Leveraging the News
Newsletter for Friends of Carlin Financial | Current Issue


Newsletter

Where's the Market?

What Franklin Templeton Thinks...

Q1 2019

  

...About VOLATILITY

Healthy Normal: Volatility Is a Positive and Likely to Persist

  • A bull market typically sustains itself with pullbacks.

  • After many years of low volatility, the higher volatility regime may feel uncomfortable but is not out of line with historical norms.
  • Large market moves, in conjunction with lower correlations, allow ample rebalancing opportunities.

  • Active managers may be a beneficiary of the new regime.

 ...About TRADES & TARIFFS

The Big IFs in Tariffs

  • A 90-day pause in the US tariff hike from 10% to 25% on $200B of Chinese imports is in place while US and China hold trade negotiations.
  • Markets welcomed the time out for compromise, but questions remain: 

IF there is no resolution, how will the global economy be impacted?

IF companies pass through costs, will consumer spending hold up?

IF companies absorb costs, how will their margins fare?

  • We believe there’s a reasonable likelihood some agreement between the US and China will be reached in the next few months, but trade tensions, a symptom of larger geopolitical issues, are likely to be chronic.

 ...About US EQUITIES

Recession Highly Unlikely for 2019; Positive Fundamentals Backdrop

  • Interest rates have risen, but they are still relatively low—not at levels likely to impede economic activity.
  • We maintain high conviction in longer-term growth in the US supported by the consumer. US households, deleveraging throughout most of this cycle, have elevated savings rates relative to net worth. Labor markets remain solid. Cheaper gasoline prices should act as a second tax cut. All of this bodes well for consumption growth in 2019.
  • We remain confident about growth staying strong enough to support risk assets over a longer-term horizon.
  • The US government shutdown creates short-term uncertainty and defers economic activity; if it persists, it could have negative outcomes.
  • Lower energy prices are a windfall, as cheaper energy is the single most important factor for increased productivity.

 ...About EUROPEAN EQUITIES AND BREXIT

 The Relentless Tick Tock Toward March 29 Leaves UK Scrambling

  • With the UK parliament’s overwhelming rejection of PM Theresa May’s proposed withdrawal agreement, chances of a no-deal “Hard” Brexit increased. Rescinding Brexit seems least likely to us, while some form of extension, which needs the support of all EU members, may be likeliest.
  • The UK market appears cheap after moving from a premium at the time of the Brexit referendum to a discount today. If the UK economy proves more resilient than feared there is scope for share prices, particularly of domestic cyclicals, to rebound strongly.
  • A hard Brexit could lower EU growth by 0.2-0.3%. Underlying market fundamentals suggest to us the potential for a near-term rebound in European equities. Without the tax benefits goosing US company 2019 earnings, US and European equities may have more equal footing. 

 ...About EMERGING MARKETS EQUITIES

Positive Signs are Developing

  • We expect EM earnings growth to resume momentum in 2019.
  • Fundamentals remain strong and many EM currencies adjusted significantly in 2018.
  • Tentative signs of a respite in US-China trade tensions also have supported emerging markets.
  • EMs are leapfrogging established models in innovation and technology. Several EMs have seized the lead in innovation in areas such as e-commerce, digital payment, mobile banking and electric vehicles.
  • In addition, we are looking for attractive opportunities related to health care, consumption and manufacturing upgrades, which are less directly impacted by tariff regime changes

 ...About INTEREST RATES AND INFLATION

Expectations for the End of the Economic Cycle Appear Overstated

  • We believe the US economy has broad-based strength to weather another rate hike or two in the coming year, while many now expect no further rate hikes.
  • We believe inflation risk remains to the upside.
  • The 10-year Treasury rate rapidly unwound its 2018 rise to 3.23% as investors fled equities in the final two months, but we think it’s more likely to push back toward that level, if not higher, than stay near the recent low.

 ...About FIXED INCOME

A Time for Balance of Rate Exposure and Credit Risks

  • High-yield bonds are enjoying positive tailwinds, given shrinking supply.
  • Volatility in the bank loan market is allowing research to be rewarded.
  • Broad-based selloff in asset classes offer bargains for the selective investor.
  • Positioning is important in emerging markets, as some countries are more exposed to the rising cost of capital.

Franklin Templeton Investments comprises multiple independent investment teams located around the world. As individual portfolio managers and teams pursue different fund mandates, there will always be different views held on the markets, and we consider that a strength. The insights above represent the current views of senior investment leaders and are subject to change.


This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

Where's the Market?

With all the external events that move the markets, here is a peek behind the numbers to help you make sense of it.

Newsletter

Have You Heard?

