Jan 20, 2023
Fasten your financial seatbelt
Robert McNamara is widely remembered as Lyndon B. Johnson’s Secretary of Defense during the Vietnam War. Love him or hate him, McNamara played a vital role in shaping our nation’s history in Southeast Asia. However, before his role in President Johnson’s White House, McNamara ran Ford Motor Company. He was the first non-Ford family member to have the position.
During his tenure at Ford, the company pioneered the use of seatbelts as an automobile safety measure. Safety belts were wildly unpopular when they were introduced—some prototypes actually fit over your neck rather than your shoulder or lap.
Where am I going with this example? We often ignore safety measures that keep us safe without appreciating their benefits. In fact, we see this in personal financial planning. And in a time of a tight labor market, rising interest rates and volatile markets, we sometimes forget to fasten our seatbelts.
Jobs will be around forever
As I write this, our unemployment rate sits at a remarkably low rate.1 That’s a great thing. Americans have their pick of jobs. Recent graduates likely have multiple offers for their first jobs. It’s a good time to be working.
But if history is a teacher, we know employment is cyclical. Layoffs happen even in good economies. So, strap on your seatbelt—and be sure you’re making career changes when it’s best to do so. We believe a tight labor market is ideal for making a job switch rather than waiting for leaner times.
Rates will go lower
Whether it’s tax rates or interest rates, we usually wish they were lower. For a time, we had wonderfully low borrowing rates. While this created consternation for savers, it was a boon for borrowers. Some borrowers ignored the ultra-low rates of 2020 and 2021 and now face a far more expensive borrowing regime.2
If you locked in great rates, good job. Bonus points for extending the life of that loan, like a 30-year mortgage or a 10-year business loan. Either way, locking in low rates when they appear is like putting a child in a car seat.
By the way, our current tax rates are scheduled to sunset at the end of 2025 and go up.3 This will impact each of us differently, but it certainly creates a financial planning opportunity.
The market doesn’t feel right
“I’m waiting for the market to show me signs it’s recovering.”
None of us possess a crystal ball, so timing the stock market is extremely difficult. However, our markets often go down but virtually never stay down. Yet, as investors, we ignore that “sale” in the market and sometimes wish we could wait until we get the all-clear to invest again. Sadly, this signal never comes, and one stands to miss out on big days of recovery in the market, waiting for the prospect of the future to look brighter.
Don’t ignore that annoying alert your car gives you; click your belt and be a disciplined investor. Your portfolio and financial security will thank you.
1 https://www.npr.org/2022/08/05/1116036160/the-unemployment-rate-fell-to-3-5-matching-its-lowest-level-in-the-last-50-years
2 https://www.fool.com/the-ascent/federal-reserve-interest-rates
3 https://etfdb.com/retirement-income-channel/a-rising-tax-environment-what-to-watch-out-for
ABOUT THE AUTHOR
Justin Peacock
Justin works closely with clients to design wealth management plans that take into account the full spectrum of their career and personal concerns with a specialization in advising law firm partners. Justin earned his MBA from Northwestern University's J.L. Kellogg School of Business and joined BDF in 2011.
CONTENT DISCLOSURE
This information is for educational purposes and is not intended to provide, and should not be relied upon for, accounting, legal, tax, insurance, or investment advice. This does not constitute an offer to provide any services, nor a solicitation to purchase securities. The contents are not intended to be advice tailored to any particular person or situation. We believe the information provided is accurate and reliable, but do not warrant it as to completeness or accuracy. This information may include opinions or forecasts, including investment strategies and economic and market conditions; however, there is no guarantee that such opinions or forecasts will prove to be correct, and they also may change without notice. We encourage you to speak with a qualified professional regarding your scenario and the then-current applicable laws and rules.
Different types of investments involve degrees of risk. The future performance of any investment or wealth management strategy, including those recommended by us, may not be profitable or suitable or prove successful. Past performance is not indicative of future results. One cannot invest directly in an index or benchmark, and those do not reflect the deduction of various fees that would diminish results. Any index or benchmark performance figures are for comparison purposes only, and client account holdings will not directly correspond to any such data.
Advisory services are offered through CI Private Wealth and its affiliates, each being a registered investment adviser (“RIA”) regulated by the U.S. Securities and Exchange Commission (“SEC”). The advisory services are only offered in jurisdictions where the RIA is appropriately registered. The use of the term “registered” does not imply any particular level of skill or training and does not imply any approval by the SEC. For a complete discussion of the scope of advisory services offered, fees, and other disclosures, please review the RIA’s Disclosure Brochure (Form ADV Part 2A) and Form CRS, available upon request from the RIA and online at https://adviserinfo.sec.gov/. We also encourage you to review the RIA’s Privacy Policy and Code of Ethics, which are available upon request.
Our clients must, in writing, advise us of personal, financial, or investment objective changes and any restrictions desired on our services so that we may re-evaluate any previous recommendations and adjust our advisory services as needed. For current clients, please advise us immediately if you are not receiving monthly account statements from your custodian. We encourage you to compare your custodial statements to any information we provide to you.
