The IRS has announced the 2017 cost-of-living adjustments applicable to dollar limitations for retirement plans and other employee benefit plans.

Retirement plans and other employee benefit plans are subject to dollar limitations that are adjusted annually for cost-of-living increases based on inflation data provided by the Bureau of Labor Statistics’ annual release of the Consumer Price Index.

To see the limits, effective January 1, 2017, please click here.

JACKSONVILLE, FL – (October 31, 2016) – The LBA Group is pleased to announce several promotions:


Daniel Brock, CPA

Daniel Brock, CPA, has been promoted to Principal in the firm’s Tax Services department. Daniel began his professional career with LBA as an intern before working with a large regional firm in Boston while he earned his master’s degree. Daniel returned to LBA in 2006 as a full time Staff Accountant and has successfully progressed to his current role over the last 10 years. He focuses on tax planning and business consultation with a variety of closely held businesses in industries such as manufacturing, distribution, consulting, and software. Daniel attended the University of Florida, where he earned his bachelor’s degree in Accounting, and Boston College, where he earned his master’s degree in Accounting.

JON LEE 2014 square

Jon Lee, CPA

Jonathan Lee, CPA, has been promoted to Senior Tax Manager. Jon joined LBA in December 2012 as a Staff Accountant and was promoted to Manager in February 2015. He has nine years of tax and accounting experience. Jon can be counted on to represent the firm in any environment and has done a tremendous job with his clients. He earned his Bachelor of Business Administration in Accounting from Georgia Southwestern State University.


Shelli Sirmans, CPA

Shelli Sirmans, CPA, has been promoted to Manager in the Audit & Assurance Services department. She has over seven years of experience in financial statement audits, with a focus on not-for-profits. Shelli earned her master’s degree in Accounting from Georgia Southern University and her bachelor’s degree in Business Administration from Valdosta State University.



Ashly Fogle, CPA

Ashly Fogle, CPA, has been promoted to Senior Accountant in the Audit & Assurance Services department.  She joined LBA in 2015 as a Staff Accountant. Ashly earned her bachelor’s and master’s degrees in Accounting from the University of North Florida.



The LBA Group provides accounting, consulting and wealth advisory services to closely held businesses, professional practices, not-for-profit organizations and high net worth individuals throughout Florida, the Southeast and Nationwide.  The firm was recently ranked by Accounting Today as #6 on the list of firms that have headquarters in the State of Florida and as a Top 200 firm by Inside Public Accounting.

#     #     #

For a PDF of this press release, click here.


Late this afternoon, Monday, October 17, 2016, the IRS announced that tax relief would be given to residents of parts of four states that were directly affected by Hurricane Matthew. This relief will affect certain parts of North Carolina, South Carolina, Georgia and Florida.

Counties affected in Florida include:

  • Brevard
  • Duval
  • Flagler
  • Indian River
  • Nassau
  • Johns
  • Lucie
  • Volusia

Georgia counties include:

  • Bryan
  • Camden
  • Chatham
  • Glynn
  • Liberty
  • McIntosh

Tax returns that were due to be filed today, including extended returns that were due today, are now extended to March 15, 2017.

To read the entire release from the IRS, click here.







The most recent publication of LBA Advisor has arrived: October 2016 issue

Articles include:

  • Purchasing a Veterinary Practice
  • A Strong Corporate Compliance Program is Important
  • Fixing a Broken 401(k) Retirement Plan (Part 1)
  • Inside LBA
  • Ten Years and Counting: Points to Consider As You Approach Retirement
  • Family Limited Partnerships
  • Are You Ready for the New Overtime Rules?

Click here to read the entire issue of 904 Magazine – October 2016, including the LBA Advisor section (Pgs. 57-72).

Global Stocks

U.S. Stocks

Global Economy

Fixed Income

Financial Planning

Global Stocks

The third quarter seemed to lull many investors to sleep. The quarter started with a bang just after the British referendum vote left stocks in oversold conditions. After the initial shock, the markets experienced high volatility, but from July 11 through September 8, the S&P 500 Index posted 43 consecutive days without a 1% move in either direction. International markets, both Emerging and Developed, rallied more than U.S. markets for the quarter. U.S. stocks were up 4.48% (MSCI US Broad Market) and International stocks were up 7.00% (MSCI All Country World Index ex. U.S.).


