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Jan 01
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How Will Increased Tapering Impact Markets in 2022?

By Blog, Stock Market News

According to a Dec. 15 Federal Open Market Committee (FOMC) statement from the Federal Reserve, the federal funds target range will remain at 0 percent to 0.25 percent. Beginning in January, the FOMC will reduce its monthly purchase of assets to $40 billion in Treasury securities and $20 billion in mortgage-backed securities, with tapering expected to finish well before mid-2022. The FOMC also projects three rate hikes in 2022. These monetary policy adjustments are all subject to change based on the economic developments going forward, signifying uncertainty for markets in 2022.

What History Says

Looking back to the last “taper tantrum” in 2013 when Ben Bernanke was in charge of the Federal Reserve, equities lost 5.8 percent during June 2013 (similar to the decline in markets during September 2021). While many considered this a “market pullback,” the S&P 500 saw gains of 17.5 percent for the rest of 2013. Looking from WWII onward, there’s been 60 instances of the stock market falling initially by 5 percent to 6 percent, but the next month it was up 3.3 percent on average, and 92 percent being higher by year-end.

From the second half of December 2013 through October 2014, the S&P 500 advanced 11.5 percent, primarily because Wall Street was confident in the economy’s health in growing with the Fed’s bond-buying.

After the rallying months, markets have gained an average of 8.4 percent 100 days later. For the 2021-2022 cycle, the rally is expected to go through January 2022. However, historical S&P 500 trends suggest volatility and a drop of 5 percent or greater in February 2022. February is generally the second worst month of the year for market performance.

What’s Happening this Cycle

Fed Chair Powell clearly indicated that rates are to be raised soon and inflation is expected to stabilize. Inflation is expected to hit 6 percent in Q4 of 2021, and trading on Wall Street is expected to see bearish trends to start 2022.

Since the Fed has been crystal clear about tapering, such communication has likely resulted in a relatively smoother transition for the markets. According to the Board of Governors of the Federal Reserve System, quantitative easing (QE) began in 2008 due to the financial crisis, was rolled back at the end of 2018, but the Fed became more accommodative again during the COVID-19 crisis. As of October 2021, the Fed’s balance sheet was $8.5 trillion. This was double what the Fed’s balance sheet was in early 2020 and 10 times as large from mid-2007 levels of $870 billion.

With Powell yet to be reconfirmed for a second term, there is uncertainty, along with the 2022 mid-term elections and pressure from progressive politicians looking for a dovish Fed chair.

Powell’s comments at the recent FOMC meeting explained that once COVID-caused jams to the supply chain are resolved, inflation will subside. This perspective, paired with his continual observation of the economy and flexibility on raising rates, has become a tug-of-war between the Fed and Wall Street investors on market performance. The Fed also indicated that once the bond-buying is complete, it’s not an automatic trigger for interest rate hikes. However, depending on how inflation plays out, the market will have its own interpretation of how the Fed will react to unfolding inflation.

Putting the Fed’s Moves Into Perspective

QE and lowering the Fed funds rate both can be effective monetary policy. QE helps when the Fed increases its balance sheet by buying long-maturity bonds and mortgage-back securities to drive lower yields. Lower interest rates enable cheaper borrowing, which can help the economy grow employment and increase growth. If QE is rolled back, there will be uncertainty over whether the economy can stand on its own two feet.

The true question of the potential impact on markets is whether the Fed will taper only or also reduce its balance sheet holdings. Other ways the Fed can tighten monetary policy is by adjusting short-term interest rates via the discount window/federal funds rate. The Fed similarly can sell assets from its balance sheet via open market operations (OMO).

Jan 01
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Long-Term Investment Opportunities Presented by the Infrastructure Bill

By Blog, Financial Planning

In November, President Biden signed legislative funding that represents the largest transportation spending package in U.S. history. The $1.2 trillion Infrastructure Investment and Jobs Act authorized funding for roads, highways, bridges, public transit systems, utility systems, electrical grids, energy projects and broadband infrastructure.

