There's Nothing Normal About This Recovery

June 7, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

June 7, 2021

We keep hearing people make comparisons between this recovery and those of the past as if it’s apples-to-apples. For example, comparing job growth today to job growth after the 2008-2009 Panic. All in an effort to make the case that government spending creates economic growth.

But there is nothing normal about the current economy. The things our government leaders have done in the past year are unprecedented. As a result, using normal economic words and phrases to explain things makes no sense – these things have never happened before.

Normal economic downturns are called “recessions.” Growth phases are called “recoveries.” And the combination of these ups and downs a “business cycle.”

This has not been a normal business cycle. The contraction in the economy last year was not a normal recession, and the return of growth in the past year has not been a normal recovery. Comparing to the economic recoveries after the Panic of 2008, or Volcker’s tight money of the early 1980s, makes little sense. In fact, trying to compare the current rebound to historical events minimizes the pain that COVID-related and government mandated economic shutdowns have caused.

At the same time, giving credit to government spending for creating the current “recovery” is simply not true. Yes, when government borrows money from the Fed (which the Fed creates out of thin air) – or borrows money from future taxpayers – and gives that money directly to people, spending goes up. But that is not a real (or sustainable) recovery. To use the Fed’s favorite term, it’s transitory.

Countries across the globe shut down major parts of their economies and kept people from working. This caused major economic disruptions with supply chains, and put businesses and services that weren’t labeled “essential” under undue stress. Not to mention the displacement of tens of millions of workers.

Governments tried to cover up the (often self-inflicted) pain with money printing and borrowing. It’s like giving morphine to someone injured in a car accident. It masks the pain but doesn’t mend the injuries.

The divergence of economic data shows this clearly. The US is still 7.6 million jobs short of where it was in February 2020. Yet, retail sales, which fell 20% during the year-ended April 2020, rose 51.2% since then, more than fully recovering! In the past 24 months, total retail sales are up 10% per year, on average, versus a 3.6% growth rate from 2014-2019. The only way this is possible is having the government borrow, print, and distribute money for people to spend today.

It's true that reopening the economy from COVID shutdowns is providing a boost to economic activity. But this is just part of the story. We can’t start up the economy like a car engine. Supply chains are damaged. Many small businesses have been crushed.

As a result, trying to compare today’s economy to history is futile. Never before in history has the US government been so profligate in spending money it doesn’t have. And any growth in spending this has caused is certainly not “proof” that government stimulus creates wealth. It creates spending, yes, but it does not heal.

In 1914, Henry Ford decided to pay his workers $5 a day to prevent turnover, but also so his employees could afford to buy the cars they were making. Here we are in 2021, and the government is paying people not to work, so they can buy things they didn’t produce. No wonder there are shortages. But, more importantly, it’s the difference between supply-side and demand-side economics. Supply-side economics says that supply (Ford’s production plus all the other production in the economy) creates its own demand (the wages and incomes to buy that production).

All of this brings us back to where we are today. It’s true that spending is up. It’s true that the economy is expanding. Part of this is because the economy is opening up, and part of it is because the government is borrowing money from future production to spend today.

Without fully opening up, there can be no comparisons to previous recoveries. And using the past year to argue that government spending works misunderstands where real wealth comes from.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

6-7 / 2:00 pm Consumer Credit – Apr $20.5 Bil $20.0 Bil $25.8 Bil

6-8 / 7:30 am Int’l Trade Balance – Apr -$68.5 Bil -$69.1 Bil -$74.4 Bil

6-10 / 7:30 am Initial Claims – June 5 370K 380K 385K

7:30 am CPI – May +0.4% +0.4% +0.8%

7:30 am “Core” CPI – May +0.4% +0.4% +0.9%

6-11 / 9:00 am U. Mich Consumer Sentiment- Jun 84.2 84.5 82.9

May Market Review

June 2, 2021 Tyler Goodrich

Dear Friends and Clients,

May’s equity markets continued the upward trend, though less exuberantly than in prior months. Driving market indecision were the three I’s: immunity, inflation and infrastructure, says Raymond James Chief Investment Officer Larry Adam. The push and pull of backward-looking economic data combined with forward-looking projections led to some volatility.

While vaccinations (immunity) are on pace and mask mandates are loosening, questions remain about the efficacy against variants, the potential need for booster shots, and what may happen when the weather begins to cool again. Inflation remains at the top of investors’ minds as the Consumer Price Index (CPI) climbed 4.2% year-over-year in April. The Federal Reserve views higher inflation as transitory, reflecting a rebound from the low inflation of a year ago and bottleneck pressures as the economy re-starts. In contrast to the previous era where the Fed would act pre-emptively, officials now want to see greater improvement in labor market conditions before raising short-term interest rates. However, if a further rise in inflation expectations is sustained, the Fed could tighten monetary policy sooner than expected. The outlook for economic growth remains strong, but labor market frictions are likely to be more intense than in a typical recovery.

Talks in D.C. around infrastructure – its definition and how to pay for it – remain at the forefront, although there’s no clarity yet as bipartisan negotiations remain deadlocked. A summer of debate increases the likelihood of a deal by fall, thought to be in the $2-$3 trillion range with pared-back adjustments to corporate and capital gains rates, suggests Washington Policy Analyst Ed Mills.

Let’s review where we are so far this year:

Economy ramping up

April’s rise in CPI reflects a rebound in prices that were repressed during last year’s lockdowns and restart pressures, which should fade in a few months. Supply chain bottlenecks and materials shortages are expected during economic recovery. They are more intense than usual now given the speed of economic recovery, spurred by fiscal stimulus and the rapid distribution of vaccines, according to Chief Economist Scott Brown. Supply chains should improve over time, but current issues may not be resolved quickly and could add to inflation expectations.

Overseas

Strong improvement in management of the COVID-19 crisis across Europe helped push equity indices up during the month, aided further by an appreciation of both the euro and the British pound. There is still region-wide anticipation of pan-European holidays this summer, which will help the region’s economy as 2021 progresses, explains European Strategist Chris Bailey. The Chinese yuan rose to a three-year-high against the dollar during May. China’s stock market rose to levels last seen in March, although many other markets in Asia and the emerging markets struggled during the month.

On bonds

Treasury yields remained range-bound, as they have for the past several months; the overall trend was a move slightly lower, although within a fairly tight range. Intermediate and longer-term corporate bonds sat on the steepest part of the yield curve, offering investors incremental yield for longer duration. Longer maturities (in the 6-to-15-year range) among municipals also seem to offer better value.

The bottom line

The economic recovery remains robust, with added momentum from fiscal and monetary support. Rising inflation and volatility remain concerns, however the positives outweigh the potential negatives, according to Joey Madere, senior portfolio analyst of Equity Portfolio & Technical Strategy.

As mentioned last month, pullbacks and volatility are to be expected in the normal course of investing, especially during times of economic recovery. Those ready to put cash to work may want to consider any weakness as an opportunity to thoughtfully add to strategic positions in areas exposed to recovery efforts.

As always, I send warm thoughts to you and yours. Thank you for your continued confidence in me. I’ll be sure to keep my eyes on the markets and relate anything of relevance. If you have any questions, please reach out at your convenience.

Sincerely,

Matt Goodrich, Financial Advisor

President, Goodrich & Associates, LLC

Branch Manager, RJFS

Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of the authors and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. The Consumer Price Index is a measure of inflation compiled by the U.S. Bureau of Labor Studies. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 is an unmanaged index of small-cap securities. The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. An investment cannot be made in these indexes. The performance mentioned does not include fees and charges, which would reduce an investor’s returns. Small-cap securities generally involve greater risks. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks. These risks may be greater in emerging markets. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Investing in the energy sector involves special risks, including the potential adverse effects of state and federal regulation, and may not be suitable for all investors.

Material prepared by Raymond James for use by its advisors.

Inflation Revisionism

June 2, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

June 1, 2021

Talk about revisionist history! A recent tweetstorm from an opinion leader at the NY Times says that, looking back, he wonders what all the fuss was about inflation in the 1970s. It wasn’t “that high,” he says, and so the risk of returning to that kind of inflation should not be a serious concern today, because it wouldn’t even be that bad if we went back there.

Just so we get our facts straight, here are the consumer price inflation rates per decade looking backward. The 1950s - 2.2%, 1960s – 2.5%, 1970s -7.4%, 1980s – 5.1%, 1990s – 2.9%, 2000s – 2.6% and 2010s – 1.7%. So, while the US in the 1970s and early 1980s was not Zimbabwe, it was the worst sustained inflation in US history. Prices were doubling every 10 years and the Fed had to push interest rates up to 20% to stop the damage.

Nonetheless, the “revisionists” say that the inflation of the 1970s was good for many people. They argue that home ownership rose, student debt got wiped out, and inflation reduced the value of the national debt. In other words, if you can see these benefits, why don’t we do it again?

First, it is true that home ownership rose in the 1970s, but it was rising even faster in the second half of the 1960s. Moreover, Savings & Loans provided assumable mortgages in the 1970s, which allowed buyers to assume a lower, pre-inflation mortgage rate. Eventually, this led to the collapse of the Savings & Loan Industry.