The biggest factor in the much needed market rally was generated by the steadfast commitment from central banks across the globe to maintain an easy monetary policy after the British Referendum. However, despite the fact that the markets had a great quarter, there was a clear lack of investor confidence. Retail (non-professional) investors and institutional (professional) investors appear to be staying on the sidelines (chart below). We view this as a positive development – explanation below.wm-oct-chart-2

High cash balances represent potential future stock purchases and most times reflect an excellent contrarian indicator. Meaning, if cash balances are high and most investors are uncomfortable, the market tends to do pretty well and vice versa. Notice how high the cash allocation was at the beginning of 2009 (chart above), right before the markets roared back. Surprisingly, the average cash allocation is higher today on a percentage basis than it was after the Great Recession.

European Banks – Canary in the Coal Mine?

The overall performance trend of banking stocks in Europe has been on the decline versus the rest of European stocks since the beginning of 2007, and 2016 has been no exception (see chart below from Ned Davis Research). The long-term structural issues faced by European banks: negative yields, flat yield curves, regulatory pressures including fines (Deutsche Bank), and cost inefficiencies account for most of the downturn. Bank stocks tend to be a leading indicator for stock markets and the economy. We are closely monitoring developments and should things turn around (and it will not take much) European banks will respond very positively. This could lead European markets higher.


U.S. Banks

U.S. banks are not in the same boat as European banks. U.S. banks are well-capitalized and do not suffer from the same negative macro headwinds described above. Additionally, should we see interest rates start to pick up, U.S. banks would respond very well and we would likely add exposure to this sector of the market.

Overall, we remain bullish on Global Stocks.

U.S. Stocks

Last month we talked about high yielding stocks and which areas of the U.S. markets are overvalued. During the quarter, bond yields increased modestly resulting in significant underperformance of the high dividend stocks (Utilities, Telecom, and Consumer Staples) versus the S&P 500. We expect these sectors to continue to underperform if interest rates move higher.

For the U.S. stock market, the biggest uncertainty is the upcoming Presidential election. The market is a little more vulnerable to shocks when there are stretched valuations. However, history tells us that markets often climb walls of worry (recent history chart below). The black line is a measure of volatility and the red line is the S&P 500.


High Yielding Stocks
Our main concern for U.S. stocks are those paying high dividends, especially those that are low quality. Many investors who should be invested in bonds, have had to take on stock risk to receive decent income. This push into higher risk assets is the stated objective of the Fed’s low interest rate policy. These high yielding stocks have attracted more dollars than they should and are now very expensive. If you need a reminder for how rising interest rates impact high yielding investments, consider the year that then Fed Chair, Ben Bernanke, announced an end to the Quantitative Easing program ( May 2013). The S&P 500 returned 12% (red line below) after the announcement to the end of the year. However, the high yielders underperformed significantly.

The key to successfully investing in stocks depends on one’s ability to refrain from having a knee jerk reaction to news headlines, and to remain committed to a long-term asset allocation. There are always “crisis” events happening and reacting to those events by selling out is detrimental to long-term returns. We use a litany of objective indicators to formulate our opinion of market direction and the weight of the evidence points to a mildly bullish environment.

We remain mildly bullish on (certain) U.S. stocks.

U.S. Election

Below is a chart reflecting stock returns under various administrations. According to history, a divided government with a balance of power is typically good for stocks. Despite all the grandstanding on how to “fix” our country from today’s major party candidates, whoever wins still has to get their plans approved through Congress.


We remain mildly bullish on (certain) U.S. stocks.

U.S. Election
Update to the chart from Ned Davis Research that we featured in July’s Market Commentary. The market has a similar trading pattern to historical Incumbent Party wins.

Global Economy

The Global Economy continues to slowly grow and the latest reading from the Global Manufacturing Purchasing Managers Index (PMI) suggests that the Global Economy continues to show signs of a second half acceleration. The reading reached its highest level in 11 months and more and more countries are reporting expansion in the manufacturing sector.

The chart below from Ned Davis Research gives a good view of which reporting country’s manufacturers are reporting a contraction or expansion. A number above 50 translates to an expansion and below 50 a contraction in manufacturing.



Fixed Income

All eyes are on Janet Yellen and market participants are trying to figure out the meaning of each and every adjective that she says. The day-to-day changes are too much to keep up with. The most important things to remember are: interest rates and inflation are historically low, the Fed is typically late on raising or lowering rates, and we are not in a fast economic growth environment. All these items will most likely result in a long, drawn out, rising interest rate environment.



Medicare Open Enrollment Begins October 15

What is the Medicare open enrollment period?

The Medicare open enrollment period is the time during which people with Medicare can make new choices and pick plans that work best for them. Each year, Medicare plans typically change what they cost and cover. In addition, your health-care needs may have changed over the past year. The open enrollment period is your opportunity to switch Medicare health and prescription drug plans to better suit your needs.

When does the open enrollment period start?

The Medicare open enrollment period begins on October 15 and runs through December 7. Any changes made during open enrollment are effective as of January 1, 2017.

