Since opening the first accounts in 2004, Northwest Criterion maintains a long-term, value-oriented view of financial markets. During our career, we have seen rates fall from the mid-teens in the 1980s to zero during the Great Financial Crisis. We have seen growth stocks outperform our strategies since 2009, as the Fed artificially maintained rates at zero and continued to purchase bonds. Growth stocks accelerated after the 2020 COVID shutdown as the Federal Government added unprecedented levels of stimulus payments to individuals and businesses.
Now, the global economy is experiencing inflation and rising interest rates for the first time since the 1970s. Stocks are on track to have their worst year since 2009, and bonds are down by double digits. Speculative assets such as cryptocurrencies, SPACs, and money-incinerating tech companies are imploding. We are fielding a lot of questions, mostly regarding which investments will work in 2023.
Here’s what we think:
Inflation seems to be moderating, which is one explanation for the market rally starting in October. We cannot predict what the Fed will do, but our value-oriented Equity Select and Dividend portfolios favor companies with substantial free cash flow that have the flexibility to raise prices. These companies will not need to raise capital and should perform well in this environment.
The Mutual Fund portfolio should also perform well, as the management teams we selected have considerable experience and have shown the ability to perform well in a variety of market environments.
We believe short-term treasury bills look attractive right now. Rates on bank deposits are near zero, but we are seeing 6-month treasury bill rates at 4.6%. If you need guidance about how to invest money sitting in the bank, please give us a call.
Overall, we recommend that you stay invested in high-quality stocks. Keep as much cash aside as necessary to maintain peace of mind but we advise keeping cash in short-duration treasuries or funds with 3.5–4.5% yields that are not subject to interest rate risk.
Planning Considerations for 2023:
Secure Act 2.0 is working its way through Congress. Proposed changes include increasing the age for RMDs to 73 in 2023 and 75 in 2033, increasing catch-up contribution limits, and expanding access to the Saver’s Credit.
If you know any recent college graduates, let them know about the Saver’s tax credit. They can get up to 50% of their contributions to a Roth IRA and Traditional IRA back in the form of a tax credit depending on their AGI.
If you or someone you know inherited a spouse’s IRA, make sure to update the beneficiaries. Proper planning for inheritance consideration can save heirs substantial amounts of tax.
Ryan and Mike would like to meet with you in the new year to discuss your financial situation. Investment decisions are only one piece of the puzzle: ensuring a secure retirement and planning for your beneficiaries can have much greater returns. One wrong move, unsigned document, or outdated form can create a substantial tax liability—and headache—for you and your heirs.
Ryan Visniski, CFA
Vice President
ryan@nwcriterion.com
Schedule a meeting with Ryan: https://calendly.com/ryanvisniski
Michael Camp
Principal
mcamp@nwcriterion.com