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Weekly Wealth of Knowledge - Week of 3/6/23

March 08, 2023

The Weekly Wealth of Knowledge is your download of this week's most important topics related to our community, financial planning, and the markets. March kicks off "retirement planning" month at MONECO. All month long we will be providing you a host of content about planning for retirement and all the things you need to be doing to prepare for it and enjoy it, if you are already there.

In this issue:

       •  Team MONECO - Fairfield Museum (2 min read)
       •  Defining Risk In Retirement (3 min read)
       •  Waiting For New Market Highs? (3 min read)

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Team MONECO - Fairfield Museum

One of our core beliefs here at MONECO Advisors is getting involved in our communities, and to highlight some of the great work our team and our local partners are doing to make contributions to the towns that we have been fortunate enough to live and work in.

This week we highlight our team's involvement in the Fairfield Museum & History CenterThe Fairfield Museum and History Center brings together people from across the regional community for a wide range of activities, from the serious to the fun. As a museum with rich historical resources and expertise, they use the past as a starting point for exploring and understanding current issues and questions. By bridging diverse experiences and perspectives, they work to cultivate a deeper sense of community identity and civic engagement.

They employ a range of strategies: both the traditional museum tools of exhibitions and public programs but also the visual and performing arts. They engage with the community both on-site and through virtual spaces, and their work embraces opportunities to have fun and to share creative experiences of music, drama, and art that spark imaginations and delight the senses.

MONECO team members are board members for the organization.  Learn more about the museum, as well as the host of other organizations that the firm is involved in supporting in various ways. If you see a cause you would like to get involved with, do not hesitate to reach out to the the office to see how you can!

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Defining Risk In Retirement

As we kick off "retirement planning" month for March, we start by taking a look at investment risk. We always say that there is investing for retirement and investing in retirement; the constant in both statements, being the word investing. Although that act does not change, you should be revisiting your level of risk as you enter into this next stage of life. If we can help, do not hesitate to reach out.

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Waiting For New Market Highs?

Financial markets have experienced quite a bit of change this year in just two short months. We started the year hopeful that stocks would benefit from a better economic and monetary policy environment by the spring, but recent developments suggest that may be further out than we initially thought. We remain confident that a new bull market will come—it just may require a bit more of our patience before we get there.

When 2023 began, we had hoped for a new bull market to bloom in the spring, prompted by the end of the Federal Reserve’s (Fed) interest rate hiking campaign. Following recent data pointing to stronger growth and higher inflation, rate hikes may extend into the summer and potentially delay the start of a new bull market. Against that backdrop, even though stocks pulled back in February, this year’s modest two-month gain for the S&P 500 Index feels like a victory.

Recent evidence of consumers’ resilience has been encouraging. Over 500,000 jobs were created in January, according to the U.S. Bureau of Labor Statistics, nearly triple economists’ expectations (the February report is scheduled for March 10). The unemployment rate is at its lowest level since the 1960s. Retail sales rose a better than expected 3% in January month over month, as consumers benefited from the healthy job market and excess savings, while motivated by the diminished COVID-19 threat (with perhaps a small assist from mild winter weather). However, that consumer strength was accompanied by a series of hotter than expected inflation reports for January, fueling more concerns about higher interest rates and, in turn, weighing on the stock market.

Rewards for investors will come—they always do—but they will require more patience than we had hoped. In an environment where inflation has been frustratingly slow to come down, with a Fed still very much intent on combating it, our patience is being tested. The risk that the Fed tightens too much and drives the U.S. economy into recession has risen. Higher interest rates also put stress on stock market valuations, so the longer we worry about the Fed, the less likely we are to see that bull market arrive this spring. Corporate America is not in a position to help much, given earnings declines are likely during the next two or potentially three quarters.

Still, we remain steadfast in our belief that investors’ patience will be rewarded. As Warren Buffett wrote in his latest annual letter to shareholders, “There has yet to see a time when it made sense to make a long-term bet against America.” Stocks have generated annualized returns of over 9% since the advent of the S&P 500’s predecessor index, the S&P 90, back in 1927—and that includes the Great Depression, World War II, the dotcom crash, the 2008–2009 financial crisis, 9/11, and numerous other economic and geopolitical shocks. Stocks may be volatile until the direction and ultimate destination of interest rates becomes clearer, but new highs will come—eventually.

In closing, we expect investors who put money to work in the coming weeks to be rewarded with solid gains this year. The next bull market may not arrive in time for spring, but stocks may still ramp up this summer as inflation eases and the Fed finally hits pause on rate hikes.

As always, if you have any questions, do not hesitate to reach out to the office.

The opinions voiced in this material are for general information only and are not intended to provide specific financial or tax advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of February 28, 2023.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Past performance does not guarantee future results.

Asset allocation does not ensure a profit or protect against a loss.

For a list of descriptions of the indexes and economic terms referenced, please visit our website at lplresearch.com/definitions.