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Suite 335
Frederick,MD 21701

Financially Speaking

From Shabri

I love the changing of the seasons, and the transition to Fall is one of my favorites. The air is crisp and the colors of the leaves on the trees are brilliant. Like most people, I associate Fall with the start of the school year—- even though I haven’t been in a classroom in a long time, nor do I have children who are currently in school!

This Fall, we continued conducting most our meetings via Zoom, but also had the opportunity to see some clients in person. A simple in person meeting, something we haven’t been able to do for almost a year and a half, was wonderful! Whether on Zoom or in person, conversations included catching up on life and family, portfolio reviews and many in-depth discussions about financial plans and retirement income stream strategies. For business owners, the discussions included transition and succession strategies. Utmost on the minds of most everyone was the potential of upcoming tax law changes and the impact on their portfolios and income. The value of an integrated financial planning and investment management process was never more evident.

At a high level, integrated financial planning and investment management will involve:
• Clearly defining goals, both from a personal and business perspective
• Conducting an assessment of resources, and determining which areas have opportunities for improvement
• Discussing retirement as the third phase of life
• Developing and implementing a strategy to help you achieve your personal and business visions
• Cash flow planning and income stream strategies during retirement
• Investment strategies and portfolio management
• Monitoring and adjusting your financial plan and investment portfolio as needed
• Estate planning
• Risk management, and longevity risk in particular
• Tax planning both now and during your retirement
• Working in tandem with your CPA and attorney
• Facilitating family meetings to discuss values and expectations

Each person’s financial plan is as unique and individual as they are.  Our team is here to help you achieve both your short- and long-term goals. 

As we have noted previously, we are all fully vaccinated and are welcoming those who are also vaccinated to the office.  Enjoy the beautiful weather and we look forward to seeing you soon.


Your Portfolio

Fall 2021

From Sean Moore

What is Monetary Policy, and Why Should I care?

                News headlines of late seem to be ever more focused on the actions – or potential actions – of the US Federal Reserve (the Fed). When we see these stories shift from the depths of business and finance publications, to the front page of mainstream news sites, it begs the question: what is actually going on, and why does it matter to me?

The Fed employs its tools in service of its mandate: stable prices, and maximum employment. Monetary policy, as the name implies, is a set of tools utilized by the Federal Reserve that control the supply of money available to banks, consumers, and businesses. In broad terms, monetary policy is either expansionary, or contractionary.

Expansionary monetary policy is employed when the economy faces high unemployment, and slow economic growth. Expansionary policy seeks to increase the money supply, thereby boosting investment and consumer spending.

Contractionary monetary policy is employed when the economy faces high inflation. Contractionary policy seeks to decrease the growth of the money supply, thereby keeping prices in check.

                One tool that the Fed utilizes to implement monetary policy is known as open market operations. Open market operations target short-term interest rates, most notably the federal funds rate. This is the target rate set by the Federal Open Market Committee (FOMC) that is being discussed when you hear about the Fed “setting interest rates.” The federal funds rate is the target for the rate at which banks lend their excess reserves to each other overnight.              

When implementing expansionary monetary policy, the Fed trading desk will purchase bonds from banks and other financial institutions, increasing the amount of money that those banks and financial institutions have on hand, thereby increasing the money supply. With more money on hand, banks will lower interest rates to entice consumers and businesses to borrow, which stimulates economic and employment growth. When implementing contractionary monetary policy, the Fed will sell bonds to banks and financial institutions, reducing the amount of money that they have on hand, thereby decreasing the money supply. This causes banks to raise interest rates, which discourages consumers and businesses from borrowing, and encourages them to put money into interest-bearing deposit accounts, thereby slowing inflation and economic growth.

Another tool the Fed uses to implement monetary policy is to manipulate reserve requirements. Reserve requirements are the funds banks must retain in proportion to customer deposits to ensure they are able to meet their liabilities. When undertaking expansionary monetary, the Fed will reduce reserve requirements, thereby effectively increasing the amount of money banks have on hand, and increasing the money supply. When undertaking contractionary monetary policy, the Fed will increase reserve requirements, effectively reducing the amount of money banks have on hand, thus reducing the money supply.

Since the financial crisis of 2008, the Fed has undertaken unconventional monetary policy. This has taken the form of quantitative easing. Quantitative easing is employed in a crisis, when the federal funds rate has been lowered to zero, but the economy still faces high unemployment and slow economic growth. In expansionary monetary policy, the Fed purchases non-government securities, most notably mortgage-backed securities, to reduce borrowing costs, and increase the money supply. In contractionary monetary policy, as was seen following 2017, quantitative tightening is employed by selling the non-government securities held by the Fed, potentially increasing borrowing costs, and decreasing the money supply.

