Broker Check

November Newsletter 2022

 

 

 November 7, 2022

“I Miss the Traditional...”


As the spookiness of Halloween fades and all ends well, we remain intently focused on navigating through the spooky and volatile investment landscape that 2022 has brought us so far this year. 

According to the Atlanta Federal Reserve Bank, (the Federal Reserve Bank that specializes in GDP forecasting) fourth quarter GDP models are currently showing a forecast of 3.6 percent growth, which exceeds current estimates of third quarter GDP models which is expected to be 2.6 percent. Economists recently surveyed by the Wall Street Journal now predict GDP will contract at a 0.2% annual rate in the first quarter of 2023 and shrink to 0.1% in the second quarter of 2023:  indicating an impeding recession. Employers are expected to respond to lower growth and weaker profits by cutting jobs. Just last week Twitter announced widespread layoffs, approximately 50% of their workforce, as did Meta, the parent company of Facebook with expected layoffs in the thousands.  

Steve and I spent a significant amount of time analyzing the portfolio this past month and we took actions that will lead to greater future investment success. We took a hard look at the Blackrock Global Allocation Fund (MALOX) and decided that it was time to significantly reduce the allocation to globally managed positions; in many cases by over fifty percent. Our decision was primarily based on continuing supply chain issues affecting international companies and our belief that our Domestic Equity portfolio will outperform over the next several years as the recession deepens and then economies recover.  The good news is that the losses harvested in taxable accounts will reduce the realized gains taken and the capital gains dividends expected to be reported by the majority of the funds in the portfolio, saving you real dollars in 2022 income taxes.  We redistributed those proceeds into high quality domestic positions that collectively yield over six percent with some paying dividends during the year and some large dividends at the end of the year.

By making this change Clients will be rewarded not only by a steady cash flow from dividends, but also once we are on the other side of the “inflation contrasted with recession concerns environment” this part of the portfolio will perform well with the eventual economic recovery.  As portfolio managers we also looked at good quality opportunities on the fixed income side of the portfolio, investing in the CD/Bond ladder with new holdings paying five to six percent interest rates. Those interest rate opportunities will stabilize the income allocations for years to come by providing steady cash flows.

We also reevaluated the income allocation to preferred stocks that pay around four percent fixed dividends but do not have a set maturity. We decided that the income portfolio could be enhanced by converting a portion of the preferred stock positions into the maturing CD/Bond ladder at higher interest rates of five, six and soon to be seven percent. 

In executing these portfolio changes we are making the total portfolio stronger for future total returns of both income and growth. Please contact our office if you would like any Realized Gain/Loss and Income/Expense information sent to your CPA so they can better assist you with your tax planning strategy prior to the year-end.

Laura spent all of last week at the combined Charles Schwab/TD Ameritrade Institutional IMPACT conference in downtown Denver.  One major focus of the conference was preparing TD Ameritrade Advisors for the upcoming merger and transition to the Charles Schwab, platform. We now know that accounts will migrate to Charles Schwab Institutional over Labor Day weekend of 2023.  As a client of Intelligent Investment Management, LLP here  are the highlights available now and how it will impact you our client:

  1. TD Ameritrade Institutional and Charles Schwab Institutional and Intelligent Investment Management. LLP collectively, will be using a “negative consent” email/letter to make the client aware of the upcoming migration. In early July, each client will receive an email notification or written letter that outlines the migration to Charles Schwab Institutional as the custodian of your investment accounts.  If you do not respond to this notification (which qualifies as negative consent) your accounts will automatically migrate to Charles Schwab Institutional over the Labor Day weekend of 2023.
  2. The Tuesday after Labor Day all accounts will be viewable on the Charles Schwab platform and you can view them at: https://advisorservices.schwab.com/advisor/login, using the same login credentials you currently use at TD Ameritrade Institutional.
  3. As long as you have logged onto the TD Ameritrade Institutional platform at: https://www.advisorclient.com/login, in 2022 your mailing and email preferences, beneficiary information and phone number will migrate to Schwab.
  4. All ACH and distribution information will also transfer. Please note that any third-party deposits or distributions will have to be reestablished; for example social security deposits, or any distributions to an account that is not like titled.
  5. Your statements, tax documents and account information will also transfer including a ten-year account history.

Our staff at Intelligent Investment Management, LLP are tracking all aspects of this in our office, if an email or letter is coming your way, or if you need to take an action we will know in advance and make sure you are notified that something needs your attention.  Please stay tuned to this important transition as it rolls out over 2nd and 3rd quarter of 2023.

As we experience all the changes that fall has to offer, the results of the national and local elections will certainly impact the future recovery from the recession and future growth of our economy.  We continue to actively manage your investment portfolio to address all changes that we see impacting the markets and we continue to make adjustments that align our portfolio strategy to meet your goals and expectations.  If you have questions about your managed portfolio please do not hesitate to contact the office and schedule some time to meet with me or Steve.  We will also continue to stay on top of the changes that will take place as TD Ameritrade Institutional, and Charles Schwab Institutional combine their resources and become fully integrated as of Labor Day 2023.

Sincerely,

Intelligent Investment Management, LLP