Interest Rates


Links To Ring In 2019

Welcome to our first blog post of 2019! Below are some links regarding financial planning for retirement, financial concerns for college, and general financial education. Hopefully these help shake off the holiday cobwebs and get your year off on the right foot.

Current Events

Our friends at Formula Folios have provided some valuable insights regarding the recent stock market volatility we’ve experienced. They include an excellent quote to steady your nerves as both news headlines and financial markets provide anything but reassurance:

Your success in investing will depend in part on your character and guts and in part on your ability to realize, at the height of ebullience and the depth of despair alike, that this too, shall pass.

– Jack Bogle


While on the subject of volatility and uncertainty in the financial world, one of the instruments people at or near retirement often ask about is annuities. Depending on your goals, they may provide you with certainty that you’ll never run out of money. However, like all insurance products, they are complex and, in general, not well understood by the general public as well as investment and money managers. Fortunately, the New York times has provided an article to explain annuities as simply as possible, as well as a list of questions to ask someone trying to sell you one.

Interest Rates

Interest rates are in the news a lot lately. Headlines about the Federal Reserve raising rates are commonplace. But what does any of this mean, and how does it affect average people like you and me? The good folks at The Street have provided an article explaining the different types of interest rates and why they are so important.

College Costs and Planning

Lastly, on the college front, it’s no secret that college costs are skyrocketing. Tuition inflation is the highest of all categories of inflation, approximately doubling the rate of inflation of healthcare. However, there are some schools here in the United States that are bucking that trend (including one here in Kentucky), and offer students free or reduced tuition. The good folks at Forbes have been kind of enough to provide a list of 75 such schools.

If none of those schools spark the interest of your college-bound children, then you’re probably thinking about college scholarships being a major part of your college financial plan. You aren’t alone. Before assuming scholarships will solve your college cost issues, take a look at this deep dive into the grant and scholarship landscape. Once again Forbes has come through with an excellent in-depth breakdown of the different kinds of scholarships out there and how they may or may not fit within your college plan.

Thanks for taking the time to read our blog and please let us know if there’s a topic you’d like to see covered or a question you want answered. Happy New Year from all of us here at SeaCure Advisors! We hope your 2019 is healthy and successful.


The Stock Market Rout: Healthy Correction or The Start of a Bear Market?

OCTOBER 12, 2018 | By Adam Goff

On the latest edition of Market Week in Review, Adam Goff, managing director, investment practice, and Rob Cittadini, director, Americas institutional, discussed possible factors behind the recent sell-off in global equity markets and what the road ahead may look like for investors.

Is a Bear Market Beginning?

The stock market was pummeled in a two-day stretch from Oct. 10-11, with major indexes tumbling across the globe. This has led many investors to wonder if the much-anticipated beginning to the next bear market is underway. Goff’s answer? Probably not.

“The recent downturn looks a lot more like the market correction that occurred in early February, following January’s peak in equities,” he stated. Looking at market moves so far this month, stocks appear to be re-tracing—or walking back—some of the excessive gains from the third quarter, Goff noted. Case in point: U.S. large-cap equities, as measured by the S&P 500® Index, were up approximately 7.5% last quarter, and are now down roughly 6.5% in October. Likewise, global equities (as measured by the MSCI World Index) advanced roughly 5% in the third quarter, and have now retreated by roughly the same amount.

“Essentially, we’re seeing the market re-thinking its excitement over the past few months,” Goff said, “with investors now realizing that perhaps there’s more to be concerned about, especially in regard to the forward- looking economic outlook.”

What Drove The Market Plunge?

What factors behind the scenes may have led to this shift in thinking? Looking at the actual news from the week of Oct. 8, nothing in particular happened that should have triggered such a steep sell-off, Goff said. For instance, the release of the U.S. Bureau of Labor Statistics’ Consumer Price Index (CPI) for September showed a 2.3% increase, year-over- year. While that was slightly below consensus expectations, it wasn’t enough to set off a firestorm of concern, he remarked.

In Goff’s mind, in order to really assess what happened in markets, it’s best to take a step back and look at things from a broader perspective. Last year was an extraordinary year for markets, he said, with stocks consistently churning upward. Ever since this year’s January high-water mark, in Goff’s opinion, a very different sort of market environment has set in, “a push-and-pull between concerns about how high interest rates will climb, when inflation will become a problem and whether trade tensions between the U.S., China and other countries will impact economic growth rates.”

These issues have all surged to the forefront in the past few weeks, Goff said, likely indicating that the remainder of 2018 will be plagued by higher volatility across markets. While there will be a bear market at some point in the future, he reiterated that the recent slide is likely not indicative of its beginning.

Is Volatility Here To Stay?

As for what the road ahead may hold for investors, Goff said it’s important to assess markets in terms of cycle, value and sentiment. When examined under these three lenses, he and the team of Russell Investments strategists don’t see the overall picture today as looking much different from a few weeks ago.

› In terms of value, equities still remain very high, especially in the U.S., Goff said. “Across the globe, stocks are at levels from which we don’t expect explosive upside,” he said.

