Category: IMG Education Center

Market Viewpoints – Spring 2022

Keith Bonjour, Portfolio Manager
Keith Bonjour, CFP® Vice President, Portfolio Manager
Both stocks and bonds struggled in the first quarter this year due to a more aggressive Fed posture, inflation risks continuing to increase, and the Russian invasion of Ukraine.

The US stock market experienced its first correction in almost two years as the Fed has steadily been increasing their rate hike expectations and discussing reducing their balance sheet as the year has progressed to try to slow down inflation, while the geopolitical risks from the war in Ukraine have only added further upside inflation risks.

The stock market began to improve throughout March, but still finished the quarter in negative territory. The bond market struggled in the first quarter with rate hike expectations increasing in a meaningful way with the Fed’s dot plot showing the potential for nine rate hikes this year.

At the beginning of the year, only three Fed rate hikes were projected by the Fed. This more aggressive Fed posturing has the market on high alert for a possible Fed policy mistake in the future if they were to overtighten causing a considerable slowdown in the economy.

Inflation continues to be the largest risk to the economy this year with a large supply and demand imbalance in many areas of the economy. The supply chain began to improve slightly early in the year prior to the Russian invasion of Ukraine. However, commodity prices including oil, natural gas, wheat and other commodities have increased due to the impact on supplies produced from both Russia and Ukraine further adding to the supply chain imbalances and adding upside pressure to energy costs throughout the globe, especially in Europe due to their large reliance on Russian oil and natural gas.

The Fed has taken a more aggressive posture to raise interest rates faster and begin to reduce their balance sheet this year, in an effort to slow the economy and stop inflation from becoming entrenched. It is too early to tell if the Fed will be successful in the efforts to slow inflation without causing too much of a meaningful slowdown in the economy.

The US is more insulated than Europe in terms of energy production so the US economy should be less impacted by inflated oil and gas prices. US GDP is projected to remain above trend this year; however, expectations have come down somewhat from the beginning of the year as inflation pressures begin to weigh on earnings expectations and consumer spending.

US companies have continued to show resilience in being able to pass along their increased input costs on to the consumer so earnings have continued to remain strong.

We will continue to monitor consumer spending throughout the year to determine if price increases begin to have a meaningful impact, which in turn will weigh on company earnings, especially companies that operate in the consumer discretionary sector.
US consumers have continued to show resilience in spending behavior in the face of higher costs, however the more entrenched inflation becomes, the higher the probability that consumer behaviors will eventually shift to a more cautious approach. The Fed has a difficult job ahead to try to rein in inflation, but not overtighten economic conditions to cause the economy to slow down too much.

While many positives remain for the global economy with global economic growth and company earnings expected to continue to remain positive in 2022, we maintain our view to be mindful of the risks that the markets face this year from a more aggressive Federal Reserve, elevated inflation, continued supply chain issues, and many different geo-political risks.

We recommend staying the course with your investment objectives, and we continue to rebalance and take profits as we see opportunities to protect portfolio gains and keep our portfolios in line with their investment objectives.

We also recommend communicating with us if any short-term cash needs arise so we can look for opportunities to be proactive when raising cash for any necessary distributions helping to protect against possible short-term negative moves in the market.

We recommend maintaining a more long-term focus on investment goals and objectives with an understanding that short-term headline risks rarely have a long-term effect on markets.

The Time to Review Your Life Insurance Is Now

Olsen Financial Spotlight

By Patrick Olsen, Special Care Planner / Financial Services Professional

Olsen Financial Logo

Life changes and priorities have a way of shifting. But one thing stays the same: how important family is and our desire to protect them. That’s why reviewing your life insurance is an important financial decision.

It means your loved ones could be OK financially if something happened to you. Ensuring the financial security of the people who matter most to you is an important responsibility. This means protecting the value of what you provide for them on a day-to-day basis. You don’t have to wait for a big life moment to review this important protection.

The time to review your life insurance is now.

Olsen Financial is a partner of Northwest Bank’s Investment Management Group. To schedule an appointment with Pat, please contact our Investment Management Group at 563.388.2628.

Reaching Your Retirement Goals Despite Volatility

During times of market stress when stock prices fluctuate up and down significantly, it’s normal to worry about your retirement investments. The good news is that you have likely planned for uncertainty and invested in a diversified mix of stocks and bonds which will help your retirement portfolio weather market volatility.

The most prudent action during unpredictable times like these is to remain focused on the long term objective of reaching your retirement goals and consider the potential impact each of these investor reactions can have on your portfolio.

