Insights

WESCAP Q4 2022 Quarterly Commentary: High U.S. Household Demand, Tight Labor Markets, & Unexpected Shortages

Portfolio results for the last quarter of 2022 were generally positive, although 12-month returns were almost uniformly negative. High U.S. household demand, tight labor markets, unexpected energy and supply chain shortages due to the Russia-Ukraine conflict and repeated Zero-Covid China lockdowns contributed to higher-than-expected inflation.  The aggressive Federal Reserve interest rate hike policy to bring down inflation had a very detrimental effect on growth stocks, longer-term bonds, and foreign currencies. Some of this reversed in the last quarter, consistent with fading recession fears and the post-mid-term election historical trend of strong 6-month returns.

Year-End 2022 Planning Opportunity Checklist

Now is a good time to review year-end tax strategies and plan for the year ahead.  Below are some items that should be completed or reviewed before year-end:

WESCAP Q3 Quarterly Commentary: Rising Interest Rates & Recession Fears

The U.S. Federal Reserve increased the Fed Funds rate by 0.75% in September, bringing the total rate increases in 2022 to 3%.  Over the next 6 months, 1.25% to 2% in additional rate hikes are expected; depending upon the path of future inflation.

As mentioned in our prior quarterly letter, such interest rate increases have been a good predictor of a recession, as has the recent inversion of the U.S. Treasury yield curve.

Get More For Your Cash!

It’s a bad time to hold too much cash in your portfolio or bank account. The Federal Reserve is systematically raising interest rates to temper inflation and as a result many fixed income products are becoming more attractive.  Cash that is not needed for your emergency fund and that is left in a savings account loses value from inflation and earns minimal returns. The average interest rate for a savings account is low, and currently sits at 0.13% according to Bankrate’s 9/21/2022 weekly institutional survey. 

The ABLE Account Program: Financial Planning for Family Members With a Disability

Financial planning for family members with a disability can be a challenging responsibility.  Governmental assistance programs such as Supplemental Security Income (SSI) and Medicaid have strict eligibility requirements that make caring for loved ones difficult.  For example, SSI has a limit of $2,000 in countable assets that a recipient can own which includes cash, bank accounts, investment and retirement accounts. An estimated 8 million people in the United States receives SSI disability benefits, but these benefits often do not cover all necessary expenses.  Families and friends can fund special investment vehicles to assist in paying all necessary expenses.