During the open enrollment period, you can:

  • Join a Medicare Prescription Drug (Part D) Plan
  • Switch from one Part D plan to another Part D plan
  • Drop your Part D coverage altogether
  • Switch from Original Medicare to a Medicare Advantage Plan
  • Switch from a Medicare Advantage Plan to Original Medicare
  • Change from one Medicare Advantage Plan to a different Medicare Advantage Plan
  • Change from a Medicare Advantage Plan that offers prescription drug coverage to a Medicare Advantage Plan that doesn’t offer prescription drug coverage
  • Switch from a Medicare Advantage Plan that doesn’t offer prescription drug coverage to a Medicare Advantage Plan that does offer prescription drug coverage

What should you do?

Now is a good time to review your current Medicare plan. As part of the evaluation, you may want to consider several factors. For instance, are you satisfied with the coverage and level of care you’re receiving with your current plan? Are your premium costs or out-of-pocket expenses too high? Has your health changed, or do you anticipate needing medical care or treatment?

Open enrollment period is the time to determine whether your current plan will cover your treatment and what your potential out-of-pocket costs may be. If your current plan doesn’t meet your health-care needs or fit within your budget, you can switch to a plan that may work better for you.

What’s new in 2017?

The initial deductible for Part D prescription drug plans increases by $40 to $400 in 2017. Also, most Part D plans have a temporary limit on what a particular plan will cover for prescription drugs. In 2017, this gap in coverage (also called the “donut hole”) begins after you and your drug plan have spent $3,700 on covered drugs — a $390 increase over the 2016 initial coverage limit of $3,310. It ends after you have spent $4,950 out-of-pocket, after which catastrophic coverage begins. However, part of the Affordable Care Act  gradually closes this gap by reducing your out-of-pocket costs for prescriptions purchased in the coverage gap. In 2017, you’ll pay 40% of the cost for brand-name drugs in the coverage gap (60% discount) and 51% (49% discount) of the cost for generic drugs in the coverage gap. Each succeeding year, out-of-pocket prescription drug costs in the coverage gap continue to decrease until 2020, when you’ll pay 25% for covered brand-name and generic drugs in the gap.

Where can you get more information?

Determining what coverage you have now and comparing it to other Medicare plans can be confusing and complicated. Pay attention to notices you receive from Medicare and from your plan, and take advantage of help available by calling 1-800-MEDICARE or by visiting the Medicare website,

This information is provided by The LBA Group for the personal use of our clients. It should not be construed as investment, tax or legal advice. Please be sure to consult your CPA or attorney before taking any actions that may have tax consequences and contact The LBA Group | LBA Wealth Management regarding any investment decisions.
This communication is strictly intended for individuals residing in the state(s) of FL. No offers may be made or accepted from any resident outside the specific states referenced.


Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.

For Immediate Release

For further information, please contact:

Jamie Thomas
p: 904.224.9798


The LBA Group Promotes
Tracy Deadman to Manager


 JACKSONVILLE, FL – (September 22, 2016) – The LBA Group is pleased to announce that Tracy Deadman, CPA, has been promoted to Manager within the Audit and Assurance Services team. Tracy joined LBA in June 2015 as a Senior Accountant.  She previously worked in the not-for-profit sector for over 15 years, both as an employee (including the role of Chief Financial Officer) and as a consultant. Tracy has an additional 10 years of experience in public accounting and internal audit.

Tracy earned her Master’s degree in Accounting from the University of North Florida and her Bachelor’s degree in Business/Accounting from Phoenix University. She currently serves on the Board of Directors for Community Health Outreach.

The LBA Group provides accounting, consulting and wealth advisory services to closely held businesses, professional practices, not-for-profit organizations and high net worth individuals throughout Florida, the Southeast and Nationwide.  In 2016, the firm was ranked by Accounting Today as #6 on the list of top firms in the Gulf Coast Region that have headquarters in the State of Florida.


To view a PDF of this press release, click here.



On August 16, 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-14: Not-for-Profit Entities: Presentation of Financial Statements of Not-for-Profit Entities. The accounting standard refreshes the current accounting policies to better portray a not-for-profit’s financial story by simplifying the face of the financials and improving financial performance communication. Not-for-profit management and accountants should be cognizant of the changes coming on the horizon.

While the changes are significant, FASB did not adopt all items from the exposure draft issued in 2015 in this update. This update is the first of two phases in FASB’s Not-for-Profit Advisory Committee’s project to improve not-for-profit financial accounting. The additional items from the exposure draft (clarifying “operations” and measures of operations in the statements of activities and cash flows) will be addressed in the second phase.

