Broker Check

The RFG Weekly Wealth Report

June 25, 2018

Stocks stumbled across the globe last week as trade tensions continued to escalate. Despite rebounding somewhat on Friday, the S&P 500 experienced its first weekly loss in a month, and the Dow posted its worst week since March. The S&P 500 dropped 0.89%, the Dow lost 2.03%, and the NASDAQ fell 0.69%. International stocks in the MSCI EAFE gave back 0.98%.


Only 14 percent of American workers say that they are "very confident" that they will have enough money to live comfortably in retirement and 30 percent of workers said they have less than $1,000 in savings and investments. 56 percent of workers have never even attempted to calculate how much they will need to save for a comfortable retirement.


While trade headlines may affect market performance, a closer look at the data shows other, more powerful drivers affecting equity prices. In particular, many investors continue to focus on corporate earnings estimates.

Analyzing Corporate Earnings
Strong corporate earnings have helped maintain a sense of market balance in 2018. As the media focuses on political stories, corporate earnings estimates continue to rise - and have a greater market affect than many investors may recognize.

How Corporate Earnings Estimates Work
Many financial services companies hire analysts to predict how much a company's stock will earn per share. The average of all the experts' predictions creates a consensus earnings estimate. This calculation gives a rough view of the company's cash flow - which helps investors value a stock. Generally, when a company beats its earnings estimate, the stock price goes up. If it misses or matches the prediction, the stock may suffer.

Where We Are Now
Tax cuts and increasing demand have helped earnings estimates grow this year. As the estimates have risen, companies with the largest increases are significantly outperforming those with the worst. The latest numbers show earnings per share growing in 2019 and 2020 - and 2018's projections are higher than they were at the end of the 1st quarter. This data has helped keep markets from overreacting to the geopolitical buzz in the background.

Looking Forward
While we expect to hear more on a potential trade war, we will continue to focus on key market principals. This week, we will receive several reports, including consumer confidence and durable goods orders. Rather than significantly affecting stocks, these releases may simply underscore what corporate earnings and other data continue to demonstrate: Right now, the economy is healthy.

Next month, earnings season will begin, and analysts expect S&P 500 companies to show 20% profit growth in the 2nd quarter.

Looking ahead, we will continue to analyze how rising tariffs could affect the domestic and global markets. But, as always, economic fundamentals will take the lion's share of our attention.

If you have questions about earnings, trade, or your future, contact us any time.



Boomer generation is a significant force in charitable giving.

A new survey of 1,339 donors finds that boomers give the most to charities, accounting for 41 percent of all contributions in 2017.

The poll estimated that boomer contributors gave $58.6 billion to nonprofits last year and boomer donors on average contribute to four charities.

The report notes that the average American charitable donor is age 64, which suggests that boomers will remain the biggest source of charitable dollars for the next few years.

Thirty-five percent of boomers make contributions through charity websites. Some 27 percent give by mail, while 11 percent use social media websites to make contributions. Three percent give via text messaging.

Fifty-two percent of boomers think they make their biggest positive impact on worthy causes by giving money, while others see volunteering (19 percent) and raising visibility through word of mouth (8 percent) as the way to make the biggest difference.

Though fewer in number, the older Silent Generation remains a significant force in charitable giving, contributing an estimated $29 billion last year. That amounted to 20 percent of all charitable donations.



Many retirees pay a higher marginal tax rate on their income in retirement than they do before retirement - even if their tax bracket falls in retirement years.

This increased rate is due to the fact that at certain income levels, up to 85% of Social Security benefits become taxable. At this point, the ability to control your income in retirement becomes an extremely valuable tool. This is a key, but often overlooked, factor in helping taxpayers understand what they can do now to make their financial portfolio last longer.

Investors have a few tools available that may help them control income in retirement. They might contribute before retirement to a Roth 401(k) or Roth IRA instead of contributing to a 401(k) or traditional IRA. With the Roths, taxes are paid at pre-retirement marginal tax rates that will be the same as their current tax bracket, instead of at post-retirement rates that may be 185% of their tax bracket. They may also consider large Roth conversions at the beginning of retirement to help reduce taxable income in future retirement years.

It may also be worth delaying Social Security benefits until age 70. Delaying taking Social Security from age 66 to age 70 adds 8% to your benefit annually, which adds up to significant dollars. In addition, only 50% of the Social Security benefit is included in provisional income used to calculate Social Security taxes, so when you do turn on Social Security benefits, offsetting this with a reduction in 401(k) withdrawals can help provide tax savings. This strategy has the potential to sharply reduce the taxable amount of benefits, which could lower annual tax bills each year beginning at age 70.