 25, 2021. 5 Ibid. Angela De Luca. Science Center. May 13, 2021. “The Glossary of Startup Jargon.” https://sciencecenter.org/blog/the-glossary-of-startup-jargon. Accessed Oct. 25, 2021. Amit Kumar. Entrepreneur. Oct. 8, 2021. “Will the Unicorn Boom Lead to a Unicorn Bust?” https://www.entrepreneur.com/article/390109. Accessed Oct. 25, 2021. 8 Ibid. McKinsey & Company. Oct. 7, 2021. “Can Japan finally become a start-up power?” https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/can-japan-finally-become-a-start-up-power. Accessed Oct. 25, 2021.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
 The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.
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Who Wants to Work?

An important economic driver for America — working consumers — is dwindling. For example, the Denver International Airport recently hosted a concessions job fair to fill around 1,000 openings at the airport for jobs at stores, restaurants, and other businesses. Only 100 people attended the fair.1

Money could be one issue. In Georgia, Kentucky, and Idaho, more than 4% of workers voluntarily left their jobs in August — the highest rates in the country. They also happen to be three states with the nation’s lowest minimum wage: $7.25 an hour. States with higher baseline wages tended to have a lower quit rate. One such district in Washington, D.C., boasts one of the highest minimum wages in the country at $15.20 an hour. In August, Washington lost only 1.7% of workers, which was the lowest state quit rate.2

For retirees thinking of supplementing their income for the long-term, now might be a good time to pick up a part-time job. Especially during the holidays, retailers and other local businesses are hiring in droves. It’s a good time to “try out” a job since higher wages during the holidays are not likely to drop once an employee is hired. However, if you feel the work isn’t worth the extra income, you can always drop the job later on. Working a bit to offset household expenses early on in retirement is a good way to create financial security over the long haul. If you’d like other ideas on how to create a retirement income stream, please give us a call.

Research has found that money isn’t the only driver for keeping people in the workforce. A recent survey of 5,000 employees in the United States and the U.K. discovered that the biggest interests are in career growth, flexible hours and working for a company that prioritizes mental health and wellness benefits.3 The latter concern may well have originated from the pandemic, in which many employers showed their true colors as to how much concern they had for workforce health.

Moving into 2022, be aware that the job market may evolve somewhat from its pre-pandemic norms. For one thing, many employers have replaced full-time jobs with temp workers — with a greater focus on skill sets and productivity levels. In other words, individual contributors may become more valuable than executives. For example, a programmer may be more necessary than a vice president. In certain white-collar jobs, labor analysts expect a more hybrid work environment in which people have the opportunity to work from home at least part of the time. Under this scenario, it would be far easier to prove one’s value based on productivity rather than the ability to manage people.4

One sector likely to attract young adults is the green industry. According to LinkedIn data, in 2015 the ratio of U.S. oil and gas jobs to green jobs was 5:1. However, last year that ratio shrank to 2:1. Interestingly, green jobs are likely to emerge in all industries, not just companies that generate renewable sources of energy. In fact, green skills may become more valued than university degrees.5

Today, some of the fastest-growing green jobs are in fields such as ecosystem management, environmental policy, and sustainable procurement. In the future, we are more likely to see green expertise moving into areas such as healthcare, agriculture, transportation, construction and manufacturing, finance, fashion technologies, and transport. These are areas in which salespeople, designers, and stylists will develop knowledge of sustainable fashion and pollution prevention.6