Effective Dates

  • Annual financial statements issued for fiscal years beginning after December 15, 2017 (CY 2018, FY 2019).
  • Interim periods within fiscal years beginning after December 15, 2018.
  • Application to interim financial statements is permitted but not required in the initial year of application.
  • Early application is permitted.

Key Updates

  • Net Assets
    1. Will be classified as “with donor restriction” or “without donor restrictions”
    2. Enhanced disclosures for composition of self-imposed restrictions on “without donor restrictions”
    3. Enhanced disclosures for composition of “with donor restrictions”
  • New Liquidity Disclosures
    1. Quantitative information about the entity’s financial assets available at the balance sheet date to meet cash needs for general expenditures within one year.
      1. Availability could be affected by (1) the asset’s nature (2) external limits and (3) internal actions of a governing board.
      2. Disclosure could be on the face of the statements or in the notes to the financial statements.
    2. Qualitative information about how the entity manages its liquidity.
  • Enhanced Disclosures for Underwater Endowments
    1. Aggregate amounts by which funds are underwater
    2. Aggregate amount of original gifts for such funds
    3. Aggregate fair value
    4. Entity’s policy concerning appropriations from underwater endowments, to include any governing board policies or decisions to spend from such funds, and any actual expenditures during the years presented.
  • Functional Expenses
    1. Report expenses by nature AND function – either on the statement of activities, separate statement of functional expense or a schedule in the notes to the financial statements
    2. Disclose the method used to allocate costs among program and support functions
  • Investment Returns
    1. Present investment return net of investment expenses (internal and external) on the face of the statement of activities
    2. No longer required to disclose investment return components
  • Statement of Cash Flows
    1. Free choice between direct and indirect
    2. Presentation of indirect reconciliation is no longer required if using direct method
  • Use the placed-in-service approach for reporting expirations of restrictions on gifts of cash or other assets to be used to acquire or construct long-lived assets

For further discussion, please contact Barbara Finke, CPA, Principal at The LBA Group via telephone (904.224.9921) or .

Full Draft available at:

To view a PDF of this Alert, please click here.

Please contact your LBA professional at 904.396.4015 for additional assistance.

Global Stocks

U.S. Stocks

U.S. Economy

Fixed Income

Financial Planning

Global Stocks

The past two years have been volatile for stocks. There have been a number of crisis events, statistical anomalies, and economic concern that would normally drive stocks into much further downturns than we have experienced. The fact that the markets continue to remain resilient even in the face of anemic economic growth is somewhat impressive. Much of the resiliency is attributed to very accommodative central banks (low to negative interest rates plus asset purchases) and the long-term secular bull market tailwind that started in 2009.

There is still room to run in this unusual market cycle. We will start to worry when irrational exuberance is displayed by the average investor and valuations are at an extreme. We are nowhere near this point as investors remain pessimistic and valuations are not yet in bubble territory. International markets appear poised to have better returns over an intermediate time frame than U.S. stocks based on sentiment and valuation perspectives. Below is one of the more popular measure of valuation – price to future earnings. A higher number translates into a more expensive marketplace.

Emerging market stocks (China, India, Brazil, Russia, etc.) have been the top performers so far this year. This asset class has underperformed U.S. and International Developed stocks for quite some time before 2016 and are highly sensitive to commodities (see below) and the U.S. Dollar. Emerging markets saw $4.9 billion in investor inflows in August, topping U.S. Large Cap stocks. We see the strong inflows as a positive indicator, especially if oil and commodity prices continue to firm.

We remain bullish on Global Stocks.

U.S. Stocks

The market rally has broadened in recent weeks and we have experienced some of the strongest breadth numbers in years. Earnings seem to have turned a corner after experiencing a trough in the first quarter (chart below). As we enter the historically worst month for stocks (September), we would not be surprised to experience a shallow pullback, but as long as our economic picture does not deteriorate significantly, we would be buyers of certain stocks.



High Yielding Stocks
Our main concern for U.S. stocks are those paying high dividends, especially those that are low quality. Many investors who should be invested in bonds, have had to take on stock risk to receive decent income. This push into higher risk assets is the stated objective of the Fed’s low interest rate policy. These high yielding stocks have attracted more dollars than they should and are now very expensive. If you need a reminder for how rising interest rates impact high yielding investments, consider the year that then Fed Chair, Ben Bernanke, announced an end to the Quantitative Easing program ( May 2013). The S&P 500 returned 12% (red line below) after the announcement to the end of the year. However, the high yielders underperformed significantly.



We remain mildly bullish on (certain) U.S. stocks.

U.S. Election
Update to the chart from Ned Davis Research that we featured in July’s Market Commentary. The market has a similar trading pattern to historical Incumbent Party wins.



