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The Morning View: January 16, 2020

BY: MARSHALL BARTLETT
Senior Vice President / Portfolio Manager

Announced this morning, Retail Sales for December rose 0.3%, as expected. Strength was seen in gasoline stations, clothing stores, and building material retailers, while motor vehicle & parts dealers were weak. The Control Group, which excludes sales for food, autos, building materials and gas stations, rose 0.5% in December, above forecasts. Overall, a nice rebound in the control group figures from the previous month, which is used in the calculation of GDP. Consumers appear to have maintained their spending levels as we moved through the holidays, suggesting the economy will continue its moderate pace of growth in the months ahead. In all, bond yields ticked higher following the report and equity futures are higher heading into the market open.

This material is intended to be for informational purposes only and is intended for current or prospective clients of Argent Trust Company. This information is obtained from sources believed to be reliable, and its accuracy and completeness are not guaranteed. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor. Forward‐looking assumptions are Argent Trust Company’s current estimates or expectations of future events or future results based on proprietary research and should not be construed as an estimate or promise of results that a portfolio may achieve. Actual results could differ materially from the results indicated by this information. Investments can go down as well as up. Past performance is not a reliable indicator of future results. 

Financial Planning for the Senior Marketplace

BY: DAVID RUSSELL, CFP®, CSA®
Vice President & Trust Officer  |  (601) 707-0008

David Russell

With the new year, I’ve entered my 36th year in the financial services industry. Just writing this fact feels strange. I’ve never characterized myself as a veteran of the industry, feeling instead that I’ve just hit my stride. The years however tell me differently and it’s easy to understand how senior professionals can feel marginalized. I chose a doctor several years my junior so that as I aged, he’d still be in practice. Understandably now, clients want to know who my back up is “just in case.”

The financial planning industry has done an admiral job of preparing people for two pivotal moments: Retirement – that magic age when one stops earning a paycheck, travels the world, plays golf every day, and enjoys a life of leisure; and Death – the final moment beyond which our assets and legacy are left to our heirs. It has done a poor job of equipping advisors to address the financial planning issues of the period in between. Sure, advisors sell long term care insurance to forty and fifty-somethings for this period, and others sell annuities to seniors skittish about the financial markets, but these are product solutions aimed at the senior market, not financial planning discussions. In a similar way, a walker solves an issue with balance and prevents falls, but a walker is not a comprehensive plan for health and wellness throughout life.

While there are several common financial planning issues for every age demographic, there are also many unique financial planning needs of the senior market.

It’s tempting to ask how a plan for continued social engagement is a financial planning issue. With social isolation a major contributor to poor health among seniors[1], and healthcare costs absorbing a significant portion of a senior’s resources, a plan for social engagement as we age should be an integral part of the financial planning conversation with seniors.

Annual Medicare elections are another example of an often-confusing labyrinth of decisions that can have significant financial impact for years.

Identity theft and elder financial fraud are estimated to cost seniors between $3 and $30 Billion a year[1], and nearly everyone I know over age 70 has been targeted. A plan that includes identity theft protection as well as vulnerabilities to undue influence inside of familial relationships needs to be included.

Plans for living arrangements, whether aging in place, or facility care should be discussed long before the actual need arises. Just as saving for retirement doesn’t begin at age 65, neither should plans for where someone lives out the remainder of their life be delayed until the 11th hour.

Family meetings to discuss an aging client’s dependency plan should be also be held long before a dependency event occurs. It helps assure family members that a plan is in place, informs them as to who-does-what-when, and when done early enough and under the direction of the aging client, preserves his or her seat of honor at the head of the table.

Family Business Succession has been a central component of financial and estate planning for years and is the least neglected area of financial planning for seniors among those who own a multi-generational family enterprise. Still, nearly 60% of the small business owners surveyed by Wilmington Trust, do not have a succession plan in place[2].

In conclusion, financial planning does not end at retirement. As one client reminded me years ago, “retirement is just another word for thirty years of unemployment.” It doesn’t look the same for all seniors but when practiced with integrity, it can be extremely beneficial to the entire family, and rewarding for the financial planner who chooses to serve this market.

David W. Russell, CFP®, CSA® is Vice President and Trust Officer with Argent Trust in Ridgeland, Mississippi.


