Saving for retirement

Why Should You Start Saving for Retirement Now?

Why Should You Start Saving for Retirement Now?

You are busy dealing with life’s day-to-day issues. To you, retirement may seem like a long way off. But preparing now for your financial future is essential because what you do today can help ensure a secure retirement tomorrow.

Although time may be on your side, there are four factors you will need to consider when planning for your retirement.

1. Inflation.

You may be aware that, over time, inflation can erode your savings. But, many people don’t realize the potentially serious effects of inflation. At 3% inflation, $100 today will be worth only $67.30 in 20 years—a loss of one-third of its value. At 35 years, this amount would be further reduced to just $34.44. Thus, it is important to seek retirement savings vehicles that have the best chance of outpacing inflation.

2. Taxes.

Your present income level, tax bracket, and the types of tax-deferred retirement savings plans that are available can all play an integral part in how much money you can save for retirement. By maximizing your pre-tax contributions to employer-sponsored plans and Individual Retirement Accounts (IRAs), you can take advantage of the tax-deferred benefits of such plans.

3. Compound Interest.

Becoming a disciplined saver is one of the key components of retirement plan success. By making regular contributions to your employer-sponsored retirement plan and your IRA, you can maximize the power of compound interest (the interest earned not only on the initial principal, but also on the accumulated interest from prior periods). With consistent contributions, your retirement savings have a greater chance of accumulating to meet your long-term goals.

4. Personal Savings.

Considering the effects of inflation, it is possible that your retirement plan income may fall short of your needs, especially during a long retirement. Furthermore, Social Security generally provides only a base level of retirement income. Thus, to avoid a potential shortfall, start planning to supplement your retirement income with personal savings.

While understanding these principles is no guarantee of future success, they can get you started down the right path. The sooner you recognize the effects that economic forces can have on your retirement income, the more likely you may be to adopt strategies that can help you achieve your long-term objectives. Being proactive today can help increase your retirement savings for tomorrow.

Have questions about your current retirement saving strategy? Give us a call at 704-237-4207 or contact us here.

 

“Why Should You Start Saving for Retirement Now?" 2018. Liberty Publishing, Inc. FMEX Editor.https://fmexcontent.s3.amazonaws.com/1289/1289.pdf


Financial News for the week of October 5th, 2020

Financial News for the Week of October 5, 2020

FINANCIAL NEWS HIGHLIGHTS OF THE WEEK

United States
  • Following a four-week losing streak, U.S. financial markets regained some gusto, buoyed by optimism on the prospect of a new stimulus package.
  • The labor market continues to mend, albeit at a decelerating pace. The American economy added 661,000 payroll jobs in September, down from 1.5 million in August. Meanwhile, the unemployment rate fell to 7.9%, in part because of a pullback in the labor force participation rate.
  • The House passed a $2.2 trillion coronavirus relief bill this week, but it will not pass the Senate. Talks between Speaker Pelosi and Treasury Secretary Mnuchin continue, but a deal has yet to be reached.

 

 


U.S. - Healing, but Slowing Labor Market

 

Financial News- Drop in Labor Force Participation Rate Following a four-week losing streak, financial markets regained some gusto, buoyed by optimism on the prospect of a new stimulus package. Sentiment soured late in the week however, as news broke that President Trump and the first lady tested positive for COVID-19. Still, the S&P 500 is on track to end the week about 2% above last week’s close (as of writing).

The release of employment data for the month of September was this week’s main economic highlight. The report showed ongoing, albeit decelerating progress in the labor market recovery. Indeed, 661,000 payroll jobs were added last month, down from 1.5 million in August. Overall, 51.5% of non-farm payrolls lost since the pandemic began have been recovered. The unemployment rate fell from 8.4% to 7.9% in September, a welcome improvement, but a markedly slower pace than in previous months. More concerning, the drop was due in large part to a pullback in the labor force participation rate (Chart 1) rather than strength in job growth.

The theme of a stalling labor market recovery was also borne out in the jobless claims data. Indeed, new filings for unemployment benefits have held stubbornly close to the 900,000 per week mark since the end of August, signaling that businesses continue to lay off workers at an elevated rate. While continuing claims have trended lower over the past few weeks, they remain well above pre-crisis levels.

