Have a seat at our table
We live in a world where having access to the internet affords everyone an opportunity to be a self-appointed expert on a vast and varied list of topics. A quick online search can provide information as broad and diverse as the best way to remove grass stains, all the way to diagnosing complex medical conditions. While educating yourself is always a wise and recommended endeavor, it’s also important to remember that discernment is key. In other words, there is wisdom in knowing when to ask for help.
Reaching your ﬁnancial goals and maintaining the assets you’ve worked so hard to attain can be a complex and overwhelming task, even for the most ﬁscally savvy of individuals. This is why we believe so strongly in a synergistic approach to money management.
The collective and comprehensive experience and training of our ﬁnancial professionals make us a respected authority on an array of banking and wealth management services. Working together as a team, we offer depth of knowledge and a holistic approach to help you realize your ﬁnancial objectives. Our staff is comprised of trusted professionals who hold advanced degrees in business, law, and other prestigious credentials. We’ve got all the bases covered. So no matter if your current focus is ﬁnancial planning, investments, retirement, or tax planning, the team at Stock Yards Bank Wealth Management & Trust will work hard to make your ﬁnancial dreams come true. ♦
Economic Update| Q3: 2018
BREAKING NEWS ALERTS: NORTH KOREA, ICE, TARIFFS, EXTINCTION, BREXIT, HATE CRIME, CONSPIRACY!
July 10, 2018
If there were any good news, would anyone be able to hear it over the hyperbole or read it through the sensationalized headlines on our smartphones?
Thankfully, we did. During the second quarter of 2018, unemployment in the United States fell to a rate not seen since 1969. Wage growth accelerated. Tax reforms boosted personal take-home pay, as well as corporate earnings. The stock market in the United States rose as the Standard & Poor’s 500 Index delivered a total return of 3.4%. International stocks as measured by the MSCI EAFE Index declined modestly due to political uncertainty in Europe and the Far East. Although many fixed income investors experienced negative returns during the second quarter (Bond prices fall as prevailing interest rates rise.), proceeds from maturing bonds could be reinvested in bonds offering more attractive yields.
Cable commentators are very good at creating a sense of uncertainty and fear to keep viewers engaged (and to sell advertisements). News organizations have plenty of raw material available to construct gripping storylines: rising
interest rates, wealth disparity, volatility in financial markets, turmoil in Washington D.C. and abroad, and tariffs. Because these variables are beyond our control, they are prone to create anxiety. Only by delving into the facts can we determine whether or not the worry is warranted.
For example, the subject of tariffs often leads to discussion of a global trade war and its potential consequences. Should we be worried? Research firm Strategas helps put this topic in perspective. It compares the size of the tariffs that have been imposed and merely proposed to the size of new fiscal stimulus including repatriation of cash held abroad by US-based companies and tax cuts resulting from the Tax Cuts and Jobs Act of 2017. In total, $800 billion of stimulative policy in the United States dwarfs the $120 billion of tariffs and potential tariffs that have been in the news.
Here are some other encouraging facts. For the first time in a decade, the United States posted three sequential quarters of 2.5%-or-better GDP growth last year. Consumer confidence and business confidence indicators have strengthened and remain strong. A decrease in regulatory burden has enabled businesses to increase efficiencies. Tax reform has helped US companies compete more effectively in the global economy. Tax cuts have provided companies, both large and small, with the ability to hire and to invest in new property, plant, and equipment. All of this is good news for economic growth.
Now, if you are beginning to worry that we have turned Pollyannaish, rest assured that we are well-aware of the business cycle. Although we do not expect to see a recession soon, we recognize that the combination of full-employment and inflation has typically compelled the Federal Reserve to act. The Fed has been especially careful to share its plans in recent years. That said, if the Fed tightens monetary policy too aggressively, a recession could follow. Since the timing and magnitude of an inevitable recession are unknowable, we investors stay the course.
By this we mean that we continue to favor common stocks as the financial asset of choice over fixed income and non-financial assets like collectibles and commodities. We welcome stock price volatility, which market commentators and business school professors call risk. In our view, volatility creates opportunity. While prices can be quite volatile, the value of quality companies is quite stable. Volatile stock prices enable alert investors to capitalize on asset mispricing. To quote Benjamin Graham, the father of value investing, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” Daily price changes are the result of emotion and speculation. But, over the long run, fundamentals dictate value.
