Limping to 2022’s Close

Limping to 2022’s Close

Limping to 2022’s Close

Stock markets limped toward the year’s close as traders grappled with the effects of China’s rapid reversal of its draconian COVID-19 restrictions. While welcome from a human rights and global supply chain perspective, the end of the nation’s strict “zero-COVID” policy has sparked outbreaks across the country and prompted fears that the situation could trigger a new variant of the virus.

The latest pandemic scare is another reminder that we won’t be especially sad to see 2022 finally sunset. Entering Thursday’s trading session, with just two days to go, the Dow Jones Industrial Average was down 9.5% for the year—better than both the tech-led S&P 500 (which is off 21%) and the formerly high-flying NASDAQ Composite (down 35%). Bear markets are the reality checks that investors must face from time to time, and 2022’s will go down in the history books as a particularly brutal one, with bonds providing no protection from losses. As we enter 2023, we are optimistic that the worst could be behind us and opportunities and better values will prevail in the year ahead.

Here’s what else we’ve been watching this week and why it matters:

  • Inflation eased for the fifth consecutive month in November, resulting in the smallest year-over-year increase since October 2021: 5.5% according to the personal consumption expenditures (PCE) index—the Federal Reserve’s preferred inflation gauge. While the central bank’s persistent worries about wage growth won’t be assuaged by this particular report, it’s nevertheless a promising sign that price gains are slowing.
  • The housing market’s slump continued in November, with home prices sliding for the fifth straight month, according to the National Association of Realtors. Higher mortgage rates remain a fierce headwind as fewer would-be buyers can afford to get their foot in the door. By some measures, the situation is as severe as it was during the great financial crisis of 2007–2009, though that’s possibly part of the Fed’s calculus as it beats back inflation.
  • Several news outlets noted that the five worst trading days of 2022 were responsible for knocking the S&P 500 down 18% this year—about 95% of its total loss for the year. What was left unsaid was that the five best days generated a gain of 19%. It’s yet another reason to ignore those who believe you can time the market. Instead, remain focused on the big picture where your portfolio is concerned.

Cheers to you and your loved ones! We remain incredibly grateful for the trust you’ve placed in us and look forward to serving all of your wealth management needs in the year ahead.

Secure Act 2.0 and Your Retirement

Manager of Financial Planning Andrew Busa

Three years after the Secure Act introduced major updates to the U.S. retirement system, more modifications are on the way today courtesy of Secure 2.0. Some of the new legislative rules won’t take effect immediately, but there’s a lot to unpack that we’ll be covering in more depth in the coming weeks. For now, here are some of the most important takeaways and how you may be affected.

1. Required Minimum Distribution (RMD) Age Increases

The headline grabber: Starting in 2023, the RMD age will increase from 72 to 73, and in 2033 it will rise to 75. Additionally, the penalty for a missed or incorrect RMD will fall from 50% of the amount not withdrawn to 25% (and to as low as 10% if the taxpayer corrects their mistake quickly).

2. Bigger Catch-Up Contributions

Currently, anyone over age 50 can direct an extra $6,500 annually to their 401(k). But per Secure 2.0, anyone age 60 to 63 will be able to sock away $10,000 in catch-up contributions in 2025. What’s more, those catch-up amounts will be adjusted for inflation. 

3. More 401(k) Matching Options

Beginning in 2024, if an employee is making student loan payments, their employer can choose to match those payments with contributions to the individual’s 401(k). 

4. Added 529 Flexibility

Secure 2.0 creates an additional off-ramp for unused 529 money. The bill permits a rollover to a Roth IRA from a 529 if certain conditions are met. It appears that $35,000 will be the lifetime limit for rollovers and the 529 must be established for at least 15 years to qualify. Finally, beneficiaries of the 529 must move the money over to their own Roth IRA. 

We’ll be providing additional detail on these and other retirement saving provisions as we move into the new year.

Chart of the Week: Don’t Bail on Bonds

Portfolio Manager Jeff DeMaso 

Stocks falling 20% or so in a calendar year isn’t fun, but it’s also something experienced investors expect. Bonds falling 13%? That’s…not what we expect.

Vanguard offers a series of static stock/bond allocation funds in its LifeStrategy series. As you can see below, its most conservative option, LifeStrategy Income (20% stocks and 80% bonds), has declined 13.4% so far this year—steeper than its 10.5% drop in 2008. With just a few days left in the year, even a rally probably won’t change the story of bonds’ poor protections in 2022.