Because the funding extends over a five-year period, it should not have a major effect on the fiscal deficit. This is not only good news for taxpayers, but also investors. Those long-term investments offer the potential for shareholders to get in on the ground floor of reliable and well-capitalized government projects by hundreds of American companies poised to get the business. The new bill is expected to enhance productivity, innovation, improve labor force participation and have a positive impact on inflation. Overall, the bipartisan bill is expected to help drive economic growth for the foreseeable future.

Local Funding

Because this funding has been long-awaited and is badly needed, infrastructure projects that have been in the planning stages for years can finally take off. Furthermore, the federal funds will be allocated to local public-private partnerships, which enable community job development and enhance local economies.

Transportation Infrastructure

More than $110 billion is directed to repair and rebuild 45,000 bridges, highways and major roads across the country. The funding also focuses on climate change resilience, as well as safety (reduce traffic fatalities) and parity across geographic areas and demographic populations. Industries poised to benefit include:

  • U.S. steel companies
  • Companies that produce aggregate materials (e.g., gravel, crushed stone, sand)
  • Manufacturers of construction, roadbuilding, earthmoving and mining equipment
  • Companies that lease heavy equipment

Broadband Internet

Presently, more than 30 million U.S. residents live in areas with either poor or no broadband access. Particularly during the pandemic, we have learned how important internet access is to keep Americans connected – in jobs, through online education, with community news and resources – not to mention social networks and personal relationships. The new legislation provides $65 billion in funding for broadband infrastructure, particularly in rural communities throughout the country, in an effort to provide universal access to reliable high-speed internet. Investment sectors that should benefit include:

  • Manufacturers of wireless towers
  • Power management companies that supply the electrical components and systems for wind and solar farms to integrate them into the national grid

Water Utility Infrastructure

The bill allocates a $55 billion investment into water infrastructure and the elimination of lead pipes for the 10 million American households and 400,000 schools and childcare centers that currently lack safe drinking water. Investment opportunities include utilities and companies that specialize in:

  • Water distribution
  • Water filtration
  • Flow technology
  • Water treatment/purification
  • Manufacturing pumps, valves and desalination units

Public Transit

Currently, the United States has a repair/replacement backlog of more than 24,000 buses, 5,000 rail cars, 200 stations and thousands of miles of tracks, signals and power systems. To update and expand the nation’s public transit system, $66 billion will go toward passenger rail, $25 billion to upgrade U.S. airports and $17 billion for ports throughout the country. In addition to bolstering the nation’s supply chains and transportation systems, upgrades will focus on reducing emissions and deploying more electrification and other low-carbon technologies. Industry sectors that should benefit include:

  • Railroads
  • Airlines
  • Trucking
  • Marine transportation
  • Delivery services
  • Logistics companies

Sustainable Energy Sources

The infrastructure bill allocates $65 billion toward upgrading the nationwide power infrastructure with new lines for the transmission of renewable, clean energy. Another $7.5 billion is earmarked to install 500,000 electric vehicle (EV) chargers along highway corridors to accommodate the fleet of electric consumer and commercial cars currently in production. Opportunities in sustainable energy investments include:

  • Electric vehicle industry, including government fleets of electric vehicles, such as U.S. mail trucks
  • Companies that build EV charging stations
  • Commodities used in green materials, such as copper (electric vehicles and renewable energy sources use four times more copper than internal combustion vehicles)

Given the breadth of infrastructure opportunities on tap, one way for investors to get exposure across the wide range of industries is to invest in a diversified infrastructure or utility funds (mutual fund or ETF). Through a single, professionally managed investment, investors can spread their capital across a wide spectrum of engineering and construction firms, rail travel companies, electricity providers, water and sewage services, and more.

Jan 01
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How to Get Your 2022 Finances in Order

By Blog, Tip of the Month

Believe it or not, the New Year is here. If you’re trying to wrap your head around everything that’s ahead, one of the best things you can do is prepare yourself financially. Here are a few tasks you can get started on right away.

Look Back at 2021

Depending on how in-depth you want to go, this could take a couple hours or more. That said, ask yourself these questions: Did you spend as planned? Where do you want to adjust, increase or decrease spending thresholds? What kind of unexpected expenses came up? How did you handle it? Think about what you’ll do for the upcoming year. When it comes to money, the cliché “hindsight is always 20/20” will often ring true.