Second, because student debt has fixed interest rates, of course it would disappear faster with higher inflation. In addition, people with student debt tend to have higher lifetime incomes than people without that debt. Is he really arguing in favor of using inflation to redistribute wealth to people with above-average lifetime incomes?

Third, the national debt did fall as a share of GDP after World War II. But almost all of the decline happened between 1946, when debt was 118% of GDP, and 1969 when it fell to 36%. It only fell by another 4 percentage points of GDP, to 32%, by 1981. And from 1946 through 1969, inflation averaged 2.5% per year. In other words, the inflation of the 1970s was not the key behind reducing the national debt.

The primary problem, with 1970s-style inflation is that everyone involved in the economy – every business owner, every worker, every investor, every manager, every entrepreneur – would have to spend time trying to forecast it. Borrowing and investing would pose danger on both sides of the transaction. The same goes for labor contracts.

Here’s what the 1970s-inflation apologists don’t say: unemployment averaged 4.6% in the 1950s and 1960s then averaged 6.2% in the 1970s. It was even higher in the 1980s, but that’s because the early part of the decade had to be dedicated to a tight monetary policy to wrestle inflation under control.

Ultimately, inflation is a “hidden” tax that doesn’t stay hidden. People adapt by redirecting resources away from production and toward inflation-hedging, which doesn’t raise standards of living over time.

The problem is, at this point, you have to be relatively old to remember the 1970s. With each passing year, a smaller share of the population actually lived through it. And so we forget the pain it caused. Hopefully, we are not condemned to repeat it.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

6-1 / 9:00 am ISM Index – May 61.0 60.9 61.2 60.7

9:00 am Construction Spending – Apr +0.5% +0.2% +0.2%

6-2 / afternoon Total Car/Truck Sales – May 17.4 Mil 16.6 Mil 18.5 Mil

afternoon Domestic Car/Truck Sales – May 10.3 Mil 12.6 Mil 13.9 Mil

6-3 / 7:30 am Initial Claims – May 29 388K 400K 406K

7:30 am Q1 Non-Farm Productivity +5.5% +6.2% +5.4%

7:30 am Q1 Unit Labor Costs -0.4% +2.1% -0.3%

9:00 am ISM Non Mfg Index – May 63.0 63.3 62.7

6-4 / 7:30 am Non-Farm Payrolls – May 653K 667K 266K

7:30 am Private Payrolls – May 600K 600K 218K

7:30 am Manufacturing Payrolls – May 21K 15K -18K

7:30 am Unemployment Rate – May 5.9% 5.9% 6.1%

7:30 am Average Hourly Earnings – May +0.2% +0.3% +0.7%

7:30 am Average Weekly Hours – May 34.9 34.9 35.0

9:00 am Factory Orders - Apr -0.3% -0.1% +1.1%

Cryptocurrency Primer

May 28, 2021 Tyler Goodrich

A quick guide on cryptocurrency application and risks.

WHAT ARE CRYPTOCURRENCIES?

Cryptocurrencies represent digital units that are utilized to facilitate online transactions without the need for a central intermediary to process. The transactions are digitally recorded on a public ledger. As of May 2021, per CoinMarketCap, more than 10,000 cryptocurrencies, also known as coins, have been launched as there are minimal barriers to launching new coins. While almost all cryptocurrencies have no intrinsic value, the two most popular cryptocurrencies, Bitcoin and Ether, have a combined market value of over $1 trillion.*

WHAT IS BITCOIN?

Bitcoin, launched in 2009, is the most widely known cryptocurrency and its market capitalization surpasses that of all other cryptocurrencies. Additionally, Bitcoin’s invention coincided with that of the blockchain (described later), which was required to facilitate transactions. The supply of Bitcoin is finite (currently capped at 21 million coins) and designed to become increasingly constrained over time.

WHAT IS ETHEREUM?

Ethereum is the most frequently used open source blockchain network (described later). The primary use case for Ethereum is the built-in functionality to create so-called “smart” contracts that can be executed without an intermediary. A simple example is a life insurance “smart” contract. When someone with a life insurance policy passes away, the notarized death certificate would be the input trigger for the contract to release the payment to the named beneficiaries. Ether, which is currently the second largest cryptocurrency by market capitalization, is the native cryptocurrency built into the Ethereum network. Ether is the cryptocurrency that is utilized to facilitate Ethereum smart contracts.

HOW DO CRYPTOCURRENCIES COMPARE TO TRADITIONAL CURRENCIES OR INVESTMENTS?

Unlike traditional, government-issued currencies, cryptocurrencies are not sponsored by a government authority, are largely unregulated and confer no claims against any assets. Moreover, due to price volatility and transaction costs, cryptocurrencies are rarely used to conduct typical financial transactions. Consequently, cryptocurrencies are not widely accepted mediums of exchange despite the small number of companies that accept them as forms of payment.

Given the lack of utility as payment mechanisms, the majority of the interest in cryptocurrencies has been for their use as speculative investment vehicles, largely based on the perception that their value will increase due to codified supply limitations and/or excitement regarding the potential application of blockchain technology.

WHAT IS BLOCKCHAIN TECHNOLOGY?

Blockchain is the technology that underpins cryptocurrencies, but its application is not limited to just cryptocurrencies. A blockchain is a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Once a transaction is agreed upon between users, the majority of computers in the network must verify that the transaction is valid before the transaction can be added to the digital ledger. Blockchain technology is designed to operate without the need for a central authority or clearinghouse. Additionally, the records that are created are irreversible and, therefore, cannot be duplicated or changed.

As its name suggests, blockchain can be described as blocks of information that are pieced together with digital signatures to form a chain of encrypted records. Beyond facilitating cryptocurrency speculation, the commercial application of blockchain technology can span a number of industries. For example, the blockchain can be utilized in supply chain management for tracking inventory and improving logistics.

HOW DO YOU BUY AND SELL CRYPTOCURRENCIES?

The buying and selling of cryptocurrencies is different than the buying and selling of more conventional instruments such as stocks or bonds. Many cryptocurrencies are bought and sold directly on cryptocurrency exchanges without an intermediary. There is no overarching best execution requirement and, in fact, cryptocurrencies often trade simultaneously at different prices on different exchanges. Cryptocurrency transactions can also involve noteworthy fees. Cryptocurrencies are stored in digital wallets that can either be connected or disconnected from the internet. While internet-connected (hot) wallets can offer a convenient way to access cryptocurrencies, they are subject to cybersecurity risks. Unlike traditional stock exchanges, most cryptocurrency exchanges also act as custodians.

WHAT ARE THE BENEFITS AND CONSIDERATIONS OF TRANSACTING WITH CRYPTOCURRENCIES?

The major benefit of transacting with cryptocurrencies is the use of a decentralized platform, which enables cross-border transactions and the ability to transact 24 hours a day, seven days a week. In some cases, cryptocurrencies can offer a certain degree of anonymity but, given that each transaction is recorded on a blockchain, such anonymity is limited. It is important to note that the infrastructure and business adoption to support these transactions is still in the early stages. From an investment perspective, the primary benefit to cryptocurrencies is that, as the market developed, there has been an increase in the value of many cryptocurrencies. However, going forward, there may not be a correlation between increased blockchain adoption and the market value of cryptocurrencies.

WHAT ARE THE BIGGEST RISKS ASSOCIATED WITH SPECULATING IN CRYPTOCURRENCIES?

Many cryptocurrencies do not have any intrinsic economic value nor do they generate cash flows such as interest payments or dividends. Currently, the primary rationale for investing in cryptocurrencies is speculation that the market for cryptocurrencies will grow and that prices will rise. Additional risks include, but are not limited to:

• Absence of regulatory oversight or investor protections – Cryptocurrencies are not regulated by any government agency or central bank.

• Cybersecurity risk – Cryptocurrencies are bought, sold and stored online, which makes all parties in the cryptocurrency value chain vulnerable to cyberattacks and breaches.

• Custody and clearing – Many of the custody and clearing standards used to trade securities have not been implemented by cryptocurrency exchanges.

• Concentrated ownership – A large number of cryptocurrencies are controlled by early adopters who are unlikely to sell, which contributes to price volatility.

CAN I BUY CRYPTOCURRENCIES AT RAYMOND JAMES?

At this time, Raymond James does not offer the ability to buy or sell cryptocurrencies. However, we continue to monitor the maturity of the space and the potential risks and benefits to investors.