Vitriolic Campaign?
Compared to elections in the distant past, the rhetoric for this election cycle has been tame! This excerpt came from an Oppenheimer Funds presentation “Compelling Wealth Management Conversations.”


U.S. Economy

Growth in the U.S. should remain slow but positive. Currently there is a very low risk of recession in the next 3 to 6 months. Wages have not grown for quite some time and have demographic headwinds for the next few years. Over 10,000 baby boomers are retiring per day at the highest pay of their career. They are being replaced by millennials at much lower salaries. This is one of the main demographic forces that are putting downward pressure on wages.
The good news is that the average U.S. consumer is on much more solid footing than they were in 2007 and 2008 when it comes to debt as a percentage of disposable income. The chart below is from the St. Louis Fed. As credit conditions continue to ease and confidence continues to increase, the consumer could be the catalyst that boosts economic growth to more normal levels.


Fixed Income

It’s hard to believe that almost a third of global bonds are offering negative yields. This means you pay someone to hold your money – a concept that defies logic. With central banks determined to be accommodative, stocks appear to be much more attractive on a relative basis. Certain bonds are ok, especially if you need to offset stock market risk. We prefer to hold short to intermediate maturity bonds at this point in the interest rate cycle.


Financial Planning: Points to Consider as You Approach Retirement

If you’re a decade or so away from retirement, you’ve probably spent at least some time thinking about this major life change. How will you manage the transition? Will you travel, take up a new sport or hobby, or spend more time with friends and family? Should you consider relocating? Will you continue to work in some capacity? Will changes in your income sources affect your standard of living? When you begin to ponder all the issues surrounding the transition, the process can seem downright daunting. However, thinking about a few key points now, while you still have years ahead, can help you focus your efforts and minimize the anxiety that often accompanies the shift.

Reassess your living expenses – A step you will probably take several times between now and retirement–and maybe several more times thereafter–is thinking about how your living expenses could or should change. For example, while commuting and other work-related costs may decrease, other budget items may rise. Health-care costs, in particular, may increase as you progress through retirement. Try to estimate what your monthly expense budget will look like in the first few years after you stop working. And then continue to reassess this budget as your vision of retirement becomes reality. According to a recent survey, 38% of retirees said their expenses were higher than they expected. Keeping a close eye on your spending in the years leading up to retirement can help you more accurately anticipate your budget during retirement.

Consider all your income sources – First, figure out how much you stand to receive from Social Security. In early 2016, the average monthly retirement benefit was about $1,300. The amount you receive will depend on your earnings history and other unique factors. You can elect to receive retirement benefits as early as age 62, however, doing so will result in a reduced benefit for life. If you wait until your full retirement age (66 or 67, depending on your birth date) or later (up to age 70), your benefit will be higher. The longer you wait, the larger it will be.

You can get an estimate of your retirement benefit at the Social Security Administration website, You can also sign up for a my Social Security account to view your online Social Security statement, which contains a detailed record of your earnings and estimates for retirement, survivor, and disability benefits. Your retirement benefit estimates include amounts at age 62, full retirement age, and age 70. Check your statement carefully and address any errors as soon as possible.

Next, review the accounts you’ve earmarked for retirement income, including any employer benefits. Start with your employer-sponsored plan, and then consider any IRAs and traditional investment accounts you may own. Try to estimate how much they could provide on a monthly basis. If you are married, be sure to include your spouse’s retirement accounts as well. If your employer provides a traditional pension plan, contact the plan administrator for an estimate of that monthly benefit amount as well. Do you have rental income? Be sure to include that in your calculations. Might you continue to work? Some retirees find that they are able to consult, turn a hobby into an income source, or work part-time. Such income can provide a valuable cushion that helps retirees postpone tapping their investment accounts, giving the assets more time to potentially grow. Some other ways to generate extra cash during retirement include selling gently used goods (such as furniture or designer accessories), pet sitting, and participating in the sharing economy–e.g., using your car as a taxi service.

Pay off debt, power up your savings – Once you have an idea of what your possible expenses and income look like, it’s time to bring your attention back to the here and now. Draw up a plan to pay off debt and power up your retirement savings before you retire.

Why pay off debt? Entering retirement debt-free–including paying off your mortgage–will put you in a position to modify your monthly expenses in retirement if the need arises. On the other hand, entering retirement with a mortgage, loan, and credit-card balances will put you at the mercy of those monthly payments. You’ll have less of an opportunity to scale back your spending if necessary.

Why power up your savings? In these final few years before retirement, you’re likely to be earning the highest salary of your career. Why not save and invest as much as you can in your employer-sponsored retirement savings plan and/or IRAs? Aim for maximum allowable contributions. And remember, if you’re 50 or older, you can take advantage of catch-up contributions, which enable you to contribute an additional $6,000 to your 401(k) plan and an extra $1,000 to your IRA in 2016.

