1. The summer in parts of the country has been hot, hot, hot, while other parts of the country, like our home office in Ohio, have not had a hot summer at all, but rather a little too cool for my taste and that’s kind of like what’s happened to the stock market these last two weeks. The rush of a comeback year has stalled a bit in the month of August. Before we get into the weekly numbers, let’s track our reoccurring weekly numbers. First, let’s look at some stocks that really moved the markets this week. How about WeWork, which is a commercial real estate company that provides flexible workspace to technology start-ups and other entrepreneurs that need a more flexible workspace than the traditional office lease. This stock jumped 54% last few days from about .12 to .20. This stock is almost certainly in the throes of insolvency, and meme stock crazies are just trying to make some money on it before it plunders. Newscorp, which owns the Wall Street Journal was the S&P 500 best performer on Friday when it jumped 4.6% as they reported record profit which is interesting because it shows the advertising dollars from corporations is still strong. Finally, UBS, a non-S&P 500 component, was up 5.6% because they told the Swiss Government they no longer needed the $10 billion government backstop, which it was granted when it took over the troubled investment bank Credit Suisse, another Swiss investment bank. How about our weekly look at GDPNOW from the Atlanta Fed, the best running estimate of real GDP growth based on available economic data for the current measured quarter. There is no forward-looking thought put into this, just real-time economic data, as it’s released, will move this number. And here we go, the estimated GDP rate is now 4.1, moving up from 3.9 where it last landed on August 1st. This week, the data that moved it were releases from the US Census Bureau, the Institute for Supply Management or ISM, and the US Bureau of Economic Analysis and Labor Statistics. You can see, as I mentioned last week, even the stubborn wall street economists are being forced to move off their pessimism. The initial claims for unemployment insurance, which we use as one of our proxies for the future health of the labor market, did have a spike up this week, although not to the highs of the summer when they came in 248,000 initial claims for unemployment insurance for the week. And finally, let’s look at the markets this week. The S&P 500, which is our proxy for growth and growth & income, but only when taken together, was negative 0.31% this week. The Russell 2000, which tracks small and mid-sized companies or aggressive growth in our Dave Ramsey vernacular, was negative 1.59% for the week, the largest loser this week. And finally, the MSCI EAFE which tracks developed international stocks, was negative a fractional 0.04%, almost squeaking out a gain for the week but ending the week negative, just the lowest loser this week. 2. This week we got inflation data. The CPI is consumer inflation data, and the PPI which is producer inflation data. Let’s look at CPI first, where CPI increased 0.17% month over month. If you annualize that number all by itself, that will get you to the 2.00% target the FED is searching for, however, can they hold that number will be the key. This is right in line with where it came in at last month, where it hit 0.18%. Your news media sights will just tell 0.20% because they’ll round up, but we get right to the nitty gritty as you see on your screen. Using the previous 12 months’ monthly inflation numbers that you can see on your screen, we are sitting at 3.2% annual inflation currently and this is slightly higher than the 3.00% we saw in June when using their previous 12-month numbers. The CORE inflation number, which the Federal Reserve looks at more closely because it excludes the volatile food and energy numbers, also increased 0.20% for the month. So good numbers in regards to CPI and the markets liked those numbers. However, to add to your confusion, the PPI numbers or Produce Price Index, came out on Friday of this week, and those ticked up to 0.30%, which as you can see is the highest level since the early part of 2023 when we hit 0.43% for January’s number, which was reported in February. The main increases for PPI, which very simplistically is what businesses are paying for goods and services, however the uptick for businesses was in the services side of the sector and 40% of that increase was tied to prices for portfolio management. Suffice to say that businesses having portfolio management done for them are seeing a decent increase in the prices they pay. This is a good time to remind our clients that WMWM has never levied a price increase on our clients. As our motto goes, we do better when you do better, so our price increases come when we do a good job, the way you should be rewarded. To wrap this up, the PPI numbers are seen as a leading indicator for CPI, so let’s watch CPI next month to see what happens. 3. This week The US Index of Consumer Sentiment was released. Remember this survey provided by the University of Michigan tracks consumer sentiment in the US, based on surveys on random samples of US households. The index aids in measuring consumer sentiments in personal finances and business conditions, among other topics. Historically, the index displays pessimism in consumers' confidence during recessionary periods and increased consumer confidence in expansionary periods. Consumer sentiment is very important because consumers are 2/3 of our economy. If they are not happy, they are not spending money, and the economy is not moving forward. This month it came in at 71.2, which was below the 71.6 reading in July but still 42% above Its all-time low and moving toward its long-term average of 86. The reading mainly ticked down because of higher gas prices that have consumers a little less optimistic. 4. This week, credit card balances hit $1 trillion dollars. A flashy number and one that anyone that is trying to sell you gold, annuities, or any variation of whole life or universal life or, as I call them, Whole LIE Insurance, however, they’ll use this to convince you not to invest in the US economy because this will kill us. Welp, here we are with data to the rescue to dissect their horrible sales tactics. And thanks to my friends at DataTrek for this helpful information and chart. Before the pandemic from 2013 to 2019, the compound annual growth rate of credit card balances was 4.68%. Does anyone want to guess the growth rate from 2022 to now? It’s also 4.8%; thus, to simplify it, we are right where history says we should be. Yes, as you can see on the screen, the growth rate has accelerated in 2020 and 2021 because the government gave massive amounts of stimulus, which people used to pay down their credit card balances, only to spend them again, once they found something they wanted to buy. This is just part of the long-term trend you would expect to see with an economy that is growing its population and inflation is moving the cost of everything up – credit card balances should rise, so don’t let anyone tell you this is a reason to bearish on the US economy, frankly, it’s more a reason to bullish. NOW! Let’s remind everyone very quickly – we don’t advocate for nor endorse the use of credit cards – as we believe that a debt-free life is a simple and more risk-free life, but as Dave Ramsey says, his advice is outside of the norm because being normal in America is a student loan around so long it’s a pet and having capital one take everything in your wallet.