 

Financial News- Expanded Unemployment Benefits Expiration ChartUnfortunately, as the $600/week federal unemployment top-up expired at the end of July, many people saw their income take a big hit in August. In fact, a 52% decline in unemployment benefits resulted in personal income falling by 2.7% month/month in August (Chart 2). While personal spending continued to make up lost ground, advancing by 1.0% on the month, the decline in incomes poses a downside risk to the recovery. What is more, spending on durable goods, which powered the early rebound in consumption, is showing signs of fatigue, while the recovery in services spending is also slowing. The latter is now in jeopardy due to a resurgence in new coronavirus cases.

Similar concerns were echoed in the September ISM Manufacturing report. The Index registered a worse-than-expected 0.6 point retreat to 55.4, pointing to a slower pace of expansion in the manufacturing sector. The details of the report showed a recovery that remains uneven, with a slew of industries continuing to contend with sluggish demand.

On a more positive note, new vehicles sales soared by 7.6% month/month in September to 16.3 million units. Alongside home sales, auto sales are one of the few economic indicators to have exhibited a “V-shaped” recovery and are now within 2.5% of their pre-crisis level from February.

All things considered, the balance of risks to the economic outlook remains tilted to the downside. The absence of a new stimulus package is beginning to take a toll on the recovery. Talks between House Speaker Pelosi and Treasury Secretary Mnuchin continued this week, but a deal has, so far, remained out of reach. Here’s hoping that Democrats and Republicans can close the gap and come to an agreement sooner rather than later.

Johary Razafindratsita, Economist | 416-430-7126


 This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

 


Financial news for the week of September 25, 2020

Financial News for the Week of September 25, 2020

FINANCIAL NEWS HIGHLIGHTS OF THE WEEK

United States
  • Major U.S. equity markets edged lower this week, extending their losing streak to four weeks. This came alongside an uptick in new COVID-19 cases and growing evidence that the economic recovery has shifted into lower gear.
  • Existing home sales rose by 2.4% to 6.0 million units (annualized) in August – another post-Great Recession record. New single-family home sales did even better, rising 4.8%.
  • The labor market is generally still moving in the right direction, but it is doing so at a slower pace. Initial jobless claims rose modestly to 870k last week, extending a flat trend just below 900k. On a more positive note, continuing claims continued to edge lower earlier in the month.

This weeks markets

 

 


 U.S. - More Evidence of Recovery Shifting into Slower Gear

Financial News- Home Sales Have Risen to Multiyear highs Major U.S. equity markets continued to edge lower this week, with the S&P 500 down 1.8% from last Friday’s close as at the time of writing. This disappointing performance, which extends the losing streak to four weeks, came alongside a recent uptick in COVID-19 cases and growing evidence that the economic recovery has shifted into lower gear.

On the data front, the housing market – one of the brightest areas of the U.S. the economy – continued to be a source of good news. Existing home sales rose by 2.4% in August to 6.0 million units (annualized), which marked another post-Great Recession record. The improvement spanned both single and multi-family segments and all four Census regions, though gains in the latter were concentrated in Northeast (13.8%). Meanwhile, in part due to a low inventory backdrop, home price growth accelerated sharply into double digit territory, with the median existing home price up over 11% in August relative to a year ago. New single-family home sales were even more impressive, rising 4.8% even after hitting the highest level in nearly 14 years in July. The level of new home sales has only been higher in the frenzied housing market of the mid-2000s that preceded the Great Recession (Chart 1).

As we argued in a recent publication, housing can’t remain divorced from the broader economy forever (see here). While we expect record-low interest rates to continue to support demand as the economy recovers, the acceleration in prices goes in the other direction. Diminished affordability will become a barrier to further increases. At the same time, the end of mortgage forbearance programs could result in more distressed sales in the quarters ahead. Finally, historically low population growth will weigh on demand growth once the initial recovery phase has played out.

Financial News- Elevated Infection Spread Likely to Slow the Recovery ProcessIndeed, the jobs recovery is already showing signs of fatigue. After a relatively steady drop in the months prior, initial jobless claims have remained near the 900k mark since the end of August. Last week they rose modestly to 870k, extending the mostly-flat trend. On a more positive note, continuing claims decreased by 167k to a still-elevated 12.6 million for the week ended September 12th (this data is delayed by a week). Meanwhile, the number of people collecting unemployment benefits from ‘all programs’ edged lower, but remained elevated at 26 million at the start of the month.