Manage taxes: As you think about when to tap your various resources for retirement income, remember to consider the tax impact of your strategy. For example, you may want to withdraw money from your taxable accounts first to allow your employer-sponsored plans and IRAs more time to potentially benefit from tax-deferred growth. Keep in mind, however, that generally you are required to begin taking minimum distributions from tax-deferred accounts in the year you turn age 70½, whether or not you actually need the money. (Roth IRAs are an exception to this rule.) If you decide to work in retirement while receiving Social Security, understand that income you earn may result in taxable benefits. IRS Publication 915 offers a worksheet to help you determine whether any portion of your Social Security benefit is taxable. If leaving a financial legacy is a goal, you’ll also want to consider how estate taxes and income taxes for your heirs figure into your overall decisions. Managing retirement income to result in the best possible tax scenario can be extremely complicated. Qualified tax and financial professionals can provide valuable insight and guidance.

Account for health care – In 2015, the Employee Benefit Research Institute reported that the average 65-year-old married would need $213,000 in savings to have at least a 75% chance of meeting their insurance premiums and out-of-pocket health-care costs in retirement. This figure illustrates why health care should get special attention as you plan the transition to retirement. As you age, the portion of your budget consumed by health-related costs (including both medical and dental) will likely increase. Although original Medicare will cover a portion of your costs, you’ll still have deductibles, copayments, and coinsurance. Unless you’re prepared to pay for these costs out of pocket, you may want to purchase a supplemental Medigap insurance policy. Medigap policies are sold by private health insurers and are standardized and regulated by both state and federal law. These plans cover certain specified services, but offer different combinations of coverage. Some cover all or part of your Medicare deductibles, copayments, or coinsurance costs. Another option is Medicare Advantage (also known as Medicare Part C), which allows Medicare beneficiaries to receive health care through managed care plans and private fee-for-service plans. To enroll in Medicare Advantage, you must be covered under both Medicare Part A and Medicare Part B. For more information, visit Also think about what would happen if you or your spouse needed home care, nursing home care, or other forms of long-term assistance, which Medicare and Medigap will not cover. Long-term care costs vary substantially depending on where you live and can be extremely expensive. For this reason, people often consider buying long-term care insurance. Policy premiums may be tax deductible, based on a number of different factors. If you have a family history of debilitating illness such as Alzheimer’s, have substantial assets you’d like to protect, or want to leave assets to heirs, a long-term care policy may be worth considering.

This information is provided by The LBA Group for the personal use of our clients. It should not be construed as investment, tax or legal advice. Please be sure to consult your CPA or attorney before taking any actions that may have tax consequences and contact The LBA Group | LBA Wealth Management regarding any investment decisions.
This communication is strictly intended for individuals residing in the state(s) of FL. No offers may be made or accepted from any resident outside the specific states referenced.


Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.

Global Stocks

U.S. Stocks

U.S. Economy

Fixed Income

Financial Planning

Global Stocks

Looking forward, the evidence points towards a stronger global market

The global stock market has responded very strongly after the Referendum vote in the U.K. We look at many indicators that have historically been very telling and weigh the evidence from these indicators. Often we can get mixed signals from our indicators leaving us with a neutral view of the markets. Right now, the indicators are pointing towards a decisively bullish market for the next six to twelve months.

Not to cherry pick indicators, but the chart below is one of the aforementioned indicators – a breadth reading. Measuring breadth gives us insight on the health of an advancing market. A market displaying poor breadth (meaning very few stocks doing well), is not healthy and has historically resulted in poor market performance. The chart below shows the percentage of stocks across the globe that have been moving up over the past 50 and 200 days (70% and 62% respectively). This type of broad based movement has had very bullish implications as you can see from the performance numbers at the bottom of the chart.

WM AUG CHart 1

The above chart comes as a relief to us because International investments have been laggards for quite some time now. Despite being overvalued relative to our international trading partners and having tighter monetary policy, the U.S. has far outperformed International investments over the past few years. Charts like the one below remind us why we are in International investments. Despite being disappointed with our international exposure’s recent underperformance, our indicators continue to turn very positive towards global stocks.

WM AUG Chart 2We remain bullish on Global Stocks.    


U.S. Stocks

July was a strange month for U.S. stocks. The first half of the month was incredibly strong and was defined by a reversal from the Brexit panic, breadth thrusts, and new all-time highs in the popular averages. The second half of the month was defined by extremely low volatility. For the last 12 trading days in July, the S&P 500 did not have a single day with a gain or loss of more than 0.5%, a feat not accomplished since 1995.