Many who are dismayed by the bond market’s fall will point a finger at the Federal Reserve’s interest-rate hikes, but the real culprit is inflation. Rising prices are the enemy of a fixed-income investor, so when inflation goes from muted to the highest level in decades, we shouldn’t be surprised that fixed-income securities have posted their worst performance in a generation.

Sources: Vanguard, Adviser.

With inflation trending down and bond funds paying out more income than before, now is not the time to abandon a well-built, balanced portfolio. Stay the course.

Best of 2022—Financial Planning Advice

The results are in! With the new year just a few days away, we compiled a list of some of the year’s most popular financial planning content as determined by readers like you. Check out the list below to see what ideas and topics got people to click through or tune in this year.

1. How Income Affects Your Social Security Benefits

Navigating the world of Social Security can be confusing. We hear from clients all the time asking how the specifics of their financial picture may impact their benefits—with income a major factor.

[Read Now]

2. Social Security Benefits for Dependents

The Social Security Administration (SSA) pays out approximately $2.8 billion in monthly benefits to four million children whose parents are either disabled, retired or deceased. In this post, we explain what dependent benefits are and who qualifies, and we answer some other popular Social Security questions.

[Read Now]

3. Can You Retire on $500K Plus Social Security?

How much savings do you need to retire comfortably? Everyone’s answer is different. This post shows a few ways to consider this question.

[Read Now]

4. How to Contest a Will

If you feel you haven’t received a fair share of a loved one’s estate or were left out altogether, you may wish to contest a will. Here’s what you need to know.                            

[Read Now]

5. Create Your Savings Waterfall

What’s a savings waterfall and why should you use one to fund your accounts? Andrew Busa, CFP®, has the lowdown.

[Watch Now]

Stay tuned for even more timely information and actionable advice in 2023. And if your New Year’s resolution is to revisit your financial plan, talk to your adviser today. We’re standing by and ready to help!

Most Popular Podcast Episodes of the Year

Like a rollercoaster, the markets peaked at the start in 2022—and the ride for the rest of the year has been a bone-rattler. It’s no surprise that our analysts’ thoughts on how to survive and thrive in a bear market proved some of the most popular topics among our podcast listeners. As we head into the new year, we hope you’ll find some practical tips here to keep your financial plan safely on track.

Navigating the Bear Market
Chairman Dan Wiener and Portfolio Manager Steve Johnson explain what is and isn’t different about this bear market and how investors can keep their eyes on the prize.

Your Bond Questions Answered
Our experts discuss why bonds still have a key role to play in your portfolio, including why Fed hikes don’t always decimate bond returns, whether TIPS are a good alternative to traditional bonds, and why munis may be in better shape than you think.

Cash Is Back—How Can You Make the Most of It?
Dan Wiener is joined by Portfolio Manager Jeff DeMaso and Manager of Financial Planning Andrew Busa to discuss how much you should be keeping in your personal cash reserve, what your options are for deploying it and what pitfalls to watch out for when it comes to I-Bonds.

Practical Steps To Beat the Bear
In markets like 2022’s, about the only thing most people feel like investing in is antacid. But Portfolio Managers Jeff DeMaso and Charlie Toole have a few practical steps you can take to help protect your portfolio and your peace of mind from the worst of the bear’s claws.

Retirement Spending Rules of the Road
When it comes to retirement planning, there is no shortage of tips, tricks and “top 5” lists meant to help you decide whether you’re ready. But which ones have a grain of truth and which can you safely ignore? Andrew Busa and Wealth Adviser Diana Linn talk through popular retirement planning advice to help you prioritize what’s really important.

Adviser in the Media

This week, Chairman Dan Wiener appeared in Yahoo! Finance to explain the value of passive investing, and in Morningstar to discuss ESG investing in retirement savings plans. Meanwhile, Adam Johnson appeared on Fox Business to make his case that investor pessimism is peaking. And don’t miss Manager of Financial Planning Andrew Busa on Secure Act 2.0 in our latest Adviser Takeaway video.

Looking Ahead

Markets and Adviser’s offices will be closed Monday in observance of the new year. As we begin 2023, we’ll be looking over new data on manufacturing and the service sector, vehicle sales, job openings and quits, the December unemployment rate, and the minutes from the Federal Reserve meeting earlier this month.

As always, please visit www.adviserinvestments.com for our timely and ongoing wealth management commentary. In the meantime, all of us at Adviser wish you a safe, sound and prosperous future, and a bright new year.

About Adviser

Adviser is a full-service wealth management firm, offering investment managementfinancial and tax planningmanaged individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.


Please note: This update was prepared on Thursday, December 29, 2022, prior to the market’s close.

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