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2023 Market Outlook: Financial Factors Shaping the Year Ahead

2023 Market Outlook: Financial Factors Shaping the Year Ahead

For the first time since 2018, the S&P 500, along with most other major indices had a negative return for the calendar year in 2022. Financial buzzwords like inflation and interest rates appeared constantly in the media and social media, and rightfully so with the role they played. Meanwhile, conflict abroad, unfortunately, came into the spotlight with the invasion of Ukraine, sending a global shockwave that had a large impact financially.

Those were just a few of the headlines we saw last year. While they undoubtedly shaped the financial picture for many, there was plenty more at play. We explore the investing trends that developed – or continued to develop – in 2022, and look toward the year ahead in our third annual market outlook. You can read the entire outlook and more about each of the pieces in this year’s publication below.

Questions about any of the pieces in this year’s outlook? Send us an email at [email protected].

Syl Michelin, CFA

Syl Michelin, CFA

US Expat Financial Advisor

A Bear Market in Search of a Recession: 2022 Recap & 2023 Market Preview

In his cover story for this year’s outlook, Syl Michelin, Walkner Condon’s resident Chartered Financial Analyst, addresses the question of whether we’re headed toward a recession. Drawing on data from prior recessions as well as data on current economic conditions, Syl points to the idea that perhaps a recession isn’t imminent.

Mitch DeWitt, MBA, CFP®

Mitch DeWitt, MBA, CFP®

Financial Advisor

Playing It Safe? The State of the Fixed Income Market

One of the investing topics we heard a lot about in 2022 – and that we covered on the Gimme Some Truth podcast – was the bond market. In a bad year for stocks, bonds also had a rough go of things. Mitch DeWitt dives more into the state of fixed income heading into 2023.

Nate Condon

Nate Condon

Financial Advisor

Geopolitical | Conflict Plays Pivotal Role in Tumultuous 2022

The war in Ukraine had wide-reaching consequences in 2022 and played a large part in the financial challenges throughout the year. Nate Condon discusses the geopolitical headlines from 2022 and how they affected the markets.

Jonathon Jordan, CFP®, CEPA

Jonathon Jordan, CFP®, CEPA

Financial Advisor

Housing Market | Will Rates Stay This Way?

Mortgage rates had a record year in 2022, but not in a good way. According to data from Freddie Mac’s Primary Mortgage Market Survey, mortgage rates rose more than any previous year on record, climbing by 3.2% to end 2022 at almost 6.5% on average. Jonathon Jordan covers what we saw in the housing sector last year and what might be on tap in 2023.

Alicia Vande Ven, MS, Candidate for CFP® Cert.

Alicia Vande Ven, MS, Candidate for CFP® Cert.

Financial Advisor

Slice of Life | How to Stop Making Bad Financial Decisions

Many of us know that a financial decision may be unwise before we make it. Yet, we still go through with it. In this piece, Alicia Vande Ven dives into the behavioral psychology of making bad financial decisions, and how we can correct the thinking that leads us astray. 

Clint Walkner

Clint Walkner

Financial Advisor

Investment Trend | The Rise of Direct Indexing

A hundred years ago, people primarily invested in individual stocks through stockbrokers. Mutual funds changed the game, followed by the further advances – and a decrease in investing costs – brought on by exchange-traded funds in the early 2000s. As Clint Walkner, explains in this piece, direct indexing, one of the newest investment options targeted toward high-net-worth individuals, is a move back to the future, of sorts. 

Stan Farmer, CFP®, J.D.

Stan Farmer, CFP®, J.D.

US Expat Financial Advisor

Currency | The End of the Dollar Bull Run?

Along with the outperformance of U.S. stocks compared to international stocks over the past decade, the dollar has also been in a period of outperformance compared to other currencies. In this piece, Stan Farmer assesses the factors at play that could contribute to a potential end to that run for the dollar, and how investors, particularly Americans living abroad, can adjust accordingly in 2023.

Keith Poniewaz, Ph.D.

Keith Poniewaz, Ph.D.

US Expat Financial Advisor

International | A Tale of Two Markets

Drawing an analogy with Charles Dickens’s “Tale of Two Cities,” Keith Poniewaz analyzes the international markets in 2022 (not quite the best of times, but not as bad as U.S. equity markets) and foreign currencies being hit hard by the dollar (the worst of times). The conclusion? There may be opportunities in international markets in 2023.

