Tag Archives: Stock Yards Bank

Market Update

by Mark Holloway & Paul Stropkay

Stock Yards Bank Wealth Management and Trust

top

markApril 3, 2018

Dear Clients and Friends,

We were all spoiled by last year’s 21% return and low volatility in the stock market.  Yesterday’s 458 drop in the Dow was just the most recent of several days with large point declines in the major stock market indices that began with the 1,032 point drop on February 5th.  The market is now down approximately 3.0% year to date.

Market volatility is traumatic for investors who forget that, while stock prices may be erratic, the fundamental value of quality businesses is actually quite stable.  Over time, price and value tend to converge.  Alert investors can take advantage of opportunities that price volatility provides.  We are encouraged by the growth in corporate profits that we are seeing this year and remind ourselves that stock valuations are reasonable in the context of history.

That said, what is causing the wild market swings?  Increasing interest rate expectations from the Federal Reserve have added a level of uncertainty.  Late last year, most analysts believed that we should expect two and possibly three increases in rates during 2018.  That expectation is now up to four increases based on the strength of the economy and renewed inflation fears related to full employment.  Full employment generally brings increasing wage pressure and has historically been an omen of future inflation.  Increasing interest rates are a threat to economic activity, increase costs for companies that borrow, and pose competition to stocks for new investment dollars.

Secondly, the drama and political turmoil in Washington has added to uncertainty.  The high rate of turnover in key areas of the Trump advisory team including Secretary of State and Chairman of the Economic Advisors rattled the markets.  The failure of Congress to pass an acceptable budget also added to the feeling of political dysfunction.

The third and most important cause of the recent volatility is the discussion of tariffs.  The Trump administration wants to impose tariffs on imported steel and other products.  Tariffs are essentially taxes on imported goods.  Exporting countries seldom sit by idly and accept these taxes.  They retaliate with tariffs of their own.  Remembering our economic history, tariffs were one of the reasons the great depression was so severe and prolonged.  The global trade war that resulted set back economic growth for a decade.  Fear of slowing global growth resulting from a new trade war has rattled markets.  We can only hope that this is part of the “art of the deal” and that the new administration is trying to force our trading partners back to the negotiation table.

We still believe that we are in a secular bull market for common stocks.  A secular bull market is a market in a general uptrend with higher highs and higher lows in absolute index price levels.  This does not mean that there will not be corrections.  The attached chart shows that stock market declines in secular bull markets of 5%, 10%, or even 20% should be expected.  Larger declines have only happened during recessionary periods.  There are no signs that the economy is heading for a recession in the near future.  In fact, economic growth is accelerating.stock vot.jpg

It is important to keep things in perspective.  The 500 point drop in 1987 represented a 21% decline.  The nearly 500 point drop yesterday was only a 1.9% decline on today’s much higher market level.

Remember, no one can time the market.  It is against human nature and too many consecutive correct decisions must be made very quickly to ever be successful.  It is important to stay invested for those good days that make all the difference in portfolio performance.  As the attached chart shows, many times these bounce-backs happen immediately after days like yesterday.neg days.jpg

We appreciate your continued trust and confidence.

The Wealth Management & Trust Group

Stock Yards Bank & Trust

 


The Wealth Management Group

KATHY THOMPSON, J.D., Senior Executive Vice President, (502) 625-2291
E. GORDON MAYNARD, J.D., Managing Director of Trust, (502) 625-0814
MARK HOLLOWAY, CFA, Chief Investment Officer, (502) 625-9124
SHANNON BUDNICK, CTFA, CFP®, Managing Director of Investments, (502) 625-2513
PAUL STROPKAY, CFA, Chief Investment Strategist, (502) 625-0385

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.
Advertisements

7 Worthwhile Ways to Use Your Tax Refund

 

SYB-Logo_Since1904

According to the Internal Revenue Service, more than 70 percent of the nation’s taxpayers received a tax refund averaging nearly $3,000 in 2017 and will get a similar amount this year. As Americans receive their refunds along with additional benefits coming from the Tax Cuts and Jobs Act passed in December, we have highlighted seven tips to help them use their money wisely.

To help consumers make the most out of their money, We have provided you with the following tips.