All in all, the labor market is generally still moving in the right direction, but it is doing so at a much slower pace. The capricious nature of the health crisis remains a downside risk, with a still-elevated infection spread to continue weighing on the recovery (Chart 2). In the meantime, without additional income supports, spending could take a tumble as the high numbers of unemployed are forced to reduce consumption. With the Fed clearing up its stance (and limitations) on monetary policy last week, the ball is clearly in Congress’ hands. On this front, yesterday it was announced that Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi have agreed to restart stimulus talks, in what marks a small positive step in the right direction.

Admir Kolaj, Economist | 416-944-6318


 This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

 


Estate planning actions for the small business owner

Estate Planning Actions for the Small Business Owner

ESTATE PLANNING ACTIONS FOR THE SMALL BUSINESS OWNER

Two things people avoid talking about are death and money. Combining the two is estate planning—the process of arranging for the management and disposal of a person’s estate while minimizing gift, estate, generation skipping transfer, and income tax. Estate planning includes planning for incapacity, reducing or eliminating uncertainties over the administration of a probate, and maximizing the value of the estate by reducing taxes and other expenses.

Conversations about estate planning, though difficult, provide clarity and prevent conflicts. If you are a business owner, there are three estate planning conversations you should have.

CONSIDER
What You Want

Would you respond with a blank look if a friend asked, “What do you want your estate to do?” Do you think someone else should figure it out for you?

Remember this: Your estate is yours, no one else’s. Think about what your legacy will be from your point of view—not your childrens’, not your employees’, and not your friends’.

Estate planning is not just about splitting up the goodies. Your legacy is about what makes you unique, what wisdom you picked up over the years, and what you want to leave to those who are here after you die.

Of course, your exit strategy will be a significant portion of your estate planning. If you decide to sell or transfer ownership of your company, you’re making an important decision about your legacy as your company will live beyond your lifetime.

TALK
With Your Significant Other

If you’re clear on why you want certain things to happen, share them with your significant other. You and your life partner should have a real conversation about your reasons.

Don’t be surprised if there are some areas where you have different ideas. If both of you are clear on your reasons, it’s easier to find a resolution. If your reason is “just because,” then think harder. Consider those you’re leaving behind and the difference that your estate will make and the effect your exit strategy will have on their lives.

SHARE
Your Thoughts with Your Heirs

The next step is one that too few actually do. That is to sit down with your heirs and let them know what you think and why. Listen to what they have to say. Your decision will affect their lives and the way you’re remembered. If you care about either of these issues, having this conversation is really important. This gives you the opportunity to explain your reasoning behind your estate planning choices and helps those in your family learn about what your motives are and what you hope to accomplish.

Discussing your estate plan with your heirs also prevents unintended consequences. You might assume that the family business should be split equally between your children. However, this arrangement could end up in a major fight between children in the business and those who aren’t.

Clarity is what makes a good estate plan. You really want to ask lots of questions and have an open conversation about what you want. A well developed estate plan can alleviate the burden of probate on your heirs, and leave them without question about your intent.

ESTATE
Planning 101

After talking with your loved ones, you need to start framing your plan. To simplify this process, it can be helpful to consider three estate planning essentials: organizing your financial information, communicating your plans and, of course, taking action.

Organizing your financial and estate information

Create an organized record that details your accounts and legal documents, so your family can easily locate them. Include items such as:

  • Professional and family contacts
  • Location of estate documents
  • Disability and life insurance
  •  Home and auto insurance
  • List of financial institutions, accounts and account numbers
  • Credit cards
  • Beneficiaries of retirement accounts
  • User names and passwords (including those to social media websites or online photo storage)

We tell ourselves we can get organized later, when things finally calm down. But sometimes later can be too late. Most people believe they will live a long and healthy life, but one never knows. A major illness or death may occur before plans are in order, leaving loved ones scrambling to make sense of incomplete information and financial unknowns during a very stressful time.

Discussing your estate plan with family members

Any time you update your estate documents, communication is key. When you name your friends or family members to any role in your plan, you should notify them right away. Confirm that they are willing to take on the responsibilities of the roles, and explain your intentions.

Discussing these matters with children can be sensitive. Here are tips on how to make the conversations age appropriate:

For children in high school and college, let them know that you have plans in place. Tell them who you name to important roles (grandparents, aunts and uncles) and why.

For young adult children, you may choose to name them to primary roles in your documents. Let them know if you plan to do so, and show openness to engaging them in this discussion in the years to come.

As children reach middle age, giving them full knowledge of your financial situation is important. Mature adult children can help parents navigate the challenges that come with aging.