Investor Reactions During Market Volatility

Flight to Safety

Some investors are not comfortable when the market experiences significant downturns – they feel the urge to sell their investments and exit the market.

CAUTION: If you sell out at these times, you will lock in your losses and not be able to participate as the market recovers. Instead, stay the course and let your portfolio work for you as the market becomes more stable. Typically the market ups and downs are temporary and stability eventually resumes. What’s more, historically the markets have moved on to reach even greater highs.

Stay the Course

You have invested and planned for long-term retirement goals and need to stay focused on that long-term timeframe instead of reacting to short-term market events. Stay the course and let your retirement portfolio work for you to meet your retirement goals.

Make the Most of It

In times of market stress it is a prudent decision to rebalance your investment portfolio to the target strategy. This process includes selling a portion of the positions that have held up the best during the recent market volatility and buying into the positions that have been oversold. For those of our clients that have enlisted our investment management services, this is the process that we manage for you. We will ensure your portfolio is rebalanced and aligned with the investment strategy we worked with you to create.

Portfolio Impact of Investor Actions

portfolio impact of investor actions

It’s Time in the Market – Not Timing the Market

Market volatility is inevitable, but panicking can be a costly mistake. Selling when stock prices have declined and then buying back in after the markets rebound and stock prices have moved higher simply doesn’t make sense—especially for long-term investors. But unfortunately, this is exactly what happens when investors let emotions influence their decisions.

Missing even just a few of the best days of returns can materially impact your portfolio’s performance as history reveals that after periods of volatility, the stock market has not only recovered—but moved on to reach new highs.

A well-diversified, professionally managed investment plan can help ensure your assets are positioned to weather the market’s ups and downs and provide you with the fortitude to stick to your investment plan.

Hypothetical Growth of $10,000 Invested in the S&P 500 (December 1979 - December 2021)

Hypothetical growth of $10000

In the Community – Ridgecrest Village

Our Non-Profit Community Spotlight

Ridgecrest Village

Ridgecrest Village logo

Ridgecrest Village has been a proud provider of senior services for the Quad Cites for over 50 years! As the leader in retirement communities, Ridgecrest Village has flourished over the years. We look forward to continuing to support our residents and staff to live purposefully and passionately.

We also want our residents to live their lives as worry free as possible. Our unique option of Lifecare offers our residents peace of mind when it comes to the future costs of their potential healthcare needs. When residents choose this option, they are able to control those costs and this can allow them to preserve their assets for their family.

Ridgecrest Village is driven not only by our mission and values, but also has the help of trusted partners. Similar to how we become this partner with residents and their families as they plan for their future, Ridgecrest Village looks to the Investment Management Group to guide us. IMG brings a lot of value to our organization by providing solid advice and performance that is beneficial to our operation, and providing a better living community for our residents.

Another of our trusted partners is our own Ridgecrest Village Foundation. With the help of the foundation’s work, we are able to sustain some valuable programs. One plan includes a nursing scholarship program to help individuals cover the costs as they further their education. Another program is our Koning Charitable Fund. This fund can provide resources for those that have been living at Ridgecrest over the years and find they may need financial assistance. This is just one more example of how we try to give our residents peace of mind.

Ridgecrest Village truly is a village of its own. We provide all levels of care from Independent Living to Assisted Living to 24 hour care to end of life care. You can find it all right here in one place. For more information about Ridgecrest Village call 563.391.3430 and ask for Karen McCoy or visit ridgecrestvillage.org. We hope to see you soon and to be able to say “Welcome Home”!

Upcoming Events from our Nonprofit Partners

Framed: Step into Art | Open until May 1 | Family Museum
Step inside the framework of famous paintings and experience art with your kids and family in this interactive exhibition.

Pollination Investigation | Open now | Putnam Museum & Science Center
Nearly 90% of flowering plants rely on about 200,000 species of animal pollinators for fertilization. Explore the essential role that pollinators play in the natural world in this Smithsonian poster exhibition.

Spring Parent Learning Series | Beginning May 4 | The Arc of the Quad Cities
The Arc of the QC is hosting a series of workshops focused on providing the tools parents of children with intellectual and developmental disabilities need to be the most effective. All sessions are free.
Visit www.arcqca.org for information.

2022 Mental Health for Healthy Living Conference | May 6 | Vera French
Vera French is hosting a conference on mental health featuring Chris McCormick-Pries, ARNP and John Medina, PHD. To register, go to forms.office.com/r/2grWjJdQwC.

HANDS Auxiliary Golf Outing| June 6 at Crow Valley Golf Club | Handicapped Development Center
Enjoy a day of golf and free admission to the cocktail party/auction for you and a guest in support of HDC. Contact Mary Egger at 563-391-4834 or maryegger@hdcmail.org to register today.