The Financial and Psychological Impact of Returning to the Workforce After a Long Absence

The Financial and Psychological Impact of Returning to the Workforce After a Long Absence

Going back to work after nearly 11 years was an exciting and daunting prospect. For me, it was also a career change. I was diving into a new job in a new industry armed with a freshly completed Master’s degree and an infectious enthusiasm for my newly chosen profession. My kids – ages 11, 8, and 8 (yes that’s right, twins) – went back to school this fall, and I went back to work. 

Why Return to the Workforce in the First Place?

I was fortunate enough to be in a position where I didn’t have to work. My husband made enough money to support our family, and we had lived comfortably off one income since our son was born. My desire to reenter the workforce had more to do with my need to get out of the house (especially after COVID), be intellectually challenged, and have a positive impact on the lives and finances of others. Financial planning, done right, is a helping profession, and I couldn’t wait to help people.

Justifying Work over Childcare & Household Responsibilities

However, given the lack of financial need our family had, I struggled to justify putting my job ahead of my childcare and household responsibilities. Spoiler alert, it’s impossible to go back to work full-time (or even part-time) and still do everything you were doing before. Something had to give. 

In addition to the shifting of responsibilities, I had to decide how to allocate the new income I was bringing in. During the years I stayed home, I dutifully contributed the $6,000 per year to my spousal IRA, but that just doesn’t add up that fast, especially when compared to what my husband was accruing in his 401k account with an employer match. Once I became eligible for the 401k plan at my new job, I made the election to contribute 100% of my paycheck to the plan through the end of the year. I was only eligible for a couple of months, so I would be well short of the annual limit, but I can tell you it’s a bit odd to get a $0 paycheck. I had to shake the feeling that I was shifting responsibility to my husband and my kids in order to bring home no extra income. 

Not Alone in the Back to Work Struggle

I thought I was in a unique situation. I was going back to work for a salary that paled in comparison to my husband’s, feeling like I was putting more strain on our time and lives for less compensation. 

But, as I started talking to clients and friends, I realized that I wasn’t alone. There are many spouses who struggle with the decision to go back to work once their kids get older. There are spouses who struggle with the decision to go back to work even when their kids are little, especially if the cost of childcare is as much or more than they are making by working. It can feel like you are working for “nothing”. 

The high cost of childcare is a whole other topic that I’m not going to get into here, but I can say that the decision to go back to work is about much more than the impact on the family’s finances. It’s about the mental, social and personal value it provides. Ultimately, the trade-off for me going back to work is measured in more than dollars. It’s about my need for fulfillment outside the home, my happiness, and also my desire to begin building a career that I will continue long after my kids have grown and gone out on their own.

My Financial Approach for Career Compensation in 2023

My plan for next year is to contribute the maximum amount to my 401k (which is $22,500 for 2023). I’m also going to still contribute the maximum amount to my IRA ($6,500 for 2023). I think it’s tempting to not max out your retirement account contributions to feel like you are making a bigger financial impact for your family today. But, I would argue that by maxing out those retirement contributions, you’re having an even bigger financial impact on your family’s future.

The time value of money is the concept that a sum of money is more valuable today than the same sum in the future. That’s why we expect to be paid interest when we save or invest our money instead of spending it. We need to know that the money we aren’t spending now will be worth more in the future and that we are getting enough of a benefit by delaying that gratification. There is not only value in the money that I’m saving for retirement, there is value in the investment I’m making into my career, that (I’m hoping) will pay off in the future.

Mental Accounting and the Value of Your Career

A behavioral bias called mental accounting causes us to view the money we earn differently than the money our spouse earns or the money we get from another source. But, assuming you have combined family finances, a dollar is a dollar regardless of where it comes from. You want to be sure you are allocating your family’s dollars in the most efficient way, while also ensuring that your spending and saving are aligning with your goals and values. 

Perhaps the biggest hurdle though, especially for me, is valuing my decision to go back to work from a happiness and fulfillment perspective, not purely a financial one. You could make the same argument for why you might choose to stop working. It may be tough on your finances to lose that income, but worth it due to other reasons like health, happiness, and family. 

Our financial decisions are never based purely on how they affect our finances. We must also examine how those decisions will impact our lives and the ability to do the things we want to do, whether that is spending more time with family or building a career.

ABOUT THE AUTHOR

Alicia Vande Ven, M.S.

