Happy end of June and welcome (officially) to summer. Read on for more about financial planning during times of high inflation, crypto, and news about our most recent acquisition.
Happy end of June and welcome (officially) to summer. Read on for more about financial planning during times of high inflation, crypto, and news about our most recent acquisition.
Inflation is on everyone's mind these days, leaving many wondering if they can do anything to take action. Below are five ways that we are actively helping our clients and their families make sure that their long-term financial plan is successful given the recent volatility:
Assessing your living expenses. Reviewing how your personal expenses may have changed relative to the cost of living increases and if you need to add to your emergency funds. There may be additional ways to save on your necessary expenses (e.g., insurance premiums, healthcare costs, variable loan interest, etc.).
Ensuring your income keeps up with inflation. If you are retired, be mindful that, unlike other retirement income sources, Social Security benefits have a built-in cost of living adjustment (COLA) that helps offset the effects of inflation. If you are approaching retirement, potentially delaying your benefits to increase both your overall income and the level subject to COLA. Where applicable, trying to reduce portfolio withdrawals during market corrections by exploring alternate options for liquidity and/or additional income can be helpful.
Reviewing your asset allocation to confirm it is well-positioned to manage the effects of inflation. It may make sense to reduce fixed income, which has higher levels of interest rate risk during periods of high inflation, and boost equities and other asset classes that have historically performed better in inflationary environments. We also will make sure all excess cash is invested to take advantage of when markets temporarily "go on sale", while optimizing the yield on cash earmarked for specific purposes (e.g., home purchase, emergency funds, etc.) by investing in instruments such as CDs and high-yield savings accounts to minimize the impact of inflation.
Finding ways to save on taxes. Identifying where we can harvest losses in your portfolio to offset future tax obligations and sell legacy positions at a reduced capital gain to increase portfolio diversification. Roth conversions may also be a viable option for some clients as traditional IRAs may be temporarily down in value, allowing a conversion at lower prices.
Evaluating your gifting and/or estate plan. We regularly analyze the impact that inflation and changing interest rates may have on your plans for transferring assets to the next generation along with the corresponding tax benefits. In a rising rate environment, making a transfer sooner rather than later allows you to lock in a lower interest rate on loans, but may have different effects on various gifting strategies.
KEY TAKEAWAYS FROM Q2
Staying Diligent During Times of Volatility: Market corrections and bear markets often strike fear into the hearts and minds of many investors. However, deep market downturns are unavoidable, most often relatively short-lived (especially vs. bull markets), and always temporary.
Corrections, which remove irrational exuberance from the market, are healthy for the long-term upward trajectory of your portfolio.
However, for most investors, it is in these times of extreme market volatility that their most expensive, even regrettable, decisions are made driven by their emotion and fear.
Our team is always available to provide knowledge and commentary on the markets and your financial plan. We are constantly looking for ways to take advantage of market discounts through tax-loss harvesting and rebalancing, with our focus being on how we can enhance your personal financial situation.
Use this volatile market and short-term uncertainty to create healthy financial habits, and do not hesitate to reach out if you have any questions or concerns.
Fed vs. Inflation: Earlier this month, in order to combat inflation, the Federal Reserve increased the Fed Funds rate by 75 basis points to a range of 1.50%-1.75% and guided expectations toward further rate hikes as well as a continued reduction in its balance sheet.
Fed officials project rates to be at least 3% by the end of the year, with a 50 or 75 basis point increase at the next Fed meeting in July.
We believe that value-oriented stocks will continue to outperform in the short-term which can be reflected in recent purchases of stable dividend-oriented technology companies and overweights to financials and industrials.
We also recently capitalized on higher bond yields by adding to our investment grade corporate bond allocation, which will provide protection against recessionary risk while generating higher income.
We will continue to communicate our tactical portfolio shifts as economic data and future guidance are released.
Crypto Calamity: Last month, TerraUSD, a cryptocurrency that claimed to maintain a one-for-one peg with the US dollar, collapsed as investors lost faith in its value and abruptly unloaded their holdings.
Crypto lender Celsius Network also announced it paused all withdrawals, swaps, and transfers between accounts due to extreme market volatility and Coinbase, a leading crypto exchange, laid off 18% of its workforce.
The overall crypto market is down 62% YTD through 6/27/221, showing that it is indeed strongly correlated with the stock market and is not the commodity that some investors touted it to be.
Given cryptocurrencies' speculative nature, inherent volatility, and lack of diversification benefits with traditional asset classes, we believe investors should not allocate a significant portion of their portfolio to these assets.
Our Investment Strategy Group is available should you have any further questions about cryptocurrencies or other alternative investments.
MIRACLE MILE HIGHLIGHTS
We are delighted to welcome Billy Blanton and the rest of the San Diego team in our first acquisition of 2022. Billy brings over 20 years of experience in the wealth management industry and was the CEO of Vintage West Capital Management.
Congratulations also to Kevin Koehler and his wife Alexa, who brought Brooks into the world last month. We fully expect him to be ready to join our investment team by age 5!
Disclosures: Miracle Mile Advisors LLC (“MMA”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where MMA and its representatives are properly licensed or exempt from licensure. The information is illustrative, and is provided for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor. The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. All investments include a risk of loss that clients should be prepared to bear. The principal risks of MMA's strategies are disclosed in the publicly available Form ADV Part 2A. Past performance shown is not indicative of future results, which could differ substantially. This message is confidential and subject to terms at: https://miraclemileadvisors.com/disclosures/ including on awards/rankings, confidentiality, legal privilege, viruses and monitoring of electronic messages. If you are not the intended recipient, please delete this message and notify the sender immediately. Any unauthorized use is strictly prohibited.
Miracle Mile Advisors, 11300 W. Olympic Blvd., Suite 800, Los Angeles, CA 90064, 310.246.1243
-1.png?quality=high&width=1112&upscale=true&name=image%20(2)-1.png)