Am I getting old when I can boldly say, "Been there, done that!" That's what I felt like this week when on August 1st, Fitch, a credit ratings agency, downgraded the U.S. debt from AAA (the highest rating) to AA+. This was a replay of 2011 when S&P made the same credit downgrade on U.S. debt. The next day, Jamie Dimon, CEO of JP Morgan Chase, who is my "dream pick" for President of the United States, him or Dave Ramsey, was interviewed on CNBC, while doing his bus tour of local branches in Bozman, Montana. He made the best point that no one has been able to counter yet, which was this: it is ridiculous that other countries are now rated higher than the US when they depend on the stability created by the United States economy and military. While on a flight to Charleston, SC, I sat next to a former Marine Pilot (thank you for your service!) who, for nearly eight years, sat on a boat halfway across the world, ready to provide support to our allies, should any rogue country start to "act up". How about that - we are the world's police with the bulk of the cost to keep peace in the world, yet Fitch downgrades our debt?!?! Fitch had warned of a possible downgrade during the debt ceiling crisis earlier this year and has sounded alarms since 2011 when a similar crisis occurred. While it seems that few investors, economists, and business leaders view the downgrade itself as meaningful, especially because AA+ still represents an extremely low default risk, that does not mean it has not impacted financial markets. After all, investors have benefited from markets mostly moving upward this year, leaving some investors unprepared for even small stock market swings. What drove the downgrade of the U.S. debt and how can long-term investors maintain a balanced perspective? The national debt has grown dramatically over the past twenty years With investing, as in life, it's important to know not just what to worry about, but when to do so. The national debt is rightfully a source of investor worry but this has been the case for decades. As citizens and taxpayers, there are important ways to voice and act on these concerns. As investors, however, focusing too much on these issues, especially at the wrong times, can lead to poor financial and investment decisions in the worst case, and unnecessary anxiety in the best case. Understanding how these issues impact a properly constructed portfolio that meets the needs of a long-term financial plan is what's most important. It's no secret that the level of the national debt has grown considerably in recent years, from $9 trillion in 2008 to over $31 trillion today. As a percentage of GDP, debt levels have risen to nearly 120% in total and 93% if inter-governmental debt holdings are excluded (i.e., debt one part of the government owes to another). Regardless of how you slice it, debt levels have risen dramatically with little end in sight. This is largely due to periods of economic turmoil, especially the 2008 financial crisis and the 2020 pandemic, that required government stimulus. Unfortunately, there are few examples of the federal government not just running a balanced budget, but operating at a surplus. This last occurred during the dot-com boom under the Clinton administration and, before that, in the early 1970s under President Nixon. Fitch's downgrade reflects the fiscal and political climate with which investors are already familiar. While their decision was based on the familiar factors of worsening government revenues, Fed tightening, and the possibility of a recession, it was largely driven by the "repeated debt-limit political standoffs and last-minute resolutions" in Washington. This is important because it draws a distinction between the ability to pay the country's debts versus the willingness to do so. Most investors would likely agree that national politics has only grown more divisive over the past two decades. It has only been two months since the last debt ceiling standoff was resolved and the agreement only kicked the can down the road to January 2025. The U.S. now has ratings of AAA from Moody's, AA+ from Standard & Poor's, and AA+ from Fitch. Only nine countries, plus the European Union, maintain the top ratings across the three major credit ratings agencies, including Germany, Switzerland, Australia, and Singapore. Interest rates have jumped following the downgrade Why does this matter? Despite periods of brinkmanship, the U.S. has never defaulted on its debt. The creditworthiness of U.S. Treasuries is critically important not only to everyone that holds these securities - from the largest pension funds to everyday households - but the global financial system is built on the premise that Treasuries are unquestionably risk-free. While the situation is still evolving, the immediate impact of the downgrade has been higher interest rates. There are some parallels to the summer of 2011, almost exactly 12 years ago to the day, when Standard & Poor's was the first credit ratings agency to downgrade the U.S. debt. At that time, only a couple of years after the 2008 financial crisis, the global economy was facing many challenges including the debt crisis in Europe that led to the Grexit situation. This was a drag on markets even before the U.S. debt downgrade. During that period, the stock market fell into correction territory with the S&P 500 declining 19%. Ironically, the prices on Treasury securities increased during the 2011 debt ceiling crisis because, even though these were the exact securities being downgraded, investors still believed they were the safest in the world at a time of heightened uncertainty. The debt ceiling was eventually raised and a new budget was approved, allowing markets to bounce back and reach new all-time highs only six months later. At the time, the market reaction was not only difficult to predict, but was unintuitive to many. For most investors, focusing on the long run while holding an appropriate portfolio, ideally with the guidance of a trusted advisor, was the best way to navigate that year. Markets have been calm this year amid the strong rally So, what does the latest U.S. debt downgrade mean for investors? In truth, nothing has changed in recent weeks regarding the health of the economy or the long-term fiscal situation for the country. Given how heated the topic of federal spending can be, it's important for investors to distinguish between their political feelings and how they manage their portfolios. Investors should always be prepared for periods of market uncertainty, especially given the low level of volatility this year. The accompanying chart shows that there has only been one pullback of 5% or worse this year which occurred in March during the banking crisis, compared to the average year which experiences several. Two long-term debt concerns that some investors often have are the growing interest payments on the national debt and the reliance on foreign borrowing. Neither has a simple solution. The fact that interest rates have been and remain relatively low compared to history has helped to keep these payments manageable. Deficit levels, and the growth of the national debt, will also naturally improve as the economy recovers. When it comes to our foreign dependency, over 75% of the U.S. debt is still held by American households and institutions, compared to foreign holdings of 3.5% by Japan, 2.7% by China, 2.1% by the U.K., and so on. While this is an issue that matters from the perspective of fiscal responsibility, it is unlikely to be something that should drive portfolio decisions. The national debt and the fiscal standing of the U.S. matter for many reasons. But from an investment perspective, the irony is that the best times to invest have been when the deficit has been the worst. This is because government spending increases - both in absolute terms and relative to GDP - during recessions and crises. In hindsight, these periods coincide with the most attractive prices and valuations. Ultimately, history shows that investors are rewarded for investing when others are fearful. The bottom line? Although the Fitch downgrade is impacting markets, it is based on factors with which investors are already familiar. As with many political issues, it's important for investors to separate their concerns and not react with their hard-earned savings and investments. In addition, this is a reminder of Proverbs 22:7, "The rich rule over the poor, and the borrower is slave to the lender." Stay debt free, especially before retirement, and you'll be like a wise man that built his house upon rock. The rain will come (debt downgrades), and the winds will blow (stock markets dips), yet you will not fall nor fail!

Worrying can be okay “The market climbs a wall of worry” and “This time is different” are two of my favorite quotes regarding investing. But what do they mean? The chart referenced below helps explain some of this. However, when it comes down to it, the two quotes have one thing in common: there is always something to worry about, and that is a good thing. In this article, I hope to help explain these a little further for you. Past History Worry I remember 2015 like it was yesterday. I worked at a financial institution and helped clients develop investment strategies within their 401(k)’s. Early in the fall, it was beginning to look like politics would change forever, the US would never be the same, and the unthinkable was about to happen; an outsider with no political experience had a legitimate chance of becoming president. People couldn’t get over that something that hadn’t happened before was about to happen. People couldn’t sell fast enough. (Please reference the chart for how that played out). Then, in 2020, COVID forced people and businesses to change their behavior overnight. The “new normal” was to stay inside and do your part by binging Netflix. Another excellent buying opportunity presented itself. Wars and terrorist attacks have also impacted the market and economy throughout history. Worry = Buy The fact is that when there is the most worry about a generational change or a “new normal,” and people fear the most, it is generally the time that makes the most sense to buy. “The market climbs a wall of worry” refers to people selling out and waiting for financial storms to blow over. As this plays out, it forces participants to return to the market from cash or other investments and can provide an excellent tailwind for growth. Money market funds currently hold 1.9 trillion dollars, the highest in history. In 2017 that number was under 700 billion. Today’s Current Worry So, what wall of worry is the market climbing now? Finding a pundit that is not calling for a recession is almost impossible. AI is replacing entire workforces. Regional bank failures, the Fed raising rates at the fastest pace in history. The market has an uncanny ability to predict the future and often moves before inventors figure out why. These things may have been priced already. As you can see from the chart, there is ALMOST always a reason you can justify getting out of the market. And it is rarely the best move on the chessboard to act on those instincts. Take the worry out Whitaker-Myers has a team of financial advisors that can help answer your questions or concerns about today’s market. They can help discuss strategies that make you feel comfortable and confident with your choices. Schedule a meeting today if you need to speak to one of our advisors.