Prior to making an investment decision, please consult with your financial advisor about your individual situation. The prominent underlying risk of using Bitcoin as a medium of exchange is that it is not authorized or regulated by any central bank. Bitcoin issuers are not registered with the SEC, and the Bitcoin marketplace is currently unregulated. Bitcoin and other cryptocurrencies are very speculative investments and involve a high degree of risk. Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment, and a potential total loss of their investment. Securities that have been classified as Bitcoin-related cannot be purchased or deposited in Raymond James client accounts REGULATORY BACKGROUND | Financial Industry Regulatory Authority (“FINRA”) and the Securities and Exchange Commission (“SEC”) have issued multiple warnings to investors regarding the risks associated with Bitcoin and other cryptocurrency. New products and/or technology, such as Bitcoin and other cryptocurrency, are typically considered high-risk investment opportunities as they commonly are targeted by fraudsters who manipulate the market with artificial promotional scams. As of January 2021, the SEC is currently reviewing more than 10 applications and has rejected multiple applications from fund companies seeking to create and list a cryptocurrency Exchange Traded Product (“ETP”) due to the highly unregulated nature of the cryptocurrency marketplace. The biggest risk factors surrounding Bitcoin (and other cryptocurrency) issuers include that they are not registered with the SEC (or local country regulator) and can be exploited by criminals for money laundering/terrorist financing making the source of funds difficult to follow and verify. RJF CRYPTOCURRENCY SECURITY DEFINITION | Approved cryptocurrency-related securities are defined as any security that is associated with a company and/ or issuer that is:

1. Affiliated with a U.S. federally regulated cryptocurrency business operation;

2. Listed on a U.S.-recognized exchange (e.g., NYSE or Nasdaq); and

3. Subject to RJF Securities Review Group (SRG) approval.

Prohibited cryptocurrency-related securities are defined as any security that is associated with a company and/or issuer that is affiliated with one or more of, but not limited to, the following non-U.S. federally regulated cryptocurrency business objectives:

1. Indexed to the underlying price movement of a cryptocurrency;

2. Cryptocurrency mining;

3. Cryptocurrency escrow services; and/or

4. Cryptocurrency exchange or payment services.

A Question for the Fed

May 25, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

May 24, 2021

It’s not a surprise. Inflation is running hot. But, is it transitory and temporary, or is it real and here for the longer term. How hot will the Federal Reserve let it run, and for how long? When does transitory and cyclical become “secular” and “serious”? These are important questions and only the Fed has the answers.

In April, the consumer price index was up 4.2% from a year ago; producer prices were up 6.2%. The “core” measures for each of these indexes are running at 3.0% and 4.6%, respectively. The Federal Reserve focuses on the inflation measure for personal consumption expenditures (PCE), which should be up about 3.4% versus a year ago once we get the April data, which is scheduled to arrive this Friday.

The Fed has said it thinks the inflation surge, at least when looked at on a year-over-year basis, is overstated because it is built on comparisons to a period when prices were falling during the onset of the COVID-19 crisis. They also think any recent pressures are “transitory,” caused by supply-chain issues that should go away as the economy continues to recover.

Meanwhile, it has discounted extremely rapid growth in the M2 measure of the money supply. Because central banks around the world have introduced Quantitative Easing in the past decade, with no pick-up in inflation, the Fed thinks any link between money and prices has been broken…Jerome Powell even said we should “unlearn” this idea that money growth causes inflation.

Clearly, the Fed is dismissing the surge in inflation this year. And Fed forecasts show that it expects inflation to fall back down to it’s 2.0% target in 2022 and beyond.

But back in mid-March, the last time the Fed released an economic forecast, it projected PCE inflation of 2.4% this year. We estimate a 0.5% increase for the month of April and, if we’re right, we could easily end up getting PCE inflation of 3.0% or more for 2021, well above the Fed’s forecast.

So, what we would like to know from the Fed is whether 2021 inflation matters at all. What if PCE inflation for 2021 ends up at 3.5% rather than 2.4%? How about 4.5%? Does the intensity of this year’s inflation carry any weight?

Maybe the Fed should say directly or at least signal cryptically (or maybe just leak through its favorite journalists), that it is handing out a one-year dispensation for inflation in 2021. Inflation can skip curfew and stay out to all hours, eat meat on Fridays, party like it’s 1999, pretty much do whatever it wants through the stroke of midnight on New Year’s Eve, but then has to get back into 2.0% compliance in 2022. And, if inflation behaves like that…gets back to its 2% target next year, then all is forgiven.

We would love the Fed to be right about this. But this is not the first time in history the Fed has dismissed an increase in inflation as temporary or unworthy of serious policy attention. The Fed sat back and watched as inflation crept upward in the 1960s and 1970s. They blamed OPEC, the value of the dollar, and a stream of one-off events for temporarily lifting prices. The Fed also thought that persistent unemployment needed to be fixed with more money printing.

The problem is that a lot of inflation always starts with a little bit of inflation. And once the Fed gets into the habit of blaming it on “transitory” events, it runs the risk of becoming more of a long-term issue.

The Fed will next release a policy statement on June 16, followed by the usual press conference. We think it’s time to let everyone know how high inflation can go, and for how long, before the Fed would adjust its policies.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

5-25 / 9:00 am New Home Sales – Apr 0.950 Mil 0.955 Mil 1.021 Mil

5-27 / 7:30 am Initial Claims May 22 425K 432K 444K

7:30 am Q1 GDP Preliminary Report 6.5% 6.5% 6.4%

7:30 am Q1 GDP Chain Price Index 4.1% 4.1% 4.1%

7:30 am Durable Goods – Apr +0.8% +1.4% +0.8%

7:30 am Durable Goods (Ex-Trans) – Apr +0.8% 0.2% +1.9%

5-28 /7:30 am Personal Income – Apr -14.3% -14.3% +21.1%

7:30 am Personal Spending – Apr +0.5% +0.3% +4.2

8:45 am Chicago PMI 68.0 68.0 72.1

9:00 am U. Mich Consumer Sentiment- May 83.0 83.0 82.8

Unsustainable

May 18, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

May 17, 2021

The US economy is recovering rapidly from the COVID-19 disaster. The rollout of vaccines, the lifting of restrictions, loose monetary policy, and a massive increase in government spending are all playing their parts.

The problem is that the massive government “stimulus” checks have put the economy in a strange position, where retail sales are far above where they would be if COVID had never happened, even as the production side of the economy remains relatively weak.

Friday’s report on the retail sector showed that retail sales were unchanged in April, remaining at essentially the same lofty level they were in March. However, the lack of an increase in April shouldn’t have been much of a surprise. Even with no increase in April, retail sales were 17.9% higher than they were in February 2020, pre-COVID. To put this in perspective, that’s the fastest gain for any 14- month period since 1978-79. A key difference? That period in 1978-79 had double-digit inflation, versus the 3.1% increase in consumer prices since February 2020.

Another way to think about how high retail sales have been lately is that if COVID had never happened and sales since February 2020 had increased at a more normal 4.5% per year pace, it would have taken until November 2023 for retail sales to reach where they were in March and April this year. In other words, sales have arrived at the recent level about two and half years ahead of schedule.

This means that growth in retail sales will face a headwind over the next few years as the extraordinary recent bouts of “stimulus” peter out, roughly offsetting the benefits of more jobs and higher wages.

Meanwhile, even though retail sales have surged to abnormal highs, the production side of the economy is still operating below pre-COVID levels and even further below where production would be today if COVID had never happened. Manufacturing production is down 2.7% versus February 2020. Part of this is damaged supply chains. The demand for new cars and trucks has rarely been higher. Retail spending at auto and motor vehicle dealerships was 33.1% higher in April than in February 2020.

And yet motor vehicle production (excluding parts) is down 18.1% versus February 2020, largely due to a shortage of semiconductor chips. But it’s not only autos. Manufacturing excluding autos is down 0.9% versus February 2020.

In spite of the hopes of some policymakers, the economy doesn’t work like a light switch. It’s not just sitting there waiting for some public officials to turn it on, returning it to pre-COVID normal operation. Many businesses have disappeared, never to return, and many of them had a huge store of operational and knowledge capital built into them, know-how about the best way to get certain things done, that capital having been developed over decades.

The divergence between consumer spending and actual production is a manifestation of inflationary economic policies, which also showed up in last week’s reports. Consumer prices are up 4.2% from a year ago while producer prices are up 6.2%. That’s what you get when people are spending more dollars provided by short-term oriented government policies, not the return for the production of actual goods and services.

But, ultimately, there is no free lunch. All extra government spending today must be paid for by reduced spending by others, today or in the future. Yes, in theory, there are some “good” infrastructure projects out there that could help the overall economy. But the monies for those projects could easily come out of other government spending commitments; they shouldn’t add to the deficit or require higher taxes, which themselves will tend to dampen future economic growth further.

For now, there are plenty of reasons to remain bullish. Opening up is the best stimulus and the economy still has long way to go to get fully open. Look for further gains in production in the year ahead, even as policymakers in Washington adopt some policies that hurt us in the long run.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

5-17 / 7:30 am Empire State Mfg Survey – May 23.8 20.0 26.3

5-18 / 7:30 am Housing Starts – Apr 1.703 Mil 1.705 Mil 1.739 Mil

5-20 / 7:30 am Initial Claims May 15 460K 493K 473K

7:30 am Philly Fed Survey – May 41.9 47.1 50.2

5-21 / 9:00 am Existing Home Sales – Apr 6.090 Mil 5.910 Mil 6.010 Mil

Biden and Powell Versus Summers and Dudley

May 11, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

My 10, 2021

One of the best economic debates that’s happening right now isn’t between Republicans and Democrats or liberals versus conservatives, it’s between policymakers who want to go full steam ahead with as much fiscal and monetary “stimulus” as possible and center-left economists who worry about the economic effects of over-stimulating the economy.