  1. National Institute on Aging. (2020). Social isolation, loneliness in older people pose health risks. [online] Available at: https://www.nia.nih.gov/news/social-isolation-loneliness-older-people-pose-health-risks [Accessed 7 Jan. 2020].
  2. Consumer Reports. (2020). Financial Elder Abuse Costs $3 Billion a Year. Or Is It $36 Billion? [online] Available at: https://www.consumerreports.org/cro/consumer-protection/financial-elder-abuse-costs–3-billion—–or-is-it–30-billion- [Accessed 7 Jan. 2020].
  3. Usatoday.com. (2020). Most small business owners lack a succession plan. [online] Available at: https://www.usatoday.com/story/money/usaandmain/2018/08/11/most-small-business-owners-lack-succession-plan/37281977/ [Accessed 7 Jan. 2020].

Fixed Income Commentary – January 2020

4th Quarter 2019 and 2019 Fixed Income Review

Fixed income markets had mixed performance in the 4th quarter of 2019, although returns for the year were quite good considering the historically low rates available and U.S. equity markets being near all-time highs. A better outlook for global growth, trade policy progress, and continued benign inflation were contributing factors.  Additionally, world central banks, including the U.S. Federal Reserve, signaled more accommodative policies, with the latter cutting the overnight rate three times in the second half of the year.

Below are some 4th quarter and 2019 Bloomberg Barclays fixed income index returns:

The 10-year U.S. Treasury (UST) Note, a bell-weather measure used in the fixed income markets, ended 2019 with a yield of 1.92%, a marked decrease from 2.68% the previous year.  However, that yield was quite a bit higher than the 2019 10-year UST yield low of 1.46%, which was the lowest yield level since 2016.  In addition, the UST yield curve “steepened” during the quarter as short-term yields increased less than longer-term yields as global bond yields rose in general.  The 2-10-year UST yield spread differential, an often-cited measure of the slope of the yield curve, ended 2019 at 35 basis points, the widest since 2018. That same yield spread was 5 basis points at the end of the third quarter (and in fact briefly inverted for a period of about a week) and has averaged almost 100 basis points for the past five years.

The chart below shows the changes in the UST yield curve from the end of 2018 (gold line) and the end of 2019 (green line).  The bar graph at the bottom shows the changes in yields for select maturities.

Following several years of overtly hawkish interest rate guidance, the Federal Reserve Open Market Committee (FOMC) signaled a complete shift in monetary policy earlier in 2019, citing deteriorating economic conditions and continued low inflation (below their 2% target).  As such, the FOMC reduced its Federal Funds target rate three times, each by 25 basis points. The Federal Funds target rate currently sits at 1.50-1.75%.

In their most recent meeting in December, the FOMC left interest rates unchanged and signaled that they would keep them on hold through 2020 amid a solid economy.  The FOMC highlighted that while factory gauges have weakened, they expect consumers to keep the expansion going. In following, the committee stated  that they will continue to monitor the implications of incoming information for the economic outlook, “including  global developments and muted inflation pressures.”

At their December meeting, the FOMC updated predictions for GDP, inflation and unemployment. The Fed’s median estimate for the core Personal Consumption Expenditures (PCE) Index, the Fed’s preferred inflation gauge, is expected to be 2.00% in 2021, unchanged from the prior projection. In addition, the median estimate for GDP in 2020 is 2.00% and 1.90% in 2021, both unchanged from the last estimates.  The unemployment rate is expected to remain near an historically low 3.50% in 2020, the same as it is now.

Foreign sovereign bond yields moved higher in Q4 2019, on better global growth expectations, and global negative yielding debt has decreased to around $11 trillion from almost $18 trillion earlier in the year.  The U.S. fixed income markets have yet to witness the negative yield phenomenon and most domestic pundits, including the Federal Reserve, do not expect negative interest rates in the U.S. At present, the use of negative interest rates is an extraordinary monetary tool being implemented by some central banks with untested results and unknown long-term repercussions.

Below, in blue, are 10-year bond yields from several foreign countries (sorted from low to high).  Note the wide difference between the yield of the bellwether German Bund (the German ten-year note) at -0.23%, which had a record low yield of -0.74 in early September, compared to the U.S. ten-year note at 1.87% currently. This marked disparity in yields is indicative of divergent monetary policies as well as differing economic outlooks domestically and abroad.

We would be remiss not to mention a marked increase in Federal Reserve overnight operations to address an ongoing liquidity issue which recently came up toward the end of the third quarter. To avoid a “cash crunch” in the overnight lending markets, the Fed has been injecting billions of added reserves in the form of repurchase agreements or “repos” to offset intermittent spikes in the overnight lending rate. There are several explanations for this recent development, with the most plausible pointing to a combination of larger reserve requirements at the money center banks and increased Treasury issuance to fund burgeoning deficits at the federal level, all exacerbated by more lucrative overnight lending opportunities in the other markets. Recent statements by the Fed Chair, Jerome Powell, downplayed any structural weaknesses in the domestic financial system. He further stated he expected the Fed’s intervention to gradually wane toward the end of the first quarter of 2020. While no obvious problems were indicated in overnight operations at year-end, we will continue to monitor and report upon this ongoing development.

