Slagle Financial

The transition from growth to value and back to growth stocks often accelerated during the pandemic. Growth-oriented stocks usually outperform when the economy is on the rise. Therefore, growth stocks took the path of the coronavirus: They tanked during the lockdown, they rose again when the economy reopened and then stumbled again until vaccines were introduced. Now that vaccination rates have stalled, and the delta variant of COVID-19 is running rampant, economists are once again pondering how growth stocks can keep up their pace.

According to the chief U.S. economist at Morgan Stanley, projections for third-quarter GDP have dropped from 6.5% to 2.9%. With this in mind, now may be a good time to work with your financial professional to use recent gains and rebalance an investment portfolio, evaluating whether to diversify with high-quality stocks in cyclical sectors. Morgan Stanley believes that a sector rotation may prompt outperformance by value stocks.¹ If you’d like to discuss your current asset allocation and future growth opportunity, please give us a call.

Value investing is a strategy of choosing stocks that seem to be trading lower than their book value (as measured by company assets, revenue, dividends, earnings, and cash flows). The idea is to invest in them while the stock market is underestimating their value, on the premise that their prices will eventually increase to align with the true health and potential of the company. Note that value stocks are more appropriate for longer-term investors who have the time and discipline to wait for market recognition. Also, be aware that value stocks are more likely to pay out dividends than growth stocks.²

Warren Buffett, one of the world’s most successful investors, is considered an advocate of value stocks. That’s because rather than look for outright stock price increases and sector momentum, he views each company holistically, considering the current share price, historical company performance, debt, and profit margins.³

At this point, the growth versus value stock debate hinges largely on the direction of the pandemic. During the height of lockdowns in 2020, value stocks outperformed growth due to several factors, such as lower energy prices from reduced consumer demand. This fall, with the delta variant throwing the country back into a tailspin, it may once again be prudent to check out well-established companies, many of which have a long history of dividends and dividend growth, which may be underpriced for value.⁴

While value stocks are worth considering, it is more important to reiterate portfolio diversification during the pandemic, given its up-and-down effect on our economy. Diversifying across countries, industries, sectors, and investment strategies can help eliminate the follies of trying to predict the market throughout an unprecedented influence like the global pandemic.

Content prepared by Kara Stefan Communications.

¹ Lisa Shalett. Morgan Stanley. Sept. 14, 2021. “Next Market Rotation Could See Value Stocks on Top.” https://www.morganstanley.com/ideas/market-rotation-value-stocks. Accessed Sept. 16, 2021.

² Niladri Mukherjee. Merrill Lynch. Aug. 17, 2021. “What is a value stock?” https://www.merrilledge.com/ask/investing/what-is-a-value-stock. Accessed Sept. 16, 2021.

³ Investopedia. Dec. 22, 2020. “Warren Buffett: How He Does It.” https://www.investopedia.com/articles/01/071801.asp. Accessed Sept. 16, 2021.

⁴ Dan Rosenburg. TD Ameritrade. Aug. 11, 2021. “Growth vs. Value Stocks: What’s the Outlook Post Pandemic?” https://tickertape.tdameritrade.com/investing/growth-vs-value-stocks-post-covid-16743. Accessed Sept. 16, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

9/21 – 1853568C

There are moments in history when people have claimed investment choices don’t matter because if the market is up across the board, you cannot fail. That is not true. In fact, that should never be guiding financial advice. However, there is no doubt that the market has been up for many years — notwithstanding the market correction in March 2020, early in the pandemic. For 2021, year to date, the S&P 500 has climbed more than 20%, double the historical average return of about 10%.¹

If security investing is appropriate for your portfolio, perhaps picking up more stocks is a good idea — but it is not a good idea to invest in just anything. It’s important to conduct due diligence to understand the fundamentals of a company’s financial situation and market prospects. Then decide if that play is appropriate for your asset allocation and whether to make it a short- or long-term situation. If you’d like help vetting a particular security or market sector, please feel free to contact us.

Public companies that trade on the stock market are required to file certain reports with the Securities and Exchange Commission. These include Form 10-K, an annual report with audited financial statements, and Form 10-Q, a quarterly update for operations and financial results.