Something happened this year that hasn't happened (very often) since the start of my career in 2007. The international markets were giving the US markets a run for their money edging them out earlier in the first quarter of this year. That is not the case today, but was it a sign of things to come? Back in 2007, there was a run of 10 years where international stocks absolutely put US stocks to shame. It would have been a bad ten years for you had you not put dollars into international investments, as our friend Dave Ramsey suggests. Then the Global Financial Crisis hit and US stocks came roaring back, especially the growth category, comprised of many of those tech stocks we all know and love (kinda) today, and international stocks lagged for the last decade. We have always maintained our international allocations and with very solid funds, the returns have been worse than US stocks, but still respectable. The MSCI EAFE today sits at a ten year return of 5.41% and the MSCI Emerging Markets Index ten year return sits at 3.41%. Not very impressive but what that has lead to is international stocks being attractively priced relative (as will be discussed below) and the pump possibly being primed for international outperformance in the next ten year period. You may have noticed in some portfolio's we tactically added an allocation to both India and Israel. The reasons are simple yet profound. First let's discuss India, which has had robust GDP growth and is constantly striving to reach industrialized status. Their literacy continues to improve; four of the Financial Times Global Top 100 business schools are Indian, their 1.4 billion people are nearly a decade younger than China’s 1.3 billion, and it's going to stay that way because their birth rate is strong (second in the world only to South Africa), and they have nearly 900 million people that don’t have internet access today, creating a vast opportunity in the future. Next Israel which is a vibrant, growing, and resilient economy, On May 14th of this year, Israel celebrated its 75th Independence Day, and Prime Minister Benjamin Netanyahu has done an excellent job of turning them into a free market, capitalistic economy from his early days as Finance Director. Their demographics are very strong as one of the world's youngest and most educated populations, with nearly 60% of the population falling in the working age. Their per capita GDP (how much growth is created per person) has been steadily growing, driven by growth in sectors such as technology, healthcare, and finance, all sectors we believe have long-term sustainability. The recent Abraham Accords, brokered by former President Trump, have provided even more economic opportunity for Israel regionally. Here is how the US and international markets have fared this year. The S&P 500 has gained 18% with dividends while developed and emerging markets have risen about 15% and 10%, respectively. Much of the story is due to the relative strength of the U.S. which has served as the main engine of the global economy, just as it did in the decade following the global financial crisis. However, there have been bright spots in other regions as well, at least when compared to what investors and economists had previously anticipated. After all, when it comes to investing, whether something is good or bad is often less important than whether it is better or worse than expected. What's driving the world economy and why should investors keep a global perspective? Global growth is better than expected but major regions have diverged It may come as no surprise that U.S. investors tend to focus on U.S.-based investments, especially when it comes to the stock market. This is often referred to as "home country bias" and has been shown to affect the behavior of investors in many countries. For U.S. investors, this has been justified due to the relative strength of U.S. markets and the economy in recent years. Today, the U.S. continues to perform well despite the inflationary concerns of the past year and ongoing Fed tightening. Despite this, investors should not count on this always being the case, especially because portfolios can often benefit from many sources of diversification. In general, home country bias leads investors to focus on assets with which they are familiar due to geography, rather than what may be attractive and appropriate for their portfolios. This bias doesn't just stop at countries - investors often show biases toward investments that are even closer to home. The classic examples are investors who primarily invest in hometown companies that they drive past every day, at which they or their friends work, that create the products they use every day, and so on. There is nothing inherently wrong with investing in what you know, but this should only be a starting point. For investors whose primary purpose is to achieve long-term financial goals, it's important to minimize this bias by understanding where opportunities lie regardless of geography. One simple way to do so is to understand trends across major geographic regions, especially because investors today have far more access to global diversification opportunities than in the past. Understanding the broad themes across developed and emerging markets does not require investors to be economic or political experts in any particular region or country. Instead, it's about building awareness around the drivers of each market in order to feel more comfortable investing globally. For example, it's easy to understand that Europe has been hit harder by the global shocks of the past few years, especially due to the war in Ukraine which directly impacted energy prices. Growth in the region has slowed across a variety of measures with Q4 2022 and Q1 2023 GDP measures coming in at only -0.1% and 0%, respectively. On a year-over-year basis, the Q1 figure amounts to only 1.1% growth. The chart above shows that Europe's purchasing manager index (PMI) has fallen into contractionary territory, lower than in the U.S. and China. PMIs represent economic activity across manufacturing and services, where numbers above 50 signal expansions and those below 50 represent slowdowns. While Europe continues to face challenges, especially in major economies such as Germany and France, it has also been resilient. Inflation improved to 5.5% in June, driven largely by declining energy prices. A milder than expected winter helped Europe maintain natural gas reserves which was a boost to consumers and businesses across the continent. Perhaps more positive is the fact that unemployment has fallen to exceptionally low levels: 5.9% across the European Union. Employment rates are at their highest recorded levels and well above their pre-pandemic peaks. At 81.4% for the Euro Area, the employment to population ratio is higher than even in the U.S. The dollar has depreciated, driving other currencies higher Similarly, China has struggled over the past few years but for different reasons. The most recent major shock was the result of zero-COVID policies enforced throughout 2022. This saw major cities, including Shanghai, locked down which hampered economic activity and industrial output. This worsened the supply chain issues that drove global inflation higher, especially for items like computer chips. Also like Europe, there are longer-term worries in China. Demographics are not in the country's favor as the population ages and declines, and crackdowns on private businesses, especially in tech and education, could hamper innovation and foreign investment. Other problems such as the real estate bubble driven by the "shadow banking" sector and few places to store cash, have not gone away. More recently, the optimism around China's re-opening has faded. The latest official GDP report for the second quarter showed that the economy grew 6.3% year-over-year and Beijing recently announced a lower growth target of around 5%. But, once again, it's all a matter of perspective. The economy's rebound from COVID lockdowns has been meaningful, as shown in its PMIs. These factors also drove the yuan lower earlier this year alongside many other currencies. While this means that the People's Bank of China may need to defend the yuan, a weaker currency is a tailwind since it boosts exports and foreign sales. Furthermore, if there is a reversal of the yuan’s depreciation in the coming months or years, it could boost returns on yuan-denominated investments. Due to its command-and-control economy, investing in China has always been tricky and subject to changing sentiment. However, the relative stability of the economy this year has been positive, despite many sources of uncertainty. This has not stopped the MSCI China index from falling 5% this year (in USD) and the Shanghai Composite index from climbing only 2.4% (CNY). The potential upside is that valuations are now more attractive. In other words, this is not about all-or-nothing investments in Europe or China - it's about adding diversification opportunities to portfolios as the global economy stabilizes. International stocks remain more attractively valued Just as in the U.S., there are always hundreds of factors, concerns, and issues that investors can focus on in every region. What ultimately matters for investors is not just the balance of risks and opportunities across regions, but how they are valued by the market and how they can contribute to portfolios. Even companies, countries, and regions with mediocre growth prospects can make for sound investments if their prices are attractive enough or their correlations to the rest of a portfolio low enough. Historically, both developed and emerging markets have experienced periods of significant outperformance while providing diversification benefits to U.S. investments. So, while U.S. stocks are an important component of any diversified portfolio, the accompanying chart shows that international stocks are far cheaper than both the U.S. and relative to their own past valuations. This is partly because U.S. stocks have performed so well this year, raising their valuations to early 2022 levels. Investors who can diversify across regions may be in a better position to take advantage of global growth as world economies continue to rebound from the shocks of the past several years. The bottom line? Investors should minimize home country bias by having a broader perspective on global growth. Doing so can help to improve portfolio diversification as investors work toward achieving their long-term financial goals.