Tackle Your Debt

If you want 2022 to be the year you become debt free, it can happen. We’re talking about consumer debt, not your mortgage, rent, car payments or any other necessities. A good strategy is to make a list of your credit cards, balances and interest rates. Start with the account balances that are the highest and create a payment plan, then move down the list until you’re finished. Balance transfers to cards with zero interest (for a limited time) are a smart idea, too. Then freeze your spending for 30 days, or however long you need. It might take some time, but these days, financial freedom is well worth it.

Increase Your Retirement Funds

Good news: the maximum contribution limit for your 401(k)s increases by $1,000 in 2022 compared to 2021, for a total of $20,500. If you’re 50 or older, the limit is $27,000, which is great for those closer to retirement. If you can’t max out your contribution, just increasing it by one percent can have an incredible effect. According to calculations from Fidelity Investments, if you’re 35 and earning $60,000, this tiny bump could yield an additional $85,000 to your retirement fund over a 32-year period. That’s equal to putting aside $12 per week (how easy is that?), assuming a 5.5 percent return and consistent salary growth.

Create a Back-Up Plan

This probably isn’t something you want to think about, but it’s necessary should something happen to you. Take few minutes to update your beneficiaries on all your financial accounts, including retirement, investment and benefits accounts. Next, make sure you have a durable power of attorney, someone you trust to take care of all your monetary affairs. After this, designate a health-care proxy or power of attorney, who can speak for you if you become incapacitated. Finally, update your will. Decide who will inherit your assets. If you have children, you can even assign guardians for them. In the long run, if the worst-case scenario unfolds, you’ll save your loved ones a lot of time and trouble.

Carve Out Time for a Life Audit

This task might sound big, but it’s necessary if you want to achieve your dreams – financial or otherwise. Start with a pen or pencil, about 100 sticky notes, a journal and a large space, perhaps a door, board or wall. Turn your phone off, then get started. Look back at your life. Assess where you’ve been, where you are and where you’d like to go, then brainstorm. Do you want to save a certain amount of money this year? Put away some cash for a dream trip? Learn a language? When you think you’ve finished, then organize your goals into three categories: personal, work/career and money. After that, further divide them short-term and long-term goals. Take a photo of your notes and keep it near to remind yourself of what you’re trying to accomplish. More often than not, your dreams involve money, which is directly related to your priorities and how you budget.

Budget for 2022

Now that 2021 is in your rearview mirror (and perhaps you’ve even done a life audit), take what you’ve decided upon and create a budget you can live with. Then, download a budget app to keep you on track. If last year’s budget worked well and you’re already on your way to living your dreams, just hit “repeat.” If not, make necessary changes. That said, no matter the status of your finances, it might be a good idea to increase your emergency fund, given all the uncertainty we’re facing in our world.

If you think about it, taking time in January to look closely at your finances is kind of like going to the doctor for your yearly checkup: You want to make sure there are no red flags you need to address. After all, your fiscal health might be as important as your physical health.

Sources

https://www.cnbc.com/2021/11/17/use-this-checklist-to-get-your-finances-in-order-before-2022.html

https://www.cnbc.com/2020/01/23/why-you-should-increase-your-401k-or-ira-contributions-by-1percent.html

https://www.fidelity.com/viewpoints/retirement/save-more

8 New Year’s Resolutions for Dealing with Debt in 2022

Jan 01
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2022 Technology Trends for The Accounting Industry

By Blog, What's New in Technology

Technology has had a major impact on the accounting industry. Gone are days when technology was a second thought and accountants preferred the traditional methods to which they were accustomed. As we start another year, technology is also progressing rapidly. The recent business disruption by the COVID-19 pandemic also has contributed to the acceleration in tech adoption. A major lesson learned from the events of the past two years is the need for digital transformation and prioritizing technologies that will help businesses remain relevant.

Since the accounting industry plays a crucial role in running businesses, it is important to be aware of relevant technologies that will impact their future work.

