Market Viewpoints

by Keith Bonjour, Portfolio Manager

Volatility has been the keyword for the year after such an unusually calm stock market in 2017, with another large spike in volatility coming during the month of October for both the stock and bond markets. October’s stock market pullback wiped out the gains for the year in U.S. equities; however, stocks staged a slight rebound right at the end of the month. All eyes have become focused on the upcoming meeting between President Trump and Chinese President Xi at the end of November during the G-20 summit in Argentina for clues to how stocks will finish the year.

Trade and tariffs will be the all-important topic discussed between the two leaders on the sidelines of the G-20 summit. Both leaders have signaled a recent opening in trade discussions so this meeting will be important to see if any progress can be made in the ongoing trade dispute. The tariff/trade war between the U.S. and China continues to act as a black cloud hanging over the market this year and the effects are starting to be seen in company earnings reports.

The Federal Reserve hiked interest rates for a third time this year in September, which matches the three rate hikes last year. The market is also putting a high probability of a fourth rate hike in December of this year, especially after the strong jobs report that was announced on November 2nd. U.S. hiring accelerated by adding 250,000 jobs for the month of October beating the expectations for a gain of 208,000 jobs. Wage growth has also increased over the last year to the highest level in more than nine years at 3.1%, while unemployment remained steady at 3.7%. This means there is a high probability that the Federal Reserve will continue on its path to gradually increase interest rates. The market will be watching the Federal Reserve’s moves closely, trying to determine what the neutral rate target is for the Federal Funds rate, and if the Federal Reserve will continue hiking until they move to a slightly restrictive Fed Funds rate.
The economy continues to see strong growth with third quarter GDP numbers coming in at 3.5% after a strong second quarter reading of 4.2%. The unemployment figures continue to be at historically low levels and inflation has remained in check hovering around the 2.0%-2.3% range. It remains to be seen if the economy will be able to continue to grow at a pace above 3% GDP growth or if we will fall back to the previous 2%-2.5% GDP range seen in previous years. Corporate tax cuts and company earnings have continued to be the driver for increased GDP growth, but for how long both can continue to contribute to higher GDP growth remains in question. We will be monitoring this closely as we close out the year and look ahead to 2019.

The market has performed well for the six months following mid-term elections over the last six mid-term election cycles, and the third year of the presidential cycle has historically been the best year for the market. However, we know history does not always repeat itself so we recommend maintaining an appropriate risk tolerance throughout the current market cycle. Also, remember not to let emotion affect your investment decision making. We continue to invest based on your long-term investment objectives and not short-term movements in the market. We have continued to maintain a neutral stance on equities with an underweight to fixed income while focusing on shorter durations in our fixed income allocations to help protect against rising interest rates.


Cryptocurrency – More Planning Required

By Cody Allen, Senior Vice President 

As the cryptocurrency craze spreads, the mainstream public is investing in bitcoin and other digital currencies. Cryptocurrency, such as bitcoin or Ethereum’s ether, could vanish into thin air when an owner dies, unless their estate-planning professionals know that a client is a crypto-lover and assists them in making appropriate plans to ensure their heirs have access to the cryptocurrency after death. Of course, those plans also have to make sure the client won’t be giving up the keys to the castle prematurely.

In one way, cryptocurrency is just another class of assets, but on another level, it’s unlike any asset that came before it. Possession equals control equals ownership. If someone gets the client’s private keys, they have unlimited access to the client’s crypto. This makes succession planning very challenging.

When a person buys bitcoin, it’s associated with crypto-graphic public and private keys. The public key, visible to all, identifies that specific bitcoin and all of its transactions on the blockchain—a public ledger that records transactions on a network of decentralized computers across the world. The private key is the owner’s secret and proves ownership and authorizes transfers. The private key must remain secret until the owner dies, or else anyone could steal the cryptocurrency.
There are several methods for an owner to hold cryptocurrency—including online exchanges, software wallets, and hardware wallets—and an estate plan needs something slightly different for each method. If held on an exchange such as Coinbase or Kraken, an heir can use the normal probate process to access the accounts.

For software wallets, the inheritance plan must say which program the client used, the device it’s installed on, the type of cryptocurrency in the wallet, and the place an heir can find the seed phrase—a security feature that allows a user to recover lost cryptocurrency. As for hardware wallets, including Ledger or Trezor, the estate plan must spell out where to find those USB-like devices and their seed phrases. It’s usually a good practice to keep hardware wallets and seed phrases in a safe deposit box because they’re secured during the client’s life, and an heir can go through the normal probate process to access the box after the client’s death.

The first step in creating a crypto-estate plan is to tell your estate planning professionals that you own a cryptocurrency. If you don’t, the risk of loss is very real.

If you have or are considering an investment in a cryptocurrency, please speak with Rebecca Bitting at 563.388.2575


In the Community - Our Non-Profit Spotlight

By Kim Findlay, President/CEO

Literary Heroines
The Putnam Museum’s newest exhibit, showcasing the fashions, interests and lives of some of literature’s most impactful female characters opened October 13.
Literary Heroines: Their Times, Their Fashions has been created utilizing apparel and accessories from the Putnam’s collection dating back to the early 1800s and from as far away as China’s Imperial City. The exhibit features various vignette displays that tell the story of different heroines. Featured books include “Pride and Prejudice,” “Memoirs of a Geisha,” “The Help,” and “Little Women.”

The exhibit allows us all to see the real-life history and culture of fictional heroines, as they spring to life from the pages of books that have endured and empowered. Through the Literary Heroines exhibit, the Putnam intends to connect generations of book-lovers while celebrating strong women of literature.

Hometown Heroines
The new exhibit includes a tribute to “Hometown Heroines” through a series of pre-recorded oral history video excerpts featuring trailblazing Quad Cities women.
Exhibit admission is included in the price of general admission — $9 for adults, $8 for youth (ages 3-18) and free for members. Seniors, college students, and military save $1 on admission.
The full list of the 20 books from which the exhibit draws inspiration and pays homage to is available at www.putnam.org/LiteraryHeroines.

Clubs and other groups may reserve a time to visit the museum, enjoy a catered luncheon and even take part in a curator presentation. To learn more, contact Relationship Advancement Director Michele Darland at 563-336-7295 or mdarland@putnam.org.

More information on the Literary Heroines exhibit and featured events such as a Japanese Tea Ceremony on Nov. 3 and Afternoon Tea featuring the movie, “Little Women” on Nov. 24 can be found at www.putnam.org.
Exhibits such as these would not be possible without the strong support of longstanding community businesses such as Northwest Bank & Trust Company. A 150-year-old icon such as the Putnam has a significant collection...yet that collection can only be preserved and experienced in beautiful exhibitions when the Museum receives financial and promotional support.


2019 Retirement Plan Contribution Limits

The Internal Revenue Service announced retirement plan contribution limits for 2019. For the most part the 2019 contribution limits are unchanged from the 2018 limits. The notable changes were the increase in the 401(k) elective deferral limits and the Roth IRA eligibility threshold.

If you have questions, or would like more details, please contact our Certified Retirement Services Professional (CRSP), Rebecca Bitting at 563.388.2575.



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