Arizona Tax Credits for 2017

The state of Arizona offers its taxpayers the opportunity to make contributions to schools and non-profit organizations that reduce the amount of tax owed to the state or increase the amount of the taxpayer’s refund, dollar-for-dollar. There are three main communities tax credit donations serve, and donors can contribute to any or all of them. To learn more about each, read on.  This summation is for informational purposes only.  Be sure to check with your tax professional to verify whether any of these strategies are beneficial in your particular situation.

Qualifying Charitable Organizations

This individual income tax credit is available for contributions to Qualifying Charitable Organizations that provide assistance to residents of Arizona who either receive Temporary Assistance of Needy Families (TANF) benefits, are low-income residents of Arizona or are chronically ill or physically disabled children residing in Arizona.

Starting with the 2013 tax year, taxpayers no longer have to itemize deductions to claim a credit for contributions to a Qualifying Charitable Organization or Qualifying Foster Care Charitable Organization.

Maximum Credit for Any Tax Year

Single or head of household: 
$400 (Qualifying Charitable Organization)
+ $500 (Qualifying Foster Care Organization)
= $900 Total

Married filing jointly: 
$800 (Qualifying Charitable Organization) 
+ $1,000 (Qualifying Foster Care Organization) 
= $1,800 Total

Beginning in 2016, the qualifying charitable organization and qualifying foster care organization donations are no longer linked, so you can take both credits for a new maximum of $900 ($1,800 for married filing jointly).

Donation Deadline
April 17, 2018 (for 2017)

Credit/Deduction Distinctions
Any charitable contribution that is included in itemized deductions on your federal return must be removed from your Arizona itemized deductions if the contributions were claimed as an Arizona credit. Donations made to organizations not listed on the department’s published website are typically allowable as deductions. You cannot claim both a deduction and a credit for the same charitable contribution on your Arizona return.

NOTE TO DONOR: Many charities indicate on their websites if they are qualified for this credit. Annual reports are often available online as well so that you can see how the organization spends its money. If a charity’s website does not provide this information, you can call and ask for copy of its certification letter from the ADOR.

Resources

School Tax Credits 

There are three school tax credits available for individual taxpayers: one for contributions to public schools and two for contributions to Private School Tuition Organizations.

Public Schools

An individual may claim a credit for making contributions or paying fees to a public school for support of extracurricular activities or character education programs. These are school-sponsored activities that require enrolled students to pay a fee in order to participate. You are allowed to specify which programs you would like your contribution to support when making a donation.

Maximum Credit for Any Tax Year

Single or head of household: $200
Married filing jointly: $400

Donation Deadline
April 17, 2018 (for 2017)

Resources

Private School Tuition Organizations

The Original Individual Tax Credit Program allows Arizona taxpayers to make a contribution to a School Tuition Organization that will help to fund private school students’ tuition.

In 2012, the Overflow/PLUS/”Switcher” Individual Tax Credit Program was signed into law, allowing donors to claim an additional tax credit OVER AND ABOVE the Original. Donors must first meet the Original Program maximum in order to claim the Overflow tax credit. Overflow Tax Credit donation revenues may only be allocated to students that meet certain criteria as determined by Arizona state law.

Maximum Credit by Tax Year

Original Program
Single or head of household 2017: $546
Married filing jointly 2017: $1,092

Overflow/Plus/ Swicher Program
Single or head of household 2017: $543
Married filing jointly 2017: $1,085

Donation Deadline
April 17, 2018 (for 2017)

Information for Donors

What is a School Tuition Organization (STO)?
A school tuition organization is one that is tax exempt under Section 501(c)(3) of the Internal Revenue Code, allocates at least 90 percent of its annual contributions to scholarships or grants and makes its scholarships/grants available to students of more than one qualified school.

What is a qualified school?
A qualified school is a non-governmental preschool for disabled students, or a non-governmental primary or secondary school located in Arizona. The school cannot discriminate on the basis of race, color, disability, familial status or national origin. The primary school begins with kindergarten, and the secondary school ends with grade 12. Qualified schools must also require all teaching staff and personnel that have unsupervised contact with the students to be fingerprinted.

Resources

Military Family Relief Fund

This individual income tax credit is available for contributions to the Arizona Military Relief Fund, which was established by the Arizona Legislature in 2007 (Arizona statute 41-608.04) and is administered by the Arizona Department of Veterans’ Services (ADVS). The fund provides financial assistance to the families of currently deployed Service Members and post-9/11 Military and Veteran Families for hardships caused by the Service Member’s deployment to a combat zone.

Maximum Credit for Any Tax Year

Single or head of household: $200
Married filing jointly: $400

*Donations to the fund will only qualify for the credit if the total amount donated to the fund during the calendar year has not exceeded one million dollars. Donations made to the fund once the total donations for the calendar year reach one million dollars will not qualify for the credit. The determination of whether a donation will qualify for the credit is made on a first come, first served basis. The ADVS will provide you with a receipt that will let you know if your donation qualifies for the credit. The ADVS will also send a copy of that receipt to the Arizona Department of Revenue.