Remote Accounting 

Remote work is picking up, and accountants have not been left behind. This creates a need for the accounting department to rethink their workflow and optimize hybrid arrangements that combine working in the office and remote work. Embracing hybrid arrangements will help avoid losing employees and enable access to a pool of employees with specialized skills as they can work from anywhere.

Cloud-Based Accounting Services

Cloud-based accounting solutions have enabled accounting services to be provided virtually. This has grown exponentially with the COVID-19 pandemic. Software solution providers are expected to continue developing innovative solutions that will enable remote accounting.

The need for cloud-based accounting services also will be heightened as more businesses seek to cut operational costs. With cloud-based solutions, they can pay for only what they use and not necessarily make heavy investments.

Increased Automation of Accounting Tasks

Automating accounting tasks has helped replace many time-consuming aspects of an accountant’s daily work. It is expected that more tasks beyond just data entry and calculations will be automated. As more accountants realize the benefits of automation, such as reducing errors in payments, ease of invoicing, less ambiguity, enabling compliance, etc., providers will develop more automated solutions.

The accounting industry has not yet fallen victim to the great resignation witnessed last year, where the labor department reported millions of people quitting their jobs or leaving the workforce entirely. Such occurrences will increase robotic process automation (RPA) to include more efficient automation for critical functions such as payroll, purchases, invoices and payments.

Cryptocurrency and Blockchain Technologies

Although cryptocurrency and blockchain technologies have been around for a while, they are still difficult for most to figure out. However, there is an increased uptake of these technologies. Some countries already have allowed cryptocurrency as a legal transaction currency. As this trend continues to grow, accountants and auditors are tasked to understand these technologies so that they can offer sophisticated service to their firms or clients who invest in cryptocurrencies.

In other areas, blockchain technologies will continue being utilized in validation services such as audit and risk analysis, and balancing and sustaining accounting records.

Advanced Artificial Intelligence (AI) and Machine Learning 

According to a CNBC TEC survey, 90 percent of executives surveyed agreed that machine learning is critical for companies in 2022, with 20 percent saying they would be willing to invest money in this technology.

There will be more adoption of sophisticated AI solutions that offer better insights, help make data-driven decisions, and carry out basic tasks that take up a lot of an accountant’s time.

Machine learning will be used to develop algorithms that learn patterns in accounting tasks to help reduce mistakes early and avoid wasting time looking for errors. It also will be useful for audits and predictive analytics to forecast future trends.

Although AI and ML may not work well in areas that require creativity and intuition, they can help aid decision-making.

Data Security

All the advanced technologies mentioned above offer promising benefits. However, they also present a new problem in data security. For instance, remote accounting adds a vulnerability that allows cybercriminals to gain access to a company network. Considering that the accounting department holds crucial financial data that attackers target, security is critical for any business.

With cybercriminals using advanced technologies such as artificial intelligence, it is now more important than ever to harden access to corporate data. Therefore, there will be more defensive cybersecurity services to handle the rise in security issues that come with technology growth.

Conclusion 

As we forge ahead in the new year, one thing is certain: Technology will continue to be a main driver in the accounting industry. This creates a need for upskilling to evolve with new accounting roles. It also helps to be conversant with technologies that will help meet client demands. 

Jan 01
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Raising the Debt Limit, Protecting the Capitol and Prohibiting Foreign Campaign Financing

By Blog, Congress at Work

A joint resolution relating to increasing the debt limit(SJ Res 33) – This legislation was initially introduced on Dec. 14 by Sen. Chuck Schumer (D-NY). It is a joint resolution that authorized an increase to the public debt limit by $2.5 trillion. It passed in the Senate and the House within one day and was enacted into law by the president on Dec. 16.

Capitol Police Emergency Assistance Act of 2021(S 3377) – This bill empowers the chief of the U.S. Capitol Police to unilaterally request the assistance of the D.C. National Guard or Federal law enforcement agencies in emergencies without prior approval from the Capitol Police Board. The legislation was introduced on Dec. 13 by Sen. Amy Klobuchar (D-MN). It passed in the House and the Senate within one day and is currently awaiting signature by the president.

