VNFA NEWS

We are pleased to announce the promotion of Elizabeth Wilson, CPA to the position of Chief Financial Officer.

Elizabeth joined the company as Corporate Controller in 2014, and was most recently Vice President, Finance & Tax Services. As part of the executive management team at VNFA, she oversees firm-wide financial operations as well as strategic and risk management, in addition to serving as Head of Tax Services.

VNFA Executive Management Team (left to right): Judianne Harris CMO, Matthew Petrozelli CEO, Elizabeth Wilson CFO

Elizabeth is a Certified Public Accountant with more than 15 years of experience in accounting and management. A graduate of Muhlenberg College in Allentown with a B.A. in Accounting and Business Administration, Elizabeth moved back to the Lehigh Valley from New York City to join the VNFA team. She was recognized in 2018 by the PICPA (Pennsylvania Institute of Certified Public Accountants) with the Young Leader Award; and in 2019 was named the Lehigh Valley Business CFO of the Year Rising Star.

The Markets This Week

by Connor Darrell CFA, Assistant Vice President – Head of Investments
Global equities continued to ride the wave of momentum created by the agreement of a “Phase One” trade deal between the U.S. and China and extended their advance into record territory. President Donald Trump and Chinese Vice Premier Liu He finally signed on the dotted line last week, officially stamping the first bit of tangible trade progress to date. The agreement mandates that China increase its imports from the United States by approximately $200 billion and decreases U.S.-enacted tariffs on Chinese goods. Progress has also been made with respect to intellectual property protections and the opening of Chinese financial markets, but much work remains to be done on these two key areas of contention, leaving the door open for additional headline risks and setting the stage for a drawn out negotiating process that could extend beyond Donald Trump’s first term as president. Substantial U.S. tariffs will continue to remain in place as the negotiations continue, but markets have clearly looked positively upon the progress that has been made thus far.

In the bond market, yields remained largely unchanged throughout the week as investors continued to favor risk-assets such as equities. With the Federal Reserve on what is expected to be an extended pause with respect to rate changes, there has been little new to report in terms of monetary policy of late. However, in comments last week, Federal Reserve Bank of Dallas President Robert Kaplan became the first Fed official to explicitly acknowledge that recent actions by the Fed to inject liquidity into the financial system may have led to an increase in investor risk-taking. He warned that the central bank should be cognizant of its impact on risk appetite in financial markets moving forward as it considers future policy changes. Kaplan’s comments echo the sentiment of many market “bears” who have argued that equity market valuations have become stretched as a result of elevated levels of enthusiasm among investors. 

Did You Know…?

by Christopher Popp, CPA, MST
The IRS has launched a new and improved Tax Withholding Estimator which can be found here https://www.irs.gov/individuals/tax-withholding-estimator. The new estimator incorporates the changes from the redesigned Form W-4. The IRS urges everyone to see if they need to adjust their withholding by using the Tax Withholding Estimator to perform a Paycheck Checkup. If an adjustment is needed, the Tax Withholding Estimator gives specific recommendations on how to fill out their employer’s online Form W-4 or provides the PDF form with key parts filled out.

Beginning in 2020, income tax withholding is no longer based on an employee’s marital status and withholding allowances, tied to the value of the personal exemption. Instead, income tax withholding is generally based on the worker’s expected filing status and standard deduction for the year. In addition, workers can choose to have itemized deductions, the Child Tax Credit and other tax benefits reflected in their withholding for the year.

The estimator allows users to choose the refund amount they prefer from a range of different refund amounts to help workers more effectively adjust their withholding. The exact refund range displayed is customized based on the tax information entered by that user. Based on the refund amount selected, the Tax Withholding Estimator will give the worker specific recommendations on how to fill out their W-4. This new option allows users who seek either larger refunds at the end of the year or more money on their paychecks throughout the year to have just the right amount withheld to meet their preference.

The new Tax Withholding Estimator also features numerous other enhancements, including one allowing someone who expects to receive a bonus to indicate whether tax will be withheld. Other improvements added, include mobile-friendly design, handling of pension income, Social Security benefits and self-employment tax.

The Numbers & “Heat Map”

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends. Interest Rates: Federal Reserve, Freddie Mac

U.S. ECONOMIC HEAT MAP
The health of the U.S. economy is a key driver of long-term returns in the stock market. Below, we grade 5 key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

VERY POSITIVE

The consumer has been the bedrock of the US economy through much of the current expansion and we have seen little to suggest that this cannot continue.

CORPORATE EARNINGS

NEUTRAL

Corporate earnings growth was weak throughout 2019 as a result of slowing in the global economy and trade policy uncertainty. However, analysts are expecting mid to high single digit earnings growth in 2020, which will be important to sustaining recent levels of equity returns.

EMPLOYMENT

VERY POSITIVE

December’s headline jobs growth number of 145,000 missed consensus expectations, though the unemployment rate remained stable at 3.5%; a 50-year low. Despite the softer than anticipated results in December 2019 was an incredibly strong year for the labor market, and it remains the healthiest area of the economy.

INFLATION

POSITIVE

Inflation is often a sign of “tightening” in the economy and can be a signal that growth is peaking. Recent inflationary data has increased slightly, but inflation remains benign at this time, which bodes well for the extension of the economic cycle.

FISCAL POLICY

POSITIVE

The Tax Cuts and Jobs Act of 2017 lowered the effective tax rates for many individuals and corporations. We view the cuts as a tailwind for economic activity over the next several years.