  • Save for emergencies.  More than 60 percent of Americans are not prepared for unexpected expenses. You can prepare by opening or adding to a savings account that serves as an “emergency fund.” Ideally, it should hold about three-to-six months of living expenses in case of sudden financial hardships like losing your job or having to replace your car.
  • Pay off debt.  Pay down existing balances either by chipping away at loans with the highest interest rates or eliminating smaller debt first.
  • Save for retirement, your child’s education or future health expenses. Open or increase contributions to a tax-deferred savings plan like a 401(k) or an IRA. Your bank can help set up an IRA, while a 401(k) is employer-sponsored. Look into opening a tax-advantaged 529 education savings plan to ensure school expenses will be covered when your child reaches college age. Or save for future health expenses with tax-free dollars by investing in a Health Savings Account.
  • Pay down your mortgage or student loans.  Make an extra payment on your mortgage or student loans each year to save money on interest while reducing the term of your loans. Be sure to inform your lender that your extra payments should be applied to principal, not interest.
  • Invest safely with U.S. savings bonds or municipal bonds. The U.S. Treasury allows for savings bond to be purchased using your tax refund for as little as $50. Savings bonds earn interest for a maximum of 30 years.
  • Invest in your current home.  Use your refund to invest in home improvements that will pay you back in the long run by increasing the value of your home.  This can include small, cost-effective upgrades like energy-efficient appliances that will pay off in both the short and long term – and with tax credits (as long as Congress continues to renew the program).
  • Donate to charity.  The benefit is two-fold: Giving to charity will make a difference in your community, and you can also claim the tax deduction, if you itemize.

Resource information provided by the American Bankers Association.

SYB-Logo_.png

3 Fall Activities That Won’t Break The Bank

With the first day of fall officially behind us, it’s time to start taking advantage of all the things offered during this season. As the leaves begin to change, take some time to get outside and appreciate the cooler temperatures and scenery. We’ve listed a few fall favorites that won’t put a dent in your bank account.

  • Take an extended bike ride. Autumn is the perfect season to enjoy the cooler weather with a bike ride. Get the whole family together and take in some of fall’s beautiful landscapes through your local park. Bring along a picnic and enjoy the sights and sounds. Leave the car at home and bike to your favorite farmer’s market. To get some ideas on where to go, check out this article on family friendly bike paths in Louisville.
  • Visit a pumpkin patch. A fall tradition, visiting your local pumpkin patch is a must do for you and your family. Spend one day picking out pumpkins to decorate your home or carve later in the season. Make sure to pick a few extra pumpkins to try out these great recipes for fall.
  • Get crafty. Even if you don’t consider yourself the “crafty” type, take some time this season to take part in some easy and inexpensive crafts. It’s a great activity to do as a family, and you can create a number of things such as decorations for your home and homemade Halloween costumes. This article includes great crafts to get you ready for fall.

8 Money Tips Every College Freshman Should Know

With Labor Day behind us, most colleges are underway with the fall semester. The American Bankers Association encourages college students to get an early start on securing their financial future. Check out these eight tips on how to avoid expenses now and reduce financial burden upon graduation.

  • Create a budget.  You’re an adult now and are responsible for managing your own finances. The first step is to create a realistic budget or plan and stick to it.
  • Watch spending. Keep receipts and track spending in a notebook or a mobile app.  Pace spending and increase saving by cutting unnecessary expenses like eating out or shopping so that your money can last throughout the semester.
  • Use credit wisely. Understand the responsibilities and benefits of credit.  Use it, but don’t abuse it.  How you handle your credit in college could affect you well after graduation.  Shop around for a card that best suits your needs.
  • Lookout for money. There’s a lot of money available for students — you just have to look for it. Apply for scholarships, and look for student discounts or other deals. Many national retailers offer significant discounts for those with a valid student ID.
  • Buy used.  Consider buying used books or ordering them online.  Buying books can become expensive and often used books are in just as good of shape as new ones.  Dedicate some time and research to see what deals you can find.
  • Entertain on a budget. Limit your “hanging out” fund.  There are lots of fun activities to keep you busy in college and many are free for students. Use your meal plan or sample new recipes instead of eating out. If you do go out, take advantage of special offers that occur during the week, like discount movie ticket days or weekly restaurant specials.
  • Expect the unexpected.  Things happen, and it’s important that you are financially prepared when your car or computer breaks down or you have to buy an unexpected ticket home.  You should start putting some money away immediately, no matter how small the amount.
  • Ask. This is a learning experience, so if you need help, ask.  Your parents or your bank are a good place to start, and remember—the sooner the better.

For more tips and resources on a variety of personal finance topics such as mortgages, credit cards, protecting your identity and saving for college, visit aba.com/Consumers.

Budgeting 101

Rainy-day funds, savings for college, or just making your rent payment can all be made easier with a budget. Although a simple and oftentimes overlooked strategy, budgeting your finances will help make the difference in managing your money. Putting together a household budget requires time and effort. Stock Yards offers the following steps to create a budget:

• Be a Spending Sleuth. Track every penny you spend for a month. Keep receipts and write everything down. This will be an eye-opening experience and will help you see where you can cut back.

• Count Your Money. Determine the total amount of money coming in. Include only your take home pay (your salary minus taxes and deductions). Your income may also include tips, investment income, etc.

• Itemize, Categorize, and Organize. Review the records and receipts you’ve been collecting over the last month. Categorize your spending using a budget sheet. You can utilize the free templates in Microsoft Excel to create a budget sheet that is fit for you and your family.