Finding the best ways to save while investing For those interested or worried about saving, this article will help clarify the options available for saving and investing for your future. As Dave Ramsey recommends, looking ahead is essential to optimize your saving and investing. “What is going out each month no matter what?” or “What is your average discretionary spending after that?” are a few of the many points we will cover in this article. Living Expenses When asked about living expenses, you should immediately consider “budgeting.” In theory, budgeting is simple - you record how much is coming in minus how much is going out, and there is your budget. In other words, it’s your allotment of spending each pay period. However, tracking your expenses is how you make budgeting work for you. Let's use an example to explain how knowing your living expenses allows you to be successful in your financial wellness. Our example brings in an after-tax amount of $2,500 per month. Living expenses are the following: Rent or Mortgage – this is usually a set monthly amount and can range, for this scenario, a monthly payment of $750 Utilities – this includes items like gas, internet, electric, etc., totaling around $250 Subscriptions – such as Netflix, Amazon Prime, etc., at $50 Fuel – on average, about $150 Food – this can be broken down for Groceries/household and hygiene items as well as eating out and spending roughly $600 Car Payment - this is usually a set monthly amount and can range, for this scenario, a monthly payment of $400 Entertainment – this can be anything you do socially or enjoy doing, think going to a ball game, movies, etc., and giving an allowance of $100 Altogether, these average costs per pay period total $2,300. When deducted from the $2,500 income, this leaves $200 per month that could be used for the future. Many times, people feel they are living paycheck to paycheck, and it could certainly feel this way when one does not keep track of what is going out each month. It can be very overwhelming and easy to feel you cannot save for yourself. However, budgeting can show you how and where to save by accurately tracking your expenses and staying within the limits you set for yourself in areas where overspending can frequently happen. We have a team of Financial coaches available to help ease the stress of that feeling. They will guide you through what should be paid first and walk you through the budgeting process, helping you learn where to save the money you can to invest eventually. Retirement Accounts Once Baby Steps 2 & 3 are complete, it is time to focus on saving 15% of your income. There is no better feeling than knowing that the money leaving your bank account is stockpiling in an investment account, helping you to build wealth for your future. When reviewing your employer-sponsored plans, knowing the plan inside out is essential. What are you going to contribute percentage-wise? What is your employer matching? Does your plan have ROTH options? How soon until you can start to contribute? These are some questions to have answered before you begin investing. Contributing 15% may be too aggressive to cover your living expenses. If this is the case, other budgetary changes may need to be made elsewhere, such as downsizing a home or selling a vehicle. It is also beneficial to be out of debt (excluding mortgage) before one starts to contribute 15% toward their future. We say this because once out of debt, you can use your income as it is meant to be, a wealth-building tool. Brokerage Accounts For some, contributing 15% to retirement accounts may max out their employer-sponsored plans. For those in this situation, thinking about a brokerage account is beneficial. Brokerage accounts are fantastic ways to continue to save for all purposes. Most commonly, they are used for short-term funds to grow in the market while still having the liquidity necessary to access them. It can be an adjustment when you start saving this much. You may think, “I just got out of debt. Now I want to enjoy all of the extra money I have.” The beautiful part about brokerage accounts is that they can be used for precisely what you want them to be used for, such as an investment savings vehicle for a new car or a new home. The most popular way to use the brokerage account is to save everything extra monthly to build up a vacation fund. What better way to enjoy your extra money than to take a trip for all your hard work? Brokerage accounts are outstanding for overflow funding, of course, but what makes them even better are their tax benefits, especially in retirement. All contributions can be deposited and withdrawn at any time, penalty-free. When taking income in retirement from a brokerage account and taking capital gains, depending on your tax bracket, you may only have to pay 10-15% in tax on just the growth. This is wildly beneficial if most of your retirement assets are wrapped up in pre-tax dollars, like your 401(k). This is because when you take income from your 401(k) or other pre-tax retirement accounts, that income is added to your taxable income for the year, which could be taxed from 20% and up, depending on your income. The power of speaking with your advisor As mentioned, everyone has different goals and timelines with their money, so it is essential to speak to a Financial Advisor about your specific needs and goals. Please contact one of the Financial Advisors at Whitaker-Myers Wealth Managers; we would be happy to help!

Is the 4th of July the new “Back to School” time of year? For many, the 4th of July seems like halfway through summer. And if you have visited a store recently, it evidently also means the start of fall. Between the “end of summer sales” and the fall/Halloween decorations starting to come out, many have a hard time believing that school starting is just around the corner. In the never-ending search to try and save money in what seems to be an ever-increasing economy, thinking “Back to School” in July may have some benefits if you plan ahead. Planning Ahead in July As I tell many of my coaching clients, one of the critical tools in being successful with budgeting is being proactive rather than reactive. Especially if you have an upcoming known cost, why wait to plan on back-to-school costs until right before you head out the door to go shopping? Start now to put yourself and your wallet in a better space. Before hitting the stores for back-to-school shopping, below are some actions you can take. Inventory your house This means look around and see what was used last year that is still good, wasn’t used at all, or you have extra. This goes from classroom supplies to backpacks, lunch boxes, clothes, and shoes. There is no reason to buy new simply because it is “a new school year.” By simply inventorying your home/closet before you head to the store, you could save a lot of money by taking the extra time. Make a list – and check it twice Santa shouldn’t be the only one making a list and double-checking things this “back-to-school season.” Again, to be proactive is to know precisely what you need vs. “having an idea” and being tempted with impulse buying while at the store(s). This step can easily coincide with inventorying your “goods” tip mentioned above. Setting your Game Plan Outside of planning ahead, setting up your game plan is critical in cost saving. Once you know what you need, finding the most cost-efficient ways to purchase the items is the next step. Cost Shop This step is another piece of homework before heading to the stores (or clicking the purchase button for online shopping). Do some research between stores and online sites to make sure you are getting the best price. Most stores have their sale prices listed for all items, which makes it easy to compare one site to the next on multiple tabs when trying to find the best pricing. You may have to do some piecemealing when purchasing items, but if it saves you more in the long run, the multiple stops (or online carts) may be the better option. Buy bulk and split I know buying in bulk may not be the option for just your family, but there are cost savings when you purchase large quantities at one time. Find a friend or another family needing the same items and cost-share the things with them. It’ll be a win-win for both (or multiple) families! Shop Tax-Free Lastly, don’t forget to shop your Tax-Free Weekend! Most states recognize that school supplies and back-to-school clothing shopping can burden families and have a tax-free weekend. Be aware that every state is different, so check out your specific state’s dates (and fine print) on what is tax-free. Check out this article to see when your State’s Tax-Free Weekend for 2023 is. *Bonus Tip – Start a Sinking Fund!* This may not help you this year regarding back-to-school shopping; however, it can help prepare you for next year’s shopping. Not familiar with what a sinking fund is? Check out this article explaining the basics of a sinking fund and how to set one up to help you be proactive with budgeting for known expenses throughout the year. Want more tips? Read Eliminate Back-to-School Blues with these Money-Saving Tips, also found on the Whitaker-Myers Wealth Managers blog page by our Chief Financial Coaching Officer, Lindsey Curry. Schedule a meeting today if you need help discussing how to properly set up a sinking fund or budget!

