Global Market Update

An Update on Recent Events in the Global Market

Global stock markets are continuing to decline with the S&P 500 down .74% yesterday morning , -3.33% year-to-date (YTD), and the MSCI World Index ex USA down 1.11% and -3.86% YTD.  Volatility measures for financial assets are also rising significantly.  There are several causes for the decline:

Oil Prices:  Oil prices continue to decline, which negatively impacts energy stocks.  The decline in commodity prices is also an early warning sign of decreased manufacturing activity.  Energy and commodity price weakness can impact a number of business sectors from steel to heavy equipment and all sectors are feeling the negative impact of lower prices and demand.

Geopolitics:  The North Korean nuclear test, ISIS, the dispute between Saudi Arabia and Iran, and the European immigration problem are all negatively impacting stock prices.  In addition, cyber terrorism continues to become a real threat.

Slowing Global Economic Growth:  The recession in Japan and continued slow growth in the Eurozone are instilling fears that global growth will fall and spillover into the US economy.

China:  China devalued the Yuan for a second time this week as growth slows as a result of its transition from a manufacturing to a consumer-driven economy.  The Chinese stock market declined 7% yesterday before the government implemented a trading suspension for the day and the Shanghai Composite is down roughly 15% from its December high.

Uncertainty:  Markets hate uncertainty, and there is a lot of it right now.  How much, how long, and when will the Federal Reserve increase interest rates again?  What will happen with US elections this year?  Will the United States experience another recession? Markets move on uncertainty in the short-term, but they focus on fundamentals in the long-term.

Fortunately, however, there are some positives!

US Economy:  We do not believe the United States will fall into a recession in 2016.  Recent economic activity continues to be positive on the services and employment front.  This is fueling an increase in consumer spending which is up 3.2% year over year.  Consumer goods and services represent the majority of our economy and are a good indicator of future economic growth.

Capital:  Capital continues to flow into the United States because of the stability of our economy and political system.  This should provide support for stock prices.  The low level of global interest rates makes the United States markets one of the more attractive investment alternatives.

Stock Prices:  Stock prices, while expensive, are still trading within a normal valuation range.  The forward PE ratio on the S&P 500 is at 23 times earnings as of Dec. 31st and the norm is something close to 17.5 times earnings.  The higher multiple can, at least partially, be justified by our very low interest rates.

Portfolio Diversification:  Diversification provides a safety net to portfolios during periods of uncertainty and increased stock market volatility.  Nearly all of our clients’ accounts are committed to fixed income in order to provide a cushion to portfolios during these periods of stock market volatility.

Security Selection: Our security selection process continues to concentrate on high quality, dividend-paying stocks, with conservative financials.  These companies provide protection in volatile stock markets because of their consistently strong sales and earnings and stable dividend yield.

If you have any questions or would like additional insight on any of the above points or would like more information about the Wealth Management Group at Stock Yards Bank & Trust Company, please call us at (502) 625-1605.

Giving Thanks & Giving Back

The holidays are often a time where we reflect upon our lives, give thanks for what we have, and look to give back to those in need. This time provides us the opportunity to evaluate the year and make our resolutions for the next. And ideally, your investments should fall somewhere in this process of reflection. After all, your portfolio, if planned well, can be a gift that has the potential to keep on giving, to you and the ones you love for many years to come. To help get you started this year, here are a few year-end investment tips that are always important to remember.

Evaluate your goals. What are the goals for your financial assets? Are they all achievable? Have they changed since last year? Sometimes these questions are the most difficult to answer, yet they are the most important. Alongside your time horizon, cash flow needs and tolerance for risk, these questions are the basis for your financial plan. And if you don’t have any investment goals or a financial plan, now is an excellent time to create one. Having a plan in place that is properly aligned with your goals gives you the best chances to succeed.

Review your diversification and harvest losses carefully. With the recent volatility in the markets, you’re probably looking to sell some underperformers in your portfolio and harvest some tax losses.  Be careful not to chase heat.  It can be easy to sell what’s done poorly and reinvest in what’s done well.  But no one investment style or category leads forever.  Stick to your benchmark and maintain your diversification.  And if your benchmark contains a 5% weighting in energy you should have close to that invested in energy as well (not 0%, but also not 20% – each of those carries too much risk).  Whether you think any one stock, sector, or fund still has room to rise or fall, remember you can always be wrong.  Even the best investors are often wrong about timing.  You don’t want to be caught on the wrong side.

Focus on your total return. Most investors want to compare their portfolio’s overall performance to how each individual investment performed. They want each individual stock, bond or fund to perform as well or better than the whole. But this isn’t how portfolio construction should work. There should always be stocks in your portfolio that perform vastly different from each other, and similar to their respective categories. If they don’t then you’re probably taking too much risk. Review the point above. This is the concept of diversification and it is immeasurably important to meeting those financial goals. Don’t always look to sell the underperformers. Focus on the total return.