Protecting Our Democracy Act (HR 5314) – This bill is designed to protect American democracy by preventing abuses of presidential power (e.g., requires the president to submit materials relating to certain pardons to Congress, prohibits self-pardons by the president, suspends the statute of limitations for federal offenses committed by a sitting president or vice president); restoring checks, balances, accountability and transparency in government (e.g., requires cause for removal of inspectors general, increases whistleblower protections, requires a candidate for president or vice president to produce 10 years of most recent income tax returns); and preventing foreign interference in U.S. elections (prohibits the acceptance of foreign or domestic emoluments and foreign donations to political campaigns); as well as other purposes.

The bill was introduced by Rep. Adam Schiff (D-CA) on Sept. 21 and passed in the House on Dec. 9. It is currently with the Senate.

No CORRUPTION Act (S 693) – Presently, the Honest Leadership and Open Government Act of 2007 prevents a member of Congress who is convicted of a felony from collecting a government pension. However, they may continue receiving their pension until the completion of legal appeals. This bill alters the conditions of the previous Act to stop pension payments immediately after the original conviction. Should the conviction eventually be overturned, the pension would retroactively pay out lost benefits and resume from that point on. The bill was introduced by Sen. Jacky Rosen (D-NV) on March 10. It passed in the Senate on Dec. 8 and is in the House for consideration.

Federal Rotational Cyber Workforce Program Act of 2021 (S 1097) – This bill was introduced by Sen. Gary Peters (D-MI) on April 13. It passed in the Senate on Dec. 14 and is currently under consideration in the House. The purpose of this legislation is to establish a rotational cyber workforce program. The program will have processes in which to dispatch certain federal employees to work in other cyber positions at other agencies.

Methamphetamine Response Act of 2021 (S 854) – The purpose of this legislation is to designate methamphetamine as an emerging threat as an illicit drug, and directs the Office of National Drug Control Policy to implement a methamphetamine response plan. The bill was introduced by Sen. Diane Feinstein (D-CA) on May 18. It passed in the Senate on Dec. 18 and is currently in the House.

Dec 01
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Year-End Tax Planning Tips for Individuals and Businesses

By Blog, Tax and Financial News

Year-End Tax Planning 2021Here we are again, nearing the end of another year. While the tax deadline for 2021 isn’t until April 2022, now is the time to plan and make some strategic moves to optimize your tax situation. Below we’ll look at some tax planning ideas for both small businesses and individuals.

Business Tax Planning

Business owners should consider a few potential planning areas. Below we’ll look at a handful of relevant topics.

Section 163(j) Interest Expense Limitation

Businesses can deduct interest expenses, subject to a limit at 30 percent of adjusted taxable income (ATI). The calculation for determining ATI is changing in 2022, so some planning might be in order.

Currently, ATI is calculated as taxable income with depreciation and amortization added back. Starting in 2022, depreciation and amortization will no longer be an add-back, effectively lowering the amount of deductible interest a business can claim.

Taxpayers should consider their current year forecast and 2022 projections to see if there is opportunity in converting debt financing to equity financing.

COVID-Driven Innovation

Many businesses needed to change and adapt processes and products to survive or thrive during the pandemic. Depending on the nature of the activities, some of the expenses might qualify for R&D tax credits. Now is the time to investigate what will qualify and begin to gather the documentation.

Remote Workers and Nexus

With so many companies allowing remote work in this new normal, consideration should be given to year-end planning for state and local taxes. State laws around nexus are evolving, and remote workers may create new reporting and payment requirements for both income and employment taxes.

Net Operating Loss Carryforward

Net operating loss (NOL) rules are changing. First, NOLs created from activity in 2021 and beyond can only be carried forward; no carry-back is allowed. Also note that NOLs generated in 2017 and can be used to offset 100 percent of current year taxable income, whereas those generated 2018 and after can only offset up to 80 percent of taxable income in any year.

As a result, taxpayers should consider revenue recognition and other tactics to maximize the use of NOLs.

Individual Tax Planning

Start Gathering Your Documents Now

Taxpayers should start gathering their documents now as there are two main benefits to this. First, it will make things more manageable and organized in 2022. Second, it will get them thinking about their financial picture. Gathering documents forces you to give your year-to-date a mental review so you don’t forget about any new or unusual events that could provide planning opportunities.

