February 2023 Newsletter - Cloudy, Not Stormy

Uniquely Waterstone for our unique Waterstone clients

In this Issue: It's about patience and calm.

Markets are about normalizing and reverting to the long term averages. P/E, one measure of the emotion of the market.
P/E, one measure of the emotion of the market.
Secure Act 2.0 – It’s encouragement to save.
Correction! Recycle those water bottles!
More about Storyworth – Ask for the family story. Tell the family story. An invitation – The Company Theatre- Saturday, Feb 25 at 2:00pm.
WaterstoneFinancialServices.com/blog additions

Know where you're going. Be careful with speed.

Be alert. Wear your seatbelt.

The annual forecasting season is almost over!

The most common opinion is the need to normalize inflation, interest rates and consumer behaviors. The Federal Reserve is ratcheting interest rates to a more moderate level and inflation is slowly subsiding. How much is enough?

Consumers are shifting from Covid-era spending on goods to more careful spending on services. This has impact since consumers influence 70% of the economy.

The strong dollar (expensive!) softens making US goods more affordable abroad.

We will likely see shifts in earnings patterns and stock leadership. The general guess is 2023 will be a market year of returning to long term averages.

Most sources acknowledge the likelihood of a recession later this year. Opinions vary as to intensity and whether a recession is already priced into these market levels or at least some industries. There may be more market decline ahead.

Our investment partners navigate on our behalf. We are comfortably buckled up for the ride.

Check CNR.com for their speedometers, 20 market indicators. Still holding the same general patterns since November...slowing and neutral.

Building on the earnings story

Short term: It’s emotion and the flow of money. Long term: It’s earnings. Share price follows earnings….eventually.

The big Wall St banks (Goldman Sachs, JPMorning Chase, Citigroup and others) were remarkably accurate in their assessment of S&P 500 companies’ aggregate earnings of $221, assessment within a dollar of actual . What they missed was the emotion. See this pictural reference above to see the impact of emotion.

P/E is price momentum to earnings. In 2021, investors were willing to pay 38 times for a dollar of earnings. In early January 2023, investors were willing to pay 19.88 times earnings as listed above. Currently the S&P 500 P/E is approx. 21.76 times a dollar’s worth of earnings with January’s strong market performance.

Earnings weren’t the story last year. It was changing interest rates and bond yields. The Price Multiple of P/E plunged from overvalued to neutral with shifting interest rates.

The Federal Reserve wants to see neutral. Strategists want to see opportunities that are undervalued. There's progress towards greater stability.

Secure Act 2.0

We focus on the markets but the
greatest need is to acquire retirement savings. On Dec 23
SECURE 2.0 Act of 2022, a law designed to substantially
improve retirement savings options.

Some features:

Saving limits are expanded for existing plans.
A national 401k or 403b plan is in the works so all workers have access to direct payroll savings.
It increases the age for RMDs and softens RMD penalties.
It provides employer matching for student loan payments, connects 529 and Roth IRAs and other benefits.
Click blog button at the end to find this and other materials.

We stand corrected about Recycling!

GreenPeace’s 2022 report that recycling is ineffective and
landfill disposal is likely most helpful at this time brought
quick responses!

Correction #1 from client, W.I, packaging engineer: “The person who wrote that is clueless. The plastic used for water bottles is PET (plastics code #1), which is the most commonly recycled plastic in the US. If your plastic bottles don’t have a value associated with a bottle deposit, or you can’t be bothered with collecting the bottle deposit, please put the empty bottles in a recycle bin so that they can be turned into recycled PET. There is a very strong market for recycled PET to make new packages that don’t require more petroleum, but the supply of material only exists if people continue to recycle their empty bottles.

As a packaging engineer, I typically specified recycled PET as the material when I had to make a package out of plastic.”

Correction #2 – WXXI Connections with Evan Dawson (1/13/23) hosted three regional recycling authorities who re enforce the above engineer’s sentiments. We have to start changing behaviors somewhere because it matters.

Thanks W.I. and WXXI for valuable input. Save those bottles!

Be Our Guest! Be Our Guest!

A Waterstone client event aims to include 3
elements: Out of your box, Experience excellence,
Appreciate community.
Join us for the Company Theatre – The Wisdom of
Eve; Saturday, Feb 25 at 2:00 Temple Theater Loft, Temple Bldg.
Reach out to kathy@waterstonefinancialservices.com or 585 586-5641 for 2 tickets and parking instructions. We'll spring for more tickets if you have teen theatricals in your circle.

Click here for https://www.thecompanytheatreroc.org/wisdom-of-eve

More on Storyworth

Several clients mentioned they use this or other family story services.

In January we reported that the younger generation asked for the family story.
Sometimes the motivation comes from the older generations who wanted to tell family stories. This was a good way to put family pictures in context. One matriarch sorted through pictures of generations, told the stories and had copies made for her offsprings. It was her version of "the family bible". Nice!

There is still room for paper. Technologies change over time. Will our digital photos get lost in upgraded technologies, changed storage methods or in the sheer volume of pictures? There is still satisfaction in touch. Be grounded in family values in a marketing oriented/social media world.

Waterstone’s interest in your family preparedness: A strong family is good for your portfolio.

Check our website for added materials. Here are added materials we find or create to support thinking conversation and skills.

Money Infrastructure:

Key Financial Facts for 2023 – tax brackets and tax credit limits, Social Security and Medicare thresholds, HSA deductions and limits.
9 Takeaways on SECURE Act 2.0
Financial Fitness Checklist

Investor Stamina:

Stormy Markets – Time to pull out the pilot analogy
The Pain of Market Volatility
AssetMark: On the Mark- Looking Ahead
AND this newsletter for future reference. (kept for the qtr)

Click here to see the current blog materials.

We love having you as our clients. Feel the good vibes!

Kathy is in the Rochester office Feb 17 thru Feb 28. Come for a visit. (fun!) Always time for a call or a zoom. (efficient). We're here to help.

Thanks if you've read to the end. You're our kind of people.
Reach out to us with your questions, comments, needs.

Kathy@WaterstoneFinancialServices.com
Josh@WaterstoneFinancialServices.com
Office: 585-586-5640 | 585 586-5641
Website: https://waterstonefinancialservices.com

Securities offered through American Portfolios Financial Services, Inc.(APFS) Member FINRA /SIPC. Investment Advisory Services offered through American Portfolios Advisors, Inc. (APA), an SEC Registered Investment Advisor. Waterstone Financial Services is not affiliated with APFS and APA.

Waterstone Financial Services | 55 Sully's Trail, Suite F, Pittsford, NY 14534

February 2023 Newsletter - Cloudy, Not Stormy