While always seeking opportunities during periods of market dislocation, we continue to recommend that our core fixed income portfolios maintain high credit quality and shorter, more defensive, durations. Admittedly, a more aggressive duration posture would have returned a bit more in 2019 but we continue to feel the potential upside is outweighed by paltry cash flows available in longer dated bonds with interest rates at current levels. We believe a core fixed-income strategy utilizing high quality individual bonds (where appropriate) evenly “laddered” over several years, and replacing maturing bonds with longer maturities, provides a good offset for riskier assets or strategies in a well-diversified portfolio. Along with this “volatility dampening” characteristic, a laddered individual bond portfolio also provides dependable cash flow and a source of liquidity which may be accessed as more lucrative opportunities become available in other sectors. As always, potential individual bond purchases are screened for sustainable financial strength, conservative debt coverage ratios, and other favorable characteristics.

As mentioned in our previous quarterly review, these are very unusual times in the financial markets. An unprecedented amount of central bank intervention with historically low (and even negative) interest rates, as well as overt political pressure for added accommodation at a time when sovereign deficits balloon to historic levels globally, is a challenging environment to traverse.  In following, for most fixed income accounts, we currently recommend a broad diversification of strategies, both conservative and more opportunistic, as a means of preserving capital, creating cash flow, and pursuing positive risk-adjusted returns. We hope you will contact your portfolio manager, or any member of our fixed income team, with questions or comments, or to discuss our thoughts further.

__ __ __

For more information about this investment commentary, please contact one of the following:

Sam Boldrick, Director of Fixed Income, Argent Trust
Hutch Bryan, Senior Portfolio Manager, Argent Trust
Oren Welborn, Portfolio Manager, Argent Trust

Not Investment Advice or an Offer
This information is intended to assist investors. The information does not constitute investment advice or an offer to invest or to provide management services. It is not our intention to state, indicate, or imply in any manner that current or past results are indicative of future results or expectations. As with all investments, there are associated risks and you could lose money investing.

5 Questions to Answer When Reviewing Your Retirement Plan

BY: MARK HARTNETTJD, CFP®, AEP®
Managing Director, Argent Family Wealth Services | (662) 550-4443

Congressional approval of the landmark Setting Every Community Up for Retirement Enhancement Act (SECURE Act) serves as a great reminder to retirees about the importance of revisiting your retirement plan to make sure you are meeting your financial goals.

The SECURE Act, which was signed into law on Dec. 20, 2019, is a game changer and ushers in some of the biggest improvements to our country’s retirement system in 13 years. For retirees, the Act increases the age for required minimum distributions and eliminates age restrictions for contributions to traditional individual retirement accounts (IRA). Those are two examples of how the legislation will affect retirement plans.

If you are planning to retire or are already retired, it’s always wise to reassess the underlying assumptions of your retirement plan with a financial advisor. Here are five questions to ask when reviewing your plan:

1. Are the underlying assumptions of your retirement plan still valid?

Times change and so should your retirement plan. The SECURE Act is a perfect example of how you need to review your plan whenever new laws are approved. One new provision in the Act limits the time frame for required minimum distributions for beneficiaries of an IRA. If your plan includes a “stretch IRA” strategy, you’ll need to make an adjustment. Remember, a retirement plan serves as the road map for your financial future. It will help manage risk and also take advantage of opportunities that come your way.

2. Have your healthcare needs changed?

Healthcare expenses will eat up a significant chunk of retirement savings so it’s essential that you watch those costs like a hawk. Even with Medicare, a healthy 65-year-old couple who both live into their late 80s will spend an estimated $606,337 on healthcare, according to HealthView Services, a health care cost-projection software company. Medical expenses are unpredictable. Adjust your retirement plan if your healthcare needs change.

3. Do you have a safety net for emergencies?

Everyone should have an emergency fund to pay for large, unexpected expenses or loss of income. Having sufficient funds set aside for emergencies is critical during retirement so you don’t tap into the savings you’ve worked so hard to accumulate. A widely used rule of thumb is to have 12-18 months of expenses in an emergency account.

