Windsor Wealth Management LLC

Investment service in Topsfield, Massachusetts

Financial Planning

A Key Trend Worth Watching & Your Portfolio

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There’s been no shortage of noise lately about an “AI bubble.”

Yet, the data suggests we’re seeing a structural shift in how the economy operates—driven by steady, long-term investments rather than speculation.

As the chart below shows, technology and R&D spending as a share of the U.S. economy is now higher than it was during the dot-com era, currently led by massive investments in AI infrastructure.

However, unlike the 90s, today’s tech leaders are backed by robust earnings and significant cash reserves—capital that’s available for acquisitions, stock buybacks and weathering downturns without needing to raise outside funding.

Chart Source: Capital Group1

Who will win? A key trend to watch.

All this spending begs the question: how does this build-out translate into shareholder returns?

While current winners include the companies building data centers and power grids that supply the computing power AI requires, history suggests the biggest beneficiaries may not even exist yet.

Just as the internet reaching critical mass enabled companies like Facebook (Meta) and PayPal, today’s AI infrastructure build-out is setting the stage for a new generation of high-growth businesses.

So who will they be?

That’s the key question—and only time will tell.

In the meantime, we’re focused on data and research—tracking where investment, earnings and innovation are converging.

You can read more about this concept and the data behind it in Capital Group’s article, 4 charts on why the U.S. economy could stay resilient.2

Your Portfolio: Rebalancing Is Critical During Aggressive Growth

One of our core disciplines during periods of strong growth is frequent rebalancing.

Specifically, trimming positions and taking profits when portfolios drift out of alignment, rather than chasing what’s already run up.

As always, our focus remains the same: staying invested, staying balanced and keeping your long-term plan on track—regardless of the headlines.

Final Thought

It’s important to remember that roughly $7.5 trillion is sitting in money market funds and cash equivalents waiting to be invested.

This sidelined capital adds a significant layer of economic stability, especially during times of loud “AI bubble” noise.

If you’d like to talk through how this trend fits into your portfolio, reach out anytime.

Happy Holidays,

–David Bunker, Financial Advisor & Licensed Fiduciary

P.S. — I recently spent some time analyzing the year ahead. If you’re curious about what’s coming next, you can find my breakdown here: Rate Cuts, Jobs and Growth: A Look at 2026.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Source:

1 & 2: Capital Group, 4 charts on why the U.S. economy could stay resilient, https://www.capitalgroup.com/ria/insights/articles/4-charts-us-economy-resilient.html

Maintaining Retirement Lifestyles: Compound Interest’s Role

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Compound interest is vital both during your working years and in retirement.

Many people concentrate on saving during their working years, however, it’s as important for your money to continue growing during retirement.

This growth helps ensure you maintain your lifestyle for the next 30+ years, including keeping up with inflation and taxes.

The below chart reflects the power of compound interest. Specifically, growth of $100K over 30 years using different interest rates.

In general, holding too many cash-equivalent investments or trying to time the market by moving all your money into cash can cause you to miss out on the compound interest your portfolio needs to outpace inflation.

Compound Interest Chart
This hypothetical example assumes an initial $100,000 contribution, with no additional deposits, and compound interest from 1% to 10%. It does not suggest nor recommend that an individual allocate 100% to equities. The ending values do not reflect taxes, fees, inflation or withdrawals. View the full 30-year compounding chart.

What happens if you try to time the market?

Studies show that missing the stock market’s 10 best days over a 30-year period can lower an investor’s average annual total return by 2.72%.

Missing the best 30 days lowers an investor’s return by 6.14%!

(Source: Bloomberg and Wells Fargo Investment Institute. Daily S&P 500® returns from 9/1/92–8/31/22.)

Realistic Approach That Supports Your Retirement Lifestyle

Instead of market timing, the 60/40 portfolio remains a reliable basis for asset allocation.

In fact, it’s achieved a compounded annual growth rate of 7.3% over the 200 years’ worth of analyzed data (from 1820 to September 30, 2023), according to Morgan Stanley research.

Certainly, the past doesn’t predict the future.