In one corner we have President Joe Biden and Fed Chief Jerome Powell. Biden signed a $1.9 trillion stimulus bill back in March and is asking for more than $4 trillion in additional measures. Powell has the Federal Reserve setting short-term interest rates at essentially zero and buying $120 billion per month in Treasury and mortgage-related securities. Moreover, the Fed is committed to keeping these policies in place for the foreseeable future. As far as Biden and Powell are concerned, any problems that might arise from overstimulating the economy can be dealt with when and if the economy shows clear signs of overstimulation.

In the other corner we have Larry Summers and William Dudley, both center-left economists. Summers was Treasury Secretary under President Clinton and ran the National Economic Council under President Obama; Dudley was the chief economist for Goldman Sachs and ran the New York Federal Reserve Bank from 2009 to 2018. Supply-siders, conservatives, or Republicans, these are not.

Summers has called Biden’s efforts the “least responsible” macroeconomic policy in forty years (by which he means the least responsible since President Reagan’s) and has argued the amount of extra spending is far in excess of what’s needed to get the economy back to where it would have been in the absence of COVID-19. “If your bathtub isn’t full, you should turn the faucet on, but that doesn’t mean you should turn it on as hard as you can and as long as you can,” Summers said earlier this year on National Public Radio.

In turn, Summers is concerned the extra spending will generate too much inflation, the Fed will have to address the increase in inflation by tightening monetary policy earlier than it would otherwise want to, and when the Fed tightens monetary policy to address inflation, it usually ends badly for the US economy.

Summers sees only a one-in-three chance of robust growth without inflation for the US, with the other two-thirds split between two different negative scenarios: (1) stagflation or (2) the Fed applying the brakes so hard it tips the economy into a recession.

Meanwhile, William Dudley has also issued warnings, saying that he thinks the Fed is putting itself in a position where when it eventually starts to raise rates, it’s going to have to do so aggressively. If the Fed is too slow to tighten, says Dudley, it will have to eventually “catch up,” and that caching up will not be “pleasant” for financial markets. A 10-year Treasury Note yield of 4.0% would be possible in this scenario, says Dudley.

What’s notable about Summers and Dudley is not only their center-left pedigrees but also that neither is likely to pursue a position in the Biden Administration, which means they have no reason to “spin” their views to get an important appointment. As such, they can say what they think, without fear of losing out on an offer of a political job.

The bottom line is that politics doesn’t make good economics. No one knows for sure where these unprecedented policies are going to take us. However, at least Summers and Dudley are thinking about how risky this riverboat gamble might be.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

5-12 / 7:30 am CPI – Apr +0.2% +0.2% +0.6%

7:30 am “Core” CPI – Apr +0.3% +0.2% +0.3%

5-13 / 7:30 am Initial Claims – May 9 500K 520K 498K

7:30 am PPI – Apr +0.3% +0.3% +1.0%

7:30 am “Core” PPI – Apr +0.4% +0.4% +0.7%

5-14 / 7:30 am Import Prices – Apr +0.6% +0.2% +1.2%

7:30 am Export Prices – Apr +0.6% +0.1% +2.1%

7:30 am Retail Sales – Apr +1.0% +1.3% +9.8%

7:30 am Retail Sales Ex-Auto – Apr +0.8% +0.8% +8.4%

8:15 am Industrial Production – Apr +1.2% +2.2% +1.4%

8:15 am Capacity Utilization – Apr 75.3% 76.0% 74.4%

9:00 am Business Inventories – Mar +0.3% +0.3% +0.5%

9:00 am U. Mich Consumer Sentiment- May 90.0 90.0 88.3

Be Prepared for Tax-Related Scams During Tax Season

May 10, 2021 Tyler Goodrich

Learn how to avoid common scams that can be prevalent during tax season.

Tax-related scams have become increasingly common. And with the tax deadline extended again this year, they can be something that can occur year-round. Fraudsters will contact you pretending to be from the IRS or other tax-related agency. You could receive fake emails, phone calls, letters or other forms of communications.

Be on high alert for phishing emails, attempting to steal information like tax IDs, account information, passwords and other valuable data. Be immediately suspicious of any unsolicited communication that asks for your Social Security number, login credentials or other personal information.

FAQs

Q. Will the IRS contact me via email?

A. The IRS will never initiate contact with you via email, text messages or social media with a request for personal or financidal data. Be extremely careful with any unsolicited email that claims to be from the IRS.

Q. What should I do if I receive an email or text message claiming to be from the IRS or another tax service that asks for sensitive information?

A. Do not reply. Do not click on any links or download any attachments. If it comes to your RJ email address, forward the email to cyberthreat@raymondjames.com and then delete the original message without responding. You can also forward any IRS-related emails received on your personal email to phishing@irs.gov.

Q. What should I do if I discover a website claiming to be the IRS that I suspect is not legitimate?

A. Do not click any links, download any files or submit any information. Send the URL to phishing@irs.gov.

Q. Are there any trusted resources I can use to identify email scams or websites claiming to be the IRS?

A. The IRS website highlights examples of email scams and bogus websites. Find this information online at www.irs.gov/uac/report-phishing.

Q. What should I do if I receive an unsolicited phone call or letter claiming to be from the IRS that I suspect may not be legitimate?

A. Contact the IRS yourself to confirm any requests made via phone or letter, particularly those that are threatening or demand immediate payment. Visit www.irs.gov/uac/report-phishing for phone numbers and other tips.

Q. If I receive a suspicious tax-related email while at work, should I notify Raymond James?

A. Yes, forward the email to cyberthreat@raymondjames.com to help determine if the message is legitimate.

Q. How can I safely send sensitive information when necessary?

A. There may be some scenarios where it’s necessary to send sensitive documents to others, like your accountant. First verify that the person requesting the information is legitimate (i.e. official phone number). Then make sure your emails are encrypted – if sharing through your RJ email, type [protect] in the subject line; if sharing through your personal email, you can reference this resource.

April Equity Markets Retain Spring in Their Step

May 5, 2021 Tyler Goodrich

May 4, 2021

April Market Review

Dear Friends and Clients,

The markets continue their upward trend, supported by accommodative fiscal policy from the Federal Reserve, strong gross domestic product (GDP) numbers and solid earnings reports.

As President Biden celebrated his 100th day in office to close the month, the traditional favorable equity market performance during the so-called “honeymoon” phase continued, with the S&P 500 rallying about 10% over that time frame. The S&P 500 ended April up 5.24%, its third consecutive positive monthly gain. The Dow Jones and NASDAQ reached new highs as well.

Driving the equity market higher is the rapid distribution of over 235 million vaccines, the best economic growth (+6.4% annualized) since 2003, and a dramatic, better-than-expected surge in corporate earnings – the highest (+36%) since 2010, explains Raymond James Chief Investment Officer Larry Adam. As the presidential “honeymoon” period ends, debates over government spending, taxes, inflation and Fed tapering are likely to lead to increased volatility.

The advance estimate of first quarter GDP came in at a 6.4% annual rate, but Raymond James Chief Economist Scott Brown notes that the headline figure understates the economy’s strength. Consumer spending on durable goods rose sharply, fueled by stimulus checks, and spending on services should pick up as the economy reopens.

In Washington, infrastructure and tax proposals remain just that – proposals. Congress is drafting legislation, and Raymond James Washington Policy Analyst Ed Mills expects to see broad compromise in order to secure the necessary votes. Generally speaking, Mills believes we can expect a significant amount of additional federal spending later this year tied to revenue-raising measures. The compromises necessary for passage may create a near-term Goldilocks scenario for the market in terms of further economic stimulus.

Let’s review where we are so far this year:

Yield, interest rates and inflation

With interest rates remaining low despite positive economic reports, demand for yield is rising across all bond maturities. Investors are keeping a wary eye on inflation, as are the members of the Federal Open Market Committee. Long-term inflation expectations, which have remained close to the Federal Reserve’s 2% long-term goal, are key. Should those long-term inflation expectations rise significantly, then actual inflation would trend higher, Brown notes. However, the Federal Reserve, which wants inflation to be moderately higher in the near term, has the tools to bring inflation back down. Fed Chair Powell has signaled that monetary policy will remain accommodative until employment and inflation are closer to the central bank’s goals.

Overseas

Once again, U.K. and European markets generated modest gains for the month, lifted by positive earnings reports and optimism for economic recovery as more and more vaccines get distributed. However, in Asia, market performance was decidedly mixed. Singapore and Hong Kong made plans to broaden travel opportunities; on the other hand, Japan (host of the Summer Olympics) implemented its first-ever lockdowns, and India’s COVID-19 cases rose to record levels, prompting large-scale economic disruption.