Vacation planning means budget planning As summer starts, if you’re like me, you’re already looking forward to that vacation that’s been booked since it was cold and windy earlier in the year. The kids are out of school, there is more pressure to entertain, and the kids' activities are kicking into high gear. Many people decide to go on a trip in the summer for a fun, action-packed, memory-inducing experience for everyone. Some fly to the Bahamas, some drive down the east coast, and some even decide to hit the slopes (all California and Florida people). In this article, we explore how to vacation within your budget correctly and still affordably create those lasting memories. Vacation Fund One of the best ways to budget for a vacation is to set up a vacation sinking fund. Many times, and more recently, people have been setting up a brokerage account for their various sinking fund needs. A brokerage account is an investment savings account or a non-retirement investment account. For those with short-term goals – like going on vacation, there is no better time to set this up. Interest rates are astronomical, which means that the Schwab Money Market is paying 4.93% (as of the writing of this article on 6/28/2023). The Schwab Money Market pays dividends monthly, which means you would get free money on the 15th of every month. To learn more about a money market fund and how it differs from a money market account, check out this video from our Chief Operating Officer. If you are like many other families who go on vacation annually, it is a good idea to set up a recurring transfer every week or every month into the account. That way, you will prioritize saving for it, and it will be out of sight and out of mind. Once this money starts to be saved rather than spent, it becomes much easier to have the funds available for family experiences. It takes personal spending discipline out of the equation and deposits it into your vacation fund. Vacation funds are an excellent way to save for this and the following years’ vacations. It allows you to be personally responsible for all the money you will spend on a vacation. It also personifies how hard you worked to earn this bucket of money that is allowing you to take this vacation in the first place. Daily Cash Limit Once you’re on vacation, another challenge begins. For example, you are in a beach town, and next to the hotel/condo/Apartment/home you are staying in, there is a pizza shop, ice cream shop, or souvenir shop within walking distance. At the same time, your kids are 1 inch from your ear shouting, “Let’s go get some ice cream!” (Or pizza, or knick-knacks, etc.). Introducing a daily spending limit is the best way to avoid overspending your vacation money, going into debt, or spending money you don’t have. Not only have you spent a few thousand dollars to get to your vacation location, but now that you’re there, more money will be spent daily on food, dessert, activities, etc. Planning your activities and daily spending limits ahead of time will make for smooth sailing on vacation (pun intended for some vacationers). Conclusion It is essential to understand that vacations are meant for relaxing and good times, so one should never feel the need to hold back or count every nickel spent. I am advising those who plan to travel to be mindful of what they have and intend to spend to be in the same financial place they were before they went on vacation. The power of speaking with your advisor As mentioned, everyone has different goals and timelines with their money, so it is important to speak to a Financial Advisor about your specific needs and goals. Please get in touch with one of the Financial Advisors here at Whitaker-Myers Wealth Managers; we would be happy to help you!

The word “sinking” can be a little intimidating when you associate it with your money, but in reality, a sinking fund can be a way to help you better prepare and project how to spend your money. So, what is a sinking a fund? Simply put, a sinking fund is a way to allocate the money you are saving, with a specific purpose in mind. Now some of you are maybe thinking to yourself, isn’t that called a savings account? Yes, but remember the part about “with a specific purpose in mind”. Sometimes to pay off a one-time thing. A sinking fund is a great way to plan for a future expense(s) that we know are coming down the pike. What are some ways I will use a sinking fund? Sinking funds are broken down into three main mind sets of how they are used: Big Purchases: Thinking of purchasing a new car? How about upgrading your cell phone? I know, you’re finally putting in that backyard pool you’ve been dreaming about. All of these can be huge hits to your bank accounts, but planning and knowing this is something you will be purchasing in the coming months to year, you can help put large amounts aside, specifically for those items. Large Bills/Expenses: Do you have an Amazon Prime membership? What about your car insurance, do you pay that as quarterly or yearly payments? Streaming services are huge now too, meaning Netflix or Hulu, any of these something you buy a yearlong subscription of? Think of items that you pay in a one big, lump payment once or twice a year. If you put money aside for them each month for this one large year end payment, wouldn’t it be nicer to know the money is already allotted for, vs. adjusting that month’s budget to fit that large expense? Upcoming Events: This category can cover things in a wide variety. You know Christmas falls every December 25th, so why not start putting money into the sinking fund today, so as you buy gifts, your eyes don’t glaze over every time you see your bank account decrease. You can also create a sinking fund for a nice relaxing vacation. Want a cabana by the pool while you’re there, or can’t wait to do an excursion? Budget that into your monthly savings so you can enjoy all the little extras on vacation guilt free. Or you can think even bigger…. like a wedding! You’re going to be getting quotes and prices ahead of time from all of your different vendors, so you’ll know the majority of your final costs will be when the day comes to pay your final deposits. Rather than dreading those days they are due, be proactive and slowly start stock piling that cash for your dream day. How do I start saving for a sinking fund? There are a couple of ways you can go about creating sinking funds, it’s a matter of how detailed you want to be. Some people put everything in their savings accounts, but as they create their monthly budgets, detail out how much is going into the account with specific line items. You have to keep very good paper records with this method as you will have just one large lump sum in your account, with no way to differentiate what dollars go where, besides your own personal key. Others will use the envelope trick. They will put that specific monthly amount of cash allotted for that item in a specific envelope labeled with what it is they are saving for, so when they time comes, they just pull the money directly from the envelope to make their payments. If your sinking fund is for a longer-term purchase, we typically recommend you allocate those dollars into a Schwab Brokerage Account with the help of your SmartVestor Pro. Longer term purchases you are building a sinking fund can be things like your new (used) car purchase, home upgrade, once in a lifetime family vacation or just undefined savings, which most likely means it’ll be there for a while. Lastly some will set up specific savings accounts with their bank or brokerage account with their investment firm, and even name that specific account the item they are saving for so they know every transaction is going directly to that fund. They can arrange to have set dollar amounts be transferred into these various accounts each month, or they will manually move money into the various accounts. How do I create a sinking fund? As I said earlier, normally the money you are putting aside for a sinking fund, you are aware of the dollar amount you’re a targeting for. If you know your yearly car insurance payment is $1,200 due in January, then you know each month you must set aside $100 into your car insurance sinking fund starting every January through the end of the year. If you roughly spend $800 on Christmas each year, and it’s May, you need to take $800 and divide it by 8 months (months left until December). Then for each month, set aside $100 so come December, you have that $800 readily available for you. Is a sinking fund different than my emergency fund? 100% different. An emergency fund is only to be used for emergencies…meaning an unplanned/unexpected expense. Please don’t confuse the two. These two need to be kept separate, and you should never dip from your emergency fund to put money in one of your sinking funds. Your emergency fund is supposed to be used for unexpected medical expenses, an unfortune accident (personally, to your car, house, etc.); anything that has a cost associated with it, that you were NOT expecting, and would cause instant panic and stress if this emergency fund did not exist. Can a sinking fund cause harm? Yes, if done incorrectly. Sinking funds can be a great budgeting tool, but remember to take care of your necessities first, before putting money aside for your wants. Don’t be starting a vacation sinking fund because you heard it can help you budget for a fun getaway. You must first make sure you are putting your money into the categories it NEEDS to be put into to pay off bills, pay debts, or even building your emergency fund first. Don’t make your sinking fund unrealistic with the money you have coming in, and the dollars you know that need to go out each month.