60/40 Example

In a recent client communication, we provided an approximate 60/40 portfolio example using a conservative 6% annual return to show how a couple with $2 million in retirement savings could grow their wealth to $2.6 million while adhering to the 4% annual withdrawal rule. See the realistic example here: 3 Steps To Help Your Money Outlive—You.

Stay the Course

Trying to time the market, i.e., moving all your money into cash, can be detrimental to your long-term investing success, including missing out on compound interest.

Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it. – Attributed to Albert Einstein

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Prices Are Falling Some; Retailers Are Feeling the Squeeze

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Here’s some good news:

Several large companies are lowering prices on popular items, including food and everyday essentials.

Certainly, we welcome these savings, but what’s really going on?

Essentially, consumers have slowed their spending, and retailers are feeling the squeeze.

In response, Walgreens, Amazon Fresh, Target and Walmart have cut prices on 1,300, 4,000, 5,000 and 7,000 products, respectively.

Best Buy, Ford, Ikea and fast-food chains are also lowering prices, according to the Washington Post.

Reasons Why Prices Are Falling:

Economic Jitters: Retailers are feeling nervous after raising prices due to inflation. With households cutting back on spending, stores are yielding in the game of chicken between stores and shoppers, according to a WCVB article.

High Interest Rates: Financing big-ticket items like cars and appliances is more expensive, resulting in consumers forgoing these purchases.

Dwindling Covid-Relief Funds: Most Covid-relief funds are spent, reducing the extra cash households had for discretionary spending.

Competitive Strategies: By lowering prices, businesses aim to attract their competitors’ customers.

These price cuts are a small win, but we’ll take it! Finally, the economic pressure consumers may be feeling has shifted some onto businesses. Still, the tug-of-war between retailers and shoppers is likely just beginning.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Q1 Stock Market Overview: Highest Performer and Underdog

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U.S. stocks were up 10% in Q1. Artificial Intelligence (AI) is a key factor fueling growth.

Image created using Microsoft’s AI image creator. Prompt: Create an image depicting the stock market increasing.

During Today’s Q1 Stock Market Overview Discussion, We:

  • Highlight Q1 2024 stock market results, including highest performer and underdog.
  • Explain what’s driving the results.
  • Clarify a misconception about U.S. oil availability.
  • Describe how AI could make your current work commute faster.
  • Provide inflation and interest rate updates.

Q1 Stock Market Overview

2024 is off to a strong financial start (U.S. stocks are up 10% quarter over quarter). Momentum, corporate earnings and artificial intelligence are driving the uptick.

Nevertheless, election years tend to be volatile.

Why?

Because the uncertainty of “who’s running the country next” creates frequent stock market movement in both directions.

In fact, the next few months could be volatile, given strong opposing opinions by political parties.

Overall, we’re optimistic about the financial environment.

As a reminder, volatility often creates opportunities, i.e., buying stocks on sale.

Related: Read our recent client letter: Upcoming Election vs. Your Portfolio.

Q1 2024 Stock Market Results

January 1 through March 31

  • The U.S. stock market increased by 10%.
  • International stocks were up just over 4.5%. The U.S. continues to outperform international stocks due to innovation and lower social democracy costs, e.g., government provided education, healthcare, public pensions, etc.
  • Bonds were slightly negative, down less than 1%.

For a deep (deep) dive into last quarter’s financial results, see our Q1 Market Data Report. It includes data by asset class and equity style.

The stock market’s highest performing sector was energy, up 13.5%.

Overall, energy companies are doing well.

OPEC is restricting output while demand remains high, ultimately increasing prices and, therefore, profits. A barrel of crude oil is about $85.

Current U.S. Oil Production

Given media coverage, many Americans believe that U.S oil companies are not producing as much oil as in previous years.

The fact is, U.S. oil companies are producing a lot of oil, actually hitting record levels. This has somewhat offset OPEC cuts, but gas prices have still climbed in most areas.

For more details, read the U.S. Energy Information Administration’s (EIA) article, United States produces more crude oil than any country, ever.

Q1 Underdog: Real Estate

The real estate sector was flat last quarter, down 0.65%.