Be aware that you can find highlights of this information on various financial news websites. The following can give you an idea of which metrics to look for and what they mean:²

• 52-week high or low – the year-long price range showing how a stock is trading relative to its most-recent history
• Dividend yield – calculated by dividing the annual dividend rate per share by the stock price; compare the company’s dividend rate to its peers, the rest of stock market and the 10-year Treasury note yield
• Gross profit margin – this is calculated by dividing gross income by sales revenues; compare it to competitors as a measure of the company’s profitability over the long term
• Price-to-earnings (P/E) ratio – this is the price of the stock divided by earnings per share, which shows how much the investor pays for each $1 of the company’s bottom line; compare that cost over time and against competitor P/E ratios

While many websites provide this type of information, it’s important not to focus on any one single measurement. These ratios, combined with other fundamentals (e.g., management experience and track record, market potential, product diversification) can offer a more complete picture of the stock’s long-term viability and upward potential.³

But don’t forget the other, perhaps more important, factor: determining if a particular stock is appropriate for your portfolio. Not just which stock, but how much to buy and at what price, because these decisions will determine what percentage of your portfolio will be represented by that stock. Too much of any one allocation can move overall performance in one direction or the other, which is why it is important to diversify securities. If you believe a certain sector is well-positioned to rise, you might consider investing in several different competitors to take advantage of the rising tide.

There is one other factor you may want to consider, long touted by famed investor Warren Buffett. He recommends that an investor buys into a company because he or she wants to own it, not because he or she wants the stock to go up. In other words, if you like the product, believe it has mass-market appeal, and wish you’d thought of it yourself, those are good criteria for purchasing the company’s stock.⁴

Content prepared by Kara Stefan Communications.

¹ Jeff Remsburg. Nasdaq. Sept. 3, 2021. “Are Stock Prices Too High?” https://www.nasdaq.com/articles/are-stock-prices-too-high-2021-09-03. Accessed Sept. 6, 2021.

² Tomi Kilgore. Marketwatch. Sept. 4, 2021. “These are the most important things to check on a stock’s quote page before deciding whether to buy or sell.” https://www.marketwatch.com/story/these-are-the-most-important-things-to-check-on-a-stocks-quote-page-before-deciding-whether-to-buy-or-sell-11630783155?mod=home-page. Accessed Sept. 6, 2021.

³ Andrew Beattie. Investopedia. Jan. 10, 2021. “The 4 Basic Elements of Stock Value.” https://www.investopedia.com/articles/fundamental-analysis/09/elements-stock-value.asp. Accessed Sept. 6, 2021.

⁴ Dayana Yochim. NerdWallet. Aug. 18, 2021. “How to Research Stocks.” https://www.nerdwallet.com/article/investing/how-to-research-stocks. Accessed Sept. 6, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

9/21 – 1838013C

While extreme weather events typically affect only certain parts of the country, there is increasing concern that climate change will affect the overall economy – including our investment portfolios.

For this reason, the federal government is making composition changes to the Thrift Savings Plan (TSP), the retirement plan for federal employees. The TSP currently holds more than $762 billion in assets, making it the world’s largest defined contribution plan. Starting in 2022, the plan will offer participants the opportunity to customize their individual portfolios by choosing from more than 5,000 funds, which may include environmental, social, and corporate governance (ESG) options.¹

Other developed countries are ahead of the U.S. when it comes to promoting ESG options among federal pension funds. A recent report from Europe found that participants who invest their federal pension money in environmentally conscious companies are at least 20 times more effective at removing carbon compounds from the environment than those who take other actions, such as reducing their airline flights and using alternative energy. In the past, the choice to invest in green companies generally meant a trade-off for lower returns. Now, repositioning assets to support ESG companies is taking precedence to greatly reduce the world’s carbon footprint at a faster pace.

In the U.S., some economists believe that the combination of long unsolved problems — such as the pending insolvency of Social Security — coupled with climate change and the recent economic damage created by the pandemic, is going to generate long-term income issues for retirees.