The bottom line

The vast majority of S&P 500 companies have surprised on the upside, beating their estimates by an average of 23.7%. Even with a relatively bullish outlook for domestic stocks, investors should expect normal pullbacks on occasion. Those ready to put cash to use can plan to use any weakness as an opportunity to strategically add positions at an individual stock and sector level. Lastly, remember to file your taxes before the extended deadline of May 17.

As always, I wish you and yours well. Thank you for your confidence in me. I’ll be sure to keep my eyes on the markets and relate anything of relevance. If you have any questions, please reach out at your convenience.

The financial markets and our office will be closed May 31 in observance of Memorial Day. As always, you can securely access your accounts through Raymond James Client Access – whenever, wherever. We will reopen on Tuesday.

Sincerely,

Matt Goodrich, Financial Advisor

President, Goodrich & Associates, LLC

Branch Manager, RJFS

Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of the authors and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 is an unmanaged index of small cap securities. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. An investment cannot be made in these indexes. The performance mentioned does not include fees and charges, which would reduce an investor’s returns. Small cap securities generally involve greater risks. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks. These risks may be greater in emerging markets. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Investing in the energy sector involves special risks, including the potential adverse effects of state and federal regulation, and may not be suitable for all investors.

Material prepared by Raymond James for use by its advisors.

Resisting the Budget Blowout

May 4, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

May 3, 2021

President Biden and Congress agreed to a roughly $2 trillion stimulus back in March and are now contemplating two new additional multi-trillion dollar pieces of legislation, on both infrastructure and social spending, as well as some massive tax hikes. Ultimately, though, it’s extremely important to keep in mind that the legislative process surrounding these bills is going to be long and arduous and that it is going to be very difficult for the Biden Administration to get everything it wants.

One hurdle is obvious: Senator Joe Manchin, a Democrat from West Virginia, has said he will not vote to get rid of the Senate filibuster and wants new major pieces of legislation to be bipartisan. In the end, we think he holds the line on keeping the filibuster but probably capitulates to a president of his own party by supporting some extra spending on a party-line vote, maybe something around $2 trillion total rather than the $4 trillion-plus the Biden Administration is seeking.

But other Senate Democrats are going to have reason to resist big spending programs and higher taxes, as well, including relative moderates such as Mark Kelly and Krysten Sinema, both from Arizona, and John Tester, from Montana.

Then there is Senate Democratic Leader Chuck Schumer. Think about all the high-income earners in New York who support him, but don’t want higher capital gains or dividends taxes. We fully expect Schumer to vote for higher investment taxes; his party’s president is proposing these policies and he doesn’t want to give Rep. Alexandria Ocasio-Cortez an excuse to challenge him in the NY Senate primary in 2022. But, behind, the scenes, we are skeptical he will twist other Senators’ arms to get the votes for drastic tax hikes on investment.

Then there’s the House. When President Clinton passed a tax hike in 1993, the Democrats started out with a 258-176 majority, but ended up losing 40 Democrats and barely won the vote 218-216. If the Democrats had lost merely one more vote then the Clinton tax hike would have gone down in flames.

This time around the Democrats have a razor thin majority to start. Yes, when it comes to twisting arms, Speaker Pelosi has been like Hercules in the past, but everyone knows she will not run for Speaker again in 2022 and this is her last term holding the gavel. And with such a short remaining time in office it becomes harder to make good on her “backroom” political promises; she just doesn’t have much time to deliver.

Meanwhile, relatively moderate Democrats in swing districts know their party was eviscerated in the 1994 and 2010 mid-term cycles, after a combination of tax hikes and spending increases. Some of these moderates were first elected in the past couple of election cycles and want to have long careers in the House. They know, if they vote for current legislation as it stands, they better start circulating their resumes, as well.

The best bet now is that spending and taxes both go up, but not nearly as much as President Biden or the far-left has asked for. Hold onto your hats, it’s going to be a wild ride.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

5-3 / 9:00 am ISM Index – Apr 65.0 65.0 60.7 64.7

9:00 am Construction Spending – Mar +1.7% +1.1% +0.2% -0.8%

afternoon Total Car/Truck Sales – Apr 17.6 Mil 17.8 Mil 17.7 Mil

afternoon Domestic Car/Truck Sales – Apr 13.6 Mil 13.7 Mil 13.5 Mil

5-4 / 7:30 am Int’l Trade Balance – Mar -$74.3 Bil -$74.9 Bil -$71.1 Bil

9:00 am Factory Orders – Mar +1.3% +0.6% -0.6%

5-5 / 9:00 am ISM Non Mfg Index – Apr 64.1 64.0 63.7

5-6 / 7:30 am Initial Claims – May 2 540K 550K 553K

7:30 am Q1 Non-Farm Productivity +4.2% +3.8% -4.2%

7:30 am Q1 Unit Labor Costs -1.0% +0.9% +6.0%

5-7 / 7:30 am Non-Farm Payrolls – Apr 978K 990K 916K

7:30 am Private Payrolls – Apr 900K 900K 780K

7:30 am Manufacturing Payrolls – Apr 60K 60K 53K

7:30 am Unemployment Rate – Apr 5.7% 5.9% 6.0%

7:30 am Average Hourly Earnings – Apr 0.0% +0.2% -0.1%

7:30 am Average Weekly Hours – Apr 34.9 34.9 34.9

2:00 pm Consumer Credit – Mar $20.0 Bil $15.0 Bil $27.6 Bil

The attached information was developed by First Trust, an independent third party. The opinions are of the listed authors at First Trust Advisors L.P, and are independent from and not necessarily those of RJFS or Raymond James. All investments are subject to risk. There is no guarantee that these statements, opinions, or forecasts provided in the attached article will prove to be correct. Individual investor's results will vary. Past performance does not guarantee future results. Forward looking data is subject to change at any time and there is no assurance that projections will be realized. Any information provided is for informational purposes only and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Protecting Your Social Security Payout

April 30, 2021 Tyler Goodrich

To handle payments for a disabled senior, it's not enough to put powers of attorney, medical directives or guardianship arrangements in place.

One in three seniors will die with dementia.1 It’s a sobering statistic, and when you consider it alongside increasing longevity, it’s easy to see why planning for the potential impact of diminished capacity on your or a loved one’s future finances is critical.

An estimated 6.2 million Americans age 65 and older are living with Alzheimer’s, and more than 11 million Americans are providing unpaid care for someone struggling with dementia.1 Numbers like these prove that planning for the possibility of long-term care and considering who will make decisions if you can’t isn’t simply smart, it’s necessary. And that planning now – before you have the need or are unable to share your wishes – is essential.

Protecting yourself

When it comes to handling Social Security payments for a disabled senior, establishing powers of attorney, medical directives or guardianship arrangements may not be enough. The Social Security Administration (SSA) requires a special designation known as representative payee.

A representative payee is someone who acts on behalf of another person who is incapable of representing themselves and is responsible for directing payouts exclusively to meet a beneficiary’s needs. The SSA may determine that an individual is incapable of managing or directing someone else to manage his or her benefits and would then appoint a representative payee. Family members may also consult the SSA if they believe their family member necessitates a representative payee. Generally, a family member or friend serves as representative payee. If friends or family are not able to serve as payees, the SSA will look for qualified organizations to be representative payees.

The SSA requires that all legally incompetent adults and most minor children (a disabled child or young adult entitled to Supplemental Security Income, for example) have a representative payee. In most cases, the person in this role cannot be paid for the work they do on behalf of the incapacitated person. And the SSA requires them to keep careful records.

A critical thing to keep in mind about the responsibilities of acting as a representative payee is that the permissions that accompany the role do not extend to other facets of your affairs. Making medical decisions or signing legal documents on your behalf will still require that someone be granted powers of attorney or guardianship.

Protecting a loved one

If you assume the role of representative payee, the SSA offers a range of resources via ssa.gov, including a series of training videos, a downloadable guide and a frequently asked questions page. The process will likely require a trip to a Social Security office and a completed SSA-11 form explaining why the beneficiary needs assistance and why they have selected you for the job. Recall, too, that this designation will be in addition to any other legal or medical role you might be playing for your loved one. It’s one piece of the larger whole that, with forethought and planning, can help ensure your loved one’s – or your own – future is secure.

1 Alzheimer’s Association, “2021 Alzheimer’s Disease Facts and Figures”

Don’t Let Estate Blunders Get in the Way of Your Wishes

April 30, 2021 Tyler Goodrich

These cautionary tales of estate planning mistakes offer a few important lessons.

You’ve worked long and hard to build your estate. Don’t let blunders keep your wishes from being carried out and leave your family – and wealth – in the lurch.

Here are a few lessons to keep in mind.

No plan in place

Prince Rogers Nelson did a lot of things right in his life, leaving an indelible musical legacy that spanned generations. Unfortunately, his financial legacy wasn’t as successful. The artist formally – and formerly – known as Prince passed away in 2016 without an estate plan in place. Years of legal battles ensued.

