Our mission is to help you Preserve Your Assets and Protect Your Lifestyle. Our newsletter is aimed to educate you on the economic environment, as well as provide life perspective and financial planning ideas that can help you!

As always, your well-being is everything to us. If you have any questions about your financial or investment plan, please contact us anytime. 

Quarterly Market Review

We thought it would be beneficial to share with you some key observations from three of our research partners along with an outline of our conclusions. 

iM Global Partner’s Market Slides

1. Despite the stress in the banking system, including the second-largest bank failure in US history (Silicon Valley Bank), global equity markets held up remarkably well in March and posted solid returns for the quarter. Does not see this as the beginning of “Great Financial Crisis 2.0”
   1. The problem is not caused by poor lending standards (credit risk), exploding derivatives, and weak bank balance sheets but instead by interest rate duration risk from the banks’ US Treasury and Agency bond holdings, whose values plunged as interest rates soared. There is no risk of default – no credit risk – in Treasuries and Government Agency MBS.
   2. Banks are better capitalized now, particularly the very largest “systematically important” banks, due to tighter regulations since the Global Financial Crisis.
2. At the March FOMC press conference, the Fed reiterated that they do not expect to cut rates this year. The Fed funds futures markets do not believe him, it is currently pricing in roughly 75 to 100 bps of Fed rate cuts this year. One thing is certain, they cannot both be right on this. Referring to the banking system stress, the Fed did state that the likely tightening in credit conditions “in a way, substitutes for rate hikes”.
3. We do not believe the S&P 500 is adequately discounting the likelihood and severity of an oncoming earnings recession. As mentioned above, despite the turmoil, the S&P is actually higher than it was at year-end. If our base case earnings recession plays out, we assess shorter-term downside for the S&P in the 2700 – 3200 range.

NDR Digest

-  Global Asset Allocation Current:

1. 65% stocks (Overweight compared to 55% benchmark)
2. 5% cash (Underweight compared to 10% benchmark)
3. 30% bonds (Underweight compared to 35% benchmark)

-  Global economy continues to grow, but some cracks are emerging. (China demand likely to slow, and US banking crisis likely to lead to tighter credit conditions) We continue to maintain the risk of recession, with 60% qualitative odds of one starting in late 2023/early 2024. Progress on core price growth (inflation moderating), combined with the recent challenges in banking, give the Fed a green light to end the tightening cycle. We expect the Fed to pause after one more 25 bps hike in May. The bear market in stocks mostly ended in the middle of 2022, with the trend evidence slowly improving, but some indicators have not verified. On the offsetting side, long-term trends, valuations, and rising debt service could weigh on gains in 2H.  

Schwab Market Perspective

On March 22, the Fed raised rates by 25 basis points, a move that was widely expected. The question is what the central bank will do next. The Fed is trying to thread a needle in balancing the threats associated with the banking crisis and the need to combat still-high inflation. The most recent employment report showed that more people are coming off the sidelines, looking for work, and not finding it. In addition to its dual mandate to keep inflation in check and to promote full employment, the Fed has a third unwritten mandate: to maintain financial stability. In times of stress, financial stability concerns often trump the other two mandates. The Fed has said it believes the issues in the banking sector are not widespread, but until the outlook is clear, it could support a pause in the rate-hike cycle. One of the complex aspects of the current economic slowdown has been the rolling aspect of it. There have been many negative GDP quarters lately among the G7 countries, though few of the negative quarters have been back-to-back, and the timing has not been synchronized across all the economies.

Our Conclusions

-  The stock market has rallied recently but is based on two primary “hopes”. The first is the Fed is set to pivot from monetary tightening, and the second, the recent “bank crisis” is contained.  We do believe the Fed is close to being done, but the stock market has not properly reflected lower earnings in a weak economy. While there may continue to be spillover effects in the banking system, we do not see this as a repeat of 2008. The Systemically Important Financial Institutions, ie “The Big Banks,” are not in the news and the assets that have been marked down are down due to interest rates rising, not because of holding “toxic assets” as was the case in ’08.

-  “Rolling Recession” and “Rolling Inflation” seems to be how to best characterize this current environment. Not a broad-based, sector-wide slowdown, but only seen in a handful of sectors – tech, and finance. Inflation seems to change from high gas prices to high egg prices and/or high natural gas prices but not staying elevated. The good news is that there has been some relief in some inflationary pressures though the bad news is that some other goods/services jump higher.

-  With the Fed having dramatically increased rates since early 2022 and concerns over uninsured deposits, we have had a number of clients explore various short-term cash instruments such as CDs, institutional money market funds, and/or treasury bills.

If you have questions about your portfolio, please contact us anytime. 

