The Fed’s target inflation rate is 2%, but since the 2008 Financial Crisis, the U.S. inflation rate has remained close to 1.5%. The extended period of this low rate is uncommon especially being that, until Covid-19, the unemployment rate was low and the economy was strong. Normally, inflation rises when economic factors are healthy and falls when the opposite occurs. There are many factors that economists think might be the reason for the low inflation rate. To name a few: Globalization; changes in how the inflation is measured; advances in technology; and consumer spending changes. What we do know, however, is that this year the Fed has loaded its balance sheet with $7 trillion in U.S. treasury bonds, mortgage-backed securities and some corporate bonds and it appears that this could continue. This has only been achieved by printing more U.S. dollars. The U.S. national debt will exceed $27 trillion while the U.S. GDP will be approximately $21.5 trillion. This puts the debt-to-GDP ratio at about 120%. We know that this large debt will have to be paid off sometime and with this comes inflation.
So, what are we doing to protect the fixed income portion of your portfolios? We are shortening up the duration (time to maturity) on our treasury bond allocation, adding to TIPS (Treasury Inflation-Protected Securities) and maintaining corporate bond positions with high credit quality. We will also continue to hold our mortgage-backed securities positions. These changes will help to protect your assets as inflation rises.
As the senior (by virtue of age and grey hair) member of the 1NWS team, I’ve been voting longer than any other team member but couldn’t until I was 21 since that’s the way it was. Because some former classmates were prevented from voting at 21 as they were victims of war, voting has always meant even more to me. Prior to this year, I’ve taken advantage of early voting, enjoying the convenience and the company of fellow voting citizens while admiring the dedication of election officials. Things are different this year – the understatement of the decade! The ballot I received by mail was deposited in a Drop Box. Although not my preferred method, this is my answer for 2020. Web sites such as vote.org and elections.maryland.gov provide constantly updated information and instructions for participation in this vital process. We all hope you exercise your right as an American citizen to vote. Take advantage of early voting if you can.
If you make charitable gifts in the fourth quarter of the year, you may be thinking about how to research which organizations are doing the work that you’d like to support. You also may be wondering how to ensure that the gifts you make to organizations that use and steward that gift appropriately. Two websites you could use in your research are https://www.charitynavigator.org/ and https://www.charitywatch.org/ . It’s important to remember, however, that organizations are much more than the financial reports you will find on these websites. We feel that a more important metric than percentage of money used on administrative costs is the impact of those donations. For example, if an organization uses more the 25% of your gift for administrative costs, it doesn’t mean they also aren’t using the rest of your donation so prudently that the impact is much larger. There are ways to determine this, and it requires speaking with the nonprofit staff to ask some straightforward questions. If you are interested in learning more about our due diligence process for potential nonprofit recipients of funding, please call our office.
As we all continue to rely more and more on the digital world for everything from Zoom birthday celebrations to telemedicine doctors’ visits, keeping track of all usernames, passwords and documents can feel overwhelming. There are dozens of password vaults and cloud storage options from which to choose. As a client at 1NWS you already have a Box account and we have discussed using LastPass. Both https://box.com and www.lastpass.com offer free versions of their services which can be used across all of your devices to help maintain control of your digital data.
Gov. Hogan has ordered an extension of all driver’s and business licenses, identification cards, permits, handicap placards, and registrations that expire or are eligible for renewal during the current state of emergency. As a result, they will not expire until the 30th day after the state of emergency has been lifted. If a customer’s driver’s license has expired over a year during the COVID-19 emergency period, MDOT MVA will allow them to renew without taking all of the tests. U.S. Department of Homeland Security has extended the national deadline for REAL ID compliance to October 1, 2021. All information is available at https://mva.maryland.gov/
As always, we are here as a resource for those that you care about and for. If you are worried that your family and/or friends may have been given improper financial guidance or are losing their hard-earned assets, we are available for a free second opinion or guidance to make sure they stay financially safe.
Be well and have a wonderful week!