Donation Deadline
December 31

Additional Notes to Donors

There is no carry forward for this credit. You must claim and use this credit on the tax return filed for the taxable year for which you made your donation. This credit is available only to individuals and cannot be claimed as both a tax credit and an itemized deduction in the same taxable year. Before you claim this credit, you must have received a receipt from the ADVS showing all of the following:

  • Your full name and address
  • The last four digits of your social security number
  • The amount you donated
  • That your donation qualifies for the credit

Resources


This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

Have You Heard?

So many things—other than your investments—effect your finances. Discover some useful information here.

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Something to Think About

Digital Estate Planning

Have you made plans or considered making plans for your electronic information and online accounts after you die? The term for this is “digital estate planning,” and for anyone who spends time online, it’s something that deserves serious thought. 

If you handle your household utility payments online, for example, how easy would it be for your family to figure out when the bills are due in the weeks after your death? If all notices for those accounts are sent to you via email, it’s something they may not consider right away and late fees--or even shut offs for non-payment--might occur. If you belong to an online community or have friends online, would anyone know to inform them of your death? Do you have any prepaid accounts or frequent flyer miles that will need to be transferred to someone else upon your death? Do you store photos and videos online and want your family to receive copies after you are gone?

Some online accounts can simply be closed or allowed to lapse, but other accounts might be important and, in the event of your death, it’s possible that you will have electronic documents or other information that need to be disseminated, deleted, archived, memorialized or even destroyed. Digital estate planning gives you time to consider these things ahead of time and put instructions in place so that your family or executor will know how to access critical information in the event of your death and handle your information or other online assets appropriately.

Keep in mind that, for some accounts, the terms of service you agreed to when the account was created will determine what happens to your information when you die. Your email account, for example, will be handled very differently depending on which company you have the account with. Apple will close your account and won’t share the contents with anyone, regardless of your wishes. With a Google Gmail account, you can choose to designate another person to handle your account after a set period of inactivity. Outlook will share all your information with anyone who can provide them with appropriate documentation. 

If it matters to you what happens to a particular account--and the information in it--after you are gone, it’s a good idea to find out what the terms of service are for that account and, if they are not in line with your wishes, consider changing providers now. 

Tips for digital estate planning:
  • First, make a list that includes each account, including login and password information. When making this list, don’t forget to include password protected files and documents. You will also want to list every device or computer that your information can be accessed from: phones, laptops, tablets, desktops, etc. Remember to include flash drives, compact discs, and other storage devices.

If you have a lot of online accounts and the idea of making a comprehensive list overwhelms you, just concentrate on the critical accounts--the utility payment accounts, the accounts with important documents, the paid subscriptions, and anything else that will require someone else’s attention. 

  • Decide how the information in each account should be handled, and who, if anyone, should be given access to it. 
  • Find a safe place to keep this information. You don’t want to make yourself vulnerable to identity theft or other types of cybercrime. 
  • Choose someone you trust to act as “Digital Executor” upon your death, and make sure he or she knows where to find this information when you die, even if you don’t make the information readily available to that person now (and for security’s sake, you shouldn’t). 
  • If you have any online assets with financial value, such as a monetized YouTube channel, an eBay store, or one of the myriad other income streams available on the internet, make sure to talk to your estate planning attorney to determine what, if anything, needs to be included in your will. 

Once you’ve made a digital estate plan, it’s a good idea to review it regularly--at least once a year--and make sure the information is current. You may also want to ensure that the terms of service haven’t changed in cases where it’s important to you how an account is handled after your death.


This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

Something to Think About

Take a look to see some innovative strategies for your nest egg.

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Carlin Cares

Carlin Cares Helps the Homeless

Carlin Financial fills gallon-sized bags full of goodies for the homeless, and we make these bags available to clients who want to help the homeless but have qualms about handing them cash. These bags are full of snacks and small items that a homeless person might find useful. A new batch of bags is now available to pick up and stash in your back seat so it’s handy when you pass one of these unfortunates. 

We are always accepting donated items for the next batch of bags. Good sources for items include the free samples provided by hotels, dental care kits your dentist gives you, and travel-sized BOGO items.

We accept: 

  • Hygiene items — shampoo, soap, toothpaste, lotion, sunscreen, etc.
  • Grooming items — toothbrushes, combs, washcloths, etc.
  • Non-perishable snacks — granola bars, nuts, hard candies, chips, crackers, etc.
  • Small drink bottles — water, Gatorade, etc.

We all have so very much.  Let’s put a little food in someone’s belly and a smile on their newly scrubbed face!

Chris


This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

Carlin Cares

We’re committed to lending a hand to those less fortunate. Maybe you’d care to help us.