The stagnation is primarily due to the Fed’s recent interest rate hiking spree. Overall, debt is more expensive for both commercial and residential real estate loans, ultimately reducing demand.

Grade A office building prices are also down; specifically, newly constructed and recently renovated buildings.

Interestingly, hedge funds are considering buying these buildings. Typically, hedge funds buy and sell financial instruments, e.g., bonds, commodities, equities and other currencies.

Nevertheless, hedge funds go where they see the biggest value.

Big Tech & Artificial Intelligence (AI)

U.S. tech stocks were up roughly 9% last quarter. Much of this growth is due to the AI frenzy. Keep in mind, AI has been around for a while. For example, Google’s search engine is AI driven. Nevertheless, the technology has made significant progress, including the following: 

Brief “Discussion” with Google’s Gemini AI App

We prompted Google’s Gemini AI App with the following question. The answers are impressive. (To manage reading length, we didn’t include the full response.)

Prompt:

What are some unique abilities of AI beyond writing a college student’s English paper?

Start Reply:

You’re absolutely right, AI has a vast array of capabilities that extend far beyond mimicking human tasks like writing papers. Here are some areas where AI shines with unique abilities:

Pattern recognition and anomaly detection: AI excels at finding patterns and anomalies in massive datasets that humans would miss. This can be used for things like predicting equipment failure before it happens, identifying fraudulent activity in financial transactions, or even detecting tumors in medical scans much earlier and more precisely than the human eye.

Optimization and resource management: AI can analyze complex systems and optimize them for efficiency. This can be used for tasks like traffic flow management, energy grid optimization, or even designing more aerodynamic airplanes. Imagine an AI constantly analyzing traffic patterns in real-time to adjust traffic signals for smoother flow. (Yes, please!)

Related: Some college students are using AI to write their college papers, leaving professors and administrators struggling with plagiarism management. A key hurdle is reliably detecting AI usage. Read the article: Software finds students wrote 22+ million papers with AI last year.

Inflation & Interest Rates

Inflation is down, hovering around 3.4% from an average 8% high in 2022. (The Fed’s target is 2%.)

Currently, increased rents, gas prices and insurance premiums are keeping pressure on inflation. Car insurance has surged 22.2% from a year earlier. Insurers have been hiking premiums to offset their rising costs due to extreme weather and the higher cost of new automobiles.

Interest rates remain steady after the Fed’s 11 hikes during 2022 and 2023.

The current 30-year fixed mortgage interest rate is about 7%, compared to 3% in 2020, according to Bankrate.

While interest rates have slowed the real estate market, they’ve not slowed corporate borrowing or earnings. Even though today’s rates seem high, they’re no comparison to the 10-15% interest rates during the 1980s.

In general, most of the rate hike impact gets passed on to consumers.

For a further look at the economy, interest rate cuts and job growth, read Vanguard’s economic and market outlook for 2024.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Rising Prices: try these saving tips to free up cash

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In the past few weeks, several clients have asked, “Will prices ever come down?”

Short answer—yes and no.

Read on to understand the current pricing situation and gain useful saving tips.

Please share any tips you have for reducing household and lifestyle expenses. We’d love to hear about them. Big or small, all ideas are welcome!

Grocery prices continue upward. Time to get creative!

Today, we talk about:

-Increasing construction and grocery costs.

-Offer key grocery saving tips to combat what seems like non-stop price increases.

-How our investment management approach helps offset economic challenges.

Pricing Overview

Current pricing levels on goods and services are mixed.

For example, prices are down for gas, used cars, airline tickets, furniture and major appliances. However, construction and food prices continue to be up.

Why?

Construction Prices

Construction price increases are largely due to geopolitical turmoil, inflation, regulatory change; and resource and labor shortages, according to a Currie & Brown report.

Also, “Material prices have started to dip slightly as supply chains focus on recovery, but costs remain high compared to pre-pandemic levels,” according to home builder Schar Construction. “Demand for construction will probably keep those costs elevated throughout 2024 and 2025…By 2024, prices could be 25% to 28% higher than they would’ve been compared to pre-2020.”