Taking action

Proactive planning requires careful consideration of possible future scenarios and a good understanding of yourself and your family. It also involves communicating your wishes to those close to you.

Finding the time to discuss death and finances in your busy life is difficult and unpleasant. But since one never knows what the future holds, it is best to be prepared.

 

Have question? We can help! Call 704-237-4207.

 

“Estate Planning Actions For the Small Business Owner"ABM.https://abm.emaplan.com/ABM/api/v1/StoredFile/b5f0728a-a93d-4a93-bbc2-5e90da780740/downloadwnload


Financial news for th week of September 18, 2020

Financial News for the Week of September 18, 2020

FINANCIAL NEWS HIGHLIGHTS OF THE WEEK

United States

  • The Federal Reserve is not likely to increase interest rates until at least end-2023, however, this has not been enough to quench investors’ thirst for more liquidity.
  • Retail sales strengthened for the fourth straight month this August, with several categories above or close to pre-pandemic levels of sales. However, the recovery momentum is fading.
  • The labor market recovery has slowed with initial claims flattening at elevated levels. Almost 30 million people are still claiming unemployment benefits.

Canada

  • Financial markets were mixed this week, with the S&P/TSX flat on the week. Meanwhile, oil markets received a boost from a bullish EIA inventory report and Thursday’s OPEC+ meeting.
  • Economic data released this week continued to point to an ongoing recovery. However, improvements are uneven across the sectors. The highlight was the ongoing strength in resale housing markets that left sales 20% above their pre-pandemic levels.
  • Meanwhile, soft CPI inflation readings for August (0.1% y/y) once again served as a reminder that slack remains in the
    economy

 

 


U.S. – The Recovery Shifts In to Low Gear

Financial News: Several Retailers are Above Pre-Pandemic Sales U.S. financial markets had a bumpy ride this week. The highs early on were followed by a sharp drop after Chairman Powell failed to quench investors’ thirst for more liquidity. The declines were primarily led by large cap technology stocks, which have so far made major gains during the crisis. As of writing, the S&P 500 is on track to end the week about 0.1% lower compared to last week’s close.

On the economic front, the Federal Reserve indicated that there will be no interest rate increase until at least end-2023. The Fed said that it would not tighten policy until inflation is higher than 2% for “some time”, a move away from its previous policy goal of “maximum employment” and “symmetric 2% inflation”. This announcement makes the Fed’s desire to make up for past inflation underperformance more explicit. However, the Fed continued to remain vague on the period over which it seeks to achieve higher inflation. Despite the dovish stance, markets thought it wasn’t dovish enough. Equities slid, as investors were hoping for the Fed to magnify its QE by announcing the purchase of more government bonds.

In terms of economic data, retail sales strengthened for the fourth straight month in August with many of the major categories being very close to or even above their pre-pandemic level of sales (Chart 1). However, the momentum is fading as sales grew by a meagre 0.6% month-on-month in August, down from 0.9% in July. Cooling pent-up demand and a decline in income for a significant share of the population (due to CARES Act payments being stopped in end-July) may be responsible for this slowdown. However, the strength in retail has been uneven as it masks the continued weakness seen in clothing, restaurants and bars and department stores. It is important to keep in mind that some of the hardest-hit areas, especially high-touch services (recreation, childcare and haircuts etc.) are not included in these data.

Financial News- Initial Jobless Claims Are Flattening at Elevated Levels Turning to the housing market, starts weakened by 5.1% month-on-month. The decline was primarily driven by the multi-family segment, which fell by 23% on the month, reversing much of the gains seen during the summer. Single-family starts, on the other hand, jumped by 4.1%. Construction for single family homes is continuing at a solid pace on the back of perceived health risks posed by dense living as well as more permanent work from home policies. The housing market is likely to see slower gains in the coming months as economic recovery slows and pandemic-induced uncertainty abounds.

Meanwhile, the labor market recovery has slowed down (Chart 2). Initial jobless claims (860k) were broadly around consensus, down 33k from last week. Continuing claims came in at 12.6 million, beating the consensus (13 million) and down 1 million. Moreover, the number of people collecting unemployment benefits edged higher in late August. At almost 30 million people, the total remains incredibly high. Job growth is expected to be slower through the remainder of the year, with a full labor market recovery not taking months, or quarters, but years.

