As earnings season kicks off, all eyes are on the banking sector after the collapses of Silicon Valley Bank and Signature Bank. These bank failures are unlikely to have had an impact on first quarter earnings across the rest of the banking sector, but guidance and commentary from management teams will be in focus. Questions regarding the stability of deposits, changes to lending standards, and the potential for new bank regulation are likely to be the most prominent. Our sense is that: 1) deposits are generally stable, 2) lending standards will tighten to varying degrees across loan types, and 3) additional regulation and/or oversight is likely coming for regional-sized and community banks. The ultimate impact of recent events on economic growth is likely negative.

Analysts are expecting a 7% decline in first quarter earnings for S&P 500 companies relative to the same period last year, following a 6% drop in the fourth quarter of 2022. The largest detractors are in the materials, real estate, and healthcare sectors while consumer discretionary and industrials are expected to have been the main positive contributors. For the year, earnings are expected to be relatively flat, which is down from 10% growth expectations just a year ago as the economy has slowed amid higher interest rates. We could face additional downward pressure as we grapple with inflation and potential credit tightening slows business growth. Some economists and investment strategists are calling for an earnings recession but estimates have a long way to go before reflecting that viewpoint.



At first, the world thought it might be an April Fool’s joke when OPEC announced it was cutting production by 1.5 million barrels per day. But it was no joke. Why did the Saudis make this move and what does it mean? It appears that this reduction was a move lead by Saudi Arabia and Russia. This reduction represents about 3% of the world’s production and, as expected, the price of oil increased about $10 per barrel almost immediately. Both countries had an ulterior motive. Saudi has been under financial pressure over the past couple of years trying to keep the populace happy with the Saudi’s version of “free” money. Then they lost a massive investment in Credit Suisse when it collapsed. Russia has lost sales of oil after invading Ukraine and needs the money from a price increase to continue to finance itself and the war. So, will prices go up dramatically? While it remains to be seen, there are several forces to blunt this move. First, not all OPEC nations signed on to the deal and even those that did often cheat by selling more than their allotment. Next, other oil producing nations, especially the US, are starting to step up their own production in response. As a result, the hope is that oil finds a new price stability perhaps higher than it was, but lower than $100 per barrel. If the price increases only a little it will cause some inflation initially, but then lead to slightly lower consumption which would translate into lower prices. If, however, oil goes over $100 per barrel and is sustained at that price, it would clearly be bad for the world economy and increases the risk of a recession.



It feels like we receive daily updates on the new capabilities of AI (Artificial Intelligence), but what does all of it mean? Over the past decade, its capabilities have gone from simple arithmetic to complex analysis and problem-solving. New technologies have disrupted the workplace throughout history, but people are again asking themselves if their livelihoods are in jeopardy.

On one hand, AI is creating new career opportunities in fields such as data analysis, software engineering, and machine learning. These jobs require advanced technical skills and expertise that are not easily replicable by machines. AI can also offer economic opportunities by increasing companies’ production and saving valuable time for employees.

On the other hand, there is growing concern that AI will automate humans out of jobs. This fear stems from the fact that AI is good at performing repetitive tasks faster, more efficiently, and with a lower error rate than human labor. The result of this automation could mean significant job losses for workers in certain industries, leading to unemployment and shifts in the workforce.

The impact of artificial intelligence on jobs is complex, and there are potential benefits and drawbacks associated with its adoption. While AI can automate some jobs and create new ones, the challenge will be replacing those jobs that have been lost. Many experts agree that AI should be used as a tool to elevate workers, but not replace them entirely. Whatever happens in the AI space, we can all likely agree that we don’t want to hear, “I’ll be back.” Anytime soon.