More than one in five construction workers is aged 55 and up. As these workers retire, the labor pool is expected to shrink even more, according to the CBRE Construction Cost Index. Ultimately, adding to price increases.

Related: See last month’s client letter for a look at the current housing market.

Grocery Prices (up, up and away)

It’s true, you’re spending more money at the grocery store and coming home with less food. In general, food prices are roughly 30% higher than four years ago.1

On a positive note, food price growth has slowed.

So, what’s going on!?

Candidly, food manufacturers are taking profits.

Keep in mind, most grocery categories are dominated by just a handful of companies that own hordes of brands.

For Example:

PepsiCo—owns 23 brands, including Aquafina, Doritos, Fritos, Gatorade, Lay’s, Pepsi and Quaker Oats.

Nestle—owns 2000 brands (not a typo), including Carnation, Cheerios, Lean Cuisine, Starbucks and Stouffer’s.

Kraft Heinz—owns 200 brands, including Maxwell House, Nabisco, Oreo, Oscar Mayer, Philadelphia and Trident.

Here’s just one example of dominating a food category, and increasing food prices without consumers receiving more value:

According to a recent Forbes article, Kraft Heinz dominates the packaged cheese category at 65% market share. Category unit volumes are up just 6%, while prices are up 21%. That’s exactly the intention. “We are not going to be chasing volume,” according to the Kraft Heinz CEO, “We’re going to be looking to drive profitable volume.”

To understand what other companies are dominating the grocery store shelves, read the full Forbes article, Why Your Groceries Are Still So Expensive1.

Related: See our past client letter, Grocery Prices Truths.

Free Up Cash: Try These Creative Grocery Shopping Saving Tips

To save on your grocery bill, do the following:

Beware of end cap “sales”. Just because items are displayed on end caps, doesn’t necessarily mean they’re on sale. Companies pay premium fees to secure these spots, however, if you go further down the aisle, you may find there’s another soup or chip brand priced—even lower. Often, the items on end caps are made to look like they’re on sale, when they’re not.

Buy generic store brands. However, pay close attention to the unit price (the cost of an item by its size) versus the retail price when comparing two similar products. Only then, will you know which product is cheaper.

Note: If you’re purchasing items in bulk at stores like Costco, remember to compare the unit price to what you’d pay at Market Basket or similar stores. Bulk purchases aren’t always the most cost-effective option.

Eat before you shop. When you have a full stomach, you’ll be more likely to resist temptations.

Look up and down. When shopping the middle aisles, stick to items on the top and bottom shelves, they’re typically cheaper. The packaging doesn’t always look as attractive, which is why it’s likely cheaper. When in doubt, compare unit prices.

Plan ahead by making a shopping list. Organize your meals, check your fridge and pantry for ingredients, review sales flyers and use coupons. Stick to your list and only purchase non-listed items if they are staple items on sale.

Swap ingredients. According to Oxford University research, adopting a vegan, vegetarian or flexitarian diet could slash your food bill by up to one-third!

Try shopping at Aldi’s. It’s currently #1 out of the seven cheapest grocery stores in the U.S., according to U.S. News & World Report. Market Basket and Costco are ranked five and seven respectfully. Aldi’s has 21 locations in Massachusetts and nine in New Hampshire.

Free Up Even More Cash

Try These Additional Saving Tips…

Maximize recurring bills, e.g., cable/internet, gym membership, insurance, mobile phone, streaming services, etc.

Are you using everything you’re paying for? If not, cancel or reduce your services. Remember, you can always re-up if you don’t like the change.

Reduce taxes by planning ahead. We’re in the throes of the 2023 tax season deadlines, an ideal time to speak with your accountant and us about ways to reduce your taxes for tax year 2024.

Use a cash back credit card. Fidelity (our long-time financial custodian partner) offers a credit card with up to 2% cash back on everyday spending. This is cash that can go back into your Fidelity account every month.

Also, some clients have their cash back automatically deposited into their kids’ 529 plans or IRA accounts.

Your Investment Portfolio & Offsetting Economic Challenges

Amid rising prices, we’re here to help ensure your financial portfolio is positioned to grow and counter inflation.