 Emma Colton. Fox Business. Oct. 24, 2021. “Denver airport’s jobs fair hoped for 5K visitors – only 100 people showed up.” https://www.foxbusiness.com/economy/denver-airport-job-fair-low-turnout-staffing-shortages. Accessed Oct. 25, 2021. Aimee Picchi. CBS News. Oct. 25, 2021. “3 states lead the U.S. in the rate of workers quitting their jobs.” https://www.cbsnews.com/news/quitting-job-great-resignation-georgia-kentucky-idaho/. Accessed Oct. 25, 2021. Marcel Schwantes. Inc. Oct. 25, 2021. “Why Are People Quitting Their Jobs, Exactly? It May Come Down to 4 Reasons, According to 5,000 Employees.” https://www.inc.com/marcel-schwantes/why-are-people-quitting-their-jobs-exactly-it-comes-down-to-4-reasons-according-to-5000-employees.html. Accessed Oct. 25, 2021. Maryalene LaPonsie. U.S. News & World Report. Oct. 25, 2021. “5 Things Job Seekers Need to Know for 2022.” https://money.usnews.com/careers/articles/job-market-outlook. Accessed Oct. 25, 2021. Karin Kimbrough. World Economic Forum. Sept. 23, 2021. “These are the sectors where green jobs are growing in demand.” https://www.weforum.org/agenda/2021/09/sectors-where-green-jobs-are-growing-in-demand/. Accessed Oct. 25, 2021. 6 Ibid.
We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.
 The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.
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How Inflation Risk Can Effect You

Inflation is a steady rise in the price of goods and services over time and actually signals both good and bad economic conditions. On one hand, as prices rise, someone living on a fixed income cannot purchase the same amount of goods, so they tend to reduce spending or buy cheaper alternatives. On the other hand, when inflation rises, the Federal Reserve tends to reduce interest rates, making it cheaper to borrow money — so spending picks up.1

This cycle of inflation tends to go round and round. Many factors can cause inflation — including a growing economy — but there are monetary policies that help drop the inflation rate in time. Likewise, each of us needs to be able to manage how inflation affects our household finances throughout these cycles, and those management strategies differ based on your situation.

For example, someone working full time may be able to adjust spending based on fluctuating prices. However, many retirees live on a fixed income and have fixed expenses, so when prices increase that can squeeze the household budget. If you’d like to learn about ways to position assets so that you can increase income when needed without threatening your financial security, please give us a call.

Inflation can actually be positive for stock investments, as a company’s revenues and earnings tend to move in tandem with higher prices. Interestingly, the stock market has held remarkably well even in the low inflationary environment the U.S. has experienced throughout the past two decades. The fact that inflation is rising now isn’t necessarily a negative for investors; the traditional theory is that stock prices should increase alongside prices of consumer goods.2

At present, the Fed expects the economy to continue growing despite the ongoing coronavirus. In fact, the agency projects inflation-adjusted GDP growth of 7% for this year and 3.3% in 2022. If this projection holds, interest rates are likely to stay in their current low range until at least 2023.3

Investors worried about rising prices impacting their portfolio may want to consider one or more inflation-mitigation strategies. For example, allocate more assets to sectors that tend to increase along with inflation, such as the energy, materials, technology and financial sectors.4 Other asset classes that tend to move with accelerating inflation include commodities, real estate, and industrial and precious metals.5 Fixed income investors may want to take a look at Treasury Inflation-Protected Securities (TIPS), a type of U.S. Treasury security whose principal amount is adjusted to reflect the inflation rate.6

 1 David Floyd. Investopedia. May 17, 2021. “9 Common Effects of Inflation.” https://www.investopedia.com/articles/insights/122016/9-common-effects-inflation.asp. Accessed Aug. 26, 2021.
2 US Bank. Aug. 6, 2021. “Effects of inflation on investments.” https://www.usbank.com/financialiq/invest-your-money/investment-strategies/effects-of-inflation-on-investments.html. Accessed Aug. 26, 2021.
3 Taylor Tepper. Forbes. Aug. 25, 2021. “Who Should Worry About Inflation—And Who Shouldn’t.” https://www.forbes.com/advisor/investing/inflation-worries-2021/. Accessed Aug. 26, 2021.
4 Scot Landborg. Kiplinger. Aug. 20, 2021. “8 Ways to Insulate Yourself from Inflation.” https://www.kiplinger.com/personal-finance/603306/8-ways-to-insulate-yourself-from-inflation. Accessed Aug. 26, 2021.
5 US Bank. Aug. 6, 2021. “Effects of inflation on investments.” https://www.usbank.com/financialiq/invest-your-money/investment-strategies/effects-of-inflation-on-investments.html. Accessed Aug. 26, 2021.
6 Collin Martin. Charles Schwab. June 24, 2021. “Treasury Inflation-Protected Securities: FAQs about TIPS.” https://www.schwab.com/resource-center/insights/content/treasury-inflation-protected-securities-faqs-about-tips. Accessed Aug. 26, 2021.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
 The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.
 