Market Viewpoints – Winter 2022

Keith Bonjour, Portfolio Manager
Keith Bonjour, CFP® Vice President, Portfolio Manager
The stock market finished 2021 on a high note, with a strong rally into year-end capping another positive year for stocks overall. U.S. stocks continued their outperformance versus both Developed International stocks and Emerging Market stocks. However, the bond market struggled last year posting a negative 1.54% annual return for the Barclays U.S. Aggregate Bond Index with the market anticipating a less accommodative Federal Reserve policy along with future rate hikes. Heading into the New Year, the economy remains on strong footing with both consumer spending, corporate profit margins, and company earnings continuing to provide support to the economy. Inflation and a more aggressive Fed policy continue to remain risks to the economic recovery, so we will be watching closely to see how both the stock and bond markets handle the Fed beginning to wind down their monthly bond purchases and begin to posture for increasing the Federal Funds Rate.
 
The Federal Reserve decided in November to begin to taper their bond asset purchases on a monthly basis, initially projecting to end those purchases early summer. In December, the Fed agreed to speed up the reduction in bond purchases to complete the reduction in March this year. This gives the Fed the ability to begin to increase the Fed Funds Rate earlier should they decide a rate hike is warranted as early as March. The Fed also indicated that they might begin to reduce their bond holdings faster than the market expected which caused both the stock and bond market to reprice assets given the possibility of a more aggressive move from the Federal Reserve. It is too soon to determine if the Fed will follow through on the more aggressive policy this year, but the market is currently pricing in three rate hikes in 2022, three more hikes in 2023, and two more hikes in 2024. The Fed continues to say they will remain flexible depending on how inflation and employment readings progress throughout the year.
 
Inflation continued to surge in the 4th quarter of 2021, leading the Fed to remove the word “transitory” from their Fed statement indicating that they feel some inflationary pressures are going to take longer to return to normal than they previously projected. Global supply chains have shown some signs of improvement with some of the port backlogs improving and some of the largest companies continuing to maneuver well to keep their shelves stocked. However, inflation expectations remain elevated for 2022. Expectations are for inflation to begin to subside as the year progresses, but still ending above the Fed’s 2% goal. Should inflation hold at higher levels than predicted, it could cause the Fed to be more aggressive than current expectations. This would generally be a headwind for markets, especially growth stocks since they tend to perform best in a low interest rate environment. We highlight this as a risk case to watch as the year progresses. 2022 will be a year in which both consumer and corporate spending will need to remain strong in order to offset a reduction in government stimulus spending and a less accommodative Federal Reserve.
 
Chinese stocks continued their struggles last quarter with the Chinese government expanding their regulatory crackdown on industries they feel are not adding to “common prosperity”. This has forced many of China’s largest technology companies to start to deleverage some of their assets and make donations to the government, which have weighed heavily on the Chinese stock market overall posting negative returns for the year. China remains a large driver of global growth so we will be paying close attention to their moves in 2022 to see if they pivot to a more accommodative policy to restore growth.
 
While many positives remain for the global economy with global economic growth and company earnings expected to continue to show strong growth in 2022, we maintain our view to be mindful of the risks that the markets face this year from a less accommodative Federal Reserve, elevated inflation, a very contagious Omicron Covid-19 variant, and many different geo-political risks. We recommend staying the course with your investment objectives, and we continue to rebalance and take profits as we see opportunities to protect portfolio gains and keep our portfolios in line with their investment objectives. We also recommend communicating with us if any short-term cash needs arise so we can look for opportunities to be proactive when raising cash for any necessary distributions helping to protect against possible short-term negative moves in the market. We recommend maintaining a more long-term focus on investment goals and objectives with an understanding that short-term headline risks rarely have a long-term effect on markets.

Significant Events Affecting Beneficiary Designations

Many people own assets that will not be controlled by their Will or Trust. Instead, on the owner’s death, those assets are distributed to designated beneficiaries identified by the owner. Such assets include life insurance, retirement accounts, annuities, stock option plans, and health savings accounts.

Because these assets pass outside the terms of your Will or Trust, you should review your beneficiary designations periodically to ensure that the designation is as you still want, and to ensure that the named beneficiary is consistent with the rest of your estate plan. Also review and possibly update beneficiary designations when there is a significant event in your life. What are these significant events?