How?

We believe equities are the long-term growth engine of a portfolio that helps mitigate the longevity risk that most people face. This said, we use both passive and active strategies to get specific sector exposure, control taxes and manage fund expenses (aiming for an expense ratio below the average of its peer group).

Also, we strive to be as tax efficient as possible to increase long-term returns and reduce clients’ taxes, and are committed to keeping our advisory fees competitive, about 22% below industry average.

With discipline and patience, the market has proven time and time again, that long-term compounding is the key driver of building wealth.

Our primary role is proactively managing this process for you, so you can be off living your life to its fullest.

Read our one-page Statement of Core Investment Beliefs.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Upcoming Election vs. Your Portfolio and the Housing Market

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(Real Quick: Just a reminder about upcoming 2023 tax deadlines.)

Presidential Elections and Stock Market

The next presidential election is on Tuesday, November 5, 2024.

Today, we’re encouraging you to:

-Stay the course during the upcoming presidential election, i.e., election year volatility often creates opportunities for long-term investors.

-Explore all options before buying or selling a home.

-Facilitate a (quick) life insurance review, especially if you’re nearing retirement.

Presidential Elections, the Stock Market & Your Portfolio

It’s common for some to experience anxiety regarding their investment portfolio as we approach November’s presidential election.

To help ease financial trepidation, consider the following financial facts reported by the Capital Group:

-U.S. stocks have trended up regardless of whether a Republican or Democrat won the White House.

–Primary season tends to be volatile, but markets have bounced back strongly afterward. Stocks have returned 11.3% in the 12 months following primaries, compared to 5.7% in similar periods of non-election years.

-Investors often get nervous and move into cash during election years. For example, net asset flows into money market funds have been more than twice as high in election years as in the year after an election.

-Staying on the sidelines has rarely paid off. It’s time, not timing, that matters most. The S&P 500 Index had negative returns in only two of the last 20 election years (2000, 2008), and both declines were largely attributed to asset price bubbles rather than politics.

For Example:

A $1,000 investment in the S&P 500 Index when FDR became president in 1933 would have been worth over $21 million in 2023. During that time there have been seven Republican and eight Democratic presidents.

Presidential Elections and Stock Market Impact

Deep Dive: If you want an in-depth look at Investing in an Election Year, let me know. I’m happy to email you Capital Group’s detailed guide—it goes well beyond the above facts. Also, call anytime to discuss in detail.

Housing Market & Your Home

Over the years, many of our clients approaching retirement have taken the equity out of their homes in order to downsize, move to a warmer climate or both.

Today, this life milestone is becoming more difficult to achieve, especially if your goal is to save money.

In general, if you’re living in New England, you have to move fairly south to begin seeing any real cost-of-living savings. What’s more, it’s common for large employers to pro-rate salaries based on where employees live.

Resource: The Missouri Economic Research and Information Center created a cost of living U.S. map. The most expensive states to live in are California, Massachusetts and Hawaii.

Limited Housing Inventory

Candidly, it’s a fantastic time to sell.

Nevertheless, where will you go and are there any affordable and available homes?

According to the National Association of Realtors, the U.S. is experiencing a housing shortage of between 5.5 and 6.8 million units, with the gap between supply and demand widening every year.

There’s no single reason for the shortage, although some reasons include:

  • Decline in construction
  • Rising construction costs
  • Regulatory barriers (zoning laws, building codes)
  • Rate lock, i.e., homeowners with low mortgage rates who want to sell, but don’t because they’ll be faced with higher mortgage rates at their next home.

Housing Recommendations

Buying and selling a home is a personal choice.

If you’re thinking of doing either, check in with us so we can help you run the numbers, avoid unintended consequences and expand your options through collaboration.

Also, don’t get discouraged by the high mortgage rates. It’s likely we’ll start to see rates fall later this year.