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Living on a Prayer

As of Aug. 28, 2021, there were 2.8 million unemployment claims in the U.S. That’s considerably higher than the pre-pandemic level of 1.7 million, but much improved from the pandemic high of more than 23 million in May 2020.1

One of the more remarkable surprises to emerge from the pandemic is how many people are no longer willing to go back to their jobs or get a new one. Whether they’re getting higher pay from unemployment benefits or figure they’ll wing it on their own for a while, many Americans have decided not to go back to work during the jobs recovery.

This has been especially profound for health care workers who’ve been quitting due to burnout from treating COVID patients.2 But there are other stories as well. When schools and daycare centers shut down, some working moms scaled back their hours or quit their jobs — in many cases because trying to work from home while simultaneously caring for young children proved impossible. With school starting back this fall, it remains to be seen whether many plan to get back into the workforce.3

Traditionally, the employment quit rate tends to decline as the unemployment rate rises, as most people feel lucky to still have a job. But that trend hasn’t borne out during this latest crisis. This time around the quit rate soared to 2.8% — the highest level on record — in April 2021, when the unemployment rate was still at 6.1%, which was well above pre-pandemic levels.4

It’s important to align household income with household needs. For example, some budgets require two working parents while, in other situations, it makes more sense for one parent to stay home. Feel free to contact us for a review to find out if your family has enough insurance to meet your household needs.

It’s difficult to understand why people would quit their job in the middle of a pandemic. After all, inflation is on the rise — especially housing rates. People who live alone have it the worst. According to a calculator developed by MIT, the following is a sample of how much a single person must earn to pay for basic living expenses (food, health care, housing, transportation, taxes and other necessities) in various states across the country.5 For reference, note that the annual income at $15.00 an hour = $31,200:

  • Alabama: $28,652
  • Alaska: $31,333
  • California: $38,823
  • Connecticut: $33,240
  • Hawaii: $40,412
  • Iowa: $28,327
  • Louisiana: $29,251
  • Nebraska: $28,234
  • New York (state): $38,719
  • Washington: $33,982

Some folks are quitting jobs because they want to find another way to make a living. That’s an interesting prospect because a recent Kelly survey found that most employers believe workers need to improve their skills. Today, about 80% of supervisors say employees need more education, credentials, or training — and 73% of workers say they’re willing to pursue upskilling opportunities offered by companies. This opens the door for many of the frustrated workforce, even those without a college degree if they are interested in learning new skills.6 Moving forward, filling those empty jobs currently available may require more “learn while you earn” effort and patience by employers.7