MONETARY POLICY

POSITIVE

With the Federal Reserve expected to refrain from any further adjustments to interest rates without a material change in the economic outlook, it is unlikely that changes in Fed Policy will disrupt the economic cycle in the near future. Furthermore, the low absolute level of interest rates remains a positive for markets.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEUTRAL

We see the possibility for short-term spikes in volatility as a result of tensions between the US and Iran, but do not believe that these risks rise to a level that could undermine economic output. We also view recent progress toward a trade agreement between the US and China as a positive development for the global economy.

ECONOMIC RISKS

NEUTRAL

Due to low inflation and weak economic activity, central banks around the world remain in a very accomodative stance. We have seen some recent evidence of modest recovery in places like Germany, but overall we expect global economic growth to remain modest.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

Meet the Team

Donna D’Imperio, EA
Client Relationship Manager & Tax Preparation Specialist
Years at VNFA – 20 Years

“I always preach to our clients that they should ask any and all questions they have, because I do not want them walking out the door with any doubts in their head.  If I don’t know the answer, I will get them an answer.”

About Donna: I work with Frank Stettner in the New Jersey office.  My many roles involve tax preparation, customer service, meetings with clients, effectuating money and account transfers and daily management duties of the Phillipsburg office. I enjoy the challenge of helping people with transferring estates. The best part of my position is getting to know our valued clients on an intimate basis, and I look forward to our new relationships.

Interests/Hobbies: When not in the office, I am usually outside doing something or spending time with my grandchildren.  I enjoy traveling and having new adventures with friends or new acquaintances. 

VNFA – 35 Years

In 1985…

  • Coca-Cola introduced New Coke (in April and six months later they returned to the original formula).
  • Microsoft Corporate released the first version of Windows (Windows 1.0)
  • Michael Jordan was named the NBA’s “Rookie of the Year.”
  • Compact Discs were introduced to American consumers.
  • Route 66 was removed from the United States Highway System.
  • Live Aid Concerts in Philadelphia and London raise more than $50 million for famine relief.
  • Hurricane Gloria caused New York’s stock exchanges to close on September 28.

Tom Riddle established his company to help clients with their financial choices on August 28.

The Markets This Week

by Connor Darrell CFA, Assistant Vice President – Head of Investments
NOTE: Last week, we reported an incorrect number for the December jobs report, which was not released until 1/10. Refer to the “Heat Map” for more details on the most recent employment data.

The U.S. equity market extended its gains last week as tensions between the U.S. and Iran showed signs of easing. Markets seem to no longer anticipate an escalation in the conflict between the U.S. and Iran following what has been seen as a largely unprovocative response to the killing of Qassem Soleimani on the part of the Iranians. With geopolitical risks at a heightened level, there remains the risk for additional unsettling headlines that could spark volatility, but it is unlikely that any such headlines would have a material impact on global markets.

Here in the U.S., the December jobs report came in weaker than anticipated, though the unemployment rate remained at its 50-year low of 3.5%. Wage growth, which had shown signs of picking up during the latter half of 2019, also came in weaker than expected. The 2.9% annual rate of increase was the lowest reading since July of 2018. Month-to-month jobs data tends to be somewhat unpredictable, and we continue to view the employment situation, and tangentially the U.S. consumer, as the strongest component of the U.S. economy. In the coming weeks, we will be watching the beginning of Q4 earnings season for further insights into consumer spending during the holiday season.

The Numbers & “Heat Map”

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends. Interest Rates: Federal Reserve, Freddie Mac

U.S. ECONOMIC HEAT MAP
The health of the U.S. economy is a key driver of long-term returns in the stock market. Below, we grade 5 key economic conditions that we believe are of particular importance to investors.

CONSUMER SPENDING

A

Our consumer spending grade remains an A despite recent softening in retail sales numbers. US consumer confidence remains high, and we anticipate a strong holiday shopping season. The consumer has been the bedrock of the US economy through much of the current expansion.

FED POLICIES

B+

With the Federal Reserve expected to refrain from any further adjustments to interest rates without a material change in the economic outlook, we have downgraded our Fed Policies grade to a B+. The low level of interest rates remains a positive for markets, but sentiment will likely no longer be aided by anticipated rate cuts.

BUSINESS PROFITABILITY

B-

As was largely expected by markets, corporate earnings growth was weak during Q3 as a result of the global slowdown and trade policy uncertainty. However, according to Factset, 75% of S&P 500 companies reported a positive earnings surprise, meaning things were not quite as weak as many had feared.

EMPLOYMENT

A

December’s headline jobs growth number of 145,000 missed consensus expectations, though the unemployment rate remained stable at 3.5%; a 50-year low. Despite the softer than anticipated results in December 2019 was an incredibly strong year for the labor market, and it remains the healthiest area of the economy.

INFLATION

A

Inflation is often a sign of “tightening” in the economy and can be a signal that growth is peaking. Recent inflationary data has increased slightly, but inflation remains benign at this time, which bodes well for the extension of the economic cycle.

OTHER CONCERNS

INTERNATIONAL RISKS

7

We have raised our International Risks metric to a 7 following the US airstrike which killed Iranian General Qassem Soleimani. We expect heightened volatility in markets as a result of the further escalation of tensions that this action represents. However, we stress that volatility stemming from geopolitical events tends to be short-term.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.