Why should this matter to you? Monetary policy employed by the Fed will affect the rates you pay to borrow money for personal or business purposes. Whether you are interested in buying a home, starting or growing a business, or sending your children to college, these decisions will directly affect your borrowing costs. Further, monetary policy decisions affect performance in investment markets globally. There are both direct and indirect effects to market performance when the Fed undertakes monetary policy.

At Moore Wealth, we stay on top of Federal Reserve policy and outlook, and seek to educate our clients as to how Fed actions could affect their portfolios, and their financial plans. If you have questions or concerns about how monetary policy might affect you, please don’t hesitate to reach out.


Your Portfolio

Fall 2021

From Erik Moore

What Does “Investment Risk” Really Mean?

                If you’re reading this piece, you’ve probably heard about risk as it applies to investing.  For most people, the concept of investment risk is known via phrases— “more risk equals more potential reward”—or as the percentage of stocks vs bonds vs cash in their portfolio.  While neither of those concepts are incorrect, investment risk is significantly more complicated than that.  It would take far too long of an article to fully explain the complexities of investment risk, but let’s take high level look at how to better understand what goes into investment risk.

The best place to start to understand investment risk is to look at the risk hierarchy of the three main baskets of investments: stocks, bonds and cash.  Cash is the least risky investment as it’s value fluctuates minimally, up to $250,000 per account is FDIC insured, and it’s available to be used at any time (fully liquid).  Moving up the risk scale a bit we get to bonds.  Bonds are riskier than cash as their values can fluctuate a fair amount due to changes in interest rates or business quality, but are less risky than stocks since they pay a guaranteed amount of interest, will return the principal amount (except in the case of default), and are fully backed by the issuing entity: the government for treasury bonds, or a company for corporate bonds.  The riskiest of the three types of investments above are stocks.  Stocks can fluctuate in value pretty wildly, have no guaranteed value or return, and can become completely valueless. 

From those three basic baskets, things get a little more complicated.  Cash can be actual bank deposits, treasury bills, money market mutual funds, etc.  Bonds can be investment grade, high yield, corporate, municipal, etc.  Stock exposure can be individual growth or value stocks, small cap, large cap, mid cap, or can be a basket of stocks that are growth oriented, value oriented, etc.  Each of these segments of the stocks, bonds, cash baskets have their own risk within the broader investment landscape.  Luckily, to show those differences we don’t have to recreate the wheel, as course material for the Certified Financial Planner designation provides us with this pyramid:

This pyramid isn’t perfect, but it helps outline the major differences in risk across asset classes.  The one piece not included, that is still important to know, is the difference in risk between small cap, mid-cap, and large cap stocks.  Large cap (the largest publicly traded companies with capitalizations of $10 billion and up, i.e. the entire composition of the S&P 500) stocks are the least risky, mid-cap (companies with capitalizations between $2 billion and $10 billion) stocks get a bit riskier than large cap, and small cap (companies with capitalizations of $200 million to $2 billion) stocks are significantly riskier than both mid-cap and large cap stocks.    So why does any of this actually matter?  It matters because a common understanding of investment risk is analyzing the percentage of stock in a portfolio versus everything else.  Portfolios are often described as being “80/20”, “60/40”, or some other ratio that describes the percentage of stock to bonds/cash held.  While this is a reasonable place to start, it’s important to know that percentage of stock alone does not dictate the overall risk within a portfolio.  A portfolio that is 70/30, where the full 70% of stock is in large cap value stocks, will likely be less risky than a 50/50 portfolio where the majority of the stock is in small cap or emerging market stocks.  Similarly, the risk associated with the bond portion of the portfolio will vary based upon how far away from maturity those bonds are, and the overall quality of the bond.  With all of that in mind, one can see that the percentage of stocks or bonds in a portfolio is not a particularly accurate measurement of the risk within a portfolio.

Ultimately, understanding what you are invested in, and how that applies to the risk you are taking on in your portfolio is incredibly important.  Frequently, people are unaware of what risks they are taking within their investment portfolio.  This leads to frustration when they see their portfolio move in a way that doesn’t reflect broad markets, or panic when their portfolio drops more than they expected.  At Moore Wealth, we place substantial emphasis on educating our clients, as well as the general public.  So hopefully, armed with this new information, you can better understand your own investments and the risks associated with them. 


