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Slick TV ads often make financial planning and wealth management sound simple, but it’s usually not. Managing wealth requires knowing a lot about highly technical topics, like taxes, government regulations, and finance as well as history, psychology and how to communicate with loved ones about sensitive issues. This article highlights some of the knowledge needed to manage wealth and why it’s often so daunting without the help of an independent personal financial advisor who is familiar with your situation.
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Understanding The Federal Reserve Mandate To End Inflation
The Federal Reserve System, the nation’s central bank, has a dual mandate to pursue maximum employment and maintain price stability. These two priorities are currently treated equally, but that was not always the case. In fact, the Fed’s bias toward maximizing employment was a critical driver of the stagflation that plagued the U.S. in the late 1960s and 1970s. Recognizing the need to balance price stability and maximum employment, in 1977, Congress revised the Federal Reserve Act.
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Fed Governor Kugler Details Inflation And Economic Outlook
The 12-month inflation rate, as measured by the personal consumption expenditures (PCE) index, was 2.6% in December, down from its peak of 7.1% in June 2022, and the six-month rate for PCE inflation was even lower, at 2%, which is the target rate set by the Federal Reserve.
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Why Rates May Not Be Cut Until June
The cost of a loan to buy a home, car, college education, and achieve the American Dream is staying the same for now. As expected, Federal Reserve Chairman Jerome Powell said the central bank did not lower loan rates following the Fed’s Wednesday, Jan. 31, 2024, policy meeting.
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Practical Suggestions For Achieving Your 2024 Resolutions
New Year’s resolutions usually fail because they‘re often too hard to achieve. After six months, only 10% of people who make resolutions achieve them or remain committed to them, , according to a study by Dr. Mark Griffiths, a Chartered Psychologist and Distinguished Professor of Behavioral Addiction at the Nottingham Trent University. What can you do to make financial, medical, or other personal resolutions more likely to be achieved?
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A Sign Of Progress In Solving U.S. Economic Problems
The Federal Reserve appears to be pulling off a feat most experts did not believe it could: ending its aggressive inflation-fighting campaign of 11 interest rate hikes without tipping the U.S. economy into a recession.
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Fed Keeps Rates Unchanged; Expects Easing In 2024
To promote transparency and free markets, the Federal Reserve System began publishing the opinions of the 19 U.S. central bankers that decide interest rate policy.
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Have You Logged Into Your Social Security Account?
Have you logged in to your Social Security account? Creating an online account at SSA.gov is an important first step in understanding your retirement income situation. However, only about 60 million of the 160 million individuals in the U.S. labor force who have Social Security accounts have created a way to access the Social Security Administration’s website.
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The Great Fake Out Of 2023 Is Poised To Extend Into 2024
All year long, the economy and stock prices have fooled experts and consumers, outperforming expectations month after month.
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Test Your Financial Planning IQ
The five questions below are a challenge meant to allow you to assess your knowledge of investing, tax and financial planning. If you have been following our news stream, this quiz draws on familiar ground. The answers are below.
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Planning Briefs
How Much Lower Can Stocks Go?
Published Wednesday, March 18, 2020, 7:30 p.m. ET
(Wednesday, March 18, 2020, 7:30 p.m. ET) — No one knows if stock prices bottomed today or if they could go lower. We do know that profits ultimately drive stock prices. So here's the picture of 2020 and 2021 profit expectations in the context of recent market panics.
Significantly, the virus crisis currently prices stocks at a 12.3 multiple of earnings expected for 2021. Every $1 of profits expected to be earned in 2021 currently accounts for $12.30 of the average Standard & Poor's 500 company's share price. How does this compare to market panics in the recent past?
After the world financial system nearly collapsed in 2008, stocks in the first quarter of 2009 traded at 9.5 times their expected 2010 earnings. That was a more frightening crisis, however, because the worst case scenario of the pandemic can be statistically modeled and its financial economic effects can be estimated. However, the end of the world financial system has no statistical basis for measurement. It posed a bigger risk.
The 12.3 price-earnings multiple on 2021 earnings is much lower than the low reached during the market selloff of June 2015 through June 2016, when Chinese growth slowed, oil prices plunged, Brexit threatened the Europe Union, and Greece defaulted on its debt. As scary as that period was, the p-e multiple dropped only to 15.3 times second-quarter 2017 earnings versus the 12.3 multiple on earnings expected in 2021.
The dotted red line shows the recent price of the S&P 500 is sharply undervalued compared to the earnings expected in 2021. The price of the S&P 500 would have to rise sharply if earnings at the end of 2021 come in as expected. This is not a forecast or prediction, but it is what the numbers show.
The price-earnings multiples on the S&P 500 are based 2019's actual earnings of $163.00 per share, and estimates for 2020 earnings of $172.90, and $193.72 for 2021, according to data from Yardeni Research, Inc. and Thomson Reuters I/B/E/S for actual and estimated operating earnings from 2015, as well as Standard and Poor's for actual operating earnings data through 2014 and stock index pricing data through March 12, 2020.
Even if 2020 is much worse than expected by Wall Street analysts, stock valuations are near an all-time low in modern history.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.
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This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.
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