Most of our clients have a long investment time horizon. Since this is the case, we have the long run in mind and are able to focus on the fundamentals that can create the most value for our clients over time. We concentrate our efforts on constructing portfolios of high quality, shareholder-friendly, growing companies that are trading at reasonable relative valuations. We prefer moated businesses with inside ownership, proven management, and unique business models that insulate them from competition. We also prefer conservatively financed businesses with low levels of debt, strong cash flow from operations, and high returns on capital. We expect that companies with these characteristics will do well in the current economic environment and, more importantly, during difficult economic times. When the inevitable recession or stock market correction occurs, the high quality, well-capitalized companies that we own will protect our clients from permanent loss of capital. We use this perspective in our investment process to minimize mistakes that could result from reacting to BREAKING NEWS ALERTS. Professional investment discipline is one of the most valuable things we can provide to our clients.
Thank you for the confidence you have placed in our Wealth Management & Trust team at Stock Yards Bank & Trust. Please contact us directly by phone or by email at any time to discuss our outlook or to review your portfolio in light of your objectives.♦
Retirement, Social Security and Divorce
Whether you expect social security benefits to account for a substantial portion of your retirement income or to supplement other sources, everyone has a similar objective of receiving the maximum benefit possible. It is widely known that married couples have several strategies to consider, however, divorced individuals have some options as well. Divorce after 50, otherwise known as Gray Divorce, is on the rise and recent changes to the tax code have removed the taxation and deductibility of alimony* paving the way for social security to become a more prevalent income consideration for couples divorcing at older ages. Understanding claiming strategies for divorced couples may be more important than ever.
In order to claim benefits on your ex-spouse’s record you must have been married at least 10 years and divorced at least 2. Your ex-spouse must be entitled to receive social security or disability benefits based on his or her work history, however, he or she does not have to be retired or currently claiming. This differs from married couples where the spouse upon whose record the benefit is being claimed must also file for benefits. The ex-spouse can be remarried and is not alerted of anyone claiming based on his or her record. In fact, multiple ex-spouses can claim on the same worker’s record!
If you wish to claim on an ex-spouse’s record, you cannot be currently remarried. Additionally, the spousal benefit must be more than what you would receive based on your own record. Although you may file as an ex-spouse you are deemed to have filed for your own benefit as well. Social Security will give you the highest benefit available (the spousal benefit is typically ½ of the higher wage earners benefit).
The earliest an individual can file for a social security retirement benefit is age 62 (unless your ex-spouse is deceased and you qualify to file for a survivors benefit). Filing at age 62 permanently reduces your benefit whether you claim on your own record, your spouse’s, or your ex-spouse’s. By claiming early you lose the opportunity for delayed retirement credits and growth of your benefit (there is no impact on the ex-spouse’s own benefit). An exception to this rule applies to those born before 1954. These individuals have the option to file for a benefit based on their spouse’s (or ex-spouse’s) work history and then claim his or her own at a later date if higher.
Exceptions also apply in the case of survivors. A divorced individual (meeting all of the criteria explained above) can claim his or her own benefit if initially it is greater than the spousal benefit, then step-up to a survivors benefit upon the death of the ex-spouse. Ex-spouses, widows, and widowers can continue a survivor benefit if they remarry after age 60.
There are many factors to consider in claiming social security whether you are single, married, divorced, or widowed. How to claim becomes equally important as when to claim. Your team of advisors at Stock Yards Bank is here to aid you in making these decisions as you move through your various phases in life. ♦
*For divorce agreements entered into after December 31, 2018.
Wealth Management & Trust
KATHY THOMPSON, Senior Executive Vice President, (502) 625-2291
E. GORDON MAYNARD, Managing Director of Trust, (502) 625-0814
MARK HOLLOWAY, Chief Investment Officer, (502) 625-9124
SHANNON BUDNICK, Managing Director of Investment Advisors, (502) 625-2513
PAUL STROPKAY, Chief Investment Strategist, (502) 625-0385
REBECCA HOWARD, Managing Director of Wealth Advisors, (502) 625-0855
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
We provide the information in this newsletter for general guidance only. It does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, investment, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, expressed or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.