If you’re not getting better, you’re falling behind. Technology makes this statement even more true. In the last week of May and the first week of June 2023, we experienced this more than ever with stocks such as Nvidia, which is a leader in artificial intelligence semiconductor chips and Tesla, the next-generation car manufacturer, having tremendous gains! My friend Dave Ramsey and his team at Ramsey Solutions are also constantly putting their foot on the petal regarding their tech stack. Think about how much easier and convenient it is to budget with the EveryDollar Budgeting App (did you know you get the plus version for free for one year from Whitaker-Myers – ask your Advisor how) or how about the Ramsey Network App, which has all your favorite Ramsey shows and podcasts in one convenient app. Why this monologue? We have made a significant investment in the online portal that you, as a client, access to view your Schwab, Betterment, or 401(k) managed through our third-party technology. If we help you manage a portion of your net worth in one of the ways mentioned above, you’ll soon get an online client experience that we are over the moon excited about. First, let’s discuss what’s not changing. If you view your account directly through Schwab.com or Betterment.com, please know that your login, password, and experience are not changing since the custodians run those platforms. However, if you use our Emoney or Morningstar Portal, your view will get quite a bit better in about two weeks. Those online portals will shut down in favor of our consolidated Whitaker-Myers Wealth Managers Client Portal. What’s even more exciting!?!? Around July of 2023, the portal will have a fully functioning mobile app in the Apple App Store and Google Play Store. Search Whitaker-Myers Wealth Managers or Smartvestor Pro, and you’ll find this one-of-a-kind, handy-dandy app. Let’s talk about what you’ll see on this new portal: Client Overview Tab This will be your landing tab when you initially log into the portal. The page will allow you to quickly and easily see some of the most important parts of your financial story, including your net worth, transactions (assuming you have linked your bank accounts to the system through PLAID), and progress on your financial plan. Ever wonder how a bad day in the markets affected your long-term financial plan? My guess is not much, but now you can log right in and quantify that question from the results of this screen. Your net worth and liabilities are tracked month to month to see the progress you’re making on paying down debt and building wealth. This is particularly helpful in a year like 2022 when the stock market dropped 20% (and growth stocks dipped nearly 35%), yet your personal real estate took a major step forward, yielding a neutral net worth. The beauty of diversification! Newsfeed All the content that the team at Whitaker-Myers Wealth Managers and Tax Advisors creates will be uploaded to this newsfeed portal so you’ll have one convenient location to watch our “What We Learned in the Markets This Week” video series or read about Qualified Charitable Distributions or any other financial planning topic, from one of our Financial Planners. You will have customized, easy-to-read statements created for you once a quarter that very simply show you your starting balance, ending balance, and gain/loss for that period and since inception. These statements will be posted right on the newsfeed. Finally, any custom videos your advisor does specifically for you will be uploaded to the newsfeed section of the web portal. Personal Finances Summary Remember how Dave says there is a nerd and a free spirit in every relationship? This page will allow you to dive deeper and further understand what you have from an investment perspective and how it's performing. You can check out information for various time frames, including your returns, market value, and allocations. We are also working with the team that built this portal for us to categorize your funds into the Growth, Growth & Income, Aggressive Growth, and International Allocations, so you know precisely which fund falls into which Ramsey Solutions category. In addition, this page will allow you to link an outside institution or add an account manually to the portal. For example, if you’d like your 401(K) balance to update daily, you can enter your login credentials for that plan. It’ll update daily (Note that those clients that use Whitaker-Myers Wealth Managers to help manage their 401(k) through our third-party technology will be able to see daily updates to their 401(k) without having to enter credentials). Reports Ever wonder what your cash flow will look like ten years later? How about what your balance sheet should look like based on executing your Baby Step 4? Click here to see a sample of this page. The Reports page lets you access even more information about your goals and finances. You’ll be able to toggle between reviewing projected cash flows and values of individual assets and liabilities and even see action steps your advisor will give you for achieving your goals. Document Vault In the document vault, you can store and share documents securely with your advisor. Files uploaded into the vault are encrypted in transit and at rest to provide end-to-end security and protection. Many users upload tax statements, wills, insurance policies, and more for safekeeping. This will become your digital LEGACY DRAWER, which Dave Ramsey and Ramsey Solutions so adamantly recommend you keep. This is also where each month we’ll upload your Schwab custodian statement. Remember, Schwab statements are some of the hardest to read (as any custodian statement is), so we’ll create our own version to help you better understand what happened in your account. Goal Results Lastly, the goal results page will give you a high-level summary of your financial planning goals and drill into detailed information on individual goals. You’ll know if each goal is funded or not, and you can then click on each goal to view more details, including projections, action steps, and suggestions. You can also complete a new goal workflow and add that to your plan. Examples of goals you can add are: Retirement Savings, College Savings, Debt Management, Home Purchase, Emergency Funds, and many more. In addition, should you have questions about linking your outside accounts to this portal, you can learn more by clicking here. This software uses Plaid to link your bank, 401(k), or other outside accounts, which is one of the premier data encryption services in the world. We are very excited about releasing this new and exciting way to view your finances. Investments and enhancements like this are why the Ramsey Solutions team continues to trust our firm, Whitaker-Myers Wealth Managers, to serve fans and listeners all over the country to live and give like no one else. You should receive your client portal login instructions in the next few weeks; however, if you’d like to receive yours today, please click here to email our Client Relations Manager, Shelly Sturts, who will be happy to send you your login today.

Hopefully, you'll excuse my two-week hiatus from "What We Learned in the Markets." I'll be back next week and better than ever when I bring the four things I learned in the market while spending time with my family. But to whet your appetite, let's talk about what the last two weeks' strong inflation data and employment info have meant to the Fed's soft landing hopes. Ten dollar words to describe two-dollar concepts. That's how I feel about the term soft landing. If you listen to business news or even office chatter, you have heard the term soft landing, thrown around and shaken your head like you fully understood the term and concept. Essentially, it's this: a controlled landing of a plane, spacecraft, or other flying object without serious damage. That it's my friends, minus the airplane. The Fed is trying to slow down the economy to kill inflation without doing serious damage to the economy. The same can not be said about the markets. You can tell by your 2022 401(k), IRA, or other investment statements. However, the Fed is concerned about the totality of the economy. Market and economic expectations have shifted 180 degrees since the start of the year when many investors expected a recession and prolonged bear market. Ongoing economic growth, low unemployment, improving price pressures, and slowing Fed rate hikes have spurred a strong market rally, especially across sectors that struggled last year. While the economic situation is far from perfect and investors should always be prepared for uncertainty, it's also important to recognize the positive trends that are raising the odds of a "soft landing." What factors are driving these changes in investor expectations? Inflation is improving across many measures Perhaps the most important are the many signs that inflation is improving. Recent data for both consumer and producer prices show meaningful signs of deceleration toward Fed targets. The Consumer Price Index (CPI) has slowed from a peak year-over-year rate of 9.1% a year ago to only 3% today. Similarly, the monthly rate of 0.2% for headline inflation represents an annualized rate of 2.2% - very close to the Fed's 2% target. Core inflation remains elevated at 4.8% when comparing prices this year to last year. However, the monthly pace slowed in June to only a 1.9% annualized pace. These are all positive signs and suggest that while prices could remain high, there is already far less upward pressure. Producer prices show even greater improvements. Headline Producer Price Index figures (for "final demand") show a year-over-year change of only 0.1% in June. Core PPI rose 2.4% compared to last year, but only grew 0.1% month-over-month. Other measures showed sharper improvements and even deflationary trends, especially among "intermediate demand" which represents industries buying the inputs they need. These data suggest that prices are declining throughout the supply chain, creating additional hope that these gains will eventually be passed on to consumers. Of course, there are always caveats. On a technical basis, the year-over-year comparisons will likely worsen next month. This is because the peak rate of inflation occurred exactly a year ago so future comparisons will become more difficult. This means that, going forward, it will be more important to focus on the current pace of inflation rather than how prices compare to last year. Additionally, many of the headline improvements have been in volatile areas like energy, which can always fluctuate. Finally, shelter prices (rent and "owners' equivalent rent") declined in June but the pace of improvement has been quite slow so far, and it's difficult to know whether this will be sustained. The Fed expects to raise rates again after pausing For the Fed, which has been grappling with the largest inflation shock since the 1970s and early 1980s, these data could not have come at a better time. The Fed decided to skip a rate hike in