Prince didn’t have a will, an executor or a trust in place, which left his hundreds of millions of dollars, his music library and his assets up in the air. In the void, multiple people vied to serve as the executor of the vast estate. With so many in the mix, the petition went to court, with siblings and half-siblings battling for control.

The point is that it’s imperative to not just name your executor or any other position with responsibility for overseeing your wishes (like a trustee or power of attorney) but to cast the right person in each role. Thoughtfully selecting these financial caregivers could help you avoid the bungles and blunders that even celebrities fall prey to.

Smoke and mirrors

Tobacco heiress Doris Duke left behind an estate worth $1.3 billion and a sizable sum to her charitable foundation. She named her butler as executor and trustee of the foundation. It wasn’t long before his spending was called into question, and he was booted by a probate judge, only to be reinstated by a higher court. A battle ensued and the parties settled on a board of trustees to manage the foundation.

The moral of the story? Thoroughly vet your chosen representative. Be extra careful whom you pick as an executor, trustee or guardian. For a large trust or foundation, a corporate trustee or board may be ideal to handle financial and administrative tasks. Also, have a backup plan in case your chosen designee declines the responsibility or is unable to uphold his or her duties.

The dotted line

One gentleman went through all the motions with his attorney and financial planner, setting up a will and living trust, but he never signed them. Time got away from him, and, sadly, so did his memory. As his Alzheimer’s advanced, his family stepped in to help, but were dismayed to discover the invalid documents. Because there was no trust or power of attorney to dictate the man’s wishes, a guardianship was required to manage both his personal and financial affairs. The family was forced to go through a court to manage his finances, a cumbersome and expensive process, and his wishes for the final distribution of his assets didn’t occur.

The lesson here? Resolve to be proactive. Waiting puts you and your estate at the mercy of life’s great unknowns. We can’t guarantee tomorrow, as much as we’d like to, but we can do as much as possible to ensure that our loved ones are taken care of when we no longer are able to do it ourselves.

Sources: More than Money 360; Broadridge; Florida Bar; fox43.com; caregiver.com; National Caregivers Library; mylifesite. net; money.usnews.com; Raymond James research; legalzoom.com; MFS; cnbc.com; uslegalwills.com; caring.com; Accenture; cegworldwide.com; Nuveen; kiplinger.com

Should We Be Concerned About the Federal Budget Deficit?

April 29, 2021 Tyler Goodrich

Raymond James Chief Economist Scott Brown explores the relationship between U.S. debt and the current economic recovery post-pandemic. Ideally, U.S. debt should grow no faster than nominal GDP – but pursuing that objective too soon could slow the current economic recovery, says Scott.

Watch video below now.

https://www.raymondjames.com/commentary-and-insights/economy-policy/2021/04/27/should-we-be-concerned-about-the-federal-budget-deficit

The Sugar High Economy

April 26, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

April 26, 2021

Mix extremely loose monetary policy, a federal government cutting checks like it’s going out of style, and extensive roll-out of the COVID-19 vaccines, and what do you get? Answer: Some really strong economic data.

The problem is that this rapid growth, like a “sugar high,” is not going to last. Look for the economy to slow in the future as unprecedented government spending and Federal Reserve money printing slow from the current torrid pace, while we continue to suffer the absence of small businesses that went under during the crisis. The good news is that entrepreneurship is not dead, businesses will re-open, and the US will benefit from productivity gains as a by-product of technology adoption forced by the COVID-19 disaster.

The other key is Washington, DC. Tax rates are going up, the only questions are when and by how much? Raising the top capital gains and dividends tax rates to 43.4% (with a personal rate of 39.6% and a Medicare tax of 3.8%) would be a steep hurdle for investors, but we think the most likely outcome is a compromise that doesn’t raise these tax rates nearly that high.

In the meantime, this Thursday should deliver a report of about 7.0% annualized real GDP growth in Q1, although we may refine our guess later this week based on reports on deliveries of capital goods as well as international trade and inventories. Here’s how we calculate 7.0% annualized growth in real GDP for Q1:

Consumption: Car and light truck sales rose at a 16.9% annual rate in Q1, while “real” (inflation-adjusted) retail sales outside the auto sector soared at a 29.1% annual rate. We only have reports on spending on services through February, but it looks like real services spending should be up slightly for the quarter. As a result, we estimate that real consumer spending on goods and services, combined, increased at a 10.9% annual rate, adding 7.4 points to the real GDP growth rate (10.9 times the consumption share of GDP, which is 68%, equals 7.4).

Business Investment: The first quarter should look a lot like the last quarter of 2020, as investment in equipment continued to rebound sharply, investment in intellectual property likely grew at a more moderate pace, and commercial construction continued to decline. Combined, business investment looks like it grew at a 7.5% annual rate, which would add 1.0 points to real GDP growth. (7.5 times the 13% business investment share of GDP equals 1.0).

Home Building: Residential construction continued to grow rapidly in Q1. We think home building has much further to grow given the shortage of homes in many places around the country, and the increased appetite for houses with more square footage in the suburbs. We estimate growth at a 16.5% annual rate in Q1, which would add 0.8 points to the real GDP growth. (16.5 times the 5% residential construction share of GDP equals 0.8).

Government: It’s hard to translate government spending into a GDP effect because only direct government purchases of goods and services (and not transfer payments like extra unemployment insurance benefits) count when calculating GDP. We estimate federal purchases grew at a 0.6% annual rate in Q1, which would add 0.1 points to real GDP growth. (0.6 times the 18% government purchase share of GDP equals 0.1).

Trade: Faster economic growth in Q1 brought a larger trade deficit (at least through February), a by-product of a faster recovery in the US than in Europe. At present, we’re projecting net exports will subtract 1.1 points from real GDP growth in Q1.

Inventories: Inventories look like they fell in Q1 as businesses that had supply-chain issues had to dip into inventories to meet strong consumer demand. Look for businesses to re-stock shelves and showrooms in the second quarter. We are estimating that inventories subtracted 1.2 points from real GDP growth rate for Q1.

Add it all up, and we get 7.0% annualized real GDP growth for the first quarter. That’s very high by historical standards, but the economy has much further to go to reach a full recovery.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

4-26 / 7:30 am Durable Goods – Mar +2.5% +1.9% +0.5% -1.2%

7:30 am Durable Goods (Ex-Trans) – Mar +1.6% +1.4% +1.6% -0.9%

4-29 / 7:30 am Initial Claims – April 25 550K 575K 547K

7:30 am Q1 GDP Advance Report 6.9% 7.0% 4.3%

7:30 am Q1 GDP Chain Price Index 2.7% 2.8% 2.0%

4-30 / 7:30 am Personal Income – Mar +20.0% +19.5% -7.1%

7:30 am Personal Spending – Feb +4.2% +3.6% -1.0%

8:45 am Chicago PMI – Apr 64.2 64.0 66.3

9:00 am U. Mich Consumer Sentiment- Apr 87.5 87.0 86.5

Yes, Stocks Are Still Cheap

April 19, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

April 19, 2021

The S&P 500 fell almost 50% between mid-February and mid-March 2020, during the initial stages of the pandemic. It bottomed at roughly 2,224 during the nationwide strategy of shutting down for “15 days to slow the spread.” Because this was not a normal recession, and the market went into the shutdown undervalued, we believed stock prices would recover as business returned to more normal levels.

By Thanksgiving 2020, even though the US economy was still producing less than it had pre-pandemic, the stock market had fully recovered and gone to new highs. On November 27, 2020, with the S&P 500 at 3,638, we set a yearend target for 2021 at 4,200, which was 15.4% higher. As of the close of trading on Friday, the S&P 500 was at 4,185, only 0.4% below our year-end target, with more than eight months to go before year end.

Looking back, there are a number of things that pushed the market to this point. Technology and communication helped the world adjust to shutdowns, big box stores stayed open, the government disbursed trillions of borrowed dollars, a vaccine was invented in less than a year, the money supply exploded, and the Fed cut short-term interest rates to roughly zero and committed to keeping them there. Because of all this, profits have soared.

With real GDP growth of 6%+ this year and S&P 500 earnings expected to grow by 27%, or more, we think stocks will easily bust through our original target by year end and so we are raising our year-end target to 4,500, which is 7.5% higher than the Friday close. The Dow Jones Industrial average, which we originally projected would hit 35,000 by year end, should hit 36,750, instead.

Some investors and analysts are skittish about further gains in equities. The price-to earnings (P/E) ratio on the S&P 500 is 32.6 (based on trailing earnings) – high by historical standards. And the total market capitalization of the S&P 500 has reached about 175% of GDP.

But technology companies have expanded more rapidly than they would have because of the pandemic. These stocks have had an outsized impact on stock indices and many have very high P/E ratios. We can divide the S&P 500 into the S&P 10 and the S&P 490. Valuations of each part have diverged. Also, persistently low interest rates make higher P/E ratios more sustainable as future profit growth is worth more with a lower discount rate.