FINANCIAL ADVISOR, CANDIDATE FOR CFP® CERT.

Alicia Vande Ven, M.S., Candidate for CFP® Certification, is a fee-only, fiduciary financial advisor who works with clients locally in Madison, WI, and around the country.

2022 Investment and Market Outlook Guide

2022 Investment and Market Outlook Guide

Walkner Condon’s team of experienced financial advisors explores key topics that are top-of-mind as we transition out of 2021 and into a new calendar year, featuring the market outlook and review from Syl Michelin, a Chartered Financial Analyst™. Other topics include index funds, sector & factor performance, a pair of U.S. expat-focused pieces, and more.

Below you can find a breakdown of the individual pieces in this year’s outlook. 

1. The Year of Impossible Choices: 2021 Market Recap & 2022 Outlook
Syl Michelin, Chartered Financial Analyst

Through a lens of current and historical data, Walkner Condon’s resident CFA® explores the last year in the markets, with an eye on factors that may impact 2022. 

2. It Only Gets Harder from Here: Valuations, Bond Environment & Wage Growth
Clint Walkner

With a multitude of market highs throughout 2021 and a long stretch of gains post-2008 financial crisis, it would appear the “easy” money, if we can call it that, has been made. In this piece, Clint dives into the three main challenges as we move forward into 2022.

3. Reviewing 2021 Sector and Factor Performance and Positioning in 2022
Mitch DeWitt, CFP®, MBA

The markets were up routinely throughout 2021, but that doesn’t mean the gains were shared equally. Mitch discusses the sector winners (and losers) of the last year, along with what factors – things like high beta, value, and quality – had their day in the sun. He also goes into what might be on the horizon this year.  

4. Exploring Index Funds: History, Construction, Weightings & Factors
Nate Condon

The goal of this piece from Nate is to provide a general overview of indexes, the differences in how indexes are constructed, including equal-weighted indexes versus market capitalization-weighted indexes, and passive and factor indexing strategies.

5. Three Reasons to Look at Investing Internationally in 2022
Keith Poniewaz, Ph.D.

Though the U.S. dollar had its best year since 2015 in 2021, Keith explains several reasons to think about international investments in 2022, including the very strength of that U.S. dollar, valuations, and the rest of the world’s growth in GDP.  

6. Top Five International Destinations for U.S. Expats in 2022
Stan Farmer, CFP®, J.D.

One of our U.S. expat experts, Stan jumps headfirst into possible locations for Americans to consider in 2022 if they’re thinking about a move abroad – or even if they’re just wanting to dream a little bit. Stan covers ground in South America, Europe, and Asia in this thorough piece, perhaps his first crack at being a travel journalist in his spare time. 

Remembering an American Hero – Gary Beikirch, Congressional Medal of Honor Recipient

Remembering an American Hero – Gary Beikirch, Congressional Medal of Honor Recipient

On Dec. 26, 2021, Gary Burnell Beikirch passed away. Most do not know this name; however, I have learned through my life that he has had a tremendous impact on many people, and his legacy will live on in the lives of those he blessed and in American history. The actions that he took on April 1, 1969, changed Gary’s life forever and had a notable influence on the future of this Special Forces Combat Medic for the U.S. Army. I want to share a bit about Gary Beikirch in this piece because I was blessed to know him.

Back in the year 2000, I met a girl while working in upstate New York. We decided to get married and start a future together. After getting engaged, we were both broke, so we made the move to her hometown of Rochester, New York. During our engagement, I needed to find a place to live, but I knew absolutely nobody in Rochester – keep in mind this was before the days of Zillow, Redfin, and all the other digital home and apartment search tools. A family friend of my future in-laws offered to have me stay in their basement during this time for free. I could not have felt more blessed. The couple was Gary and Lolly Beikirch. 

During my time there, I frequently went upstairs when I was not working and spent time with them. I remember that Gary would often rest after a long day as a middle school guidance counselor and would fall asleep while talking to me. I didn’t think anything of it at the time, but I soon found that the man I was talking to was an American war hero. I was using their computer one evening and waiting for the whirr-kssshh-de-do of the dial-up modem to connect when I noticed on his bookshelf a couple of photos and what looked like military medals. There was a Purple Heart, photos with Norman Schwarzkopf and Colin Powell, and then an empty case that said Congressional Medal of Honor. I immediately researched what this medal was for and soon learned that it is the highest award from our government for acts of valor. And here I am, a 22-year-old living in this man’s basement, and he never once told me about it. It now made sense to me why he was always talking to me about humility and being a servant leader. I will never forget those talks or the lessons that I learned from Gary and his wife. He even told me that the reason it was empty is that he had lent it to a local pastor who was using it in a sermon about sacrifice.

