February 2020
Each month, Wellspring's wealth strategist and advisors will share news and articles to shed light on the current economy, financial markets, and common tasks for maintaining a well-rounded and resilient personal financial plan.

Click on the links below to learn more.
Economic Outlook

Feb 3 - ISM PMI report
Feb 5 - ISM Non-PMI report
Feb 7 - Employment report
Feb 14 - Retail Sales report
Feb 25 - Cons. Confidence report
Feb 27 - GDP 4Q19 (second estimate)

Key observations:
  • Preliminary PMIs for countries around the world such as Germany, the UK and Japan showed an uptick but still remain contracted. (PMI can serve as a leading indicator of where the economy may be heading.)
  • In the US, PMI data reflected a similar story as global cohorts, falling short of economists' expectations. (Usually a PMI below 50 percent indicates a negative position.)
  • In contrast, unemployment in the US remains at historical lows and consumer confidence is high, bringing about some respite.
  • The Fed continues to monitor inflation with data so far reflecting narrow increases.
  • Interest rates are expected to remain unchanged following last year's rate cuts, leaving the federal funds target rate at a range of 1.50%–1.75%.
  • Some challenges ahead include global trade tensions, political rifts in the US and abroad, and the curtail of corporate earnings as margins are pinched.

Articles of interest:

Article written by Jeffry Bartash for MarketWatch.

Patti Domm for CNBC wrote, '“The question is what’s the economy going to do this year, and I think right now the 10-year note is saying we don’t really know..."'

Financial Markets

Articles of interest:

Martin Fridson for Forbes wrote, "For one thing, if you are about to step up your equity allocation, find a better rationale than the fact that 2020 is a U.S. presidential election year."

Frank Holmes for Forbes wrote, 'One of the biggest concerns some investors might have right now is that the U.S. business cycle is maturing and possibly reaching its “natural end.”'

Article written by Matthew Weller for Investing.com, the story within this article presented the concept of exponential function in a vivid example, also, drawing a parallel to the coronavirus outbreak. The exponential function being the basis behind the power of compounding returns for long-term investors.
Personal Financial Planning

Investors can take this month to conduct a review of their investment portfolios and begin organizing their tax documents in preparation for a meeting with their tax professional.

As the year is still young, if an investment review was not conducted at the end of 2019, now can be the time to look ahead and revisit the existing equity and fixed income allocation and rebalance accordingly. Especially following a strong year in 2019, portfolios may be leaning heavily on equities; subsequently, more volatility than were meant to be.

As tax documents roll in, take the time to review statements such as W-2s and 1099s to gather some data. These documents can reflect personal savings and investing habits.

W-2s will provide an annual look back of how much income was allocated into an employer sponsored retirement plan. Review whether the savings amount was as planned. Is there room to save more this year? Consider increasing savings rate if income is increased or anticipated to increase. In 2020, 401(k) elective deferrals (contributions) increased to $19,500 for individuals under the age of 50. In conjunction, the catch-up contribution for age 50 or older increased to $6,500. (The rule of thumb for savers with a retirement plan at work is to at minimum contribute up to the employer's match, if one is available.) Further, a traditional or Roth IRA is available if a retirement plan at work is not. Adding, beginning this tax year, 2020, with the SECURE Act the age limit restriction for IRAs is now removed.

1099-INTs will show income earned on savings-type accounts, check whether interest earned is optimal and in line with expectations. 1099-DIVs on the other hand, investors looking to optimize their tax-efficiency can look out for any sizable capital gains distributions to see whether it would make sense to hold ETFs or direct stock holdings in a separately managed account instead. The existing mutual fund may have an ETF equivalent.

Articles of interest:

This article written by Greg Iacurci for CNBC highlighted the SECURE Act and one provision that eliminated the "stretch-IRA" for savers. Looking ahead, investors with savings in retirement accounts can take steps to review beneficiaries on record (this should be done periodically for all accounts types), tax implications with or without Roth IRA conversion, and the qualified charitable distribution for those inclined.

Article written by Daniel E. Burns for National Review.

An anecdote that illustrated a common question savers ask. In the end, personal financial circumstances will dictate what is optimal when making a decision, and therefore the strategy will always depend. Article written by Catey Hill for MarketWatch.

Dan Caplinger for The Motley Fool wrote, "Moreover, some have suggested that full retirement ages could rise even further in the years to come. Without a corresponding increase in the maximum age for delayed retirement credits, that could produce more substantial reductions in maximum benefits."

Note: Social Security benefits received a 1.6% cost-of-living adjustment, effective beginning this year where beneficiaries would have seen an increase to their monthly income.

Wellspring In Action
2019 Tax Reporting Mailing Schedule

Clients with brokerage and investment advisory accounts can expect tax documents to be available beginning January 31 (Phase 1):

Phase 2 - February 15

Phase 3 - February 28

Phase 4 - March 15

Tax documents along with other account statements can also be downloaded online through the NetXInvestor portal .

Please contact our team if you need assistance.
Phone: (408) 435-1668

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