› Turning to cyclical factors, he said that a tug-of-war remains between concerns over a flattening U.S. Treasury yield curve and rising interest rates, versus continuing robust economic data in the U.S. and many other regions of the globe.
› In regard to sentiment, Goff said that he and the team of strategists don’t view the U.S. equity market as fully oversold yet, as they don’t think it’s quite poised enough for a big upturn. “We do feel that the S&P 500® Index’s dip below its 200-day moving average represents a point at which some investors who’ve been underweight U.S. equities may want to consider getting back in,” he stated. U.S. Treasuries may also be a little oversold, Goff added, due to the sharp spike in the 10-year yield the week of Oct. 1.

All things considered, Goff expects to see continued volatility in the weeks and months ahead. The main takeaway for investors, in his opinion? “Now is not a great time to be taking lots of risk, given historically high valuations and the late-cycle phase of the market.” That said, Goff concluded that he and the team of strategists at Russell Investments will be looking for opportunities to exploit market weakness in the days ahead.

Watch The Video

Please do not hesitate to contact us if we can be of any assistance and as always, we welcome your feedback. You should follow us on Facebook for our weekly commentaries, for insights on how to navigate through times of market uncertainty, updates and other news as it relates to financial markets.

Always at your service,

Carolyn Howard, CFP®


US Fiscal Issues: Larger Deficits Are Driving Up Debt

According to the most recent Congressional Budget Office (CBO) projection, the federal budget deficit for the fiscal year 2018 (which ends on September 30) will reach $793 billion, or 3.9% of gross domestic product (GDP). This figure is $230 billion larger than the CBO previously estimated in June 2017, largely because legislation enacted since then reduced potential revenues and increased anticipated spending.1

The government runs a deficit when it spends more money over the year than it collects in tax revenue. To cover the difference, the government must borrow money from investors through the sale of Treasury bonds. Annual budget deficits add to the national debt, which already exceeds $21 trillion.2

As things stand, the budget shortfalls are not projected to end any time soon. In fact, the federal deficit is projected to widen substantially over the next several decades, reaching 9.5% of GDP by 2048.3

Here’s a closer look at the nation’s current fiscal situation and what it could mean for future economic growth.

Lower taxes, higher spending

The Tax Cuts and Jobs Act, which took effect in January 2018, included permanent rate reductions for corporations and temporary ones for individuals. The CBO projects that the tax law will stimulate economic activity and increase annual real GDP by 0.7%, on average, between 2018 and 2028.4

The Bipartisan Budget Act of 2018, passed by Congress in February, is a two-year budget deal that raises statutory spending caps that have been in place since 2011. It allows for $80 billion in additional spending for defense and $63 billion for domestic programs in 2018, and similar amounts for next year. The Consolidated Appropriations Act, a massive 2,232-page spending bill approved in March 2018, provides $1.3 trillion in government funding through fiscal year 2018.5

Despite higher GDP growth, these three bills are expected to increase deficits by $2.7 trillion between 2018 and 2027, with $1.7 trillion from reduced revenues and $1.0 trillion from increased spending.6

Future unfunded liabilities

While discretionary spending is controlled by Congress on an annual basis, mandatory spending (primarily for programs such as Social Security, Medicare, and Medicaid) is set automatically by formulas. Mandatory programs will account for about 38% of federal non-interest spending in 2018.7

Going forward, mandatory spending is projected to rise by an average of 6% per year, reaching $4.4 trillion by 2028. This trend is partly due to demographics, as a large population of baby boomers become eligible for benefits. In addition, health-care costs per Medicare and Medicaid beneficiary are likely to grow faster than the economy over the long term.8

Debt and the economy

If the nation stays on its current path, debt held by the public will grow from roughly 78% of GDP in 2018 to 96% of GDP by 2028, according to CBO projections. This would be the highest level since 1946 and more than two times the average over the last 50 years.9

Rising debt combined with higher interest rates will increase the government’s annual interest costs, which would roughly double between 2018 and 2028 (when measured as a percentage of GDP).10

The CBO expects that a significant rise in federal spending will boost the U.S. economy in the short run, especially in 2018 and 2019. However, it is likely to lower real GDP in later years, when rising debt payments take a bigger bite out of tax revenues, resulting in even larger deficits.11

Potential consequences

Increasing federal borrowing to cover large deficits could erode Treasury bond values.12 The Treasury is selling more bonds to finance higher debt at the same time the Federal Reserve is winding down its bond-buying program. To some degree, the expected increase in the supply of available Treasury bonds could be offset by an increase in demand if new Treasuries offer higher yields, but imbalances of supply and demand could spur some market volatility.

Another concern is that the economy and inflation could heat up too quickly, prompting the Federal Reserve to raise rates at a faster pace. And with debt mounting, lawmakers may have less flexibility to use fiscal policies to respond to future economic challenges.

The widening deficit also highlights some key challenges in balancing the federal budget. Tax breaks are often welcome, but they reduce revenue unless they generate large-scale economic growth. Many costly government programs are popular, essential, or both. Eventually, it could take some hard choices to reduce annual deficits and keep the national debt from rising to unsustainable levels.

U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. Bonds not held to maturity could be worth more or less than the original amount paid.

1, 3-4, 6-11) Congressional Budget Office, 2018
2) U.S. Department of the Treasury, 2018
5) The Wall Street Journal, March 23, 2018
12) The Wall Street Journal, April 23-24, 2018