“The best investors I’ve seen all have an above-average ability to change their mind.”
-Joel Tillinghast
Here’s what you need to know this week:
- Stocks move lower on a hotter-than-expected jobs report
- Earnings and inflation reports dictate the week ahead
- Protect your family’s assets with these estate planning tips
Too Hot
Stocks fell over the last week on the heels of December’s jobs report. The report showed job growth at 256,000 for the month, much higher than the 141,000 that analysts expected[1]. The report also showed unemployment falling to 4.1% and hourly earnings ticking up by 2.8%:
It may seem counterintuitive that a strong jobs report would be bad for stocks. However, strong job gains and wage growth typically cause inflation to rise, which would mean fewer interest rate cuts in the near future. In fact, bond yields have been steadily rising since mid-September, reflecting investor expectations of fewer rate cuts than previously planned. The ten-year Treasury bond yield is fast approaching its highest level in almost twenty years:
Inflation Cues
Speaking of inflation, later today we will receive the Consumer Price Index (CPI) report for the month of December. Analysts expect the report to show monthly inflation at 0.3% and annualized inflation at 2.9%, slightly higher than November’s 2.7% report[2]. If the report shows inflation hotter than expectations then markets may become more volatile, but even a soft report is not expected to produce a rate cut in the near term.
The Federal Open Market Committee (FOMC) holds their next meeting on January 28-29 and will announce their decision on interest rate policy on the afternoon of the 29th. As of writing, markets are only assigning a 2.7% chance of a rate cut at this meeting. Additionally, markets currently only expect one rate cut this year, although of course this can change as market conditions change[3].
This week also kicks off fourth quarter earnings season. Large banks and financial institutions will be among the first to report and investors are expecting to see record-high earnings. Strong bank earnings are typically a sign of a strong and healthy economy which is normally good for stocks, although they may also dampen expectations of interest rate cuts.
Estate Planning Tips
Estate planning is understandably a difficult topic for many people. No one likes to think about their own passing and leaving their family behind. However, estate planning is a critical component of any financial plan; having a plan in place helps ensure that your family is taken care of and that your wishes are carried out.
The easiest way to get started is naming beneficiaries on accounts. Every type of financial account allows for a named beneficiary which allows for you to dictate where your assets will go should something happen to you. Many married couples like to name their spouse as the beneficiary per stirpes, meaning that your children will all receive an equal share of the account’s assets if your spouse predeceases you.
Tangible assets such as homes and vehicles also have methods for naming beneficiary, usually through a transfer on death (TOD) form. The forms are available online and are typically one page, all you need to do is fill them out and file them with your county court clerk for your home or the DMV for your vehicle.
Of course, the cornerstone of an estate plan is actual written directions for executing your estate, usually through a will. Drafting a will has become much easier with the advent of technology, and Nationwide even offers a free tool for drafting your own will. Click the link below if you want to check it out:
Lastly, we usually recommend two more advanced estate planning tools. The first is an advance medical directive (AMD), often known as a “living will” which dictates your wishes should you be medically incapacitated for any length of time. The second is a revocable trust, which lets you transfer assets outside of probate and provides more concrete direction on the dispensation of your assets. These documents are typically drawn up by a lawyer although there are online services for these as well.
Wealthier individuals may have more complex estate planning needs, but the tools listed above are the essentials that we believe every family should have in place. If you have any questions or would like to review your current estate plan, please feel free to contact me or one of the other CERTIFIED FINANCIAL PLANNER® professionals here at Eternal Wealth Management.
What Else
- President-elect Trump’s inauguration takes place next Monday, January 20th
- At least 24 people have perished in the southern California wildfires as firefighters struggle to contain the blaze
- Ohio State and Notre Dame collide in the College Football Championship next Monday at 6:30 PM CT on ESPN
- The Divisional Round of the NFL playoffs takes place this Saturday and Sunday
- Markets will be closed next Monday in honor of Martin Luther King Day
What We’re Reading
Chic-Fil-A is famous for two things: delicious chicken and ruthless efficiency. In fact, COVID testing sites turned to Chic-Fil-A at the onset of the pandemic to learn how to more efficiently process their drive-through test lines. Now, Chic-Fil-A has set its sights on optimizing their lemonade. Click below to read how Chic-Fil-A processes more than one million pounds of lemons per day to produce their famous lemonade, as well as selling the lemon’s oils for perfumes:
What’s Happening Downtown
Less than three weeks remain for the Devon Ice Rink in the Myriad Gardens. Tickets are $14 for adults if you need to rent skates, $9 if you bring your own skates, and the rink is also available to rent for parties and other events. Click below to learn more:
To read more from our blog, click here
Written by: Kane Ogle, CFP®
Steve Beck, Amber Eduvigen, CFP®, Kane Ogle, CFP®, Cale Olbert, CFP®, Brett Valentine, Brandon Ingerson, Jenni Hess
Sources: [1] Bloomberg [2] Yahoo! Finance [3] CME Group