Insights

Interest rates are rising – quickly – making bonds more attractive.

With our Tax Department working diligently towards the April deadline, we wanted to provide a brief update on recent legislation for retirement savings.

The U.S. has regained more than 90 percent of the jobs lost during the pandemic, and hiring continues at a strong pace, constrained only by the supply (or shortages) of labor. The recent data show 431,000 jobs added during the month of March, while the unemployment rate fell to 3.6%. There are only five months on record where the unemployment rate has been lower. The negative impact of the virus appears mostly behind us, as a majority of Americans likely have some immunity from vaccination, infection, or both. Consumer spending is particularly strong, especially in the sectors that were hardest hit during the pandemic, such as travel and leisure.

Our second podcast episode of Money Stories with Linda Davis Taylor is here!

Howland’s Money Stories Program this month features two of the firm’s partners, Nick Crocker and Maureen Quigley, who teamed up to reflect on how they help clients navigate through financial milestones often experienced by families. From the young investor just starting out on a savings plan to discussions about how to pass on family values, Howland’s approach brings the firm’s collective experience and thinking to the dialogue.

Over the past few days, U.S. equity markets entered into correction territory largely due to the threat of war between Russia and Ukraine. With global leaders now responding to the Russian invasion, we are expecting to see increased volatility in the international markets as well as at home.

The adage, “actions speak louder than words” is true for many of life’s important lessons. But when it comes to learning about money, actions without words—the absence of open and candid conversations—can create gaps in our confidence and competence regarding money matters.

Howland Capital’s “family” roots run deep. The firm was founded by Dusty Howland to help steward and grow the family’s wealth, and throughout our 55-year history, we have been privileged to work with and learn from hundreds of families to help them harness their financial resources to achieve their family goals. 

As we enter the new year, Congress is still deliberating on legislation that could impact the 2022 tax year. The Build Back Better plan was passed by the House in late 2021 but ultimately was not signed into law by the end of the year. The bill has gone through several revisions and could be passed in early 2022. While the act was not passed before the start of 2022, it could still have retroactive tax implications this year.

Because bond prices typically move in the opposite direction of changes in interest rates, rising rates pose a potential headwind to expected bond returns. In cases where bonds are held until final maturity, this is not a risk. The benefit of rising interest rates to bond investors is that maturing bonds can be reinvested at higher rates. If economic and employment conditions remain favorable, Fed rate hikes will likely continue into next year. After living with short-term rates at or close to zero for years, this is welcome news.

Global stock markets rallied through the fourth quarter to finish 2021 with a bang, capping off an unexpectedly strong year. U.S. equities, as measured by the S&P 500 Index, returned nearly 11% in the fourth quarter alone, including dividends, bringing year-to-date performance to a whopping 29%. Non-U.S. stocks, as measured by MSCI’s All Country Worldwide Ex-U.S. benchmark, returned 2% in the fourth quarter including dividends, ending the year up a respectable 8%.