Broker Check

The RFG Weekly Wealth Report

January 16, 2018

Domestic markets continued their strong start to 2018, posting gains across the board for their 2nd week. The S&P 500 added 1.57% and closed at a new record high on Friday. The index just posted its best 10-day beginning to a year since 2003, with a 4.2% gain so far this year. The Dow also hit a new record on Friday and gained 2.01% for the week. The NASDAQ increased by 1.74%, while international stocks in the MSCI EAFE joined last week's gains, adding 1.20%.


Martin Luther King and George Washington are the only Americans to have had their birthdays observed as national holidays.


By week's end, we didn't receive a tremendous amount of economic data. However, the economy did provide details that reveal it continues to pick up speed.

What We Learned Last Week

1. Corporate Earnings Continue to Increase

Earnings season is upon us, and analysts expect the data will indicate strong corporate performance in the 4th quarter of 2017. Some projections show corporate earnings may have risen 11.2% between October and December last year. According to FactSet, each of the S&P 500's 11 sectors will likely record growth in both revenue and earnings. We haven't seen these kind of broad increases since 2011.

In addition to gaining insight on last quarter's performance, this earnings season will provide perspectives on how large corporations expect tax reform to affect them. As we make plans for 2018, this information will help inform our strategies.

2. Inflation Is Accelerating

On Friday, the latest Consumer Price Index (CPI) data came out, showing an unanticipated uptick in core inflation. At first glance, the inflation numbers don't seem particularly noteworthy. The CPI's December growth was 0.1%, and its annual rate was 2.1%, which met expectations. When digging a bit deeper, however, you'll see that the CPI rose at a 2.6% annual rate during the 4th quarter - significantly faster than the Fed's 2% inflation target.

What This Information Means For You

Faster inflation, combined with our currently strong labor market and low unemployment, may mean interest rates will also pick up this year. With this latest CPI data, the Fed will likely increase rates at least 3 times in 2018.

Higher inflation may also impact stock performance. When Friday's CPI numbers first came out, stocks stumbled as some investors worried that economic growth could slow if the Fed raises rates too much. However, the strong corporate earnings data helped demonstrate our economy's vigor and reassure investors.

In short, we haven't experienced such strong inflation increases in quite some time. As more details around inflation and economic growth come out, we will continue to monitor how they may affect your financial life. If you have any questions about your specific strategies and needs, we are here to talk.



A nationwide survey has found that 53 percent of boomers plan to cut back on sugary foods in 2018, reflecting a trend toward healthy eating habits.

Conducted by Wakefield Research for Label Insight, the survey indicates that boomers and adult women of all ages are especially conscious of the health hazards of consuming too much of the sweet stuff.

The survey of 1,023 Americans also found that many boomers (33 percent) put a high priority on food labels that consumers can easily understand.

Two-thirds of those surveyed (67 percent) said they will put a high priority on healthy or socially conscious food purchases this year.

If you are considering reducing your sugar intake this year, try the "Hidden Sugar Quiz" below from the AARP:



Some of the hardest decisions a family can make are how to handle money, property and other family investments. An answer to these difficult questions, especially for families with considerable real estate holdings, is establishing a Family Limited Partnership (FLP). When used properly, an FLP can be very profitable and save families thousands of dollars in gift and estate taxes. FLPs provide both protection from creditors and flexibility not found in other trusts, as it can be amended or changed.

In an FLP, generally, the senior family members (parents or grandparents) contribute assets in exchange for a small general partner interest and a large limited partner interest. They can then give all or a portion of the limited partner interest to their children and grandchildren. This interest can go to the heirs directly, or be set aside in a trust.

By combining investments together into an FLP, a family's investment fees may be significantly reduced. Instead of maintaining separate brokerage accounts or trusts for each child, the partnership can hold one brokerage account, and the children or trusts for children can own partnership interests.

An FLP must be structured with both the present and future owners in mind, protecting the generations of today as well as generations to come. To begin the FLP process, a written limited partnership agreement must be prepared. After the agreement is prepared, assets may be transferred, such as real estate, corporate stock, or cash. FLPs are not designed for the transfer of an individual's home, life insurance, or retirement plans.

The general partnership interests are retained by the senior partners for their lifetime, while the limited partnership interests are given as gifts over time to the limited partners.