Retirement Accounts Review

Generally, everyone should consider topping off tax-advantaged retirement accounts such as IRAs or 401(k).

Perhaps more importantly, consider a back-door Roth conversion. This tax savings strategy permits taking deductible or non-deductible IRAs and converting them to a ROTH IRA. There are a lot of nuances to this move depending on the individual’s situation, but it’s very important to consider since 2021 may be the last year this is allowed, depending on legislative developments.

Required Minimum Distributions

In 2020, required minimum distributions (RMDs) from retirement accounts were suspended. RMDs return for 2021 however, so taxpayers who are 72 or older need to remember to make the calculation and withdrawal by Dec. 31.

Conclusion

There is no better time than now to step back and look at the past year, your financial situation, and the changes to tax laws this year and next. Remember, tax planning only works if you act before the end of the tax year. Once we reach 2022, it will be too late to make much of an impact on your 2021 tax situation.

Dec 01
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How Businesses Can Recognize and Combat Employee Burnout

By Blog, General Business News

Employee BurnoutAccording to the job site Indeed, COVID-19 has taken a toll on workers even more in 2021, compared to 2020. The survey conducted by Indeed found that 52 percent of those surveyed felt “burned out” in 2021. Sixty-seven percent of those asked said that feeling burned out has become more pronounced as COVID-19 has progressed. It’s more noticeable among remote workers (38 percent), compared to 28 percent of employees working in person.

Gallup reported in October 2020 that between 2016 and 2019, worker burnout was already on the radar. Once COVID-19 hit workers in 2020, those working remotely 100 percent of the time are reporting even higher levels than those who work outside the home.

Pre-COVID-19, when employees worked remotely either 100 percent of the time or via a hybrid approach, they had lower levels of burnout compared to those who worked at their place of employment full-time.

When it comes to remote-only employees who “experience burnout at work always or very often,” levels have gone from 18 percent pre-pandemic to 29 percent during the coronavirus pandemic.

This phenomenon is blamed on not being able to choose to work remotely or at the workplace – the choice is not there with COVID-19. As of September 2020, 4 in 10 full-time employees worked exclusively from home, compared to 4 percent pre-COVID.

According to the Mayo Clinic, “job burnout is a special type of work-related stress.” Internal factors, according to the Mayo Clinic and Gallup, include uneven treatment by management, excessive work assigned to an individual, a toxic workplace and ambiguous or unclear assignment instructions.

Outside factors such as their personal life, their natural disposition, mood disorders, etc. may add to it. When a worker is fatigued, physically or intellectually, this also grips the worker with a feeling of lower productivity and a loss of who they are professionally.

For those who can’t manage job-related stressors, burnout often leads to negative results. According to the Centers for Disease Control and Prevention (CDC), this includes feeling dubious about one’s future at the company, experiencing an inability to sleep, an inability to concentrate, feeling tired and having little motivation to complete one’s work.

If there’s a completely new way of working, unpredictability of being exposed to COVID-19, having to juggle work and personal obligations throughout the workday and the inability to have the right tools to get work tasks completed, burnout will likely ensue.

Managing Burnout

There are many recommendations to regain control and keep work-related stress in check. This includes creating a schedule for both regular sleep and time to fulfill work tasks, if feasible. Taking strategic breaks and finding constructive non-work interests can lessen the stress of work as part of a balanced schedule.

According to Gallup, managers must harmonize maintaining high-performance expectations with employee commitment to the organization and worker welfare.

Gallup credits effective managers and “organizational communication” with keeping full-time remote workers fully engaged by making them feel like an integral part of their company. Through purposeful training and crystal-clear expectations, workers are set up for success.

The CDC recommends how workers can reduce the effects of burnout. Staying diligent with emotional wellbeing treatments and recognizing and getting treatment for new substance abuse issues is recommended. Staying in touch with others can help both sides feel supported mentally and lower stress. Taking a break from constant negative news is also recommended.

Much like businesses, employees are unique. With COVID-19 impacting each of us differently, managers must evaluate their organization’s circumstances and employees to find a balance between employee performance and their ability to maintain wellbeing.