Sources: The Robots Have Finally Come for My Job – WSJ

Artificial Intelligence 101: Why It’s Different This Time – The Wall Street Journal Google Your News Update – WSJ Podcasts



If you were born between 1946-1964, you are part of the group known as the “baby boomers.” That means the youngest boomer women are turning age 59 and the oldest age 77. A recent article noted that baby boomer women need advice on topics such as divorce, widowhood and poverty.i

Each topic brings up unique questions. Back in 2004, AARP coined the term “gray divorce” noting the growing trend of married couples over age 50 to divorce. Baby boomer women tend to be at a disadvantage in a marital breakup, especially if they were not the principal breadwinners. According to one study, the standard of living for women who divorce after age 50 declines on average by 45% compared to 21% for men.ii

For instance, divorcing baby boomer women should consider:

  • Hidden martial debt
  • What assets to keep that make you money (think investment accounts) versus assets that cost you money (think house and car)?
  • Determining an amount and duration of alimony
  • Life insurance costs to cover alimony
  • High cost of health insurance
  • Social Security benefits
  • Does mediation work for your situation?

At any stage of life, divorce takes an emotional and financial toll. Remember that as financial planners we are dedicated to providing “Financial planning for your life and lifestyle.”

Sources: i Lofton, Lloyd, “Baby Boomer Women Need Advice” https://www.thinkadvisor.com/2023/03/29/baby-boomer-women-need-advice/

ii Lauren Gray, “Your Standard of Living Plumments If You Divorce After This Age, Studies Say” https://www.yahoo.com/video/standard-living-plummets-divorce-age-200728451.html



According to The USA Wealth Report published by Henley & Partners, millionaires are moving from traditional northern cities of New York and Chicago, western cities like San Francisco and Los Angles and southern cities represented by Houston. Where are they going? Over the past ten years the cities of Austin, Greenwich, Miami, and Scottsdale have seen a 70%+ increase at the expense of cities like Chicago and New York. Having said that, New York still is number one when it comes to counting greatest wealth with 340,000 millionaires, 724 with a net worth of $100 million or more, and 58 billionaires. While Chicago has 124,000 millionaires, 295 $100 million plus and 24 billionaires. Over the past decade, San Francisco Bay Area grew millionaires at a 68% clip and New York at 40%, but Greenwich and Darien grew at 72%, Miami at 75%, Scottsdale at 88%, West Palm Beach at 90% and Austin doubled at 102%.



From Uber rides to cocktail parties, when we share our occupation, people typically want to know what stock they should buy. Or perhaps they ask about crypto or commodities – whatever is soaring and making headlines. The allure of making money overnight, whether it’s through new technology or an underappreciated growth story, is incredibly hard to resist. As such, our answer of “a well-diversified portfolio” is rarely appreciated.

Underappreciated though the maxim may be, the Tortoise and the Hare’s author, Aesop, had it right: slow and steady wins the race. A thoughtful portfolio that includes stocks and bonds, large and small companies, US and non-US firms provides a much more reliable path to growth than any exciting story. In news cycles driven by likes and retweets, this boring approach to riches struggles to be truly appreciated. But that doesn’t make it any less effective. For an empirically grounded, high likelihood of success route to wealth, let us be the Tortoise and not the Hare.



Keep Your Ego in Check

Aesop’s Hare was fast, proud, and confident and eagerly boasted about his talents. If he had had a Twitter account, he would have many followers. But the Hare’s talents made him overconfident. He was so sure that he would beat the Tortoise that he came in and out of the race. Meanwhile, the Tortoise, continuing in a straight line at a consistent pace, came out ahead. No viral videos to show him racing across the finish line.

Like the Hare, many investors grow overconfident, thinking they sell their stocks and bonds to avoid losses and buy back in just before the market is about to rise again. As markets go haywire and headlines turn dour, it can be tempting to decide to “sit this one out” and sell your investments for a time. Or perhaps to wait until the storms have passed, and then reinvest in the market.