Donate Stock, Not Cash. Finally, for those whose year-end goals include making donations to the charitable organizations you support, consider donating appreciated stock instead of cash.  It’s easier than you may think and saves you money.  Say you own a stock for which you paid $1,000 that’s now worth $2,500.  If you sell that stock, you’ll have to pay taxes on the $1,500 gain.  If you have a 33% combined tax rate, that’s $500 you’ll owe just to the government, leaving only $2,000 for the charity. Yet if you donate the stock, you will owe no taxes and the charity receives $2,500, and you have a $2,500 tax deduction.  A win-win for you and your favorite charity!

We hope you had a great year and we look forward to working with you in 2016. From all of us here in the Stock Yards Bank & Trust Wealth Management Group, Happy Holidays!

PERSONAL RETIREMENT PLANNING SERVICES & IRAS

Take your retirement savings to the next level with the wealth management services offered through Stock Yards Bank & Trust. We have broad experience as a trustee of corporate retirement plans, and can put that expertise to work for you in your Individual Retirement Account. Our wealth advisors will meet with you, one-on-one, and help you evaluate your personal financial situation. As a result, you will receive a strategic investment plan custom designed to match your lifestyle and goals.

Rollover IRA
If you are retiring or changing jobs, don’t leave your 401(k) or pension behind. Let us show you how easy it is to transfer your retirement dollars into a Rollover IRA and keep those funds tax sheltered and growing towards retirement. Then, when you are ready to turn that lifetime accumulation of funds into a source of income, we will work with you to properly structure your investments to provide regular distributions.

Traditional IRA
IRA limits are higher than ever before and a Traditional IRA is the perfect way to take advantage of this. Workers age 50 and older can make “catch-up” contributions to help accelerate investment growth. And remember, your contribution may be tax-deductible. But even if you don’t qualify, your IRA interest remains tax-deferred until withdrawn.

ROTH IRA
Now Roth IRAs have higher limits too and new opportunities for conversions from Traditional IRAs. Roth contributions are not tax-deductible, but your earnings grow tax-deferred. After five years, you may qualify for tax-free withdrawals on qualified distributions. Also, you can always get back your principal tax-free and IRS penalty-free for any reason. Unlike a Traditional IRA, a Roth IRA allows contributions after age 70 1/2 for working individuals with no mandatory distribution requirement.

For more information on services offered through our Wealth Management Group, call us:

Louisville / Southern Indiana
(502) 625-1005

Indianapolis
(317) 238-2892

Cincinnati
(513) 824-6127

Email us at:
WealthManagement@syb.com

Holiday Planning: Make a List and Check it Twice

As the holidays quickly approach, the American Bankers Association is encouraging consumers to plan ahead to avoid excessive debt in the New Year.

“Develop a plan in advance of the holidays, and be sure to check it twice,” said Frank Keating, ABA’s former president and CEO. “Assessing your finances and spreading out your holiday spending are terrific ways to avoid starting the New Year with debt you’ll regret.”

Below are seven holiday spending tips from ABA to help consumers have a financially happy New Year:

  • Plan ahead. Before you start shopping, develop a realistic budget. Consider your income, subtract your normal monthly expenses and then add any savings to whatever cash is left over. If you need to use your credit card, think about what you can afford to pay back in January.
  • Keep track of other costs. Don’t forget costs beyond gifts, like postage, gift wrap, decorations, greeting cards, food, travel and charitable contributions.
  • Make a list and check it twice. Keep your gift list limited to family and close friends, noting how much you want to spend on each.
  • Shop early, spend carefully. Avoid shopping while rushed or under pressure, which can lead to overspending. Make sure to comparison shop online first, or download an app that lets you compare prices before you buy anything in a store. Before you head to the cashier (or online checkout), make sure your purchase is within the budget you set.
  • Avoid traps. Finding a spectacular sale on something you’ve been wanting can easily throw you off course. Stay strong and stick to your budget. And don’t apply for store credit cards you don’t need just to get a one-time discount.
  • Use credit wisely. Limit the use of credit for holiday spending. If you must use credit, use only one card, preferably the one with the lowest interest rate, and leave the rest at home.  Pick a date when you can pay off your holiday credit card bills, and commit to paying off the balance by that time. Be sure to check statements for unauthorized charges and report them immediately.
  • Save your receipts. Not only will you need them for possible returns, you’ll need them to keep track of what you’ve spent and to compare with your credit card statement. Knowing how much you spent will help you plan for next year, too.