Sohaib Shahid, Senior Economist | 416-982-2556


 This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

 


Financial news for the week of September 11, 2020

Financial News for the Week of September 11, 2020

FINANCIAL NEWS HIGHLIGHTS OF THE WEEK

  • A wide dispersion of forecasts for U.S. growth over the next year reflects high levels of uncertainty around the duration of the health crisis as well as future government supports.
  • Assuming a modest fiscal package passes Congress this fall and a vaccine becomes available by the middle of next year, the American economy should recover most of what was lost through the pandemic by the end of 2021.
  • Inflation data showed an acceleration in price growth in August. Total CPI was up 1.3% year-on-year in August, continuing its recovery from only 0.1% in May.

Economic Key Financial Forecasts

 

 


A Wide Dispersion of Expectations for Recovery

Financial News: Spending Recovery Retreats as Summer Ends As we head into the final days of summer, it’s a good time to step back and evaluate the prospects for the American economy over the next year. The dispersion of economic growth forecasts has perhaps never been higher. While forecasters all expect a meaningful decline in activity this year, that is due to what’s already been recorded. Meanwhile, forecasts for growth in 2021 in the Blue Chip survey range from over 6% at the high end, to under 2% at the low end. At the high-end, this recovers all the activity lost to the pandemic, while at the low end, it is nothing short of stagnation.

This wide dispersion reflects the unprecedented level of uncertainty around the course of the pandemic, as well as its secondary economic impacts. This can be seen in the wide array of underlying assumptions among forecasters around items key to the outlook. For example: when and if a vaccine becomes available, how effective and permanent it will be, how much future government support will be provided.

We do not claim to have any better insight on these questions than other forecasters, but we have tried to make plausible assumptions to ground our forecast. In the case of the health questions, we assume that a vaccine or effective treatment becomes widely available by the second half of 2020.

Beyond the basic uncertainty around when and if we recover fully from the pandemic, we have little in the way of traditional macro models to gauge how consumers and businesses respond to health crises. This was true on the way down, but also on the way up. We can observe, based on recent data, that after an initial plunge, households have been more than willing to increase spending on durable goods – suggesting little permanent damage to household confidence. Rather, what’s holding back a broader recovery is service-sector areas of the economy where activity is directly impacted by the potential risk of infection. This offers reason to expect a fairly solid bounce back once these fears are allayed.

Financial News: Continuing Jobless Claims Remain Elevated Through the End of AugustIn the case of government policy, we are equally in the dark. The extraordinary fiscal supports early in the year have divorced measures of overall economic activity from household income. Spending rebounded as it did due to these supports. Congress continues to debate another package, but the chasm between Republicans and Democratic bills is roughly 10 times ($300 billion versus $3 trillion). So, we’re left making assumptions. We assume that Congress does eventually come up with some additional support, but closer to the lower range of outcomes, around $400 billion, split between individual checks and unemployment benefits.

With these assumptions in place, and assuming no major second wave of the virus leads to another round of shutdowns, it is reasonable to expect the American economy to recover much of what was lost to the pandemic over the past year. While growth appears likely to slow after its initial burst on reopening, it should pick up again once a vaccine is available. Importantly, much of the deficit in spending is due to high-income individuals, who should be able to dip into these accumulated saving to support growth once the virus threat has passed. As a result, we expect the level of GDP to regain its pre-recession level by the first quarter of 2022. We will be publishing our full views on the economic outlook next week and hope you will give them a read.

James Marple, Senior Economist | 416-982-2557


 This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

 


Financial news for the week of September 4, 2020

Financial News for the Week of September 4, 2020

FINANCIAL NEWS HIGHLIGHTS OF THE WEEK

  • After reaching new highs early in the week, financial markets tumbled, driven by a broad sell-off in technology stocks. The S&P 500 is on track to end the week about 3% below last week’s close.
  • The labor market recovery continued as the economy generated 1.4 million jobs in August, and the unemployment rate fell to 8.4%. However, the pace of the recovery has slowed from previous months, a theme that is echoed in other economic data.
  • In speeches throughout the week, Fed officials warned about the fragility of the current recovery. They emphasized the importance of additional government help in supporting the recovery going forward.

Stock Market Figures

 

 


Labor Market Mending Continues, but Risks Are Mounting

Financial News: Employement Gains Eased in Late SummerThis was a volatile week for U.S. financial markets. Fresh highs early on were followed by a sharp drop, driven by a broad decline in technology stocks and signs of slowing economic momentum. As of writing, the S&P 500 is on track to end the week about 3% below last week’s close.

