Photo of Jon Brethauer Jon Brethauer Oct 01, 2021


While the first half of the year saw the markets continue their upward momentum as the economy recovered from the pandemic, the equity markets got a little ahead of themselves. With the outstanding earnings growth reported for the second quarter, the markets – while still expensive by historical norms – got into a less scary range. During the 3rd quarter, the markets took time to digest the future direction of the economy, with the S&P 500 increasing by just 0.58% while the Russell 2000 declined by 4.36%. Meanwhile, the MSCI Developed Equities Index decreased 0.45%, still lagging U.S. equities since the start of the year. Bonds remained steady until the very end of the quarter, with the Aggregate Bond Index up 0.05% as interest rates rose after the September Fed meeting, erasing some of the index’s gains during the quarter.



If you have read any financial news lately, chances are you have seen the word ‘taper’ mentioned with increasing frequency. The buzz hit a fever pitch last week following the announcement of the Federal Reserve’s broad support to start tapering shortly. Taking a step back, the Federal Reserve has a policy tool known as quantitative easing (QE) in which it purchases assets (mostly U.S. Treasury debt) to keep interest rates low. This is meant to encourage borrowing and stimulate economic activity. The first instance of QE was in 2009, following the Great Financial Crisis, and there have been multiple rounds of QE since. The most recent was initiated last year in response to the COVID pandemic. The Fed committed to purchasing $120 billion of U.S. Treasury and U.S. mortgage-backed securities (MBS) each month to maintain liquidity and ensure proper functioning financial markets. The Fed’s massive monetary policy moves have added $4 trillion to its balance sheet, nearly doubling in less than two years. 

Since the depths of last year’s recession, the economy has come roaring back and inflation has risen at a historical pace. With the economic and financial systems in a healthy state, the Fed is now considering pulling back some of its stimulative measures. Minutes from the Federal Open Market Committee’s recent meeting indicate a tapering of QE as soon as November of this year, with a complete end to QE occurring sometime in mid-2022. Even when considering the $15 billion monthly reductions in bond purchases, between now and the end of June next year they will still purchase $600 billion worth of bonds.

The eventual vacuum of demand in Treasuries and MBS left behind by the Fed will likely put upward pressure on yields (downward pressure on prices). We are already seeing this occur in longer-term Treasury yields as the market anticipates the move. The fact that long rates started increasing should be positive for the banking sector as it will allow them to increase their spread on loans vs. deposits. Unfortunately, with the Fed keeping short rates low, savers are not likely to see an increase in interest rates in their bank accounts. We view tapering as a general positive for markets as higher yields on mortgages lowers the risk of an overheating U.S. real estate market and higher yields on U.S. Treasuries deter investors from driving up the prices of financial risk assets.

It is important to distinguish between the Fed tapering its QE program and raising the Federal Funds rate. The Fed is split on if it will raise rates in 2022 but has broad support for doing so in 2023. Raising the Fed Funds rate has a farther-reaching impact and seeks to balance the positive of reigning in inflation with the negative impact of tempering economic growth. Higher interest rates eventually slow the rate of growth for equities as bonds become more attractive, but equities should do well in the near term as we come off historically low rates.

This Fed has done a relatively good job in responding to the pandemic with unprecedented stimulus. Its next task is to turn off the water spigot at a measured pace while telegraphing every move to the markets as clearly as possible. This will be no easy task. Keep in mind that central banks around the world have maintained historically easy monetary policies for over a decade now. If done successfully, markets will digest the monetary policy shift in stride. If the water spigot is turned off too fast or too slow, markets will become more volatile.



As we have reported in the past, October has been the month with some of the biggest down days. But September is traditionally the worst month for the market over the last 30 years, with an average return of -0.2% for the S&P 500. This September didn’t disappoint, declining 4.65%. The 3rd quarter earnings season will have a major influence on the market between now and the end of the year. The market, in our opinion, is still ahead of itself, but not as bad as it was at the end of the 2nd quarter. Earnings are likely to be very good, but if they disappoint, the correction we have talked about all year may be on the horizon. It will likely be a correction, however, not a new direction for the market.