We are in the middle of earnings season and almost 80% of companies that have reported have beaten lowered Wall Street expectations. If you are unable to jump over a high bar, the easiest thing to do is lower the bar. Earnings expectations are a constant game between management and Wall Street (see chart below). Nevertheless, an 80% beat rate does not happen often and gives us more confidence that earnings are firming. The question is whether earnings will accelerate enough to be a catalyst for the next move up for stocks, or just enough to not get in the way of low interest rates and a friendly Fed.

We remain mildly bullish on U.S. stocks.


WM AUG Chart 4


U.S. Economy

The next move up on the earnings front will need to come from a pickup in revenue, which is largely dependent upon the Economy. The economy continues to grow, slightly below target. The housing market continues to be strongly supported by the formation of new households. We still believe there is a low chance of recession on the horizon; low productivity and wage growth will keep the economic advance somewhat muted. However, the growing economy combined with an accommodative fed policy should keep the chances of a recession unlikely. While Brexit temporarily put the fed on hold, inflation is getting close to their target of 2%, where they would resume raising interest rates. While we do not expect this before the U.S. election, it could very likely happen right afterwards.

Do Recessions Matter for Elections?

The economy has been in a recession five times on Election Day. Four out of those five times resulted in an incumbent party loss. When the economy has not been in a recession, the odds of the incumbent party retaining control of the White House has jumped to 71%. Our indicators are pointing towards a very low probability of recession. We thought this was an interesting study from Ned Davis Research.


WM AUG Chart 5


Fixed Income

Yields dropped across the globe after the Brexit vote and expectations for an interest rate hike from the Federal Reserve disappeared from the face of 2016. The 10 year Treasury bond yield dropped to a record level of 1.367% at the beginning of July and quickly rebounded to finish the month at 1.45%. We agree that this is very low, but how low can they go? They can evidently go into negative territory as evidenced by other developed market 10 year yields (Japan, Germany, Switzerland, etc.).

WM AUG Chart 6 


Financial Planning: Caring for Your Aging Parents

Mom? Dad? We need to talk

The first step you need to take is talking to your parents. Find out what their needs and wishes are. In some cases, however, they may be unwilling or unable to talk about their future. This can happen for a number of reasons, including:

  • Incapacity
  • Fear of becoming dependent
  • Resentment toward you for interfering
  • Reluctance to burden you with their problems

If such is the case with your parents, you may need to do as much planning as you can without them. If their safety or health is in danger, however, you may need to step in as caregiver. The bottom line is that you need to have a plan. If you’re nervous about talking to your parents, make a list of topics that you need to discuss. That way, you’ll be less likely to forget anything. Here are some things that you may need to talk about:

  • Long-term care insurance: Do they have it? If not, should they buy it?
  • Living arrangements: Can they still live alone, or is it time to explore other options?
  • Medical care decisions: What are their wishes, and who will carry them out?
  • Financial planning: How can you protect their assets?
  • Estate planning: Do they have all of the necessary documents (e.g., wills, trusts)?
  • Expectations: What do you expect from your parents, and what do they expect from you?

Preparing a personal data record

Once you’ve opened the lines of communication, your next step is to prepare a personal data record. This document lists information that you might need in case your parents become incapacitated or die. Here’s some information that should be included:

  • Financial information: Bank accounts, investment accounts, real estate holdings
  • Legal information: Wills, durable power of attorneys, health-care directives
  • Funeral and burial plans: Prepayment information, final wishes
  • Medical information: Health-care providers, medication, medical history
  • Insurance information: Policy numbers, company names
  • Advisor information: Names and phone numbers of any professional service providers
  • Location of other important records: Keys to safe-deposit boxes, real estate deeds

Be sure to write down the location of documents and any relevant account numbers. It’s a good idea to make copies of all of the documents you’ve gathered and keep them in a safe place. This is especially important if you live far away, because you’ll want the information readily available in the event of an emergency.

Where will your parents live?

If your parents are like many older folks, where they live will depend on how healthy they are. As your parents grow older, their health may deteriorate so much that they can no longer live on their own. At this point, you may need to find them in-home health care or health care within a retirement community or nursing home. Or, you may insist that they come to live with you. If money is an issue, moving in with you may be the best (or only) option, but you’ll want to give this decision serious thought. This decision will impact your entire family, so talk about it as a family first. A lot of help is out there, including friends and extended family. Don’t be afraid to ask.

Evaluating your parents’ abilities

If you’re concerned about your parents’ mental or physical capabilities, ask their doctor(s) to recommend a facility for a geriatric assessment. These assessments can be done at hospitals or clinics. The evaluation determines your parents’ capabilities for day-to-day activities (e.g., cooking, housework, personal hygiene, taking medications, making phone calls). The facility can then refer you and your parents to organizations that provide support.