Sources

https://www.cdc.gov/coronavirus/2019-ncov/community/mental-health-non-healthcare.html

https://www.gallup.com/workplace/323228/remote-workers-facing-high-burnout-turn-around.aspx

https://www.mayoclinic.org/healthy-lifestyle/adult-health/in-depth/burnout/art-20046642

https://www.indeed.com/lead/preventing-employee-burnout-report

Dec 01
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Fed Chair Nomination in 2022: How Will it Impact Markets?

By Blog, Stock Market News

Fed Chair Nomination in 2022As the Board of Governors of the Federal Reserve System points out, Jerome Powell was appointed to a four-year term on Feb. 5, 2018. With the Fed Chair’s term expiring in February 2022, there has been much uncertainty as to whether he would be reappointed or replaced.

Powell’s first term as the Chair of the Fed began in 2018, after being nominated by President Trump in November 2017. If reappointed, Powell will serve another four years, where he will guide the nation’s short-term monetary policy and become the Federal Open Markets Committee’s (FOMC) chair.

During a Nov. 22 announcement, President Biden said that he’s renominating Powell for another term for the chair position of the Board of Governors of the Federal Reserve System. President Biden also announced that Lael Brainard has been nominated for the vice chair position of the Board of Governors of the Federal Reserve System. With the Fed vice chairman for supervision resigning at the end of 2021, these series of events are providing President Biden with additional nominations to promote his policies.

Understanding the Federal Reserve’s Influence on the Markets

Similar to a chief executive officer, the chair is entrusted to carry out the mandate of the Fed. The primary foci include influencing short- and long-term interest rates, maintaining price stability and encouraging a balance in employment.

The chair of the FOMC is the steward for the nation’s monetary policy by adjusting the federal funds rate, discount rate and buying/selling of government securities to support the economy in its role in fulfilling its economic goals.

How President Biden’s Decision is Expected to Impact Markets

With Brainard having a favorability for fintech and cryptocurrencies and the ability to curry favor with progressives due to her desire for strong bank regulations, her nomination will provide the market with greater stability in conjunction with Powell’s renomination. This is due to Powell’s past four years of steering the market through its challenges, especially with COVID-19. With Powell already communicating the timeline of tapering and when the Fed is likely to increase rates, it should provide greater certainty for the markets.

Additionally, the investment community believes the markets will perceive Brainard as more politically focused due to her contributions to Hillary Clinton’s presidential ambitions in 2016. With Brainard expected to consider and strongly influence the FOMC’s actions on the 2022 midterm elections, she’ll likely lobby the committee to raise interest rates deeper into 2022 after the “tapering” or bond purchasing schedule is complete, compared to the earlier path under Powell’s lead alone.

Political Implications

According to a Nov. 19 statement in support of a Fed Chair other than Jerome Powell and who is committed to addressing climate change, Rhode Island Sen. Sheldon Whitehouse and Oregon Sen. Jeff Merkley made their thoughts clear on how they want the nomination process to not go in favor of Powell.

While Powell has been renominated, he’ll certainly face Congressional pressure during confirmation hearings and beyond if he’s indeed confirmed for a second term. However if the Federal Reserve nomination process plays out for Biden, Powell and Brainard, the FOMC will certainly have its policy influenced by more than President Biden.

Dec 01
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Venture Capitalism and ‘Unicorns’

By Blog, Financial Planning

Venture Capitalism UnicornsVenture capitalism comes from an investor who offers money to start-up companies in exchange for an equity stake – much like you see on the ABC television show, Shark Tank. As a general rule, a venture capitalist (VC) invests after the new venture is up and running and looking for additional capital to further commercialize its product.

Once a privately held enterprise reaches a value of $1 billion, it is referred to as a “Unicorn.” This is because new start-ups that reach this level of success are so rare that they are considered comparable to the mythical creature. What is interesting these days is that the current labor market is so disruptive that we are seeing more start-ups, and this trend is expected to continue. At some point it becomes a numbers game – the more new start-ups established, the greater the likelihood of Unicorns achieving success.