• Achieve Your Goals. Set a realistic financial goal and develop your budget to achieve that goal. Subtract your monthly expenses from your monthly income. Find ways to cut spending and set limits on things like entertainment expenses.

• Save, Save, Save. Make one of your financial goals to save a certain dollar amount each month. Start an emergency fund if you don’t already have one. You never know when you may need it.

• Stick to it. Keep track of your spending every month. Update your budget as expenses or incomes change. Once you achieve your financial goal, set another.

Resource information provided by American Banker’s Association.

Save or Spend: 5 Ways to Make Your Refund Count This Tax Season

According to the Internal Revenue Service, the nation’s taxpayers received an average tax refund of nearly $3,000 in 2015. This year, with more than 70 percent of taxpayers receiving a refund, the American Bankers Association is highlighting five tips to help them make the most out of their windfall.

“Tax season is a great time for consumers to reassess how they allocate extra cash,” said Corey Carlisle, executive director of the ABA Foundation. “It’s wise to take steps toward securing your financial well-being like storing your refund for rainy days or using it to get a jumpstart on saving for retirement.”

To help consumers make the most out of their money, ABA has highlighted the following tips:

• Save for emergencies. Open or add to a savings account that serves as an “emergency fund.” Ideally, it should hold about three-to-six months of living expenses in case of sudden financial hardships like losing your job or having to replace your car. Click here for more information regarding Stock Yard’s account options.

• Pay off debt. Pay down existing balances either by chipping away at loans with the highest interest rates or eliminating smaller debt first.

• Save for retirement. Open or increase contributions to a tax-deferred savings plan like a 401(k) or an IRA. Where can you get one? Stock Yards can help set up an IRA, while a 401(k) is employer-sponsored.

• Put it toward a down payment. The biggest challenge that most first-time home buyers face is coming up with enough money for a down payment. If you intend to buy a new home in the near future, putting your tax refund toward the down payment is a smart move.

• Invest in your current home. Use your refund to invest in home improvements that will pay you back in the long run by increasing the value of your home. This can include small, cost-effective upgrades like energy-efficient appliances that will pay off in both the short and long term. If you have more substantial renovations in mind, your bank can help with a home equity line of credit. Click here for more information on how to make the most of your investment.

Resource information provided by American Bankers Association

Buying vs. Renting

Buying a home is one of the biggest financial decisions you ever have to make.  You will be required to ask yourself questions about the kind of floor plan you like, the neighborhood or area of town where you would like to live, the price range you can afford, and your preferences regarding having a yard which will require regular work and maintenance vs. a maintenance free lawn provided through a condominium or patio home.  However, the most important question (the question you should ask yourself first) is should I rent a home or should I buy?

There are definitely advantages and disadvantages to both and it is important to consider the pros and cons before making the leap into homeownership.

Advantages to Buying a Home Include:

Equity or Savings

If you are renting, the money you spend each month pays for your place to live, but it does not provide any kind of long-term benefit or savings to you.  If you purchase a home and are paying your mortgage payment each month, you are building equity in your home.  The more you pay, the more equity or savings you have.  Homes typically increase in value, which also increases the equity or savings you have in your home.

Income Tax Deductions

You can deduct the amount of interest you pay through your mortgage payments as well as the amount you pay in annual property taxes.  Uncle Sam does not allow this deduction for rent payments.

Creative Freedom

You can paint every room a different color and decide on any carpet or floor covering you want if you own your home.  However, if you rent, your landlord most likely will have restrictions on painting and other creative ideas you have to make your home fit your personality.

Stable Housing Costs

With a fixed rate mortgage, your monthly housing costs will be more stable than rent which can increase from year to year.

Home ownership can also develop a sense of self-pride, which provides strong ties to the community in which you live.

Advantages to Renting Include:

Less Responsibility

Repairs to a home can be costly.  As a renter, the landlord will be responsible for any repair costs.

Flexibility

Since leases tend to be short term (a year or less), it is easier to move around if you rent.

Insurance Costs

Insurance as a renter is much less expensive than insurance as a homeowner.  You are only responsible for insuring your personal contents and not the home itself.

Purchasing a home or choosing to rent is a personal decision that you as an individual must make.  Owning a home is a financial responsibility that requires planning and commitment.  Home ownership is not for everyone.  Renting can be easier if you want to pursue job opportunities that may require frequent relocation.  However, home ownership makes sense if you plan to settle into an area or community and want to pay toward something you can eventually pay off and own outright.

Should you buy or should you rent?  It can be a tough decision to make.  We have qualified mortgage professionals that will be happy to assist you in this process. We have many programs, including down payment assistance, that can be tailored to meet your needs. Visit our website at www.syb.com for more information.