This Is Life - "One Door Closes and Another Door Opens"

Managing investments and maintaining financial plans are the “business” aspect of GFP. It’s not just about “Preserving Your Assets” but also recognizing we are “Protecting Your Lifestyle.” In our financial planning reviews and regular portfolio reviews, we are privileged and blessed to hear what is occurring in “your” lives; it brings purpose to “why” we do “what” we do. We thought you would enjoy hearing about a very important aspect of our lives …….. Our children!

A quick update on what’s happening with the Nguyen kids; Gavin and Lauren. Gavin (14) just wrapped up his Freshman season of playing Frosh high school basketball for Portola High School. The team finished 17-8 with Gavin getting to start a handful of games. He has really sprouted this year (probably about 5 inches of growth) and has just about caught up to dad 5’ 9”. (As a reference point, I think I was maybe 5’ 2” as a 14 year old). They are in spring league right now and he has been called up to play on the Varsity squad. At their tournament a few weeks back, he was shooting the ball real well and I could hear parents from the other team yelling “Guard him, he’s a shooter”. (Proud papa moment as I’ve never heard that uttered when I played). Oh, and he is also getting straight As.

As some of you know, Lauren (12) tore her ACL playing soccer early last year. After an arduous recovery, she made her way back to the field this last Saturday. She subbed in at the start of the 2nd half and played about 15 minutes, as mom and dad held on with bated breath. She was solid and won a few 50-50 balls. She was excited to be back out there on the field and with her teammates. She did complain about being a little sore afterwards, but I reminded her (having torn both of my ACLs) that the process continues, keep training/strengthening and with time she will truly be back to 100%. She is also doing quite well in school, with primarily As and one B. The not-so-great update: she’s now wearing make-up and into boys…it begins. : (

The Bartels girls are also doing well; Taylor and Blake.Taylor (almost 12 in May) is half-way through her first year of middle school. Taylor loves school and her favorite subject is math. She wants to be a math teacher when she grows up! Taylor started aerial silks at Ruby Karen Project in Costa Mesa last August and just made it onto the apprentice program where she will now participate in acrobatic performances! Taylor is strong, determined, and organized.

Blake just turned 10 this April. Blake is in the 4th grade in a special day class. Blake loves school and her friends! Blake enjoys playing basketball, soccer, and water polo. When Blake is not active in sports, her favorite past time is playing with babydolls. She received a reborn baby for her birthday and loves to dress her, diaper her, and take her on walks in the baby carrier. Blake is full of energy and spunk!

The Guinet boys/men are getting on with their lives as well; Brennan, Elliot, and Evan. Brennan (27) has accepted a new position at Metagenics in Aliso Viejo, CA. A shorter drive to work than the drive from the OC to Studio City. Beginning in the Summer of 2023, he will begin working towards his Masters of Science in Clinical Mental Health Counseling from GCU. He has always had a passion for helping people and families, and is excited about this next chapter in his life.

Elliot (25) is close to receiving his degree in Graphics Design in Animation from Cal State Fullerton: working part time for Door Dash, living in the dorms, and enjoying his independence. Its is amazing how much he has changed and matured being away from home. I’m pretty sure he is looking forward to the day he is done studying. “BUT” weren’t we all …. ; )

Evan (23) continues to pursue his passion for dance as a professional commercial dancer. I cannot think of a second in any day when he is not doing something related to dance. He is contemplating moving to New York,  and seeing what other opportunities may exist in a different part of the country. Recently he performed at the Grammys as part of the opening act featuring Bad Bunny. He is living and breathing his passion for dance!

As parents, we always want the best for our kids. We hurt when they suffer challenges (Lauren’s torn ACL), smile when they experience success (Evan’s Grammys), and are proud of how they see themselves (Taylor will be an amazing teacher). We wish the very best for our kids. Regardless of where they go and what they do, we will always be proud and supportive of their journey.

We hope our commitment to family is reflected in our commitment to you as the doors “Open and Close” in each of our lives.

Thank you for being the best part of GFP.

Your Financial Spring Cleaning

This spring presents a great opportunity to tidy up your finances and start fresh for the year ahead. In light of this, we have compiled simple tips to help you get organized financially:

Review your budget: Take another look at your monthly budget and adjust your expenses based on your spending so far this year.

1. Cut down on subscriptions: Over half of Americans have forgotten or unused subscriptions. As part of reviewing your budget, check your account registers for recurring charges you may have missed. Alternatively, you can use apps like Rocket Money or Hiatus to help.
2. Pay off debt: Allocate a portion of your tax refund towards paying off debt, and commit to avoiding any new debt.
3. Obtain your free credit report: If you haven't done so in the past year, obtain your free annual credit report, and scrutinize it for errors or illegitimate inquiries.
4. Assess your insurance coverage: Rates for coverage change annually, so review your existing coverage to ensure you have adequate protection at a reasonable cost.
5. Discard old financial documents: The IRS recommends keeping at least three years of tax returns, as well as documents related to your home, car, and stocks. Any other financial documents can be safely shredded.

If you have any questions or would like to schedule a spring review, feel free to contact us at any time!