On the economic front, the main highlight was the release of the August employment data. As largely expected, the American economy continued to churn out jobs last month, albeit at a slower rate than in June and July (Chart 1). Indeed, August saw a total of 1.4 million net new jobs added, down from 1.7 million in July. Overall, nonfarm employment is about 7.6% below where it was in February. The unemployment rate also continued to trend lower, falling to 8.4% in August. While it has come down significantly since the apex of the crisis, it remains high by historical standards.

As unemployment fell, purchases of new vehicles jumped up 3.9% month/month in August (from 12.4% in July), to 15.2 million units. Meanwhile, the recovery in international trade progressed further in July, as exports rose by 8.1% (from 9.6% in June), and imports grew by 10.9% (from 4.6% in June).

Financial News: Service Sector Recover Showing Signs of Cooling DownIn contrast, other data was consistent with a slowdown in momentum. The number of people receiving unemployment benefits - or continuing claims - has ticked up to 29.2 million in all programs in the week ended August 15th. Unlike initial claims, continuing claims have yet to show any meaningful and sustained improvement. Similarly, the latest Fed Beige Book (covering the period up to August 24th) noted that hiring volatility is becoming a recurring issue, particularly in services industries. The report highlighted that as demand remains subdued, temporary furloughs are increasingly being turned into permanent layoffs. That was born out in the August jobs data, where despite a drop in overall unemployment, the number of people “permanently” unemployed (i.e. out of work, but not on a temporary layoff) rose to 7.4 million, outnumbering the temporarily unemployed (6.2 million) for the first time in months.

Service industries also lost some momentum in August. The ISM Services Index declined by 1.2 points to 56.9, signaling that the pace at which the services sector is expanding is slowing (Chart 2). By contrast, the ISM Manufacturing Index recorded a surprise 1.8-point gain to 56.0. Despite the top-line increase, the details reveal an uneven recovery thus far, with many businesses still holding back on investment and hiring due to elevated uncertainty.

Given the still very high level of unemployment, the moratorium on residential evictions until the end of 2020 issued by the Center for Disease Control and Prevention (CDC) was a welcome development (it applies to individuals earning less than $99,000 per year). With pandemic-related uncertainty remaining elevated, near-term risks to the economy still appear tilted to the downside. As such, continued government support will be essential in limiting financial stress to households and businesses. This was emphasized by Fed officials in speeches throughout the week, noting that additional support will be key in determining the pace of the recovery. Considering stalled negotiations around the next stimulus package in Washington, consumption growth is at risk of tapering off in the coming months. It is going to be a long and bumpy road back to economic normalcy.

Johary Razafindratsita, Economist | 416-430-7126


 This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

 


Business owners, do you have a succession plan?

Business Succession Planning

Retiring Business Owners - Plan for Succession

If you’re a small business owner, you’ve invested a great deal of time and effort into building your company. With day-to-day demands, it may be difficult to imagine your eventual transition into retirement. Yet, if you want to build personal financial security and ensure business continuation, it is important to plan ahead. Business succession planning can help create retirement income for a retiring business owner and facilitate the transfer of operations and/or ownership to family or another entity. A succession plan can also provide a strategy to handle unforeseen events, such as death or disability.

 

Laying the Foundation

It is never too early to begin planning for succession. An early start can allow you ample time to develop an appropriate exit strategy, choose the right person to be your successor, and train your successor to manage the daily operations of your company. Consider the following points to create a foundation for a successful plan:

 

Business Valuation

A key aspect of planning for continuation is calculating the worth of your business. There are a variety of techniques for business valuation, and the most appropriate will depend on your business circumstances. A qualified professional can help you choose strategies for valuation.

 

Plan Your Exit Strategy

It is important for a retiring business owner to plan his or her departure from the day-to-day operations of the business. A solid plan can help ensure this transition will go smoothly, as well as facilitate the transfer of ownership.

 

Choose a Successor

If you plan to keep ownership and control of your business within your family, start by assessing your family members’ interests and qualifications, and how well they match the needs of the business. Discuss with family members who will participate in the company and in what capacity. Then, determine how working members will be compensated and what will be given to nonparticipating members.

If you expect unrelated parties to carry on the business, meet with the key people involved for an in-depth discussion about the company and its future. If succession involves the sale of the business, be prepared to address such issues as what the purchase price will be, how it will be paid, and when the succession plan will be activated.