The sad truth is that most investors earn much less than they could because they buy and sell at the wrong times. The 2022 Quantitative Analysis of Investor Behavior (QAIB) shows that the average equity fund investor earned only two-thirds of the return that the broad markets offered. While fees contributed to somewhat lower investor returns relative to the S&P 500, most of those lost returns were because of investors’ buying and selling behavior.  Investors tend to act like the Hare, buying and selling at the wrong times.

Source: The Dalbar Study: 30 Years of Average Equity Fund Investor vs. S&P 500 Average Annualized Return, 12/31/1945 to 12/31/2021
Past performance is not a guarantee of future results. Investing in stock involves risks, including the loss of principal. Indexes are unmanaged, and performance of the indexes includes reinvestment of dividends and interest income, unless otherwise noted. It is not possible to invest directly in an index. Source: DALBAR, Inc. with data from 2022 QAIB Full Study, as of 12/31/2021. DALBAR’s Quantitative Analysis of Investor Behavior (QAIB) has measured the effects of investor decisions to buy, sell and switch into and out of funds over short and long-term timeframes. These effects are measured from the perspective of the investor and do not represent the performance of the investments themselves.



Don’t Sleep on the Job

In Aesop’s fable, the Hare could’ve beaten the Tortoise; just like in theory, investors could profit from selling at the top of the market and then buying back in again at the bottom. Aesop’s Hare lost because he was snoring away as the Tortoise ambled past him to win the race. In investing, even a short nap can be disastrous for your portfolio.

Here’s a simple illustration of what’s at stake. Going back to 1990, a $10,000 investment in the S&P 500 would have grown to over $100,000 – an impressive ten-fold increase. Hit the snooze button, though, and not be invested during just ten of the best days in the market, and that nest egg would be just $47,000, less than half the potential.

Hypothetical Returns of a $10,000 Investment in the S&P 500 Index January 1, 1990 – December 31, 2022
At the risk of repeating ourselves, past performance is not a guarantee of future results. Investing in stock involves risks, including the loss of principal. The hypothetical example assumes an investment that tracks the price returns of an S&P 500® Index but does not reflect dividend reinvestment and the impact of taxes, which would change these figures. The “Best Days” were determined by ranking the one-day price returns for the S&P 500 Index within the stated time period. There is volatility in the market and a sale at any point in time could result in a gain or loss. Indexes are unmanaged, and performance of the indexes includes reinvestment of dividends and interest income, unless otherwise noted. It is not possible to invest directly in an index.
Source: Factset, as of 12/31/2022.



Take Your Time

What else does the tortoise portfolio need to be successful? Time.

The longer an investor holds a portfolio, the greater the chance of a positive outcome. Looking back to 1950, a portfolio evenly split between stocks and bonds returned anywhere from up 33% to down 15% after a single year. But extend that time horizon to 20 years, and even the worst return was up 5% on an annual basis. In fact, on average, a stock and bond portfolio grew during that time by five-fold. Now that statistic deserves a retweet.

Portfolio (50% Stocks, 50% Bonds), Range of Total Returns Annualized Total Returns, 1950 – 2022
So just in case you didn’t get it the first two times, here it is again – past performance is not a guarantee of future results. Investing in stock involves risks, including the loss of principal. The hypothetical example assumes an investment that tracks the price returns of a S&P 500® Index and Bloomberg Barclays U.S. Aggregate but does not reflect dividend reinvestment and the impact of taxes, which would change these figures. Indexes are unmanaged, and performance of the indexes includes reinvestment of dividends and interest income, unless otherwise noted. It is not possible to invest directly in an index.
Source: J.P. Morgan Asset Management, Kestra Investment Management with data from Factset, as of 3/31/2023.



Be the Tortoise, Not the Hare

When the Tortoise won his race, there likely weren’t any cheering crowds, reporters, or medals. Just the simple satisfaction that a consistent approach and time won the day. A lesson in how small, consistent actions over an extended period of time can overcome even the most difficult challenges. May our portfolios be similarly fortunate.

Invest like the Tortoise.