4. Do you have the right investment portfolio structure?

For most people, investments held in retirement accounts – 401(k)s, IRAs and similar tax-deferred accounts – represent the majority of their nest egg. Your retirement is at risk if you are not protecting the value of those assets – and maximizing income and capital appreciation –through proper diversification. Have your financial advisor perform a stress test on a regular basis to make sure your investments can tolerate a major stock market correction.

5. Should you reassess your giving?

One of the greatest acts of kindness is giving to others in need. Consider making financial gifts now rather than as part of your legacy. Is there a family member who could use financial help? Is there a charity or special cause that would benefit from a larger donation now instead of smaller contributions over several years? A retirement plan check-up can help you transfer wealth in a meaningful, purpose-driven manner without jeopardizing your retirement.

A retirement plan is a dynamic document. Revisit it regularly – at least once a year – to see if you are still meeting your savings, spending and giving goals. If you’re off track, find out why so you can correct your course and feel confident about your financial future.

Mark Hartnett, JD, MBA, CFP®, AEP® currently serves as Managing Director of Argent Family Wealth Services, a division of Argent Financial. His practice focuses on providing leadership to financially successful families and family offices that desire to grow their family balance sheet through multi-generational planning in order to overcome the proverb “shirtsleeves to shirtsleeves in three generations.” Mark and his wife Jo-Shannon have been married twenty-eight years and live in Oxford, Mississippi, with their three children.

Investment Outlook- January 2020

Halcyon Wishes

BY: JIM McELROY, CFA  

The word “halcyon” has an interesting derivation. According to Greek myth, two married lovers compare themselves in their happiness to Zeus and Hera. For their hubris, Zeus kills the husband by thunderbolt and the grieving widow (Alcyone) drowns herself in the sea. The other gods take pity on the couple and change them into kingfishers, which, again according to myth, make their nests on the surface of the sea during the seven days before and after the winter solstice. The gods further assured the couple and their descendants that the seas would be calm and the winds mild during this period of incubation.

Halcyon (from Alcyone), the Greek word for kingfisher, describes a period of calm, peace and elation, an apt adjective for the holiday season, and not a bad descriptor of the current state of the financial markets.

2019 is ending with a lot of good cheer: the S&P 500 is up 28% for the year; the much feared inverted yield curve has returned to a healthy and positive slope at rates attractive to borrowers; the U.S. unemployment rate continues to set record post WWII lows; the fully employed domestic consumer remains a strongly additive force to the seventy or so percent of the economy it controls; the Fed has signaled that barring a dramatic increase in unemployment or inflation, changes in interest rates are on hold; and both sides in the Sino-American trade war have declared a cease-fire, pending further negotiations.

With the stock market hitting new highs on an almost daily basis and the economy posting ever more positive results — now the longest uninterrupted expansion in the post WWII era — one might be tempted to declare the end of cycles and bear markets and to accept the arrival of a New Millennium. Our experience with the fatal phrase, “it’s different this time,” is enough to keep such temptations at bay. But we must admit, from the vantage point of late December 2019, the portents for 2020 appear to be good.

Before we sink too far into the eggnog, however, we should acknowledge that there are several potential troubles on the horizon. The year 2020 is an election year and, based on the partisanship of recent days — the President has been impeached for only the third time in history — the body politic of the nation will be subjected to an extremely divisive year. For now, the partisanship has had little impact on the world beyond the city limits of Washington D.C., but as the year progresses and the campaigns of each party promote their differences in predictably intemperate language, we should expect that Wall Street, as well as Main Street, will be shaken by the prospect of either party winning.

The world economy, outside of the U.S., seems to be mired in recessions, near-recessions or “growth recessions.” A good bit of the blame for this weakness overseas is due to the assertiveness of the Trump administration in using tariffs to protect U.S. industry and laborers. The U.S. tariffs have begotten foreign tariffs and, in the case of China, a true trade war. For now, the trade war with China appears to be on hold, but if the past is any kind of guide to the future, negotiations will likely break down several times during 2020 and trade wars will return.

Eventually, high tariffs and trade wars beggar everyone, including the U.S. On this subject, it’s certainly good news that the USMCA (the successor to NAFTA) has been ratified and signed. We can hope that this is a harbinger of better trade relations in the coming year.

The turmoil in global trade has a direct impact on U.S. manufacturing. The Institute for Supply Management in its most recent Purchasing Managers’ Index shows a reading of 48.1, the lowest reading since the end of the Great Recession. It’s often suggested by Wall Street analysts that since consumer spending represents anywhere from 60% to 70% of domestic GDP, the other components of GDP — government spending, net exports and investment — are of secondary importance; as long as the consumer is experiencing low unemployment, rising wages and high confidence, the economy should be healthy. Since manufacturing only employs about 17% of the workforce (services employ 81% and agriculture 2%), it’s assumed by many that slowdowns in manufacturing are of minor importance the economy. And this is largely true in the short term.