Olivia Mitchell, a Wharton School professor who specializes in retirement income research, had this advice for retirees. “People are just going to have to work longer if they possibly can. And if they can’t, they’d better start looking to move where they’re not subject to drought, fires, floods, hurricanes and all the other things that climate change brings with it,” Mitchell said. She also emphasized that those nearing retirement age should consider downsizing their homes, buying an electric car or growing a vegetable garden “because we’re going to need to be more self-reliant in this new world.”²

When it comes to retirement planning, self-reliance may not always be your best option. That’s our business, so please contact us to help you devise a multi-faceted income plan for the future.

Farmers also are looking for ways to create more sustainable crop generation for the future. The traditional blueprint is to clear trees for vast spaces of land to raise livestock and plant rows of single crops, which are called monocultures. At present, about half of all habitable land is used for growing food, and the globe is running out of room to meet this demand. A new trend in farming is called agroforestry, which is the blending of trees, crops and livestock to create more sustainable yields. In fact, certain trees feed nitrogen into the soil, which eliminates the need for excessive fertilization. In some areas, the mix has produced up to 40% more than same-crop monocultures. Today, less than 2% of U.S. farmers practice agroforestry. There is enormous potential to deploy this farming technique to better protect farmland from the ravages of climate change while at the same time generating higher crop yields.³

According to Morgan Stanley, one overlooked investment sector is the electrical industry. It has recently been overshadowed by high-profile investment themes such as electric vehicles, grid modernization and distributed power. However, these innovations are all electrical equipment, a long-standing, lower-risk investment sector with explosive growth potential for the future industrial economy. Market analysts at Morgan Stanley project that the “electrification” theme could produce 6% compound annual growth throughout the next two decades.⁴

These investment opportunities are key to boosting both the future of the United States and our individual financial viability. Fortunately, the largely bipartisan infrastructure bill currently under consideration in Congress can further support these goals. As the largest federal allocation to infrastructure projects since the Great Recession, the investment gives a nod to the saying “you have to spend money to make money.” While it is expected to contribute to growing government debt, analysis by the Penn Wharton Budget Model refers to the investment as “productive assets” that will not only produce jobs and yield a higher income tax base but also generate improved transportation to help private firms get goods to market at a lower cost.⁵

Content prepared by Kara Stefan Communications.

¹ Knowledge@Wharton. August 16, 2021. “Should the Federal Government ‘Green’ Its Pension Plan?” http://www3.weforum.org/docs/WEF_Davos_Lab_Youth_Recovery_Plan_2021.pdf. Accessed Aug. 20, 2021.

² Ibid.

³ Johnathan Lambert. Science News. July 14, 2021. “Mixing trees and crops can help both farmers and the climate.” https://www.sciencenews.org/article/trees-crops-agroforestry-climate-biodiversity. Accessed Aug. 20, 2021.

⁴ Morgan Stanley. July 29, 2021. “Plugging into the Electrification Supercycle.” https://www.morganstanley.com/ideas/electrification-grid-energy-transition-opportunities. Accessed Aug. 20, 2021.

⁵ Knowledge@Wharton. August 16, 2021. “How the $1 Trillion Infrastructure Bill Would Impact the Economy.” https://knowledge.wharton.upenn.edu/article/how-will-the-1-trillion-infrastructure-bill-impact-the-economy/. Accessed Aug. 20, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

9/21 – 1822273C

The mid-year U.S. economic recovery numbers look strong. On Wall Street, analysts predict that our economy will expand by trillions of dollars and create 2 million good-paying jobs throughout the next 10 years. However, despite nearly 1 million jobs reported in July alone, the White House cautioned that the resurgence in COVID-19 cases among unvaccinated Americans could set us up for an economic relapse in the remainder of the year.¹

While the U.S. lags in vaccination numbers, other countries are starting to pick up the pace. This could mean that our foreign competitors excel for the rest of the year while the U.S. plateaus. Overall, experts say the world economy is nearly restored to its pre-pandemic size, showing remarkable resistance in the wake of the first global pandemic in memory. Unfortunately, the International Monetary Fund (IMF) reports that the recovery is lopsided due to the rate of vaccinations. At the end of July, 40% of the population in advanced economies had been fully vaccinated whereas only 11% of emerging market (EM) economies could say the same.²