When faced with a difficult situation, most of us look for two or three options. But there are at least five options in every situation. You may need to think creatively and even consider the kinds of things that would normally make you say, “I couldn’t do that!” But many options are there every time. Let your thinking stretch to accommodate them. – Thomas J. Leonard, Author of The Portable Coach

Warning: Watch out for falling real estate prices in Florida. Overall, pricing is increasing. Yet, prices are falling significantly in parts of coastal Florida such as Cape Coral, because the risk of natural disasters is driving up the cost of home insurance.

Finally, when you find an appealing cost-of-living situation, remember to consider: crime levels, extreme weather trends, education/healthcare systems, public transportation, indoor/outdoor offerings and proximity to loved ones, i.e., forecast all future needs.

Life Insurance Review

When approaching retirement, often you no longer need as much life insurance. When evaluating your life insurance, ask yourself these three key questions:

#1—What is your insurable need, e.g., paying off mortgage, college, etc.?

#2—What are you trying to prevent, e.g., spouse being unable to afford a home?

#3—Do these needs and preventions still exist?

Here’s a brief life insurance review checklist:

Evaluate Dependents’ Needs: If you have dependents who rely on your income, assess whether they will still need financial support in your absence, e.g., an adult child with special care needs.

Review Policy Benefits: Understand your policy’s benefits, including any cash value, death benefit or additional riders.

Consider Health & Age Factors: Assess your current health condition and age.

Note: Some employer-sponsored life insurance plans allow you to increase your coverage annually without a physical exam.

Understand Tax Implications: Consider tax impacts associated with canceling your policy, especially the cash value component.

Compare Costs & Benefits: Compare the costs and benefits of maintaining the policy versus canceling it, taking into account premiums, potential future needs and the financial impact on beneficiaries.

Overall, if you’re questioning if you have enough or too much life insurance, or are considering canceling your policy—let’s talk, since changes you make could impact your financial future.

Rule-of-Thumb: A general guideline for life insurance needs is 10 times your annual salary.

Note: As a licensed fiduciary, we do not sell insurance or receive any form of referral payments. This said, life insurance is a key risk management tool and, therefore, we have established long-term relationships with experienced insurance consultants. If you need a referral or want to run some numbers with us to help isolate what your insurance needs may be, reach out anytime.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Cautiously Optimistic: Three 2024 Financial Projections

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Trivia: Before exploring our 2024 financial projections, here’s a little trivia to pique your interest: Can you guess the price of a McDonald’s Big Mac in 1970? (See answer below.)

Your financial horizon is bright! Strategic planning and disciplined spending
will lead you to a treasure trove of prosperity.

Today, we’re concluding the year with three 2024 financial projections.

While we don’t possess a crystal ball, our outlook for the New Year’s financial landscape is crafted from recent economic data, sprinkled with a touch of financial fairy dust for good measure.

Brief 2023 Reflection

Before forecasting, let’s reflect on one popular 2023 estimation that missed the mark—analysts projected a recession that never materialized.

Also, most analysts didn’t anticipate the impressive 9% surge in the S&P 500 last month, its highest climb since July 2022. At the end of the day, when it comes to forecasting economic conditions, geopolitical events and more, the only certainty is uncertainty. In fact, we spend a great deal of time managing the risks ssociated with uncertainty, leaving you with the freedom to pursue your passions without worry.

Projection #1—Interest Rates Fall Late 2024

It’s likely interest rates will remain the same well into 2024.

However, if the economy tilts toward a recession, it’s possible the Fed may cut rates in the third quarter next year to stimulate economic growth.

Generally, interest rate cuts are a win for you, since lower interest rates often drive up bond prices, increasing the value of your current bond holdings.

Also, companies generally make more money in a decreasing interest rate market, since they can borrow money at a lower cost. This is particularly beneficial for businesses relying on debt for expansion, capital investment or day-to-day operations.

Overall, lower interest expenses contribute to higher company profit margins.

Resource: If you missed it, check out our bond perspective in last month’s client newsletter: Essential 2023 Year-End Financial Action Items, including how we’re positioned to buy more intermediate bonds in preparation for the expected rate cuts.

Good News!

According to Capital Group, during the last four Fed hike cycles from 1995 to 2018, with data through June 30, 2023, one year following the final Fed hike, stocks easily outpaced cash by 16.2%.