Wells Fargo’s “Women and Investing – Building on Strengths” dove into what women say about investing. More often than men, women described themselves as “not at all experienced” or “not very experienced” in their level of investment experience. This perception of inexperience and lack of confidence has the following negative consequences for women including 1) being more fearful of a down market, 2) expecting lower returns on their investments, and 3) being reluctant to take investment risks to potentially generate higher returns. 

The information should be contrasted with another Wells Fargo study finding that women have more expertise with money and finance than they give themselves credit. Single women earned the highest returns followed by female-led investment accounts. The good news is that women can and are effectively managing their finances. Given women’s longer life expectancies and smaller nest eggs going into retirement, women need to develop greater confidence and knowledge in how investments work and how they can create and maintain their lifestyles.



On October 15th, Medicare enrollment will begin for 2022. Where did the year go? Enrollment closes on December 7th and each new year brings challenges. Do you stay with what you have? Change supplements? Use Medicare Advantage? It is a highly specialized matrix that one must manage. First, the basics. You can register for Medicare three months before turning age 65 until four months after your 65th birthday. If you are still working and want to stay with your current health plan, you should still sign up as Part A (hospital coverage) has no premium and becomes your primary source of insurance for hospital coverage. Your health plan becomes a supplement for this coverage and continues to cover your other medical expenses. At some point you must elect either to be covered by Medicare Part B (doctors and testing), probably Part D (drugs), and a supplement for both or go into a Medicare Advantage plan. It is best to re-examine each year as benefits can change. We do not provide advice on Medicare, but we would be happy to refer you to an excellent insurance agent. Just drop us an email.



As Congress looks for ways to raise revenue to fund the President’s agenda, here are a few more to add to the proposals we have already shared. First, Congress has suggested that because of the perceived abuse of some taxpayers having too much money in their retirement accounts (IRA, 401(k), 403(b), etc.) the size needs to be limited to no more than $10 million. Once achieved, the taxpayer will not be permitted to make future contributions and required distributions will be mandated, taking 50% of the amount over the limit. If somehow the accounts still grow and pass a $20 million threshold, further rules apply. This provision applies to single taxpayers with incomes exceeding $400,000 and joint taxpayers over $450,000. The income limits make no sense to us. While it is unlikely that someone with a lower income would accumulate this much in an IRA, what if it did happen? Why shouldn’t they be subject to the same rules?

Secondly, after this year, the “back door” Roth would be eliminated along with the conversion of after-tax money in a retirement plan to a Roth. Roth conversions with pre-tax money will continue to be allowed but only for single taxpayers under $400,000 and joint filers under $450,000. Taxpayers above those amounts would no longer be able to do conversions of pre-tax money beginning in 2032.

Thirdly, certain investments in retirement accounts that require the taxpayer to be an accredited investor will be disallowed. Additional restrictions are placed on the ownership of a privately held business where the taxpayer owns 50% or more of the company. 

If and when Congress passes a bill that affects taxes, we will prepare a special edition of ProVise Perspective$.



The Bank of America’s 2021 Workplace Wellness Benefits Report said that 47% of employers (up from 40% a year earlier) provided employees access to a financial advisor as an employee benefit. Not only is it something they want to provide, but more employees are requesting it. Perhaps even more amazing is 95% of the employers surveyed felt they had a responsibility to help their employees and 56% said an “extreme” responsibility. Employers understand that employees that have greater confidence in their financial situation are not only happier but better, employees. Through our Personal Financial Officer (PFO)™ program, we offer a discount for both financial planning and investment management to employers who are willing to provide these benefits to their employees. To learn more about how you can take advantage of this program to provide financial wellness to your employees send an email to



According to the Federal Reserve, America’s household wealth increased by almost $5 trillion to $141.7 trillion in the 2nd quarter. As amazing as that seems, that is up $31 trillion in the past year. The $1.2 trillion of the almost $5 trillion of gains came from the stock market and another $3.5 trillion is from real estate gains.



For those of us living here in the Tampa Bay area, we think we live in a pretty good place for retirement. But if you don’t live here, the following is a list of the ten best places to retire, according to WalletHub. They measured 182 cities for affordability, quality of life, healthcare, and things to do:

10) Atlanta

9) Miami

8) Ft. Lauderdale

7) Cincinnati

6) Denver

5) Minneapolis-St. Paul

4) Tampa

3) Scottsdale

2) Charleston 

1) Orlando.

With four of the top ten in Florida, it isn’t surprising how much the state is growing.