Q3 Market Review

Fall 2021

Market Update for the Quarter Ending

September 30, 2021

Market Update for the Quarter Ending September 30, 2021

Rocky September Leads to Mixed Quarter for Markets

Markets pulled back sharply in September after setting record highs in August. The S&P 500 declined 4.65 percent in September but gained 0.58 percent for the quarter; the Dow Jones Industrial Average fell 4.20 percent for the month and 1.46 percent for the quarter; and the Nasdaq Composite declined 5.27 percent in September and 0.23 percent for the quarter.

These weak results came despite improving fundamentals. According to Bloomberg Intelligence, as of October 1, the average earnings growth rate for the S&P 500 in the second quarter was 96 percent. This is higher than analyst estimates of a 65.8 percent growth rate. Future earnings growth is also expected to be healthy, which should support markets.

Technical factors throughout the month and quarter were also supportive. All three major indices remained above their respective 200-day moving averages throughout the entire period. This marks 15 straight months with continued technical support for the three major U.S. markets.

International markets had a similar September. The MSCI EAFE Index of developed markets dropped 2.90 percent for the month, leaving it down 0.45 percent for the quarter. The MSCI Emerging Markets Index dropped 3.94 percent in September and 7.97 percent for the quarter.

Fixed income also had a challenging month and quarter, driven by rising long-term interest rates in September. The 10-year U.S. Treasury yield increased from 1.31 percent to 1.52 percent at the month’s end. This led to a 0.87 percent decline in the Bloomberg U.S. Aggregate Bond Index for the month, though it managed a 0.05 percent quarterly gain.

High-yield fixed income, as measured by the Bloomberg U.S. Corporate High Yield Index, lost 0.01 percent during the month but gained 0.89 percent for the quarter. High-yield is typically less affected by changing interest rates.

Medical Risks Decline in September

We ended September with a solid decline in the number of daily new COVID-19 cases throughout the country, and we saw similar improvements in terms of hospitalizations and deaths. This improvement can be attributed to increased vaccination, with 55 percent of the population fully vaccinated and another 8.8 percent having received at least one shot.

Economic Recovery Slows

Medical concerns during the quarter were accompanied by increased economic risks. Job growth slowed sharply in August, and layoffs ticked back up during September, signaling continued potential weakness in the labor market. Meanwhile, the expiration of federal support programs hit consumer confidence, which dropped during the quarter. 

Spending held up well in August, despite declining confidence. Retail sales increased by 0.7 percent and personal spending growth was up 0.8 percent. These results were well above economist estimates and showed consumers continue to spend and empower the economic recovery.

Business confidence and spending also showed signs of continued growth throughout the period. The Institute for Supply Management (ISM) Composite index, a measure of manufacturer and service sector confidence, finished August at 61.5. As you can see in Figure 1, business confidence remains well above recent lows.

Figure 1. ISM Composite Index, 2016–Present

High levels of business confidence supported additional business spending and investment during the month and quarter. Businesses have been scrambling to meet high levels of pent-up consumer demand with increased investment and hiring. This should be a tailwind for growth through the end of the year.

Housing continued to be an area of strength, and sales remained well above pre-pandemic levels, supported by near-record-low mortgage rates and shifting consumer demand for more space due to the pandemic.

Risks Shifting as We Head into the Fall

Political risks are very real as we enter the fourth quarter. While the last-minute deal at the end of September to avoid a partial government shutdown helped mitigate some of the political risk, the ongoing negotiations between the White House and both parties in Congress over the debt ceiling and two large spending bills continues to rattle investors and markets.

Internationally, risks are rising as well, as seen by the slowdown in China and the concern over the country’s property development sector. While these troubles aren’t expected to cause a global financial crisis, the uncertainty from the situation is one more thing for investors to worry about.

Ultimately, the most likely path forward for the economy and markets is continued growth, as the economy still has considerable momentum. A well-diversified portfolio that matches investor goals and timelines remains the best path forward for most. As always, speak to your financial advisor if you have any concerns.



Moore Wealth

Fall 2021

Disclosure: Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg Barclays government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg Barclays U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.

Moore Wealth is located at 50 Carrol Creek Way Ste 335, Frederick, MD 21701 and can be reached at 301.631.1207. Securities and Advisory Services offered through Commonwealth Financial Network ®, Member FINRA, SIPC, a Registered Investment Adviser, FINRA’s BrokerCheck. This communication is strictly intended for individuals residing in the states of CA, CO, DC, DE, FL, MD, MN, NC, NJ PA, TN, UT, VA, VT, WA, WV. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services.

Authored by Brad McMillan, CFA®, CAIA, MAI, managing principal, chief investment officer, and Sam Millette, senior investment research analyst, at Commonwealth Financial Network®.

© 2021 Commonwealth Financial Network®