In the long term, however, the manufacturing sector is critical to continued growth: it produces 92% of the nation’s exports, 65% of research and development spending and 42% of growth in productivity. In a global economy, where all developed nations and many developing nations are experiencing zero or negative population growth, an extended decline in manufacturing, with related shortfalls in R&D spending and productivity, will put a significant “crimp” on long term growth. For now, however, focusing on the near term, the prospects for the economy in 2020 appear positive.

A positive economy suggests a positive stock market, and we’ve certainly seen that in the closing days of 2019. And yet, despite the new records being set on an almost daily basis, the current level of the U.S. equity market does not suggest irrational exuberance in earnings expectations for 2020. The P/E multiple on future earnings is 19.7 and on trailing earnings is 21.5, suggesting an earnings growth rate of 9.1% (some brokerage firms place the earnings growth expectation even lower, at 6%) well below the average and median rates of earnings growth since 2008 (33.2% and 12.4%, respectively) and over the last 30 years (14.8% and 12.1%, respectively).

It’s true, that the absolute level of P/E multiples is above average, but this may reflect more the absence of competition for returns from fixed income and other markets than an overabundance of optimism about growth. The second longest bull market since 1928 (the longest, from December 1987 through March 2000, lasted 12 years and about 3 months) may very well continue into the new year.

In the fixed income markets, the concerns over the last year that the Fed would incite a recession by raising rates too far and too fast, have so far proved to be overly pessimistic. After holding short term rates near 0% during the Great Recession and for the six years which followed, the Fed began lifting rates from 2016 through 2018, ultimately reaching a target range between 2.25% and 2.50%. But, because of concerns about a stubbornly inverted yield curve (short rates higher than long rates) and a global slowdown due to tariffs and trade hostilities, the Fed this past summer embarked on a mid-cycle adjustment: in three steps, it lowered the rate to a range between 1.5% and 1.75%. The latest from the Fed is that they consider this current range enough for now to meet the twin goals of full employment and price stability.

The market expressed its confidence in the Fed by delivering a positively sloped yield curve: as the upper range of the overnight rate dropped from 2.5% to 1.75%, the ten-year yield on the U.S. Treasury rose from 1.47% to the current 1.92%. We expect the ten-year rate to increase gradually and for the yield curve to remain positive and moderately steepen over the coming year. Critical to these expectations is the belief that inflation will be held in check — near 2% — and that employment levels will remain high. If these assumptions are shaken or overturned, 2020 could provide a very bumpy ride, both for bond and stock investors.

We began this commentary with a Greek myth about lovers, hubris, divine wrath, transformations and peace. After exhibiting much hubris trying to forecast the future, we confess that we’re bracing ourselves, if not for thunderbolts, then at least for condemnation for our bad guesses. But we must say that at this time of year, with the kind of returns we’ve experienced, it’s hard not to be positive about the future. And we have seen several kingfishers flashing over the lake where we live.

 

About the author: Over an investment management career covering nearly forty years, Jim McElroy has served as portfolio manager, partner, mutual fund manager, Chief Investment Officer, President, consultant and writer of commentary for several financial institutions and private firms. In addition to a Ph.D. and an MBA, he is the proud holder of a Chartered Financial Analyst designation.

Three Ways a Certified Retirement Plan Advisor Can Improve Your Retirement Plan

Originally published on BenefitsPro.com on December 12, 2019

BY: BRAD KNOWLES
Managing Director, Argent/Heritage Retirement Plan Advisors
(405) 608-8660

With the new year just around the corner, many benefit plan executives will soon be updating and organizing their retirement plan files and looking for better ways to help employees save for the future. Plan sponsors at large companies also will be spending additional time reviewing governance documents, including policies and procedures manuals, investment committee meeting minutes and quarterly reports in preparation for the annual audit as required by the Department of Labor.

Ensuring plan compliance and fiduciary plan governance is no easy feat given the increasingly complex and changing rules and regulations governing retirement plans. One way sponsors can stay ahead of the game is to work with advisors whose companies have passed certification from third parties, such as the Centre for Fiduciary Excellence (CEFEX).

