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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

Creating a Culture of Philanthropy

Creating a Culture of Philanthropy

New to the Walkner Condon team, I come from 10 years of fundraising for non-profit organizations. Whether it was promoting wildlife conservation or helping to eradicate preventable diseases (which feels especially poignant these days), my career in charitable giving has cemented my understanding of the importance of philanthropy.

I have had the privilege of working for some highly reputable organizations, but I have also had the privilege of working with a highly diverse swath of donors and volunteers – ages, nationalities, and socioeconomic backgrounds. 

Taking some time now to reflect on my tenure in charitable giving, I have noticed a common thread among those generous donors and volunteers. No matter the size or shape of their gifts, they subscribe to a culture of philanthropy. Somewhere along the way, the importance of giving back was impressed upon them. Perhaps their families have supported the same causes for years, or perhaps they themselves were beneficiaries of gifts that changed their lives. Regardless, experiencing a culture of philanthropy instilled the importance of exploring the many ways in which we can all make the world a better place.

But where to start? Depending on the charity, gifts can be made in several different ways – for example, outright cash, monthly sustaining gifts, gifts of appreciated assets such as stocks, IRA qualified charitable distributions (QCDs), as well as giving posthumously from your estate. But beyond that, giving can also take the form of volunteering and advocacy for your favorite organization(s). Is there a cause that you find important or an organization that intrigues you? Research it! Visit that charity’s website, send an inquiry to their volunteer office, or do the really fun task of reading their annual reports. 

Some families have established family foundations that allow and ensure their culture of philanthropy transcends generations. But for the majority, it can be as simple as taking the small step of making room in our monthly or annual budget for this purpose. Perhaps it’s a monthly contribution to your favorite cause. Or perhaps you choose 2-3 charities to give to each December. And even beyond financial support, consider the other resources you have to offer (time, talent, etc.).

Deciding where and what to give can be a solo decision – or one that you make together as a family. We know our kids are watching and learning from us as we talk about money, so why not include them in the discussion? Instilling this culture of giving back at an early age can be critical and lead to a legacy of giving.

If you ever think a gift is too small to make a difference, I would challenge you to reconsider. Think about that “small” gift combined with hundreds of other families doing the same thing. That “small” gift now becomes something substantial. And not to mention, that act of giving can turn into a habit or inspire others to join you, especially those in your own circles of influence.

We all know how it feels when asked to contribute to a friend or family member’s fundraiser for this or that. All are important and worthy to support, but might be difficult to prioritize. So maybe create some space in your budget for those individual fundraisers that pop up. It may even give you a sense of security knowing you can be there for those who need you when they need you. Plus, you are demonstrating to your children (or other impressionable connections) that you can care passionately about something and actually do something about it.

In the world we live today, there is no shortage of worthy causes. Just remember to do your research and ensure you understand where your money is going. Charity Watch and Charity Navigator are two great places to start.

This is one of the things I’m most excited about in joining the Walkner Condon team: learning the money management side of this equation. After all, thanks to smart financial planning, your family can create space for giving back and making your own brand of difference in the world.

While I leave behind a career of soliciting, processing, and stewarding donations, I look forward to helping our clients achieve their goals, whether that includes charitable giving or not.

But if you think about it, the simple act of giving once and talking about it with your children, grandchildren, nieces, or nephews, could be the inspiration and catalyst for creating your family’s culture of philanthropy.

Polly Price

Intersection of Sports and Investing: What is Invesco QQQ?

Intersection of Sports and Investing: What is Invesco QQQ?

As someone who has always loved college basketball, watching the Baylor Bears easily defeat the Gonzaga Bulldogs in the 2021 NCAA men’s basketball National Championship game and stop Gonzaga from going undefeated, a feat that has not been accomplished since Indiana did it in 1976, brought back a lot of memories. I’m a University of Virginia fan, and my childhood was filled with plenty of ACC and local high school games. I will never forget when I was in eighth grade and went to see a local prodigy from our rival high school, South Lakes, play against my Chantilly Chargers. Their star player was none other than Grant Hill, who proceeded to absolutely dominate our talented team with a barrage of dunks, 3-pointers, and superb defense. It was awesome to watch. The following year in 1992, he helped lead Duke to a national championship. Due to injuries, Hill had a long, but uneven, pro career and never was able to completely dominate as he did before. 

I couldn’t help but reminisce as I enjoyed this year’s coverage with Hill serving as an analyst for the tournament. It was hard to miss Hill because he was also a spokesperson for an ETF called Invesco QQQ, which was marketed heavily during the tournament. We have fielded a lot of questions about ETFs, and QQQ specifically, so I thought I would blog a little about it to help make sense of the hoopla, a unique intersection of my everyday life and passion for sports. 

What is an ETF?

Before we dive into Invesco QQQ, let’s first cover the basics of ETFs. An ETF is an Exchange Traded Fund that consists of a basket of stocks (or other investments) to diversify the risk. They are similar to mutual funds; however, they are traded on an exchange (Like the New York Stock Exchange) throughout the day and have some important differences that can have their advantages and disadvantages. Most ETFs are index funds as they attempt to mirror the performance of an index like the S&P 500 or Dow Jones Industrial Average. Because they are not usually actively managed, they generally have very low fees and can be traded on many platforms with no commission. They also have some tax advantages over mutual funds because they do not kick out capital gains to the shareholders regardless of a sale of the shares owned. Some mutual funds can even show capital gains when the value of the shares is down significantly at the end of the year! But on the downside, ETFs that are not actively managed can not move to cash or sell investments when they are up to buy others when they are down like an actively managed mutual fund attempts to do. This can hamper the ability to “beat the market” or as we call it “create Alpha.”

Big Man on Campus – QQQ

QQQ is the ticker symbol for a specific ETF that is offered by Invesco that invests in 100 Nasdaq companies such as Amazon, Apple, and Google. Many other companies comprise this specific ETF, but over the previous 21 years, it has amassed an enormous amount of investment and has become the fifth-largest Exchange Traded Fund in the world. It also is the No. 1 performing ETF in the Large-Cap Growth space during that time (out of 327 funds) through December 31, 2020. Large-Cap Growth funds are companies that have a capitalization of over $10 billion, and growth delineates that they have a 70% greater likelihood to grow than other large-cap companies. Many investors that like to have riskier portfolios are interested in things like QQQ because they offer the potential for greater returns if the companies grow and investors continue to buy shares and increase the value of the underlying company. We believe that investments like QQQ make sense as a part of an overall diversified portfolio and should be monitored and rebalanced regularly to keep that portfolio in alignment with your goals and objectives. If you have questions about QQQ and can’t get a hold of Grant Hill, we would be happy to have a conversation with you to see what would make sense in your portfolio. Like Hill’s career, QQQ is a standout, but if you watched his professional career vs. his high school and college career, you would understand why we remind clients that past performance is not always indicative of future success, and your results can never be guaranteed!

Jonathon Jordon, CFP®