 

Develop a Business Plan for the Future

Through your business plan, you can outline clear-cut, short-, medium-, and long-term business goals for your successor, along with an action plan for achieving them. Include budgets and financial forecasts that can be modified according to changing conditions in both the industry and the economy.

 

Choose a Transfer Strategy

Depending on the type of business, its value, and your personal financial situation and goals, determine the best ownership transfer strategy for your business. There are a variety of ways to structure and fund buy-sell agreements. For transfers to family members or charity, gifting may be an appropriate option. Consult your tax and legal professionals for specific guidance.

 

Plan for Contingencies

Regardless of your intentions for succession, it can be helpful to compile current information in case an unforeseen event, such as a death or disability, occurs before you have finalized your succession plan. This information should include the following:

  • A copy of your current business plan.
  • Job descriptions for all positions within the company, including details regarding areas of responsibility and delegation of duties.
  • A list of potential successors.
  • A plan to ensure extensive “hands-on” training for your designated successor.
  • An estate plan that addresses any Federal and state estate tax obligations.

 

Other Considerations

A comprehensive succession plan involves strategies to handle a number of financial, legal, and tax issues. For instance, how will a successor secure funds to buy out a retiring, deceased, or disabled owner’s share of the business? What are the estate planning issues? How can an owner minimize gift taxes resulting from the transfer of company stock to family members? Such situations can be addressed in a succession plan, with the guidance of qualified legal, tax, financial, and insurance professionals. You owe it to yourself to ensure that your business will continue to flourish after your retirement, as well as in the event of death or disability. Proper planning through a business succession plan can help provide long-term security for your retirement, your company’s future, and your family.

Not sure where to begin? Contact Aventus Advisors for help at (704) 237- 4207.

 

“Retiring Business Owners - Plan for Succession"Fmex 2017. https://abm.emaplan.com/ABM/api/v1/StoredFile/cda87305-6b3e-4794-9498-0552159efdd9/download


Financial news for the week of August 28, 2020

Financial News for the Week of August 28, 2020

FINANCIAL NEWS HIGHLIGHTS OF THE WEEK

  • Federal Reserve Chair Powell unveiled a change in the Fed’s monetary policy strategy, announcing that it will target an inflation rate “that averages 2% over time” (instead of a strict 2% goal), and that it will be concerned with shortfalls of employment from its maximum level (rather than deviations). Taken together, these mean a bias to keeping rates on hold well after economic recovery sets in.
  • Personal income and spending data this week showed continued, albeit slowing progress in recovering from the pandemic-induced shock earlier this year. Real personal spending rose 1.6% in July down from 5.7% in June. Total spending is still 4.9% below its pre-recession peak, with the deficit entirely due to spending on services.

This Weeks Market Data

 

 


Federal Reserve Flips the Script, Targets Average Inflation

Financial News- Chart 1It’s not easy being a central banker. The job of the Federal Reserve – to keep the economy and inflation on an even keel with just its power over the monetary printing press – has been made a lot more difficult by the unprecedented global pandemic. While lower interest rates certainly help, as evidenced by the strong rebound in activity in the auto and housing market, there is still a large hole to fill in other areas of spending less sensitive to interest rates. Things like food services and accommodation, healthcare, and recreation services, which together make up 90% of the deficit in spending relative to January of this year, will not return to normal as long as the virus threat remains. Until they do, employment will remain impaired.

It’s not just the health crisis that has complicated the Federal Reserve’s task of achieving maximum employment and price stability (which it interprets as an inflation rate close to 2%). Its traditional policy lever – the fed funds rate – is consistently impaired by the effective lower bound. Once it cuts to near-zero, it must turn to less traditional tools such as large scale asset purchases. At the same time, the relationships between economic variables that it relied on to achieve its mandate appears to have weakened. A hot labor market does not seem to put upward pressure on inflation the way it seemed to in the past.

Faced with challenges to achieving its goals, the Federal Reserve has decided a chance of tack is necessary. Nothing too revolutionary of course, but a recognition that it should be more concerned with employment undershooting its goal than outperforming it. At the same time, having consistently over-predicted the future path of inflation over the past decade, it has come to the view that it should be less concerned about overshooting its 2% objective. So, rather than targeting a forecast of 2% inflation, it will target a rate that includes the recent past – an average inflation target. In other words, if inflation has underperformed, due, for example, to a period of economic weakness, it will not immediately tighten policy even if inflation pushes higher than 2%.