Meanwhile, looking at market cap relative to GDP has its own problems, in addition to not adjusting for lower interest rates. First, it’s a stock versus a flow – a net worth versus an income. Second, GDP was artificially low last year due to COVID. Third, corporate profits are already high relative to GDP and set to move even higher in the year ahead.

As always, we rely on our Capitalized Profits Model. The model takes the government’s measure of economy-wide profits from the GDP reports, discounted by the 10-year US Treasury note yield, to calculate fair value. If we use a 10- year Treasury yield of 1.6% to discount profits, then our model suggests the S&P 500 is substantially undervalued. But this is because the Federal Reserve is holding the entire interest rate structure at artificially low levels. Using these rates distorts valuations.

Using fourth quarter profits, it would take a 10-year yield of about 2.4% for our model to show that the stock market is currently trading at fair value. And that assumes no further growth in profits.

With the Fed committed to holding rates down, it would take an upside surprise to already very strong growth forecasts to push the 10-year Treasury yield above 2.4% anytime soon. And if it does happen, it would likely be accompanied by even faster profit growth that lifts our model’s estimate of fair value. That’s why we are comfortable with a year-end target of 4,500 for the S&P 500.

While the market won’t move in a straight line, and a correction is always possible, as the economy opens up, those sectors of the market that fell behind in the past year (because of shutdowns and limited global trade) will be a source of strength. The Fed remains highly accommodative, there are trillions of dollars of cash on the sidelines, vaccines have reached over 50% of Americans, and the economy is expanding rapidly. Some valuations have been stretched, but the market as whole remains undervalued. As a result, we remain bullish and are lifting our targets.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

4-22 / 7:30 am Initial Claims – Apr 17 625K 670K 576K

9:00 am Existing Home Sales – Mar 6.150 Mil 6.040 Mil 6.220 Mil

4-23 / 9:00 am New Home Sales - Mar 0.886 Mil 0.884 Mil 0.775 Mil

The attached information was developed by First Trust, an independent third party. The opinions are of the listed authors at First Trust Advisors L.P, and are independent from and not necessarily those of RJFS or Raymond James. All investments are subject to risk. There is no guarantee that these statements, opinions, or forecasts provided in the attached article will prove to be correct. Individual investor's results will vary. Past performance does not guarantee future results. Forward looking data is subject to change at any time and there is no assurance that projections will be realized. Any information provided is for informational purposes only and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.

Housing Boom to Continue

April 12, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

April 12, 2021

Housing prices have soared in the past year. The national Case-Shiller index is up 11.2% in the past twelve months, the largest gain since 2005-06. The FHFA index is up 12.0% in the past twelve months, the largest on record (going back to 1991).

Given these gains, some are wondering whether housing is back in a 2000s-type bubble. But a deep dive into the data suggests we are not.

To assess home prices we use the market value of all owner occupied homes calculated by the Federal Reserve. We then compare that to the “imputed” rent calculated by the Commerce Department for the GDP report. (Imputed rent means what people would pay to rent their homes if they rented them from someone else.) In the past 40 years, home values have typically been 16.4 times annual rent. At the peak of the bubble in 2005, they were 21.4 times annual rent, or 33% above normal. Now, home prices are 17.8 times annual rent, about 11% above normal.

We also compare home prices to the Fed’s measure of replacement cost. In the past 40 years, home prices have typically been 1.59 times replacement cost. In 2005, they peaked at 1.94 times replacement cost, a premium of 22.5%. Now homes are selling for 1.63 times replacement cost, only 2.5% above normal, which is minimal.

Does this mean housing is at risk? We don’t think so. The recent price surge is based on fundamentals and the housing market should continue to boom.

The primary problem is a lack of homes. Based on population growth and scrappage (voluntary knockdowns, fires, floods, hurricanes, tornadoes…etc.), we would normally expect housing starts of 1.5 million per year. But in the past twenty years (March 2001 through February 2021), builders have only started 1.256 million per year. Builders haven’t started more than 1.5 million homes in a calendar year since 2006.

No wonder the inventory of homes for sale is so low! Single-family existing home inventories are at rock bottom levels, with only 870,000 for sale in February. To put this in perspective, the lowest inventory for any February on record from 1982 through 2016 was 1.55 million. Meanwhile, there are only 40,000 completed new homes for sale, versus 77,000 a year ago and an average of 87,000 in the past twenty years.

Two other factors are likely at work. One issue is that there’s a moratorium on evictions, so some tenants are paying less in rent than they normally would, which is temporarily holding down rental values versus home prices (therefore elevating the price-to-rent ratio). This is also holding down the housing component of the Consumer Price Index, which is calculated using rents, not home prices.

Another factor is that people have moved away from places where renting is popular to places where home ownership is popular. If you leave New York City or San Francisco for Nashville or Boise, there’s a good chance you went from renting to owning. This helps boost home prices as well.

Yes, home prices are up and, yes, they look somewhat expensive relative to normal, but this is more about the unprecedented events of the past decade, not some problem with the market. With the Fed so easy, and the stock of housing constrained, prices will continue to rise. The housing boom will continue.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

4-13 / 7:30 am CPI – Mar +0.5% +0.5% +0.4%

7:30 am “Core” CPI – Mar +0.2% +0.1% +0.1%

4-14 / 7:30 am Import Prices – Mar +0.9% +0.7% +1.3%

7:30 am Export Prices – Mar +0.5% +0.8% +1.6%

4-15 / 7:30 am Initial Claims Apr 10 700K 713K 744K

7:30 am Retail Sales – Mar +5.5% +5.6% -3.0%

7:30 am Retail Sales Ex-Auto – Mar +4.8% +5.1% -2.7%

7:30 am Empire State Mfg Survey - Apr 18.8 21.8 17.4

7:30 am Philly Fed Survey – Apr 40.0 47.6 51.8

8:15 am Industrial Production – Mar +2.5% +3.0% -2.2%

8:15 am Capacity Utilization – Mar 75.6% 76.0% 73.8%

9:00 am Business Inventories – Feb +0.5% +0.5% +0.3%

4-16 / 7:30 am Housing Starts – Mar 1.600 Mil 1.620 Mil 1.421 Mil

9:00 am U. Mich Consumer Sentiment- Apr 89.0 92.5 84.9

March Market Review

March 31, 2021 Tyler Goodrich

March 31, 2021

Friends and Clients,

Investors may have been hoping for March to go out like a lamb, but it seems the month simply marched on. The big news came with the passage of the latest stimulus bill, which injected trillions into the economy, and the release of the Ever Given, a giant container ship that had gotten stuck in the Suez Canal, which hampered shipping worldwide. The continued progress of the vaccine rollout and the passage of the stimulus bill created major tail-winds for the economy, reflected by rising gross domestic product estimates, a further move up in equity prices and a steady rise in interest rates, explained Larry Adam, Raymond James chief investment officer.

The yield on the 10-year Treasury hit its highest level in more than a year, yet domestic equity markets managed to gain ground for both the month and the quarter, seemingly on the hope of strong economic activity the rest of the year.

Federal Reserve policy remains accommodative and another round of fiscal stimulus has further boosted sentiment. Supply chain issues have added to cost pressures for manufacturers, and we may see some increase in inflation as the economy reopens, but inflation expectations remain firmly anchored at 2%, the Fed’s long-term goal. The Consumer Price Index is expected to rise to over 3% for the 12 months ending in April, but that merely reflects a rebound from the low figures of a year earlier, notes Chief Economist Scott Brown.

Within equities, the market has seen gains across sectors. This bodes well for intermediate-term performance. Outsized gains have come from areas most aligned to an economic reopening, while last year’s best performer, Technology, has largely consolidated its prior strength, acting as a source of capital for the reflation trade, explains Joey Madere, senior portfolio strategist, Equity Portfolio & Technical Strategy. He remains broadly positive on equities, but investors should not be surprised if the historically strong gains experienced over the past 12 months become more normal (with normal pullbacks) over the next 12 months. Given that positive view, weakness could represent buying opportunities.

Speaking of which, let’s review where we are:

Tax Hikes Are Coming

March 29, 2021 Tyler Goodrich

First Trust Monday Morning Outlook

Brian S. Wesbury - Chief Economist

March 29, 2021

The federal budget deficit hit an all-time record high of $3.1 trillion last year. With the passage of the recent blowout “stimulus” bill, it’s set to be even higher in 2021. Now we watch and wait for a potential infrastructure bill, which could run as much as an extra $4 trillion over the next ten years. A trillion here, a trillion there… you know how the old saying goes.

As night follows day, higher spending – unless offset with future spending cuts – is going to lead to higher taxes. That’s certainly the course the Biden Administration looks set to follow. So far, consistent with his campaign pledge, President Biden says he’s not going to raise taxes on people making less than $400,000 per year. But that’s not where the money is.

Let’s say they raise the top personal tax rate of 37% back to 39.6%, which is where it was for eight years under President Clinton, the last four years under President Obama, and the first year of President Trump. That change would generate only an additional $20 billion in extra revenue per year, based on 2018 tax data. If they also raised the 35% income tax bracket to 39.6%, that would raise an extra $13 billion per year. And this year the 35% tax rate kicks in at $209,426 for singles and $418,851 for married couples, which means that path would violate the $400,000 promise. Either way, it’s like trying to fill a swimming pool using a teaspoon.