Years later, I was at a conference with friends in Milwaukee and the speaker began telling a story about having “battle buddies” in life. The kind of people that you can call at any hour, and you know that they will be there for you. He said that he had a battle buddy that served in Vietnam the same time that he did but they did not meet until years later back in the United States. As he was telling the story of this man, it suddenly occurred to me that he was speaking about Gary! I excitedly told the person next to me that I used to live in the basement of the man he was talking about, which caused him to look at me like I was crazy! He then said “my battle buddy is a hero and a recipient of the Congressional Medal of Honor. But most importantly, he is my friend that I can call at 3 a.m. for anything, and he will be there for me. His name is Gary Beikirch.” Later that evening in 2013, I called Gary and Lolly to tell them about it and catch up. It was truly a blessing for me to have them in my life. 

I wanted to share this story because Gary recently passed away due to cancer, though his legacy will live on forever. He risked his life and showed the man that he was when the battle was raging around him. He used that the rest of his life to make a difference in the lives of others. You can read more about the bravery of Gary Biekirch here or see his official Medal of Honor bio. I am incredibly grateful for Gary. He’s one of the many men and women I have had in my life who have helped shape me and my perspective of how I can have an impact on others’ lives.

Jonathon Jordan, CFP®, CEPA

Financial Check List for the End of the Year

Financial Check List for the End of the Year

There is a small, but distinct, satisfaction that comes from crossing items off of a list. The immediate sense of accomplishment gives us a boost that propels us to the next thing on the list. Whether it is a chore list on the weekend or items off a grocery list, we, as a whole, increase our productivity when we have a set of priorities. 

Our financial lives would benefit from a task list just the same. As we move through 2021 with Covid still in the news and the stock market enjoying another great year, we should keep in mind that there are still things to accomplish pertaining to our finances. Think of this as a mid-year financial checklist: 

1: Fund your IRA, HSA accounts

If you have personal retirement accounts, such as Roth or Traditional IRAs, be aware of how much you have contributed to this point and how much you plan to fund before April 15, 2022. The maximum contribution amount for Roth or Traditional IRAs for 2021 is $6,000, or $7,000 if you are over the age of 50. Monthly systematic contributions plans are a great way to fund these accounts; however, many of these plans were set up years ago when the contribution limits were lower. You may not be max funding your account if you haven’t increased your monthly amount within the last few years. Health Savings Accounts are another great way to save money in a tax-preferred way. Not everyone is eligible for an HSA, so check to make sure you qualify. The 2021 contribution limit for individual HSA accounts is $3,600 and $7,200 for family accounts. 

2: Complete your RMDs from IRA, Beneficiary RMD

Required minimum distributions, or RMDs, are annual distributions from IRA accounts. In 2020, required minimum distributions were suspended and have been reinstated for 2021. Recent legislation has increased the age for RMDs to 72 for tax-deferred IRA; however, inherited IRA accounts have different distribution restrictions, so be aware if you are the owner of an inherited IRA as you may need to take distributions prior to age 72. RMD’s must be taken by December 31 of each year, except in the year that you turn 72, in which you have until April 1 of the following year. It is the responsibility of the IRA owner to ensure that the total RMD amount due is withdrawn each year and that the calculation takes into consideration all of their tax-deferred IRA assets.  

3: Verify your 401k, 403b Contributions

The maximum amount that employees can contribute to their 401k or 403b accounts for 2021 is $19,500, with an additional $6,500 allowed if the employee is over the age of 50. This maximum contribution amount has been increasing over the last few years so it is important to verify the amount coming out of each paycheck if your desire is to max fund your account. These limits do not take into consideration any match provided by your employer. Most employers offer flexibility in making and changing contribution amounts, so you could increase your amount mid-year if you are not on track. Also, be aware that many of the 401k or 403b plans now offer a Roth option within their plan. This doesn’t affect any Roth IRA contributions. 

