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Five Things to Know This Week February 28th, 2022

Five Things to Know This Week


Russia’s invasion into Ukraine has heightened geopolitical risks around the world. To date, Germany has halted the expansion of the Nord Stream 2 pipeline and sanctions have been placed by others against Russian banks as well as on the Russian Oligarchs and their families. Harder sanctions may be kept for later if Russian attacks escalate further, which could result in greater global market volatility. It is important to remember, however, that the vast majority of U.S. companies have very little to virtually no business in Russia or Ukraine. The largest impact for the U.S. should be limited to higher energy prices which would add to supply-driven inflation, at least in the short-term. We had been planning to expand our allocation into international developed and emerging markets for diversification prior to this, but because of the recent developments and geopolitical risk, we are currently holding off on these investments until there is further clarity or a resolution to the geopolitical tensions.


As many of you have seen or heard, the markets are currently experiencing a correction in the midst of elevated volatility. The year has not had a strong start but let us not forget the economy is fundamentally sound. Consumer spending was strong in January and February, unemployment remains very low, and 4th quarter corporate earnings thus far have been strong. In addition, the International Monetary Fund is currently projecting 4.0% growth in 2022 for the United States and 4.4% globally*.

Inflation does pose a risk to this general outlook if it remains more persistent. We do not believe inflation will stay this elevated though and will likely moderate back down to 3-4% by year-end. As a result, the Federal Reserve is moving to its first rate hike expected in March. While the precise number of hikes for 2022 is unknown, it is very likely the Federal Reserve will raise a handful of times as the economic data allows. You may be asking, “So what have we done with the recent developments?” Most recently we have reduced our credit exposure and reduced or eliminated certain high valuation positions as the Federal Reserve looks to begin to tighten while increasing certain lower valuation areas of the market. In times like these, it pays to remember that markets are resilient and have historically resolved themselves with time as most recently witnessed in 2020.


If you are considering a Roth conversion in 2022 (or if our team has told you that you might be a good  candidate for a Roth conversion this year), the current market downturn provides an excellent opportunity to convert Traditional IRA funds to a Roth IRA. We recommend transferring a highly volatile position from the growth sleeve of your Traditional IRA portfolio into your Roth IRA to allow for the greatest possible tax-free growth potential in the Roth IRA over time. Please note that you will need to pay the tax on this Roth Conversion, but we will work with your tax advisor and you to review the tax cost and optimal amount to convert to keep your tax rate manageable. We will remind you that having funds in a Roth IRA can provide excellent tax and estate planning flexibility. Please talk with us if you are interested.


If you don’t need cash from your retirement account, and given our current market projections, it may be wise to delay taking your Required Minimum Distribution until later in the year as your portfolio values increase. The same goes for timing of donating all or part of your RMD as a Qualified Charitable Distribution, for those of you considering this strategy.

5. 2021 TAX PREP

Publication of the first 2021 tax documents for Schwab and TD Ameritrade accounts have begun. These documents are available for you online. We have forwarded the pertinent documents to your tax advisor if you have requested this for 2021 tax forms. Please let us know if you’ve recently changed tax advisors so we can update our records and establish new relationships. Also, please be aware that sometimes corrections are made to tax documents and such amended documents are usually published by mid-March.

Be well and have a wonderful week!