Divorce

Automatic events may occur at the time of your divorce. If you live in a State with a Beneficiary Revocation statute, such as Iowa or Illinois, then on your divorce the designation of a spouse or close relative of a spouse is automatically revoked. A contingent beneficiary becomes the primary beneficiary if the automatic revocation deletes a primary beneficiary. If, after the automatic revocations occur, there is no named beneficiary, the asset will be distributed according to terms set by the holder of the asset. These automatic events may not be what you prefer, and the only way to ensure the asset passes as you prefer is to sign a new beneficiary designation. The designation must be processed by the asset holder before it is effective.

Death of a Loved One

A review of beneficiaries is appropriate on the death of a loved one, to confirm whether and how you named the deceased as a beneficiary. If the deceased was your primary beneficiary, the contingent beneficiary is who will receive the asset after your death. Is this what you want? Consider whether a different beneficiary should be named and whether the pattern of beneficiaries is consistent with the rest of your estate plan. Confirm with the asset holder what happens to the asset if no beneficiary survives you.

Disability or Incapacity of Loved One

If your loved one is “only” disabled or incapacitated at the time of your death, receipt of your asset may not serve their best interests, especially if they are receiving State assistance. It is possible that they will become ineligible for State assistance if they receive the asset. It is also possible they will be better served if your asset can be used to fund a trust drafted for their benefit, ensuring they will not lose the assistance they are presently receiving. Talk with your attorney about this.

Minor Beneficiary

Many people avoid naming a minor as a beneficiary of an asset, knowing that the asset holder may not pay the proceeds directly to the minor, but instead will require that a Conservator or Guardian be appointed via a Court proceeding, to receive the asset and later deliver the asset when the minor reaches some minimum, and perhaps inappropriate, age like 18 or 21. Interestingly, it is not uncommon to insert the phrase ‘per stirpes’ after the name of an adult beneficiary, so that the asset will pass to the descendants of a deceased beneficiary, without considering whether a descendant is a minor or has a disability. Is there a better option for minors? What will the asset holder require when a minor is a beneficiary?

Changed Estate Plan

With so many of our estates comprised of assets that have a designated beneficiary, make sure your pattern of named beneficiaries is consistent with a changed estate plan.

What’s next?

Contact Marie to learn more at 563.388.2631 or mtarbox@northwestbank.com

Marie Rolling-Tarbox
Marie R. Tarbox, JD Vice President & Trust Officer

 

In the Community – River Music Experience

Our Non-Profit Community Spotlight

River Music Experience

By Tyson Danner, Executive Director

River Music Experience Logo

Since its founding in 2004 as part of downtown Davenport’s revitalization, the River Music Experience has served as a leader in the Quad Cities’ musical landscape. As it progressed through its early years, it found its place serving community needs by providing inclusive educational programming and high-quality, accessible concerts by local and regional talent.

Now in its eighteenth year, the River Music Experience has a greater impact on our region than ever before, partnering with music venues, city governments, and other nonprofits to create unique, diverse concerts throughout the Quad Cities. RME educational programs have prioritized accessibility with programs like the Acoustic Music Club for youth and adults with special needs. RME is investing in the next generation through mentorship with programs like InTune, a music mentoring program held within community centers. The organization’s staple educational program, RiverCurrents, continues to bring the musical traditions of the Mississippi River to elementary students across the region.

The Echo is RME’s newest endeavor – an online music publication that highlights all the great music happening in our local scene. It is the latest in RME’s growing dedication to building our regional music scene and bridging the gap between artists and potential audiences. Articles, resources, and a full music calendar are available at TheEchoQC.com.

With recent financial stability and program growth, the organization was prepared to invest for the first time. The staff at Northwest Bank’s Investment Management Group was incredibly helpful in guiding us through that process, providing encouragement, guidance, and vast experience to help us meet our goals. We are thankful for our partnership with Northwest Bank, and couldn’t be happier to work with a bank that places such high value on supporting its community.
To learn more about the River Music Experience, visit https://rivermusicexperience.org/.

Upcoming Events from our Nonprofit Partners

Winter Wheels: Antique Motorcycle Exhibition | Open through April 3 | Putnam Museum & Science Center
This community-curated exhibit features vintage, classic, and antique motorcycles of all makes and models.

Framed: Step into Art | Open January 22 – May 1 | Family Museum
Step inside the framework of famous paintings and experience art with your kids and family in this interactive exhibition.

Easter Egg Scramble | April 16 | Handicapped Development Center
5K walk/run located in the Village of East Davenport, supporting HDC. Contact maryegger@hdcmail.org for details.

Spring Parent Learning Series | Beginning May 4 | The Arc of the Quad Cities
The Arc of the QC is hosting a series of workshops focused on providing the tools parents of children with intellectual and developmental disabilities need to be the most effective. All sessions are free.
Visit www.arcqca.org for information.