These organizations regularly update their assessment protocols and refine their certification criteria to ensure retirement plan advisors have the expertise, capabilities, policies and procedures in place to help plan sponsors meet their fiduciary obligations. Here are three reasons why working with a certified retirement plan advisor can make benefit sponsors’ lives easier:

  1. Ensures sponsors are following all retirement plan documents

Managing your plan’s governance can be time consuming. The IRS and the DOL both have oversight of company retirement plans. In general, the IRS oversees the qualified status of the plans, while the DOL is responsible for fiduciary standards and reporting requirements. Here is a small sample of the list of documents that have to be in your audit file and ready for inspection:

  • Corporate charter
  • IRS approval letter
  • Summary plan documents and any amendments
  • Custodial or trust documents and any amendments
  • Current fidelity bond policy
  • Investment policy statements
  • Qualified Default Investment Alternative (QDIA) Notice
  • Investment committee meeting minutes

Advisors who have passed certification exams have verified processes that can make your job much easier. They can also identify potential problems, material weaknesses in internal controls or conflicts of interest so the annual audit will go smoothly for plan sponsors.

  1. Confirms that plan investments are diversified

One of the primary responsibilities of retirement plan fiduciaries is to provide employees an opportunity to participate in plans so they can build their wealth. Certified advisors have proven methodologies in place to help plan sponsors offer participants a range of options to growth their money in risk-appropriate investments. Just as important, certified advisors can help plan sponsors select investment managers who have a proven track record of success.

  1. Ensures that plan expenses are reasonable

Lawsuits over retirement plan fees continue to be a major concern for plan sponsors. While lawsuits against large corporations tend to make the headlines, more small business owners are finding themselves the targets of litigation. Certified advisors can assist plan sponsors in selecting reasonable and  cost-effective investment options – and helping them document the process to satisfy their fiduciary obligations to ensure the fees being paid are reasonable for the investment services provided.

Benefits professionals are under constant pressure to meet federal regulations. By working with a certified retirement plan advisor, sponsors can be confident their plans are in compliance and that they are helping improve the financial well-being of their employees.

 

The Morning View: December 17, 2019

BY: MARSHALL BARTLETT
Senior Vice President / Portfolio Manager

In this morning’s data, Housing Starts were 1.365 million units in November, more than expected and an increase of 3.2% over the previous month. In addition, Building Permits were 1.482 million in November, also more than forecast and an increase of 1.4% over the previous month.  Overall, housing continues to show strength amidst the accommodative stance by the Federal Reserve, both in terms of interest rates as well as adjustments to their balance sheet.  Even though it comprises less than 4% of GDP, the jobs and activities related to a strong housing market can feed through to other parts of the economy and should help support moderate economic growth in the months ahead.  In all, bond yields are little changed, and equity futures have turned slightly higher heading into the market open.  We wish everyone a safe and happy holiday season!

 

This material is intended to be for informational purposes only and is intended for current or prospective clients of Argent Trust Company. This information is obtained from sources believed to be reliable, and its accuracy and completeness are not guaranteed. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor. Forward-looking assumptions are Argent Trust Company’s current estimates or expectations of future events or future results based on proprietary research and should not be construed as an estimate or promise of results that a portfolio may achieve. Actual results could differ materially from the results indicated by this information. Investments can go down as well as up. Past performance is not a reliable indicator of future results.

 

The Morning View: December 13, 2019

BY: MARSHALL BARTLETT
Senior Vice President / Portfolio Manager

Announced this morning, Retail Sales for November rose 0.2%, less than expected.  Electronics and motor vehicles strong, while health & personal stores and clothing stores were weak.  The Control Group, which excludes sales for food, autos, building materials and gas stations, rose just 0.1% in November, also below forecasts.  The previous month for both the headline and the control group were revised higher.  Overall, retail sales were weaker than expected in November, but still increasing, suggesting the consumer is hanging in there.  When coupled with weak business investment and manufacturing, the results support the moderate economic growth we are seeing at this point in the cycle.  Meanwhile, with the reports of a phase one trade deal with China and election results in the U.K., a couple of the uncertainties facing investors could be fading.  However, the election in the U.S. is just getting started and that uncertainty will likely remain a focus in the months ahead.  In all, bond yields are little changed following the Retail Sales report and equity futures are higher heading into the market open.   

 

 

 

 

 

 

 


This material is intended to be for informational purposes only and is intended for current or prospective clients of Argent Trust Company. This information is obtained from sources believed to be reliable, and its accuracy and completeness are not guaranteed. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor. Forward-looking assumptions are Argent Trust Company’s current estimates or expectations of future events or future results based on proprietary research and should not be construed as an estimate or promise of results that a portfolio may achieve. Actual results could differ materially from the results indicated by this information. Investments can go down as well as up. Past performance is not a reliable indicator of future results.