1 USA Facts. Aug. 28, 2021. “COVID-19 Recovery Indicators.” https://usafacts.org/covid-recovery-hub/. Accessed Sept. 15, 2021.
2 Madeline Holcombe, Erica Hill and Laura Dolan. CNN. Aug. 26, 2021. “’I think we already broke’: Mississippi’s nurses are resigning to protect themselves from Covid-19 burnout.” https://www.cnn.com/2021/08/25/us/mississippi-covid-nurse-strain/index.html. Accessed Aug. 26, 2021.
3 Megan Cassella. Politico. July 22, 2021. “The pandemic drove women out of the workforce. Will they come back?” https://www.politico.com/news/2021/07/22/coronavirus-pandemic-women-workforce-500329. Accessed Sept. 15, 2021.
4 USA Facts. Aug. 19, 2021. “More Americans are quitting their jobs. Here are the industries and states impacted.” https://usafacts.org/articles/more-americans-are-quitting-their-jobs-here-are-the-industries-and-states-impacted/. Accessed Aug. 26, 2021.
5 Francisco Velasquez. CNBC. Aug. 25, 2021. “How much money a single person needs to earn to get by in every U.S. state.” https://www.cnbc.com/2021/08/17/income-a-single-person-needs-to-get-by-in-every-us-state.html. Accessed Aug. 26, 2021.
Kelly Services Inc. April 9, 2021. “Work of the future: How upskilling charts the course.” https://pi.kellyservices.us/resource-center/business-resource-center/general/how-upskilling-charts-the-course/. Accessed Sept. 15, 2021.
7 Jamie Merisotis. Medium. Aug. 26, 2021. “Is America’s Workforce Ready for a Tsunami of Skilled Jobs?” https://medium.com/todays-students-tomorrow-s-talent/is-americas-workforce-ready-for-a-tsunami-of-skilled-jobs-67eaba1012c2. Accessed Aug. 26, 2021.
We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.
The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.
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Holiday Shopping This Summer

Even with lockdowns, fewer parties and reduced travel, the National Retail Federation reports that in 2020, Americans spent $209 billion on holiday-related purchases — averaging about $998 per person.1

If it seems a bit early to be talking about holiday shopping, consider that you may want to shop earlier than ever this year. That’s because the combination of periodic COVID-related shutdowns and the bizarre logjam at the Suez Canal this spring continues to affect shipping ports around the world. In fact, industry experts say shipping disruptions could result in a shortage of goods this holiday season. However, a key reason shipments may be slow this year is that many retailers have already placed their orders for the holiday season, which is exacerbating traffic and congestion problems in the shipping industry.2

Manufacturers have been warned to develop alternative solutions for their supply chains and sales strategies to deal with lack of inventory when the holidays roll around. Given that demand will be high and supplies low, this will likely include raising prices of goods. Many customers may feel that certain items are not worth the higher price and will go looking for alternatives. Retailers should bear this in mind and have less expensive and off-brand options available.3

To help ensure you don’t overspend this year, you may be able to find certain gift items now at more affordable prices before they are priced higher or unavailable altogether by the end of the year. Ask family members to consider these factors when compiling their list of wants, perhaps including alternative items and goods made in the U.S. that are unlikely to experience shipping delays. Don’t forget to support local businesses and artisans for their current inventory, and consider supporting artists, crafters and vintage retailers nationwide at online shops such as Etsy.com. You may end up spending less than usual this holiday season by following these strategies.

Also, consider helping cash-strapped adults on your list by offering to pay for regular insurance policies – such as their homeowners or auto insurance. That’s a generous surprise to find in one’s stocking.

Then again, don’t forget the usual holiday shopping strategies, such as buying seasonal items when they tend to go on sale. Here are a few examples:4

  • August – Summer clothing and swimwear, school supplies and laptops; take advantage of “tax-free weekends” that many states host in August, which waive sales taxes on clothing, school supplies and even electronics.
  • September – Outdoor furniture and grills, leftovers from back-to-school sales, appliances and mattresses.
  • October – Older model iPhones and winter clothing.

Several national retailers, including Best Buy, Walmart and Target, have already announced that their stories will be closed on Thanksgiving Day — reversing previous trends to get Black Friday sales started earlier. In fact, the pandemic morphed many shoppers from in-store to online enthusiasts, so don’t be surprised to see website inventories reduced more quickly as well.

1 Emily VanSchmus. Yahoo. June 16, 2021. “7 Budgeting Tips to Help You Save Money at the Holidays.” https://www.yahoo.com/lifestyle/7-budgeting-tips-help-save-233507890.html. Accessed June 16, 2021.