Source: Capital Group Economic Indicators

For additional charts and an economic outlook deep dive, check out Capital Group’s article, A Mixed Picture for Global Growth in 2024.

Projection #2—Inflation Will (Slowly) Fall

The current inflation rate is about 3.25%, down sharply from its 9.1% high in June 2022.

However, the Fed wants the inflation rate lower (around 2%).

Why? Because it believes businesses and consumers will view the reduced rate as more stable and, therefore, increase the likelihood that both parties will pursue long-term investments that boost economic growth.

We predict inflation will fall some.

However, it will be difficult reducing it further because there’s a great deal of wage inflation. Also, some industries are still having difficulty hiring, including professional and business services; leisure and hospitality; food services and more.

For Example:

According to a recent U.S. Chamber of Commerce’s article, Understanding America’s Labor Shortage: The Most Impacted Industries, “Jobs that are fully in-person and traditionally have lower wages have had a more difficult time retaining workers, even prior to the pandemic…The leisure and hospitality industry has experienced the highest quit rates of all industries.”

Projection #3—Food Prices Will Continue To Rise

It certainly would be nice if food prices would return to pre-pandemic levels, yet it’s unlikely. Instead, we’re anticipating that the increases are here to stay, with prices continuing to rise, but at a slower pace.

Earlier this year, we discussed grocery pricing truths. In short, food manufacturers are focused on profits, and as long as consumers are willing to spend on certain goods and services, prices will remain elevated.

This quote from a CNN article sums up the situation, “If you start dropping prices, it can undermine the value proposition that brands and manufacturers have built up over the years with their consumers…Lower prices could, for example, make people think food quality has gone down — or make them think they were paying too much in the first place.”

Also, the USDA is forecasting a 2.9% increase in food prices for 2024.

Your Portfolio

Windsor Wealth Management maintains a cautiously optimistic view on the economy and the financial outlook for 2024.

We’re closely monitoring opportunities and risks, especially in light of potential Fed rate cuts.

Presently, our focus is on strategically adjusting portfolios to favor top-performing companies; specifically, those with substantial cash reserves. Generally, businesses with extra cash are better positioned to enhance their business operations and boost revenue—helping to strengthen your portfolio.

Wishing You a Wonderful Holiday Season

Julie and I wish you and your family a joyful holiday season filled with warmth and laughter. We’re also grateful for the trust you place in us, and are committed to delivering the utmost dedication and expertise to support your financial goals.

Here’s to a wonderful year ahead!

Happy Holidays,

Dave

Trivia Answer: 65 Cents (Today, the average price of a Big Mac meal is $6.05.)

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Essential Financial Planning Questions

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October is Financial Planning Month, therefore, today we discuss:

  • How much is enough?
  • Setting one-year, five-year and 10-year financial and well-being goals.
  • Revisiting your budget. (See our helpful budgeting template below.)
Financial Planning Month

Your future, how much is enough?

Our goal today is to help you explore your financial, emotional and physical well-being goals, since they’re interrelated and essential for building a comprehensive financial plan.

When planning goals, a key question to ask yourself is: How much is enough?

Candidly, the answer isn’t always clear.

In a recent article called 2,500 Years of Thinking About “How Much is Enough?”, the author tries to help us answer the question by highlighting popular philosophers’ thinking, such as Lao Tzu, Henry David Thoreau and others, and how each addressed the idea of sufficiency, contentment and the value of money.

Overall, the “thinkers” emphasized the importance of personal values and mindset in determining “enough,” suggesting it’s not merely about a specific monetary amount, but rather a reflection of what truly matters in life and embracing the flow of money rather than accumulating it.

Said differently…

Think of money as the sails on a ship. You need them to navigate the financial waters, but the real voyage is about the destinations and experiences along the way, not just the sails themselves.

Understandably, many of the conversations we have with clients are about money. However, in celebration of Financial Planning Month, we’re encouraging you to also think beyond money to help ensure that your personal values are reflected within your plan. Said differently, what meaning and fulfillment do you seek?