June in order to "allow them more time to assess the economy's progress toward the Committee's goals of maximum employment and price stability," according to the latest FOMC meeting minutes. In other words, the Fed had already decided to slow the pace of rate hikes from 25 basis points every meeting to perhaps every other meeting. The accompanying chart shows that Fed officials expected to raise rates two more times later this year (i.e., an additional 0.5%). At the moment, markets are anticipating only one additional hike. This disconnect between the Fed and markets has driven volatility over the past year, with the Fed staying firm and markets adjusting to meet monetary policy. In general, a slower pace of rate hikes, if justified by the economic data, has been cheered by markets as this year's S&P 500 return of 17% shows. Wage growth is still strong despite improving inflation? The Fed's challenge since they began raising rates in March 2022 has been to strike a balance between beating inflation and preventing a recession, i.e., achieving a so-called "soft landing." The absence of a recession so far, alongside these inflation data, is positive and a big reason for this year's market rally. Current consensus forecasts by economists still call for flat GDP growth in the third quarter and slightly negative growth in the fourth before rebounding next year. Over the past twelve months, these forecasts have been revised upward with recession forecasts continually pushed back. What has helped is the strength of the labor market. The latest report from the Bureau of Labor Statistics shows that 209,000 net new jobs were added in June, a slower but still very healthy number. Unemployment continues to hover around 3.6%, near historic lows. Wage growth is strong with average hourly earnings rising 4.7% on a year-over-year basis. Despite earlier layoffs in tech, there are still 9.8 million job openings, or about 1.6 openings per unemployed person, which suggests that many businesses would like to hire if only they could find qualified workers. Theoretically, higher wages should make inflation stickier as consumers spend more and the cost of doing business rises. Thus, higher wages in a disinflationary environment are somewhat surprising given that economic theory typically assumes that there is a tradeoff between inflation and jobs. Additionally, perhaps an even bigger fear investors faced last year was around the possibility of stagflation - a period of poor growth in which inflation remains stubbornly high. While it's too early to declare victory, updated expectations by investors and economists suggest that these scenarios are now less likely. The bottom line? The current economic environment is far from perfect but is still significantly better than what many had feared only six months ago. This is a reminder that consensus views are not always correct and can change rapidly as conditions shift. That said, with markets having priced in a return to normalcy already, it will be important to stay balanced as the inflation, Fed, and economic situations evolve.

Activate Baby Step 5. Your mission, should you choose to accept it is to create financial independence for yourself by saving 15% of your income into retirement, putting money away for your child(s) college using tax-advantaged accounts such as a 529 Plan, Educational Savings Account (ESA) or UTMA (my personal favorite) and paying off your home early. For many of us, Baby Step 5 and 6 will end technically before Baby Step 4 is (should I be so bold as to ask Dave to reorder the steps? Ha! Never). Baby Step 6 will create a joyous memory that your family will never forget. The grass will feel different, and the bank gets no more of your monthly cash flow. However, ending Baby Step 5 is much less happy, in my opinion. It means parting with a lot of hard-earned money and watching your child gain a lot more independence, ready or not. However, if planned correctly, there need not be financial stress to compound the other stresses you'll inevitably face. It's no secret that college costs have risen much faster than inflation over the past 40 years, increasing the financial burden on families as they set money aside and on graduates once they enter the workforce. And yet, there are numerous professional and personal benefits to pursuing higher education for those who wish to do so. Weighing the costs against the benefits while considering personal priorities and the broader economic picture makes college planning a complex topic. There are many economic benefits to attaining higher levels of education This is why saving for college is a core component of any financial plan alongside other major goals such as retirement or buying a home. With all of the market and economic uncertainty of the past decade, customizing a financial plan to each individual or household's needs, ideally with the guidance of a trusted advisor, has never been more important. What should those planning for college consider today? The rapid increase in the cost of education has led many to question whether college is still worth the investment. An important reason tuitions have risen so rapidly is that the economic benefits of college and advanced degrees have grown even faster. According to the Bureau of Labor Statistics, job prospects improve as educational attainment increases. For example, the accompanying chart shows that unemployment rates were 6.2% for high school graduates but only 3.5% for those with 4-year bachelor's degrees. Similarly, the median annual earnings of those with high school diplomas was $40,450 compared to $66,700 for college graduates. Not surprisingly, these patterns continue for advanced degrees as well. Of course, these statistics are averages that don't consider individual circumstances or differences within each education level. Pursuing college and advanced degrees may not be for everyone, and there are many personal factors that must be considered. For instance, today's very low unemployment rates may make the opportunity costs of attending a 4-year college less attractive to some, including those who attend trade schools or benefit from on-the-job training. In contrast, poor economic periods, such as during the global financial crisis, may make the benefits of college more pronounced. Dave Ramsey's friend Mike Rowe does incredible work around the wealth that can be created in the trades, not to mention the savings to be had from not having to attend a four-year college. You can read more about Mike Rowe and the path to success in the trades here. Additionally, these particular statistics don't consider the choice of college major or type of employment. Clearly, those studying highly employable subjects, such as those related to engineering and financial services, will likely have greater job prospects. Please don't let your child study left-handed puppetry. If your child goes for the generic majors of psychology or sociology, we need to have an economic conversation with them about their plan to generate an ROI from those degrees (some people obviously do, but many work in unrelated fields). Regardless, the broad data make it clear that higher education has many economic benefits if done correctly. The cost of a college education has risen much faster than inflation The other side of the equation is that the sticker price of a college education has increased 800% over the past 40 years. Even after adjusting for inflation, the cost of college has increased dramatically across all types of institutions, as shown in the accompanying figure. The real, inflation-adjusted cost of a private 4-year college degree rose 176% from 1981 to 2021, while public universities saw prices climb 252%. The cost of 2-year degrees has increased more modestly but has still easily exceeded inflation in most years. Unfortunately, these inflation rates for education have also outpaced wage gains. Thus, those saving for college will need to save earlier, save more, take advantage of investment returns, and borrow. Certain investment vehicles with tax benefits, such as 529 plans, have been created to encourage earlier college savings in order to take advantage of compound returns over time. Recent data by Sallie Mae suggest that the average household pays for 43% of the total cost of college with the parents' income/savings, 11% through the student's income/savings, 29% via scholarships, grants and relatives, and 18% through borrowing. Thus, how families and students decide to pay for and finance the cost of college requires a thorough understanding of their particular circumstances. Student loans are a major burden on consumers Unfortunately, borrowing for college often results in high levels of student loan debt upon graduation. At the individual level, this burden on graduates must be factored into every financial and career decision. In the worst case, it may mean that graduates are unable to take as many risks or pursue their true passions if it means they are unable to generate the steady income needed to repay their loans. Proverbs 22:7 says, "The rich rules over the poor, and the borrower is the slave of the lender (ESV)." Student loans have ballooned over the past 20 years to $1.6 trillion at the aggregate level across the economy, outpacing other non-mortgage consumer debt. This has led to macroeconomic concerns, with some comparing the size of student loan debt to the subprime crisis prior to 2008. While it's difficult to say exactly how this will impact the economy, there are important differences to subprime loans such as grace periods, forbearance, parent cosigners, and more. Still, it's possible that high levels of student debt could act as a drag on the economy due to its influence on career decisions, reduced consumer spending, and more. Of course, the student debt crisis has become a key political issue. The current administration recently sought to cancel up to $20,000 in federal student loans for qualified borrowers. However, the Supreme Court has ruled that this is an overstep of the executive branch and invalidated the action. Politics aside, this has resulted in uncertainty for those with student loan bills coming due. The bottom line? Higher education continues to be extremely valuable from a financial and economic perspective. Deciding how to pay for college is an important component of any financial plan. Saving early, making appropriate investments, and using attractive vehicles, ideally with a trusted advisor's guidance, can help increase the odds of financial success. At Whitaker-Myers Wealth Managers, we have been talking about college savings a lot lately. That's because we have launched a new service through our Financial Coaching Team called "Debt Free College Savings Plan," where we will not only have a Financial Advisor help you determine the appropriate amount to save each month but also walk you through the tactical and business decisions that must be made for college. A great way to introduce your soon-to-be newly minted adult into the beautiful world of finances.