Kate Duffy. Business Insider. June 14, 2021. “A COVID-19 outbreak at a major Chinese port is worsening the global shipping crisis, which could disrupt orders for the holiday season, experts say.” https://www.businessinsider.com/shipping-delay-crisis-holiday-christmas-thanksgiving-orders-covid-suez-canal-2021-6. Accessed June 16, 2021.

3 John LeBaron. DigitalCommerce360. May 18, 2021. “Why now is the time to prepare for the 2021 holiday season.” https://www.digitalcommerce360.com/2021/05/18/why-now-is-the-time-to-prepare-for-the-2021-holiday-season/. Accessed June 16, 2021.

4 Kristin McGrath. US News & World Report. Jan. 11, 2021. “The Best Days to Shop in 2021.” https://money.usnews.com/money/blogs/my-money/articles/shopping-holidays-the-best-days-to-shop-this-year. Accessed June 16, 2021.

5 Melissa Repko. CNBC. June 9, 2021. “Best Buy says stores will close Thanksgiving Day, to offer Black Friday deals online.” https://www.cnbc.com/2021/06/09/holiday-2021-best-buy-closed-on-thanksgiving-day-black-friday-deals-online.html. Accessed June 16, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

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Lessons From the Pandemic

They say we don’t always appreciate what we have until it’s gone. That was one of the big lessons learned during the pandemic — but there are others. We learned a lot about the quirks and interests of family members — which tend to change as our children grow and we don’t always realize how much.

We also learned to never take good health for granted. For many who either didn’t contract COVID-19 or did so with mild symptoms, it’s hard to appreciate that one small change in a person’s health — asthma or diabetes — could be the difference between some people not taking the disease seriously and others dying.

We also may have learned a thing or two about financial security and the value of emergency funds and insurance safety nets. If it has occurred to you that your household finances could be in better shape, particularly if we have more pandemics and more shutdowns in the future, please give us a call. We can help you position assets for reliable income and emergency cash.

 Family

Students switched to online classes. College graduates moved back home with no job in sight. Breadwinners either worked from home or risked their health to serve in essential positions or to keep their businesses afloat. With fewer entertainment venues available, we were either all living in close quarters or living alone with greater social isolation than ever before. As of last July, 52% of people ages 18 to 29 lived with a parent. That’s the highest number in more than a century, according to the Pew Research Center. While some households may have fared better than others, in the best-case scenarios families learned to spend days upon days together sharing (and negotiating) indoor spaces, preparing meals together, walking and working in the yard, and talking. One parent of a boomerang Millennial observed, “You raise your kids to grow up, and somebody else gets to meet them like this, as adults. But now I get to know her like this.”1

Education

The pandemic may be the catalyst to effectively evolve our nation’s higher education system. At least some form of hybrid classes (online and in-person) are expected to continue permanently. In addition, colleges are becoming more focused on how to better prepare students to work (and find) jobs when they graduate, including more for-credit internships with local employers. Perhaps the growing cost of education may begin to subside, since the fees universities charge for student services has grown four times as fast as those for instruction. With so many students graduating with student debt throughout the last two decades, today’s young adults are questioning the value of a college education altogether. Instead, they are focused on a higher return of investment for taking on that level of debt. Today, only 66% of students say they believe a college degree offers a good return on investment, compared to 78% last August.2

Jobs

COVID redefined the concept of an “essential worker.” It is no longer just fire, police, emergency and hospital workers. The category has expanded to include grocery store stockers and clerks, factory floor workers and delivery drivers. Meanwhile, employees at every income level began to question their career choices, some not just abandoning jobs but switching professions. With more people enjoying the work-from-home option, they are less focused on how much they can earn but how it provides for their quality of life. If they earn less but are happier working from home, many are willing to make that sacrifice. As of January, a Pew survey revealed that 66% of unemployed people have seriously considered changing occupations.3