Ever since the onset of the COVID-19 pandemic, the United States has experienced a shortage of workers. It started with massive layoffs during the shutdown, but even though jobs returned – not all workers did. The lack of child and elder care forced many working moms to leave their jobs. Today, the controversy over low wages not keeping pace with the cost of living has many people rethinking their career choices. It used to be that a position with a company with generous health insurance benefits was the very definition of a good job. Now, in the wake of the Great Resignation, it appears more workers are looking for a job that is fulfilling. In fact, because workers can now purchase affordable healthcare insurance on government exchanges, they are no longer tethered to a specific employer.

This combination of frustration and flexibility is empowering would-be entrepreneurs to go ahead and take the leap to starting their own business. In 2021 alone, there has been a tremendous increase in new business filings. Furthermore, venture capitalists have been pouring money into these new ventures at a record pace, with more than $240 billion invested this year alone through September. The largest of these investors tend to be private equity firms, hedge funds and corporations.

With more new start-ups, come more Unicorns. Historically, the number of new Unicorn businesses averaged about four per year in the United States. In 2021, however, more than 260 have reached $1 billion status. And the United States isn’t alone in experiencing this trend. Young adults in Japan also are leaving traditional corporate jobs to start their own businesses – and many of them are receiving financing from VCs and other institutional investors in the West.

In China, where TikTok was born and became a global phenomenon, there are presently more than 800 Unicorns. India is the third largest start-up ecosystem in the world, with more than 65 companies recently reaching Unicorn status.

Dec 01
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5 Affordable Ways to Share the Holiday Spirit

By Blog, Tip of the Month

Holiday SpiritThe holidays are a season of giving. While much of this involves financial expenditures, you can also give in ways that are more affordable and may hold more meaning. Here are some suggestions about how you can engage in acts of generosity and return to what the season is all about.

Cook Food

Nothing nourishes the heart and soul, not to mention your stomach, like food made with love from your own kitchen. Baking cookies is always an easy and fun thing to do, but a main dish (with protein) or hearty casseroles are also good options. People who are homebound due to an illness, those going through financial difficulties or even new moms will appreciate the gift of a warm meal. You might also ask co-workers, local churches or homeless shelters if they’re looking for some extra sustenance during this time of year.

Create Necessity Bags

Giving to those on the streets during the holidays is an easy, inexpensive way to make a difference. Fill a gallon-sized food storage bag with things like gloves, toothpaste and toothbrush, hand sanitizer, sanitary wipes, bottled water, snacks and a gift card to a grocery store. Then contact your local organizations and charities to see where the needs lie. You might also carry these bags in your car and when you see someone, give it to them. Moments like these are invaluable to those in need and for you, too.

Volunteer Time

Showing up with an extra pair of hands is often what someone needs. A great place to check out is VolunteerMatch. Just type in your ZIP code and you’ll find all kinds of opportunities to help everyone from seniors to children in many sectors, including education, arts and health. You might also find ways to help animals or read to the blind. These are feel-good, money-free ways to experience the joy of giving.

Donate Craft Items

How many times have you thrown away your toilet paper rolls or egg cartons? This year, save and donate them to nearby schools or community centers. All it takes is a few phone calls to find out what their craft needs are. You’ll also be helping the environment – sharing some love for Mother Nature. How simple is that?

Declutter Your Dwelling

This one has so many terrific benefits. You can get rid of clothes and belongings that crowd your closets, which is a wonderful feeling. One option is to sell them on eBay Charity and donate to a nonprofit of your choice. You choose what percentage of the sale goes to the organization (from 10 to 100 percent). eBay will even give you a credit on your selling fees based on the percentage you choose. If you want to give away gently used professional clothes, Dress for Success and Jails to Jobs, are groups that empower people to look their best when making a fresh start. If you’d like to rid yourself of shoes you’ll never wear again, Soles4Souls is a great resource and you can ship up to 15 pairs of shoes without paying a fee through the Zappos for Good program. Talk about good for the sole, er, soul!

For the most part, should you choose to get into the holiday spirit with these activities (aside from a few costs here and there), the main thing you’ll be spending is time. However, experiencing the joy of the giving is priceless.

Sources

https://www.discover.com/online-banking/banking-topics/affordable-ways-to-spread-generosity-holiday-season/

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