Questions To Ask Yourself

It’s important to revisit your financial plan at least annually, since life’s only constant is change. Therefore, consider your financial and well-being goals over a one-year, five-year and 10-year timeline.

ONE YEAR FROM NOW

Financial Goals:

  • What specific financial milestones do you want to achieve in the next year?
  • Are there any short-term savings or debt reduction goals you want to prioritize?
  • Do you have any upcoming major expenses, e.g., vacation or home renovation?

Lifestyle and Health:

  • What health and wellness goals do you want to achieve in the next year?
  • Are there any lifestyle changes or experiences you want to prioritize?

FIVE YEARS FROM NOW

Long-Term Financial Goals:

  • What are your major financial objectives for the next five years, e.g., buying a second home, starting a business, etc.?
  • How much savings and investment growth would you like to see during this period?

Family and Personal Life:

  • Do you plan to care for grandchildren or aging parents?
  • Are there personal or family milestones you’d like to achieve in the next five years?
  • Who do you want to spend time with?

Retirement Planning:

  • What date do you want to retire?
  • How do you envision your retirement lifestyle, and how will you stay mentally and emotionally engaged during retirement?
TEN YEARS FROM NOW

Long-Term Financial Security:

  • What are your financial aspirations for the next decade?
  • Do you foresee any major expenses 10 years from now, e.g., a new furnace or roof?

Legacy Planning:

  • What legacy or charitable contributions do you want to make in the next 10 years?
  • Do you have a clear plan for how you want your assets distributed upon your passing?

Health and Well-Being:

  • What steps will you take to maintain or improve your health and well-being as you look 10 years ahead?
  • Do you have healthcare and insurance plans in place to support your long-term health needs?
  • How do you want to feel while retired?

Travel and Experiences:

  • Are there specific travel destinations or experiences you’d like to enjoy in the next decade?
  • How will you allocate time and resources for these endeavors?

Resource: Earlier this year we created a Prolonging Retirement Income checklist. If you haven’t had the opportunity, definitely take a look. The checklist also includes key retirement-related questions to ask yourself. You’re welcome to share it.

Financial Planning Mindset

To strengthen your financial mindset and goal-setting abilities, we recommend the book, The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel. (We have extra copies of his book. Reach out if you’d like one. It’s a must-read!)

Housel discusses the psychological aspects of money and investing, emphasizing how emotions and biases can impact financial decision-making. This is relevant to financial planning because understanding your own financial psychology is key to making informed decisions.

He also talks about the importance of adaptability in financial planning. As you ponder your one, five and 10-year goals, being flexible in your financial approach and adjusting to changing life circumstances is crucial for long-term financial success.

“Planning is important, but the most important part of every plan is to plan on the plan not going according to plan…a plan is only useful if it can survive reality. And a future filled with unknowns is everyone’s reality. A good plan doesn’t pretend this weren’t true; it embraces it and emphasizes room for error. The more you need specific elements of a plan to be true, the more fragile your financial life becomes.” – Morgan Housel

Budgeting

Many people underestimate how long they’ll live in retirement. It’s crucial, therefore, to maintain an accurate budget to help prolong retirement income.

For instance, using the Social Security Administration’s Life Expectancy Calculator, a man born in 1958 (age 65) retiring today can expect to live roughly 18 more years, and a woman born at the same time can expect to live roughly 21 more years. Keep in mind, these numbers don’t factor in health, lifestyle or family history.

In the end, to project the longevity of your retirement savings, a well-maintained budget is essential. Budgets, much like financial plans, benefit from annual reviews and adjustments to ensure their success.

Our job is to tell you what you can afford to spend without running out of money. If there’s a discrepancy between this number and your goals, let’s talk. It’s important no stone be left unturned.

Resource: Check out our detailed budgeting spreadsheet. Even if you already have one, it’s worth a quick look to help ensure you haven’t missed any categories. (Note: Depending on your computer settings, this document opens a live spreadsheet, or in some instances it downloads automatically. Either way, it’s a link within our secure website.)

Please feel free to reach out to discuss this in more detail.

–David Bunker, Financial Advisor & Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.