 

Investment Commentary: December 2019

BY: FRANK HOSSE
Director of Investments – Argent Trust Company  |  615.385.2720

Global stocks continued their upward trend in November. The MSCI ACWI Index, a common measure of both developed and emerging-market stocks, gained 2.4% in the month. This index broke through highs not seen since early 2018. U.S. stocks continue to lead returns across the world, gaining 3.6% in November. Amazingly, the S&P 500 Index closed at a record high 11 times during its 20 trading days in November. Foreign equity markets were positive in November but unable to match the returns of U.S. stocks. Developed international stocks gained 1.1%, while emerging-market stocks edged lower by 0.1%.

Currently, every underlying sector of the S&P 500 has a positive year-to-date return (2013 was the last calendar year where all sectors were also positive). The majority of sectors are clustered around the S&P 500’s gain of 27.6%; however, technology and energy are outliers on either end. If the tech sector return holds, it would be the sector’s best calendar year return this decade—a fitting end to a decade that has been dominated by technology and tech-related businesses. Whether many of these businesses thrive in the 2020’s remains to be seen, but it will be hard for their share prices to match the sector’s 17% annualized return this decade.

 

 

 

 

 

 

 

 

 

As is typically the case with investing, there is always something to worry about—and that “something” continues to be a trade war between the U.S. and China. Hong Kong’s pro- democracy party won 85% of the seats in the local elections, a massive increase on the 25% seen in 2015. A few days later, Donald Trump signed the Hong Kong Rights and Democracy Act into law, triggering tension in Beijing as the text supports the demonstrators. This development is making it tricky to finalize the US-China trade truce, especially as Beijing has only offered very gradual changes to intellectual property rights for the 2022-25 period. A “phase one” trade deal was supposed to be agreed upon in November, but negotiations continue to drag on and uncertainties linger. The two sides have about two weeks to agree on terms before the United States is set to impose another round of tariffs on Chinese goods on December 15.

In the fixed-income markets, the U.S. Treasury yield curve steepened last month following a Federal Reserve rate cut late in October, which brought the short-end of the curve lower, while the longer-end inched up during the month. Most bond markets were flat to negative in November. The U.S. core bond index lost 0.1% but is still up an impressive 6.7% year to date. High-yield bonds and emerging market bonds were mixed, gaining 0.3% and losing 0.5%, respectively. At this point, bond markets don’t expect the Fed to cut for a fourth time when their December meeting concludes.

Certain material in this work is proprietary to and copyrighted by Litman Gregory Analytics and is used by Argent Financial with permission. Reproduction or distribution of this material is prohibited, and all rights are reserved.

The Morning View: December 6, 2019

BY: MARSHALL BARTLETT
Senior Vice President / Portfolio Manager


Announced this morning, the economy added 266,000 jobs in November, well above forecasts. Additions occurred in manufacturing, health care, and motor vehicles, given the adjustments from the recent auto strike. The unemployment rate ticked lower one tenth to 3.5% and Average Hourly Earnings increased 0.2% for November and 3.1% on an annual basis. Furthermore, Average Weekly Hours worked remained at 34.4. Overall, a strong headline number highlighting a stable job market, with low unemployment and moderate wage increases. With the Federal Reserve currently on hold with respect to interest rate policy, the labor market continues to support steady, moderate economic growth in the months ahead. Meanwhile, the back and forth trade negotiations between the U.S. and China remain in focus for the markets as the upcoming December 15th deadline for additional tariffs looms. In all, bond yields ticked higher following the report and equity futures are also higher heading into the market open.

 

 

 

 

 

 

 

 

 

 

This material is intended to be for informational purposes only and is intended for current or prospective clients of Argent Trust Company. This information is obtained from sources believed to be reliable, and its accuracy and completeness are not guaranteed. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor. Forward-looking assumptions are Argent Trust Company’s current estimates or expectations of future events or future results based on proprietary research and should not be construed as an estimate or promise of results that a portfolio may achieve. Actual results could differ materially from the results indicated by this information. Investments can go down as well as up. Past performance is not a reliable indicator of future results.

How Your Charitable Donations Can Have the Greatest Effect

BY: MINDY HIRT
Vice President / Wealth Advisor
(615) 385-2718 
|  mhirt@argenttrust.com

Mindy Hirt

With the holiday season now in full swing, many of us are thinking about what we can do to help the less fortunate.

Charitable giving feels good to do and can make a big difference to organizations that rely on donor contributions for a large portion of their operating budgets. Around this time of year, there tends to be an increase in “checkbook giving” — writing a small check to a charity, sometimes in response to a mail solicitation. It’s quick to do and requires very little effort.