Keating noted that banks are committed to helping consumers responsibly handle credit and save for the future.

“Banks offer a wide menu of options to help you save for the holidays and other expenses,” said Keating. “Ask your banker about a customizable savings plan, such as a Christmas account that enables you to set aside money throughout the year for your holiday spending.”

For more information on managing your money – as well as a variety of other personal finance tips and resources – visit aba.com/consumers.

Resource Information: American Banker’s Association

Protecting Your Identity

Identity theft continues to be one of the fastest growing crimes in the United States. In 2014, there were 12.7 million victims of identity fraud in the U.S., according to Javelin Strategy and Research. In recognition of Cyber Security Awareness Month, Stock Yards Bank & Trust recommends following these tips to keep your information – and your money – safe.

1. Be cautious of who you share with.

Don’t provide your Social Security number or account information to anyone who contacts you online or over the phone. Protect your PINs and passwords and do not share them with anyone. Use a combination of letters and numbers for your passwords and change them periodically. Do not reveal sensitive or personal information on social networking sites.

2. Shred sensitive papers.

Shred receipts, banks statements and unused credit card offers before throwing them away.

3. Keep an eye out for missing mail.

Fraudsters look for monthly bank or credit card statements or other mail containing your financial information. Consider enrolling in online banking to reduce the likelihood of paper statements being stolen. Also, don’t mail bills from your own mailbox with the flag up.

4. Use online banking to protect yourself.

Monitor your financial accounts regularly for fraudulent transactions. Sign up for text or email alerts from your bank for certain types of transactions, such as online purchases or transactions of more than $500.

5. Monitor your credit report.

Order a free copy of your credit report every four months from one of the three credit reporting agencies at annualcreditreport.com.

6. Protect your computer.

Make sure the virus protection software on your computer is active and up to date. When conducting business online, make sure your browser’s padlock or key icon is active. Also look for an “s” after the “http” to be sure the website is secure.

7. Protect your mobile device.

Use the passcode lock on your smartphone and other devices. This will make it more difficult for thieves to access your information if your device is lost or stolen. Before you donate, sell or trade your mobile device, be sure to wipe it using specialized software or using the manufacturer’s recommended technique. Some software allows you to wipe your device remotely if it is lost or stolen. Use caution when downloading apps, as they may contain malware and avoid opening links and attachments – especially from senders you don’t know.

8. Report any suspected fraud to your bank immediately. 

Resource Information: American Banker’s Association

SYBT Call Center: Frequently Asked Questions

If you have ever had a question about your account balance, branch information, or online banking assistance, you have probably had a chance to talk with representatives in our call center. At Stock Yards Bank & Trust, we work hard to ensure that no question goes unanswered, so today we have teamed up with Kim Coleman, our Call Center Supervisor, to go in depth on some of the most frequently asked questions that come into the call center.           

Question That Frequents the Call Center: Updating Browsers

If you have experienced difficulty logging into online banking, you may simply need to update your browser. Browsers are a key part of keeping your online financial experience and information safe. If you are not familiar with updating your browser or need help with the basics, look no further!

What is a browser? A program used to navigate the world wide web.  Here are some popular browsers you probably recognize:

 Internet_Explorer_logo  chrome  firefox-logo.bee1d85af18f  safari
Internet Explorer Google Chrome Mozilla Firefox

Safari

How do I know if my browser is up to date? Visit https://whatbrowser.org/. This website will tell you what browser you are currently using and will include the message, “This is the most current version.” If your browser is not up to date, the links to update the browser are listed in the chart below. Browsers become more secure with each release, so don’t miss out. No matter what browser you use, make sure you have the latest version installed.

Microsoft operating system browsers:

Browser Operating Systems Most recent version Download
Internet Explorer Windows 7 & 8 11 http://www.microsoft.com/ie/default.mspx
Mozilla Firefox Windows 7 & 8 27 http://www.mozilla.com/firefox/
Google Chrome Windows 7 & 8 33 http://www.google.com/chrome

Mac operating system browsers. Mac OS is the computer operating system for Apple Computer’s Macintosh:

Browser Operating Systems Most recent version Download
Safari OS X (10.8) 7 http://www.apple.com/support/mac-apps/safari
Mozilla Firefox OS X (10.6 -10.8) 27 http://support.mozilla.org/en-US/kb/install-firefox-mac
Google Chrome OS X (10.6 -10.8) 33 http://www.google.com/intl/en/chrome/browser/?hl=en&platform=mac&brand=CHFJ

The second most popular topic for questions is assistance with online banking.

Since many of these questions vary by customer, we wanted to provide additional resources on this blog that may help you in the event you need assistance for online banking:

New Customer Banking FAQ

Online Banking Requirements

Still need help? Contact us!