2022 Mental Health for Healthy Living Conference | May 6 | Vera French
Vera French is hosting a conference on mental health featuring Chris McCormick-Pries, ARNP and John Medina, PHD. To register, go to forms.office.com/r/2grWjJdQwC.

2022 Retirement Plan Contribution Limits

The Internal Revenue Service announced retirement plan contribution limits for 2022.

Rebecca Bitting, Trust OfficerFor the most part the 2022 limits are unchanged from the 2021 limits. The notable changes were the increase in the Roth IRA eligibility threshold and the ability for 401(k) and SIMPLE IRA participants to increase their contributions.

If you have questions or would like more details, please contact our Certified Retirement Services Professional (CRSP), Rebecca Bitting.

Contact Rebecca: 563.388.2575

2022 Contributions 
Elective Deferrals2022
401(k), 403(b), 457(b) PlansLesser of $20,500 or 100% of participant's compensation
Simple IRAsLesser of $14,000 or 100% of participant's compensation
IRA Contribution Limits2022
IRAs (Traditional or Roth)Lesser of $6,000 or 100% of earned income
Additional "Catch Up" Limits2022
401(k), 403(b), 457(b)$6,500
SIMPLE IRAs$3,000
IRAs (Traditional or Roth)$1,000
Roth IRA Compensation Limits - Income Phase Out Range2022
Single$129,000 - $144,000
Married Filing Jointly$204,000 - $214,000
Married Filing Seperately$0 - $10,000

Market Viewpoints – Fall 2021

Keith Bonjour, Portfolio Manager
Keith Bonjour, CFP® Vice President, Portfolio Manager

After a strong start to the quarter, stocks pulled back from their recent highs in September. The US economy remains on solid footing, however there are several topics that are concerning markets. The first has to do with the US debt ceiling and both parties being far away from any compromise to allow the debt ceiling to increase risking a potential US default on its debt obligations. The infrastructure bill discussions continue to drag on without any breakthrough on the total size of the package. Inflation also continues to worry the market while supply disruptions continue to increase with container ships and rail backups along with energy prices continuing to rise. Last, but not least, China has continued its crackdown on many different areas in its economy such as real estate, online education, online gaming, and technology. China has also tried to reduce its energy consumption, especially coal, which is causing energy shortages and adding further strain on already frail global supply chains.

The debt ceiling debate is intensifying with US Treasury Secretary, Janet Yellen, warning that the US would be unable to pay its bills without the debt ceiling raised by October 18th. The issue is becoming very political and the potential risk of a US debt downgrade is looming large over markets. Hopes are that an agreement can be reached soon to avoid unnecessary stress on financial markets. Infrastructure discussions continue without any new breakthroughs to end the quarter. Congress was trying to pass two separate bills, but progressives continue to try to force the bills to be linked together. Progressive and moderate Democrats remain divided on the overall price tag of the bills. Expectations are that a compromise will be reached sometime during the month of October.

Inflation concerns continue to be an issue with the Fed’s stance that inflation will be transitory starting to come under question. Global supply chains continue to be fractured for a variety of reasons such as not enough workers, bottlenecks, Covid shutdowns, and lack of excess inventory. These factors are proving to take longer to unwind then the Fed had initially projected and shipping costs continue to increase. Interest rates have also started to rise from their extremely low levels with the Fed indicating they will begin tapering (reducing) their monthly bond purchases by the end of the year. Tapering does not mean tightening, though, so the Fed will remain very accommodative well into 2022. We will be watching for any indication from the Fed of when the first rate hikes will begin with expectations currently split between the first hikes happening at the end of 2022 or early 2023 according to the Fed’s most recent dot plot.

The Chinese government is also making headlines for their strong regulatory crackdown on many areas of their economy such as online gaming, private education, real estate, and the large technology companies. This has increased the risk for publicly traded stocks in China due to the growing risk of further government intervention. China is also dealing with trying to reduce energy consumption and carbon emissions, which is further slowing their manufacturing and adding to supply chain issues.

The fourth quarter is usually a strong period for stocks; however, we maintain our view to be mindful of the risks facing the market for the remainder of the year. We continue to recommend staying the course with your investment objective, and we will rebalance as year-end approaches to bring portfolios in line with our recommended allocations. We also recommend determining any short-term cash needs that you may have over the next six months as we continue to maintain appropriate cash levels for clients needing distributions. Creating this cash can help protect against an increase in volatility and short-term moves in the market. We recommend maintaining a more long-term focus on investment goals and objectives with an understanding that short-term headline risks rarely have a long-term effect on markets.