Heads Up!

by Thomas M. Riddle, CPA, CFP®, Founder & Chairman of the Board
Many banks are taking advantage of savers by paying VERY LOW INTEREST RATES on bank savings accounts. A review of Bank of America and Wells Fargo Bank indicates both are paying .03% on bank savings accounts – this equates to $13.50 of annual interest on a balance of $45,000. Meanwhile, a number of U.S. Government only money funds are earning above 1.3% which yields $585 per year. And, a one-year maturity U.S. Treasury Bill yields more than 2.25% which generates $1,012.50 of interest per year. It pays to keep an eye on the interest rate being earned on your idle cash and emergency funds. Contact our office for details.

Valley National News

CLIENT REMINDER: Quarterly estimated tax payments are due on June 15, 2018.

You can write a check or use a secure service provided by the IRS to pay electronically, called IRS Direct Pay. Please note: You will need information from previous tax returns in order to use the IRS Direct Pay service. We suggest you have a copy of your 2012 through 2016 tax returns accessible for verification purposes.

If you mail your estimated tax payment and the date of the U.S. postmark is on or before the due date, the IRS will generally consider the payment to be on time. If you use IRS Direct Pay, you can make payments up to 8 p.m. Eastern time on the due date. If you use a credit or a debit card, you can make payments up to midnight on the due date.

If you have questions or need another copy of your voucher(s), please contact our office.

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

US ECONOMIC HEAT MAP
The health of the US 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+

Consumer spending is expected to remain healthy as individuals with lower tax rates spend their windfalls.

FED POLICIES

C-

The Federal Reserve increased the Fed Funds Rate by 0.25% in March, and is expected to implement at least 2 more hikes this year. Rising interest rates tend to reduce economic growth potential and can lead to repricing of income producing assets.

BUSINESS PROFITABILITY

A

Q1 Earnings season is almost over, and it has been fantastic. US companies are reporting YoY earnings growth of almost 25%.

EMPLOYMENT

A+

The unemployment rate has dropped below 4% for the first time since 2000. Additionally, there are over 6 million unfilled job openings throughout the economy; close to an all-time record.

INFLATION

B

Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. The inflation rate remains benign at this time, but we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

5

The above ratings assume no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.

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.

Did You Know…?

by Roxie Muñoz, CLU®, FLMI, Assistant Vice President, Insurance Services

What are Long Term Care Hybrid policies, and are they right for you?
Clients today have many more options to assist with covering a portion of a chronic illness. In the past, the only option was to purchase a traditional long term care policy and pay annual premiums for insurance coverage you may never use. And, the premiums are not guaranteed so could increase several times.

Newer generation policies are available that blend several types of insurance coverage into a single contract.  These Combination or “Hybrid LTC” policies combine the benefits of an annuity or life insurance with long term care protection. If you never need LTC services, these contracts can provide either an annuity cash value or a life insurance death benefit.

You may have mentally “set aside” some investment dollars which you plan to utilize should a long term care illness occur. By repositioning these monies into one of these policies, the amount will automatically increase for long term care needs.

In addition, the cost of the LTC benefits will not be includible in gross income; it will simply reduce your investment in the contract. You may even be able to exchange an existing annuity, life insurance policy or long term care contract tax-free to one of these policies.

Our office can provide more information, and design a personalized plan based on your financial situation.

“Your Financial Choices”

The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®. This week Laurie will discuss:

A review of tax season take-aways – AGAIN.

Laurie will take your calls on this or other topics. This show will be broadcast at the regular time WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton and Phillipsburg area– or listen to it online from anywhere on the internet. For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org. 

The Markets This Week

by Connor Darrell, Head of Investments
Both large cap stocks and bonds ended the week marginally lower, but the heightened volatility observed over the past few months seems to have waned for the time being. Internationally, stocks traded largely in line with those in the U.S., although emerging markets stocks had their worst week in quite some time. Emerging markets stocks have faced headwinds from the increasing strength of the U.S. Dollar, which reached a five-month high last week.

US small cap stocks were a bright spot last week, and have been all year. The Russell 2000, which tracks a broad basket of small cap stocks, is up over 6% so far this year, outperforming the S&P 500 by about 4%.

Oil Prices on the Move
It is easy to forget that there was a solid four-year stretch from December 2010 to November 2014 where the average retail price of a gallon of gasoline in the US was well over $3. But a confluence of factors (including technological advances that increased US oil production, as well as a concerted effort by members of OPEC to put a squeeze on those same U.S. producers) led to a massive decline in the price of oil beginning in late 2014. From peak to trough, the total price decline was over 70%, and consumers reaped the benefits for a number of years. However, that has changed rather dramatically in the last 12 months, as prices have come roaring back.

The surge in oil prices over the past year has been driven by a variety of influences, including increasing demand driven by strong global economic growth, cooperation between Russia and OPEC, economic collapse in Venezuela, and logistical inefficiencies disrupting the distribution of US shale oil. On top of this, the Trump administration’s decision to withdraw from the Iran nuclear deal and re-impose sanctions could lead to a decline in Iranian production, which would further deepen the supply shortfall.

In the near term, the rise in oil prices has the potential to increase inflation and pose as a headwind to economic growth (albeit not nearly large enough to offset the benefits of recent tax reform). We have discussed in the past that the Fed is watching inflation closely, as it is one the key indicators that helps to dictate monetary policy. However, the Fed is unlikely to be coerced into altering its path of normalization by something as fickle (and potentially temporary) as rising oil prices. It is more likely that the worst side-effect of the recent run up in oil prices will be some pain at the pump during the summer travel 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

US ECONOMIC HEAT MAP
The health of the US 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+

Consumer spending is expected to remain healthy as individuals with lower tax rates spend their windfalls.

FED POLICIES

C-

The Federal Reserve increased the Fed Funds Rate by 0.25% in March, and is expected to implement at least 2 more hikes this year. Rising interest rates tend to reduce economic growth potential and can lead to repricing of income producing assets.

BUSINESS PROFITABILITY

A

Q1 Earnings season is almost over, and it has been fantastic. US companies are reporting YoY earnings growth of almost 25%.

EMPLOYMENT

A+

The unemployment rate has dropped below 4% for the first time since 2000. Additionally, there are over 6 million unfilled job openings throughout the economy; close to an all-time record.

INFLATION

B

Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. The inflation rate remains benign at this time, but we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

5

The above ratings assume no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.

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.

Did You Know…?

by Jessica Goedtel, Senior Associate
If you are a Pennsylvania resident and are considering leasing a car, you should know that Pennsylvania imposes an additional 3% tax on the lease of motor vehicles, in addition to the state 6% sales tax. This special tax is collected and put into the Public Transportation Assistance (PTA) Fund, and is dedicated to funding mass transportation.

This tax is 3% of the total lease price, and applies to motor vehicles leased for 30 days or more. When deciding on whether to purchase or lease a new vehicle, make sure to factor in this additional cost.

Click here to read more about the PTA Fund and applicable fees and taxes on the PA Dept of Revenue website.