As we’re planning our donations, though, it’s good to keep in mind how a well-considered financial strategy can make these charitable dollars go further, as well as provide some benefits back to the donor in the form of tax breaks. Many of our clients at Argent are charitably inclined. Whenever we know someone has an interest in giving, whether it is to a religious organization, educational institution, health and human services or other nonprofit, we have conversations about tax-advantageous ways to help those donations have the greatest effect.

Here are a few of the most popular options available:

Donating stock or other property: By donating stock that has increased significantly in value since it was purchased, you can receive important tax benefits. The primary one is avoiding a tax of up to 23.8 percent that you’d normally pay if you sold the stock (the 20 percent capital gains tax, plus the Affordable Care Act tax of 3.8 percent). A charity, on the other hand, could receive the stock as a gift from you, sell it and pay zero capital gains tax. This benefit also applies to other types of assets as well.

IRA distributions: We have a number of clients with individual retirement accounts (IRAs) who are age 70½ or older and must take minimum required distributions from their accounts. Distributions are normally taxed at the IRA owner’s ordinary income bracket — which could be as high as 37 percent, meaning the person may only receive 63 percent of their money after taxes. By giving some or all of your IRA distribution to charity (up to $100,000 per year), you can fulfill the yearly distribution requirement while making your dollars go further than they would if you received them directly.

Donor-advised funds and foundations: Donor-advised funds can be a smart way to receive the tax benefits of a charitable contribution even if you haven’t decided on a recipient for your money. The barrier to entry for opening a donor-advised fund is low — only $5,000 — and once you’ve made the contribution, it can be maintained for your lifetime. One important note: Once you contribute to a donor-advised fund, it’s technically no longer yours, so you can’t change your mind about donating. However, you can designate what charities receive distributions and the amount. Management fees for these funds are in the 1 percent range, which is very affordable.

Private foundations also allow donors to make a gift in the current tax year without selecting a specific charity as a recipient. Foundations are more complex to set up than donor-advised funds but are intended to last for multiple generations and allow donors a higher degree of structural flexibility. Foundations also differ from donor-advised funds because minimum distributions of 5 percent annually must be distributed to charitable beneficiaries.

Charitable lead trusts/charitable remainder trusts: Charitable trusts can also be a way for clients to structure donations and receive income. With a charitable lead trust, a charity receives distributions from the trust for a finite time — 10 or 20 years, for instance — after which the beneficiaries receive any remaining assets. A charitable remainder trust works the opposite way — beneficiaries receive income from the trust for a lifetime or specific number of years, after which the principal is donated to charity.

Timing donations: With the 2017 tax reform, the timing of when you donate is even more important. Clients can often benefit from “bunching” or “bundling” their charitable gifts for a number of years into one taxable year. This strategy allows the donor to itemize deductions in the year of the “bundled” charitable gift (often done through a donor-advised fund) and use the standard deduction in those years that donations are not made. In total, the deductions can be maximized over multiple years.

Each donor’s personal financial picture and charitable goals will ultimately make the difference in which route they choose. The first step should be a conversation with a wealth advisor who can offer personalized recommendations before the donor meets with their CPA or attorney.

The Morning View: November 19, 2019

BY: MARSHALL BARTLETT
Senior Vice President / Portfolio Manager

 Announced this morning, Housing Starts indicated there were 1.314 million units started in October, an increase of 3.8% over the previous month. While a bit below forecasts, units rebounded from previous levels and growth was seen in both single family and multi-family homes.  Meanwhile, Building Permits indicated there were 1.461 million permits issued in October, an increase of 5.0% over the previous month, above forecasts.  While housing is only a small portion of GDP, less than 4%, it is an interest rate sensitive portion of the economy and it is reassuring to see it rebound given the recent rate cuts by the Federal Reserve.  Should housing figures continue to strengthen, it could provide additional support to the slow growing economy in the months ahead.  In all, bond yields ticked slightly lower following the report and equity futures remained higher heading into the market open.

 

This material is intended to be for informational purposes only and is intended for current or prospective clients of Argent Trust Company. This information is obtained from sources believed to be reliable, and its accuracy and completeness are not guaranteed. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor. Forward-looking assumptions are Argent Trust Company’s current estimates or expectations of future events or future results based on proprietary research and should not be construed as an estimate or promise of results that a portfolio may achieve. Actual results could differ materially from the results indicated by this information. Investments can go down as well as up. Past performance is not a reliable indicator of future results.