We can view this lopsided recovery in two ways. One is to be cautiously optimistic and invest in well-established performing securities that have weathered difficult events in the past. The other is to look at weak areas of the market as investment opportunities. When you believe a company, industry, or geographic region is well-poised to eventually recover, buying shares now at a bargain price could prove rewarding for those with a long-term outlook. However, your investment style is as unique as your financial circumstances, so it’s best to consult with an investment advisor to help you determine appropriate strategies for your situation. Contact us for advice today.

The market analysts at T. Rowe Price appear bullish on China, which currently has more than 5,200 public companies listed on the country’s exchanges — more than in the U.S. Despite the economic fallout from the pandemic, nearly 900 Chinese companies launched initial public offerings (IPOs) between the end of 2018 and June of this year.³

According to Merrill Lynch, consumer spending in developing countries will be a tremendous market influence once we’re on the other side of this pandemic. The United Nations reports that the developing world now constitutes about 41% of global personal consumption expenditures. This is the reason the wealth manager believes growth investors should allocate some portion of assets to EM equities.⁴

The United Kingdom had to initiate multiple lockdown restrictions starting last spring but was able to reopen its economy by the end of July thanks to higher vaccination rates. And yet, as of early August, there were six countries in the European Union that had actually exceeded the U.K.’s vaccinated population levels: Malta, Belgium, Spain, Portugal, Denmark, and Ireland. In recent months, the vaccine rate in France nearly doubled after their president imposed rules that banned citizens without proof of vaccination or a negative test from visiting restaurants, movie theaters, museums or travel on long-distance train routes. Denmark, Italy, Greece, and Germany have all adopted similar penalty-based vaccination plans.⁵

Interestingly, the U.S. has now entered an economic phase for which consumers are likely to be the greatest influence on our growth prospects in the near term. That’s a rather unique phenomenon — and an opportunity to yield control over our own destiny.

Content prepared by Kara Stefan Communications.

¹ Christina Wilkie. CNBC. Aug. 6, 2021. “Biden skips victory lap after strong July jobs report warns of economic peril from rising Covid cases.” https://www.cnbc.com/2021/08/06/biden-warns-of-economic-peril-from-covid-despite-july-job-gains.html. Accessed Aug. 6, 2021.

² Tom Fairless, Stella Yifan Xie and Aaisha Dadi Patel. The Wall Street Journal. July 30, 2021. “World Economy Caps Extraordinary Return From Covid-19 Collapse.” https://www.wsj.com/articles/world-economy-caps-extraordinary-return-from-covid-19-collapse-11627643509. Accessed Aug. 6, 2021.

³ T. Rowe Price. June 2021. “Positioning for a New Economic Landscape.” https://www.troweprice.com/content/dam/iinvestor/resources/insights/pdfs/positioning-for-new-economic-landscape.pdf. Accessed Aug. 6, 2021.

⁴ Merrill Lynch. July 2021. “Whispering Winds.” https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/Viewpoint_July_2021_Merrill.pdf. Accessed Aug. 6, 2021.

⁵ Jon Henley. The Guardian. Aug. 6, 2021. “Six EU states overtake UK Covid vaccination rates as Britain’s rollout slows.” https://www.theguardian.com/world/2021/aug/06/six-eu-states-overtake-uk-covid-vaccination-britain-rollout-slows. Accessed Aug. 6, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions

8/21 – #1771282C

Young adults have weathered difficult times the past two decades: mass school shootings, extreme weather conditions, student loan debt, and a global pandemic. But now they’re witnessing an unprecedented job market, where even those with little to no work experience can dictate their own terms.