4: Check Your Mortgage Rate For Possible Refinance Opportunities

I fully realize that the mortgage refinance discussion is becoming quite repetitive at this point, but it does bear repeating. The current mortgage rates are under 3% for a 30-year fixed mortgage, and the 15-year mortgage rate is in the low 2% range at many lending institutions. We generally advise looking into a mortgage refinance if you are planning on staying in the home for at least 3-5 more years and a rate reduction of at least .5%-.75%. That said, everyone has a different financial situation and should consult with a financial advisor or mortgage specialist prior to making a final decision. For many people who have refinanced within the last few years, another refinance may not be appealing; however, it would behoove you to look into this option again if the variables are in your favor. 

5: Review Your Cash Position, Travel Expenditures

Take time to review your current cash position and the amount of cash you prefer to have at any given time. A person or family’s cash position is an interesting subject within the world of financial advising. We have clients who need six-figure cash positions to feel comfortable, while other clients desire to hold small cash positions as they don’t like “money on the sidelines.” We like to frame this conversation by taking into consideration any other investment and retirement accounts. For example, a client with a large taxable account can afford to get away with a smaller cash position in contrast to a client with all of their non-cash assets in IRA or 401k accounts, where liquidity provisions are more onerous. We strongly believe that every well-built financial plan has a healthy cash position to cover job losses, emergency expenses or unexpected travel. The current low-rate environment is creating a challenge to find a decent return for cash; however, safety is the main job for this portion of your financial plan. 

This is not a comprehensive list, by any means, but I hope this makes you think about a few things to review between now and the end of the year. We are more than happy to discuss any of these items with you and how they pertain to your overall financial plan.

Nate Condon

Three Tips For Improving and Organizing Your Email Experience

Three Tips For Improving and Organizing Your Email Experience

As I was sitting down to write, my intention was to go through growth versus value investing. While still an important topic – one I touched on in this video – I instead chose to write about something non-financial that has impacted my life recently, something that warrants sharing. 

At the time of writing this, masks are getting put back on as the Delta variant takes hold, and potentially, lockdowns could be back on the table. All of this can certainly cause stress, especially as COVID-19 lingers on longer and stronger than many anticipated.

Doing something that allows you control – and also the ability to declutter – can be helpful to reduce stress and put you in a better mindset. In fact, there’s quite a bit of internet literature that discusses the benefits tidying up can have on mental well-being. And decluttering doesn’t just apply to our homes or apartments; it’s just as, if not more, important for our digital environments. So, I chose to focus on organizing my digital life, namely my email. If you’re like me and are (somewhat?) neurotic about keeping a clean inbox, here are a few things I did to better organize my email:

Create Filters to Organize your Email More Efficiently 

Do you have some emails that come to you every day that you don’t want to remove but you want to mark them as read or archive them? Most mail programs can do this, but I use Gmail myself and will show examples from that email provider. If you go to your “settings” and then “filters”, you can create a filter that takes emails and does something with them. 

For example: 

Matches: from:([email protected]); Do this: Mark as read

I have an automated email that sends me five separate emails a day for each of my portfolios, so this is helpful to keep unread emails from piling up. If we take this one step further, I have also created labels that will automatically categorize and group certain emails. 

For example: Matches: from:([email protected]) Do this: Mark as read, Apply label “IBKR Notices”, Categorize as Updates.

Opt Out of (Almost) Everything!

After organizing my current email, I turned to a problem with both my personal and professional email – I am subscribed to WAY too many newsletters. For the last few weeks, I have been vigilant in unsubscribing from almost every newsletter service that has come across my inbox. I figured that if I really needed it, I could go back and resubscribe at a later date. This literally is over 100 that I have taken the time to remove, but after a few weeks of doing this, there is a massive difference in how many emails I receive daily. There’s also the added benefit of having less of my personal information out in the internet ether.

Protect Your Email Privacy

Maybe I’m a little late to the party, but I read this article about the Gmail app and some of the privacy concerns it has. It’s important to remember that if you have a free Gmail account that a massive amount of data gathering and tracking will occur. I haven’t yet moved exclusively over to my iCloud account (which everyone that has an Apple ID should have), but I am strongly considering it. As a half step, I have removed the Gmail app from my phone and pull my Gmail through the Apple Mail app.

I hope that these few small suggestions can help you uncover some ways to organize your digital life and reduce the amount of stress it can give you. Additionally, I have found that you will likely save money by removing many of the “sales” that are offered to you on a daily basis!

Clint Walkner