If they were to go for broke and raise both the 35% and the 37% brackets to a 100% tax rate, and people keep working and paying everything they made in taxes, that would have raised about $681 billion in 2018. Big money, but still not close to bridging the budget gap.

That’s why we think Transportation Secretary Pete Buttigieg’s trial balloon about taxing auto mileage has to be taken seriously. The big spenders in Washington, DC know that tapping into the incomes of people making less than $400,000 per year is necessary to pay for all their spending promises.

At this point, we think it’d be very tough to get to 50 Senate votes for a whole new federal tax system on mileage. The same goes for a Senator Elizabeth Warren-style wealth tax, which is also of dubious Constitutionality. And, unless they get rid of the filibuster, the same goes for applying the Social Security tax to wages and salaries above $400,000.

Instead, we think the tax hike, which will likely be implemented on January 1, 2022, includes the following parts. 1. A top rate back up to 39.6% 2. A corporate rate, now 21%, close to 28%. 3. A top rate on capital gains and dividends at about 24% versus the current 20% 4. A lower exemption for the estate tax.

The one thing we can say for sure about all this is that some of these projections will be wrong. But we think most of it’ll be right. The Biden team has suggested getting rid of the step-up basis at death for capital assets, but we think that would be an administrative nightmare. Moderate Senators would listen to horror stories about trying to adjust the basis for small farms and business owners and say, no.

The Biden team has also supported applying the 39.6% tax rate to the capital gains and dividends of the highest earners. That’s one proposal that, if enacted, could hurt the stock market and the wider economy. The long-term capital gains tax rate hasn’t been that high since the late 1970s; the dividends rate since 2001. Raising them both that high at the same time? If you haven’t already decided that all this spending is damaging to long-term growth and investments, this would certainly be worrisome. We see a rise to 24% as the compromise that gets the votes.

Bargaining on tax hikes has already started in Washington, at least behind the scenes. It’s going to be a long process, but we can say with high conviction that taxes are going up.

Date/Time (CST) U.S. Economic Data Consensus First Trust Actual Previous

3-31 / 8:45 am Chicago PMI – Mar 60.0 60.9 59.5

4-1 / 7:30 am Initial Claims – Mar 27 680K 725K 684K

9:00 am ISM Index – Mar 61.4 61.0 60.8

9:00 am Construction Spending – Feb -1.0% -0.3% +1.7%

afternoon Total Car/Truck Sales – Mar 16.4 Mil 16.4 Mil 15.7 Mil

afternoon Domestic Car/Truck Sales - Mar 12.6 Mil 12.6 Mil 11.9 Mil

4-2 / 7:30 am Non-Farm Payrolls - Mar 643K 625K 379K

7:30 am Private Payrolls – Mar 635K 605K 465K

7:30 am Manufacturing Payrolls – Mar 37K 37K 21K

7:30 am Unemployment Rate – Mar 6.0% 6.0% 6.2%

7:30 am Average Hourly Earnings – Mar +0.1% +0.2% +0.2%

7:30 am Average Weekly Hours – Mar 34.7 34.6 34.6

Tax Deadline Changed to May 17

March 26, 2021 Tyler Goodrich

The IRS has extended the deadline for filing your 2020 income taxes. Learn more about this important change.

The Treasury Department and IRS have officially extended the deadline for filing your 2020 federal tax return to May 17, 2021.

If you’re expecting to receive a refund, you should still consider filing your taxes ahead of the new deadline. However, for those with a large tax liability, the new deadline may provide some extra time to develop a thoughtful strategy for paying the taxes due.

Common questions

Do I still need to file my federal tax return by April 15, 2021?

No, the new deadline for filing your federal taxes is May 17. However, if you’re expecting to receive a refund, you should consider filing sooner.

Does this extension apply to state tax return deadlines?

No, the extension applies to federal income returns, not state tax payments or deposits. However, some states have also adjusted their deadlines as a result of February storms or other ongoing challenges. Please consult your tax professional for more details about your state’s policies, which may change as updates unfold.

What if I pay estimated quarterly tax payments?

The extension does not apply to estimated tax payments that are due on April 15, 2021. Per the IRS, these payments are still due on April 15.

What do I need to do to elect the deferral?

No special election needs to be made if you decide to delay. Any interest or penalty from the IRS from April 15 to May 17 will be waived. Penalties and interest will begin to accrue on any remaining unpaid balances after May 17, 2021.

Does this mean I can make 2020 IRA contributions until May 17?

This hasn’t yet been clarified. The IRS is expected to provide this information in the coming days.

How can I learn more about this change?

The IRS has established a special section on their website to help taxpayers stay up to date with COVID-19-related changes. Visit irs.gov to explore related resources, and reach out to your tax professional and financial advisor with any questions you have about your specific tax situation and financial plan.

While we are familiar with the tax provisions of the issues presented herein, Raymond James financial advisors are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Social Security Myths and Misconceptions

March 26, 2021 Tyler Goodrich

Learn how to get the most from your hard-earned benefits.

There’s no doubt about it. Filing for Social Security can be daunting. There’s a ton of information – and misinformation – to weed through, as well as the need for some calculations based on several variables. Your benefits depend on your age, how long you’ve worked, what you earned, your marital status and number of dependents. Seems like you have to factor in everything but your IQ. So to help, we offer some common misconceptions as well as some guidance on ways to get the most from your hard-earned retirement benefits.

Myth No. 1: Social Security won't be around when I need it.

While it’s true that your contributions go to current beneficiaries as opposed to an account reserved for you, Social Security continues to be replenished by younger, working Americans, as well as earned interest on its bond portfolio and income tax on benefits paid to higher-income retirees. However, the trustees have projected that any existing surplus could be depleted sometime between 2033 and 2037, if no further legislative action is taken. This could mean that future retirees may be paid some portion, between 75% and 80% for example, of the benefits promised, but not zero like many fear.

Myth No. 2: Social Security is all you need.

Somewhat paradoxically in light of Myth No. 1, more than half of Americans expect to fund their retirement entirely with Social Security. While benefits do get adjusted for cost of living increases, they were always intended to supplement, not replace, retirement savings. Retired workers received an estimated average of $1,548 in benefits for the month of February in 2021. Even if you live frugally, that amount is likely not enough to account for all the variables you might encounter over a decades-long retirement. That’s why it’s important to do what you can to maximize all your retirement savings for as long as possible (think taking full advantage of your employer’s 401(k) match).

Myth No. 3: File as early as possible.

No one quite knows how long you’ll live past full retirement age (FRA), so some think you should collect as soon as you’re eligible. But that means permanently reducing benefits when the odds favor a longer lifespan for most of us. Your advisor can help you calculate your breakeven point based on your statistical life expectancy and your family history. Higher earning spouses, in particular, may want to delay as long as possible, not just to maximize their own benefits, but to ensure a higher payout for their widow or widower when the time comes. Surviving spouses are eligible for 100% of their spouse’s benefit.

Myth No. 4: File as late as possible.

We’re not trying to confuse you. For the vast majority of applicants, waiting past full retirement age to file makes the most sense financially. But there are conditions that warrant filing early, particularly if you need the extra income or if your health isn’t the best. On the other hand, retirees who want to have the most income during their prime years may want to file early, too. Should you change your mind, you can claim a do-over within the first year, but you have to pay back what you received. If longer than a year, you can voluntarily suspend your benefits at FRA and then earn delayed credits until age 70.

Myth No. 5: You'll lose benefits if you continue to work after filing a claim.

If you file before your normal retirement age and continue to work, your benefits will be temporarily reduced depending on how much you earn. But those benefits are merely delayed until full retirement age (FRA), not lost forever. Once you reach FRA, you’ll receive increased monthly payments to make up the difference. Plus, you may end up increasing your annual benefit because Social Security is based on your 35 highest years of income.

Myth No. 6: You're out of luck if you've never worked outside the home.

It’s true that regular benefits are based on an employment record of at least 40 quarters. But those who haven’t worked for that long, or at all, can receive half of what a spouse or even an ex-spouse would receive (as long as you were married for at least 10 years and haven’t remarried). If you’re a surviving spouse, you may be eligible for full benefits on your spouse’s record. Even ex-spouses can claim full survivor benefits as long as you were married for more than 10 years and never remarried before he or she passed away. Of note: remarriage after age 60 does not prevent or stop entitlement to benefits for survivors – even ex-spouse survivors.

Myth No. 7: Follow advice from friends and family.

Filing for Social Security based entirely on advice from nonprofessionals may work just fine, but it may not help you maximize benefits, which could leave thousands of dollars at stake. Often a consultation with your financial advisor and an accountant can help determine the best strategy.

Sources: ssa.gov; investopedia.com; forbes.com; thefiscaltimes.com; marketwatch.com; cnnmoney.com