Saving and Spending

Since we could go nowhere and do nothing, millions of Americans saved more money in the early months of the pandemic. The Federal Reserve Bank of St. Louis reported that in 2020, the personal savings rate grew from 8.3% in February to 33.7% in April. By January 2021, it still remained as high as 20.5%. The ability to work from home meant fewer people dressed for work or paid dry cleaning bills. According to the U.S. Bureau of Economic Analysis, Americans spent $23.9 billion less on clothing and footwear in the fourth quarter of 2020 than in the fourth quarter of 2019. There was less driving in both business and commercial markets, reflecting $88.2 billion less spent on gasoline and other energy goods than in 2019. Additional savings resulted from preparing more meals at home and exercising at home in lieu of gym fees. 4

Health

The relatively quick onset of COVID-19 showed just how fast industries could adapt when necessary, particularly the health industry. Policymakers are driven to focus more on wellness, prevention and public health. Employers (and schools) have a greater appreciation of how precautionary measures can help prevent the spread of other airborne and infectious diseases (during cold and flu season). And while the U.S. has been debating health care reform for years, there is now a greater appreciation of how value-based payment models can create a more resilient health care system.5

1 Soumya Karlamangla. The Los Angeles Times. June 9, 2021. “A pandemic love story you haven’t heard before: Parents and their adult children.” https://www.latimes.com/california/story/2021-06-09/adult-kids-parents-have-unique-covid-love-stories. Accessed June 12, 2021.

2 Bianca Quilantan. Politico. Jan. 25, 2021. “How the pandemic forever changed higher education.” https://www.politico.com/newsletters/weekly-education-coronavirus-special-edition/2021/01/25/how-the-pandemic-forever-changed-higher-education-792939. Accessed June 12, 2021.

3 Joanne Lipman. Time. June 1, 2021. “The Pandemic Revealed How Much We Hate Our Jobs. Now We Have a Chance to Reinvent Work.” https://time.com/6051955/work-after-covid-19/. Accessed June 12, 2021.

4 Stephen Schramm. Duke Today. May 5, 2021. “How We’re Saving Money During the Pandemic.” https://today.duke.edu/2021/05/how-we’re-saving-money-during-pandemic. Accessed June 12, 2021.

5 Laura Joszt. American Journal of Managed Care. May 17, 2021. “Building a More Resilient and Sustainable Health System.” https://www.ajmc.com/view/building-a-more-resilient-and-sustainable-health-system. Accessed June 12, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

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Putting Inflation Expectations in Persepctive

Historically, inflation has been highly correlated with unemployment levels. When more people were out of a job, inflation was lower. As more people got jobs, inflation increased. From an economic point of view, this makes sense. Jobs increase income, which increases spending, which increases demand — supplies drop and prices rise. The opposite is true when fewer people hold jobs.1

That’s one thing that makes economic policy so difficult to set. It requires a careful balance of cause and effect, keeping in mind that what’s good for some portions of the population is bad for others. During periods of rising inflation, it’s important to monitor how it might affect us personally, from buying household goods to managing a portfolio. While economists are keeping an eye on the direction and momentum of rising inflation now, you may want to consider how higher inflation may affect your long-term financial planning goals and be ready to act accordingly. Contact us if you’d like to review what possible impact this may or may not have on your unique situation.2

In April, the inflation rate grew to 4.2%, which drove speculation that the Federal Reserve might reconsider its current stance on interest rates and monetary policy. The consumer price index (CPI) rose significantly for used cars and trucks, food, housing, airline fares, recreation, motor vehicle insurance, household furnishings and operations.