Financial News Chart 2It’s worth unpacking the theory behind this last change. The thinking is that controlling future inflation depends on influencing people’s expectations for it. In order to get inflation up to its (now average) target it has to convince people that its ok being a little behind the curve when it starts to show up. It remains to be seen how effective this can be. Communication will be challenging. People don’t especially like inflation and there will be pressure to tighten policy when the actual rate moves above 2%. The Fed has also not said how much history it is averaging over or how high it will allow inflation to overshoot, simply that it will tolerate it “moderately above 2%.” Will it tighten policy if inflation is at 2.5% or is 3% the more relevant threshold? At the same time, other influences besides expectations may keep downward pressure on price growth. Just because it wants inflation to move above 2% doesn’t mean it will. Just ask the Bank of Japan.

Still, the reaction in markets to the statement has been positive so far. Stock markets rallied on the news. This makes some sense. Taken at face value, the fed funds rate are likely to remain lower for even longer.

James Marple, Senior Economist | 416-982-2557


 This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.

 


Financial news for the week of August 21, 2020

Financial News for the Week of August 21, 2020

FINANCIAL NEWS HIGHLIGHTS OF THE WEEK

  • The housing market continues to exceed expectations. Existing home sales and starts rose by 24.7% m/m and 22.6%, respectfully in July. Existing home sales are now 8% above January levels while starts are 7% below the pre-pandemic peak.
  • The labor market recovery, meanwhile, appears to be losing steam. Initial and continuing jobless claims are settling at high levels suggesting more modest job gains in August compared to previous months.
  • The Federal Reserve is wrapping up its comprehensive monetary policy framework review. Chairman Powell will provide an update next week at the Jackson Hole Symposium.

This Weeks Markets Data

 

 


Markets Optimistic Despite No Deal Yet from Washington

Financial News- Housing Activity Has Rebounded It was a volatile week for financial markets this week as the S&P500 briefly touched record highs before tumbling back down on Wednesday’s release of the Federal Reserve’s July meeting minutes. Since then, markets have made up some ground and at the time of writing, the S&P was a tad higher than close last week.

On the economic data front, housing activity continued to exceed expectations. Both housing starts and existing home sales trounced market forecasts in July, rising by 22.6% and 24.7% month-on-month, respectfully. Starts are now just 7% below their pre-pandemic peak (January), while existing home sales are 8% above January levels (Chart 1).

The housing market has been a bright spot for the U.S. economy during this pandemic. Record-low mortgage rates have had a magnetic pull on prospective buyers, especially millennial who have held-off purchasing a home due to affordability constraints (see report). This has given homebuilders the confidence to resume construction at extraordinary speed.

Looking ahead, the housing outlook depends on the labor market recovery. Prospective buyers will need the income to take the plunge into homeownership, but a wobbling labor market could delay their plans.

Financial News - Initial Jobless Claims Flattening at Elevated Levels Worryingly, the labor market recovery appears to be losing steam. Initial jobless claims data released for the week ending on August 15th rose to 1.1 million claims, flattening at a level almost one million higher than in pre-pandemic months (Chart 2). Likewise, overall continuing claims are also stabilizing around the 28 million mark. Taken together, these indicators suggest employment gains slowed in August compared to May, June or July.

With the labor market hitting speed bumps, the onus is on policymakers to provide additional support to households and businesses that are struggling due to the pandemic. Congress has been deadlocked on the next set of fiscal measures, with the Democrats pushing for more income support and Republicans arguing for less. It is clear, however, that more aid will be needed to avoid deepening the economic crisis.

This sentiment was the key discussion point among Federal Open Market Committee (FOMC) members. As noted in the minutes from July, participants zeroed in on the importance of fiscal policy in holding up spending, investment, and the labor market until a vaccine or effective treatment is found. A significant downside risk to the economic outlook is if fiscal support disappoints. At the current juncture, this seems to be a very real possibility.

In terms of monetary policy, several FOMC participants agreed that without convincing fiscal support, more stimulus may be needed to promote the economic recovery. They debated the use of forward guidance and yield curve control, with the former getting more attention among members. Fed Chairman Jerome Powell will likely provide more insight into these issues as well the broader wrap up of the comprehensive monetary policy framework review next week at the Fed’s annual Jackson Hole Symposium.

Sri Thanabalasingam, Senior Economist | 416-413-3117


 This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.