A few highlights to hit before we dig into "market stuff" over the following few paragraphs. This last Friday, the Whitaker-Myers Wealth Managers Team traveled from near and far to enjoy an evening of BBQ, swimming, and awards to celebrate our success over the last year. Despite the tough market cycle of 2022, the Lord has blessed our firm, and we wanted to celebrate that and thank Him! To that end, we make sure everyone gets a fun Whittie Award (to play off the Dundies from the popular TV show The Office) but receiving special recognition this year were Kelly Kranstuber, Andrew Young, and Shelly Sturts, along with Sandy Whittlesey, who won our award dedicated to kindness and caring, named after her late husband, Jim Whittlesey. Here are a few of your favorite Advisors receiving their Whittie Awards: The past few years are proof that market sentiment can turn on a dime. This year's strong market rally, with the S&P 500 rising 13% and the Nasdaq gaining 29%, has been driven by technology stocks, improving inflation, and the absence of a recession. While it may be too early to tell, some investors believe we are in the midst of a new bull market. However, with the Fed and other central banks signaling further rate hikes to return inflation to 2%, others are questioning the sustainability of this year's rally. For long-term investors, who should be less concerned by day-to-day market swings, what matters more than what we call this market period is the level of valuations and interest rates. What are these factors signaling about achieving financial goals in the coming years? Valuations are no longer cheap after this year's rally It's important to start by discussing why valuation measures matter to long-term investors. Simply put, valuations are the best tools that investors have to gauge the attractiveness of the stock market over years and decades. This contrasts with much shorter time frames during which global headlines, industry news, and company-specific events can dominate market movements. These concerns eventually settle and fade, leaving only traces of their impacts on asset prices, underlying fundamentals, or both. In this way, valuations are not market timing tools for making all-or-nothing investment decisions. Instead, valuation levels are an important input in determining appropriate asset allocations based on financial goals. Unlike stock prices on their own, valuations don't just tell you how much something costs, but what you get for your money in terms of earnings, book value, cash flow, dividends, and other measures. After all, holding shares of a company means you are entitled to a portion of its profitability, so paying an appropriate price can improve the odds of future growth. Valuations are correlated with long-term portfolio returns for this reason - i.e., buying when the market is cheap can improve the chances of success, and buying when the market is relatively expensive can reduce future returns. To a large extent, the reason this pattern exists is exactly because it is difficult to stay invested when markets fall and valuations are the most attractive. Just think about how most investors felt at the start of this year, or back in March 2020, or during 2008. When it comes down to it, staying patient is much easier said than done. What do valuations tell us today? On the surface, broad stock market valuations are above both their recent lows and historic averages. The price-to-earnings ratio for the S&P 500 (based on next-twelve-month earnings) is 18.9x, well above the average of 15.6x since the mid-1980s. This metric only briefly fell to 15.3x during last year's bear market crash before rebounding immediately. These numbers are highly dependent on the market and economic cycle and can therefore fluctuate over time. For example, the average over the past decade has been considerably higher at 17.6x, making it more difficult to interpret these valuation metrics. Tom Lee at Fundstrat, one of my favorite buy side analysts recently pointed out the worn out agruement that valuations are too high at 18.9x is foolish because when removing FAANG from the calculation, where you land is a 16.4x valuation, not horribly higher than long term averages. And one must consider, if these FAANG names do infact deserve higher valuations. They've proven a repeatable model to drive higher than average earnings, hence the dominance of large cap growth over the last six years. Earnings growth has flatlined but is expected to pick up A related question many investors may be facing is around the impact of higher interest rates on the market, since there are many ways in which rates and stocks are linked. Higher interest rates tend to slow the economy which then impacts company sales and profitability. Higher rates also reduce the value of cash flows far into the future, making highly uncertain businesses or those reliant on future growth less valuable, at least in theory. Interest rates also impact stock prices directly through financial markets and investor preferences. When rates are higher, bonds become more attractive relative to stocks since they can generate more income. The resulting headwind on stocks can be interpreted as investors shifting their portfolios toward bonds, or equivalently that stock prices should adjust so that their "yields" rise to new levels. The first chart above highlights this relationship by focusing on the earnings yield of the S&P 500, which is just the inverse of the P/E ratio. This measure tells us how much in corporate earnings an investor is "yielding" for every dollar they invest, allowing us to think of stocks in a bond-like way. Specifically, the S&P 500 has an earnings yield of 5.3% compared to 10-year Treasury bonds yielding 3.7%. The gap between these two measures - a gauge of the relative attractiveness of stocks over bonds, has fallen as interest rates have risen. This difference is now 1.5% compared to a historical average of 1.9%. Of course, stocks are not like bonds in that earnings are not guaranteed, but this comparison is still helpful. On the surface, these measures suggest the market is no longer cheap, which is to be expected after this year's significant rallies. However, there are big caveats to the preceding discussion. One reason this may be harder to interpret today is that the market's earnings yield has worsened not only because stock prices have risen, but also because earnings expectations have been flat. However, if the economy does avoid a recession and begins to accelerate, corporate earnings could also recover. This would boost earnings yields, making stocks more attractive again. Given that even the most negative economic forecasts expect only a shallow and short-lived recession, it may be important to not focus too much on near-term earnings outlooks when interpreting valuation measures. Also, longer-term interest rates have been more stable this year despite the possibility of further Fed rate hikes. This could improve the comparison between stocks and bonds over time as well. Many sectors are more attractive than the broader market Additionally, valuations are only expensive when considering the broad market and certain sectors. Many parts of the market still look quite attractive, especially if earnings do rebound over the next year. The accompanying chart highlights both the forward-looking P/E ratios across sectors in addition to consensus earnings growth projections. It's easy to see that there are significant differences beneath the surface of the market. Diversifying across many of these sectors, with an eye toward growth and valuations, could be increasingly important as economic uncertainty continues. The bottom line? While valuations are not short-term market timing tools, they are among the most important metrics for constructing long run portfolios that include both stocks and bonds. This is especially true as earnings growth recovers and interest rates stabilize. Investors should focus more on valuations than day-to-day headlines in order to stay focused on their financial goals.