Currently, the federal funds target rate (which serves as the benchmark for bank interest rates) ranges from 0 to 0.25%. Previously, the Fed indicated that it expects to maintain a near-zero interest rate through 2023. The central bank targets an average inflation rate of 2 percent throughout time, so it appears not particularly concerned with the recent spike. In recent comments, Fed chairman Jerome Powell noted that the committee was monitoring “a broad range of financial conditions,” rather than focusing on addressing just one.3

Besides, Fed officials expected inflation to increase as the U.S. economy reopened. The surge in prices is expected to be temporary, as it is simply a matter of a supply crunch after months of pent-up demand. It’s normal that prices for hotel rooms, rental cars, used vehicles, sporting events and restaurants will go back to their pre-pandemic levels. Once jobs, consumerism and inflation reach a level of normalization, the Fed will consider whether it needs to raise the target federal funds rate.4

In terms of the investment market response, CNBC’s Jim Cramer observed that people expected high inflation due to stimulus and jobs numbers. As a result, when the numbers were announced the market didn’t panic – thus far it has taken the high inflation number in stride. Cramer went on to note that raising interest rates won’t solve all the problems that occurred last year. In many cases, only time can resolve them.5

Likewise, time may resolve the current labor shortage, as restaurants and hotels struggle to find enough workers to fill open jobs. Additionally, the current strong economy could solve for the national minimum wage debate without the need to pass new legislation. For example, retailers Amazon, Costco and Target have all voluntarily increased wages to $15/hr or more to meet demand. This strategy follows the traditional economic principle of supply and demand, in which the only way to stay competitive in the labor market is to increase wages. After all, workers have to keep up with the rising costs of housing, childcare, food and transportation.

Speaking of childcare, after decades of working mothers in the labor market, it will be interesting to see if the rising economy also can address the problem of childcare. During the pandemic, more women than men left their jobs to stay home with children sidelined from schools and childcare centers. This phenomenon may continue until employers — or legislators — come up with a solution. It will be difficult for the American economy to advance while there are millions of unemployed women staying home because of trouble securing child care. This could however be offset to some degree by the ability to work from home due to technology depending on the industry and skillset of the employee.

The pandemic also convinced twice the number of Baby Boomers to retire than the previous year. Raising wages and providing more childcare resources, paid parental leave and paid vacation time may be the only way to woo more people back into the labor force.6 

1 Greg Depersio. Investopedia. Aug. 22, 2020. “What happens when inflation and unemployment are positively correlated?” https://www.investopedia.com/ask/answers/040715/what-happens-when-inflation-and-unemployment-are-positively-correlated.asp. Accessed June 11, 2021.

2 Greg Iacurci. CNBC. June 8, 2021. “Gold as an inflation hedge? History suggests otherwise.” https://www.cnbc.com/2021/06/08/gold-as-an-inflation-hedge-history-suggests-otherwise.html. Accessed June 11, 2021.

3 Knowledge@Wharton. June 1, 2021. “Inflation: What Lies Ahead?” https://knowledge.wharton.upenn.edu/article/inflation-what-lies-ahead/. Accessed June 12, 2021.

4 Patti Domm. CNBC. June 11, 2021. “Inflation is hotter than expected, but it looks temporary and likely won’t affect Fed policy yet.” https://www.cnbc.com/2021/06/10/inflation-hotter-than-expected-but-transitory-wont-affect-fed-policy.html. Accessed June 11, 2021.

5 Tyler Clifford. CNBC. June 10, 2021. “Jim Cramer reacts to red-hot inflation number: ‘The market took it in stride’.” https://www.cnbc.com/video/2021/06/10/jim-cramer-reacts-to-inflation-report-the-market-took-it-in-stride.html. Accessed June 11, 2021.

6 Sarah Hansen. Forbes. May 15, 2021. “Could Covid-19 Worker Shortages Create A $15 Minimum Wage—Even Without A New Law?” https://www.forbes.com/sites/sarahhansen/2021/05/15/could-covid-19-worker-shortages-create-a-15-minimum-wage-even-without-a-new-law/?sh=1ae0db234929. Accessed June 11, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

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