It’s important that we steer our young adults to good saving and investing habits now, while they have the capacity to earn increased income. This job market may not always be the reality, so it’s good to build a treasure chest when they have the opportunity. Here are some tips to get them started:

Invest when you’re young. You don’t have to wait until you have a lot of money — the power of compounding interest makes time your greatest ally. When you start early, you can accumulate substantially more wealth with less invested capital than if you start investing later. In fact, you can start small — $50 to $100 a month — and increase the amount as you earn more. Investing regularly and automatically allows your money to work even harder than you do. The advantage of starting an investment program before you start making a lot of money is that you learn to live on less. Always strive to live below your means.¹

Many graduates just starting out in the work world barely earn enough to make ends meet. There is one way to empower your ability to save a portion of what you do earn: Take control of your vocabulary. Instead of saying, “I can’t spend that much money” for something you want, say “I don’t want to spend that much money.” The second version implies that you are making a choice, and you choose not to overspend.² We’d be happy to help you open an investment account and determine where to invest your savings every month. It’s never too early to start and no amount is too small to get started.

Diversify. Don’t invest all your money on one big stock tip you read about or receive from a friend. Spread it out over a portfolio of investments, which is less likely to lose money. The market will go up and down, but the way to protect your portfolio is to have some investments performing well while others don’t. The easiest way to do that is through a mutual fund or exchange-traded fund (ETF).³

At some point, you’ll want to establish a strategic asset allocation. There are three basic types of assets: stocks, bonds, and cash instruments (like CDs and money market accounts). Stocks represent the biggest risk — meaning a higher chance of losing money for the potential of higher gains — followed by bonds, then cash. As a general rule, the younger you are, the more you’ll benefit from a higher allocation to stocks, but you may want to allocate a portion to bonds and cash as well.

It’s particularly important to establish an emergency fund for your cash account. That way if any big expense comes up — like a car repair — you won’t have to tap your investments to pay for it. The longer your money stays invested, the better its potential to grow (and the lower your risk of losing it). Asset allocation is similar to diversifying your investments, but it’s more strategic because you maintain that balanced mix of stocks, bonds, and cash.⁴

Invest tax-deferred. Even if your employer doesn’t offer a retirement savings account, you can open your own. Anyone with earned income under age 50 can contribute up to $6,000 a year to an Individual Retirement Account (IRA), in which you choose which securities to invest. With a “traditional” IRA, you can deduct that amount from your current income taxes, and the account grows tax-deferred until the money is withdrawn. If you open a Roth IRA, you don’t get the tax deduction, but you won’t have to pay taxes on withdrawals (as long as you don’t take out money for at least five years from your first contribution).⁵

Whether graduating from high school or college or transitioning with some time off, don’t get too wrapped up in the pursuit of money. Pursue your interests, and the money will likely follow. Invest time in learning about the job(s) that interest you while also investing in meaningful friendships and worthwhile hobbies that develop healthy habits and expose you to new opportunities. Start now and your rewards will grow with time. Your career, friends, family, and activities are all seeds you plant now for a secure and happy future.⁶

Content prepared by Kara Stefan Communications.

¹ John Woerth. Vanguard. June 18, 2021. “Investment advice for recent grads.” https://investornews.vanguard/investment-advice-for-recent-grads/. Accessed July 5, 2021.

² Vanguard. January 12, 2021. “Want to set financial goals that stick this year? Start with one word.” https://investornews.vanguard/want-to-set-financial-goals-that-stick-this-year-start-with-one-word/. Accessed July 5, 2021.

³ John Woerth. Vanguard. June 18, 2021. “Investment advice for recent grads.” https://investornews.vanguard/investment-advice-for-recent-grads/. Accessed July 5, 2021.

⁴ Vanguard. January 11, 2021. “Choosing an asset allocation.” https://investornews.vanguard/choosing-an-asset-allocation/. Accessed July 5, 2021.

⁵ Fidelity. 2021. “IRA contribution limits.” https://www.fidelity.com/retirement-ira/contribution-limits-deadlines. Accessed July 5, 2021.

⁶ Chasity Holt. Fidelity. April 19, 2019. “5 tips for new grads.” https://www.fidelity.com/spire/career-building-tips-college-graduates. Accessed July 5, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference. 8/21-1745738C