If you can’t be there to care for your parents, or if you just need some guidance to oversee your parents’ care, a geriatric care manager (GCM) can also help. Typically, GCMs are nurses or social workers with experience in geriatric care. They can assess your parents’ ability to live on their own, coordinate round-the-clock care if necessary, or recommend home health care and other agencies that can help your parents remain independent.

Get support and advice

Don’t try to care for your parents alone. Many local and national caregiver support groups and community services are available to help you cope with caring for your aging parents. If you don’t know where to find help, contact your state’s department of eldercare services. Or, call (800) 677-1116 to reach the Eldercare Locator, an information and referral service sponsored by the federal government that can direct you to resources available nationally or in your area. Some of the services available in your community may include:

  • Caregiver support groups and training
  • Adult day care
  • Respite care
  • Guidelines on how to choose a nursing home
  • Free or low-cost legal advice

Once you’ve gathered all of the necessary information, you may find some gaps. Perhaps your mother doesn’t have a health-care directive, or her will is outdated. You may wish to consult an attorney or other financial professional whose advice both you and your parents can trust.

This information is provided by The LBA Group for the personal use of our clients. It should not be construed as investment, tax or legal advice. Please be sure to consult your CPA or attorney before taking any actions that may have tax consequences and contact The LBA Group | LBA Wealth Management regarding any investment decisions.
This communication is strictly intended for individuals residing in the state(s) of FL. No offers may be made or accepted from any resident outside the specific states referenced.


Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.

Market Recap

Global Stocks

U.S. Stocks

U.S. Economy

Fixed Income

Understanding Risk

Market Recap: The Vote Heard ‘Round the World

Market reaction to the U.K. exiting the European Union was violent. It was the 64th worst day for the S&P 500 post World War 2. Safe haven assets: gold, the Yen, and the U.S. dollar were the strongest performers, while investments in British stocks, the Pound, and stocks across the globe suffered.

While the initial reaction was certainly severe, investors have taken a step back to ask, what does the world’s most expensive divorce mean? There are no known true facts right now other than the Brits were voting against globalization and the free flow of goods, people, and capital. Obviously, over the short to intermediate term this will be bad for the British economy, but will they be better off over the long term? We can all speculate, but no one truly knows the answer especially considering the terms of the exit deal will not be known for some time. The only thing we do know, is that multi-national companies (JP Morgan, Goldman Sachs, etc.) will most likely withhold investments in their U.K. business units.

Global Stocks: What Brexit Did Accomplish… 

The unexpected vote to “leave” produced an oversold condition in stocks. It also returned pessimism to its highest levels since February and dropped Global stock valuations to their lowest level since early April. Remember, markets have historically performed the best when pessimism is abundant among the investing public and valuations are low.

However, the main thing that Brexit accomplished was it encouraged central bankers to remain accommodative. Here in the U.S., Brexit will be the Fed’s next excuse to not hike rates again this year. In fact, bond markets are pricing in the possibility of a rate decrease. A 10-year Treasury bond yields 1.4% (the lowest yield ever – see below). Ten-year yields in Japan, Germany, and Switzerland ended June in negative territory.

WM July Chart 1B

WM July Chart 1




We remain bullish on Global Stocks.                         Source: Yahoo Finance

U.S. Stocks: Technicals and Fundamentals

Will Geisdorf at Ned Davis Research (our trusted research partner) did an analysis of two big “down” days in the market followed by three big “up” days. We experienced this price action after the Brexit results were revealed. Going back to 1928, there were five historical cases with a similar pattern. The message from the chart below (historical cases reflected) is to expect volatility over the next month or so but after that, markets appear to have done pretty well.

With the Fed encouraged to remain accommodative, solid technicals, and eventual election resolution, U.S. stocks are poised for an advance past all-time highs. However, compared to our international trading partners, valuations will continue to be a headwind, and a sluggish economy (not including whatever fallout from Brexit) could keep market gains tempered.

WM July Chart 2
We remain mildly bullish on U.S. Stocks.    Source: @WGeisdorf & @NDR_Research

The Next Unknown and the U.S. Economy

Now that the fog overhanging the markets the past couple of months has been partially lifted (Brexit), we will turn our attention to the next big unknown event: the U.S. Presidential election. Typically, once uncertainty over who will be the next President is removed, the market responds positively with the Incumbent Party winning as the best case scenario, historically.

The housing market has been a bright spot and will continue to be a solid contributing factor to GDP growth. Mortgage rates and credit standards remain favorable and tight housing inventory is putting upward pressure on prices. Household formation remains positive and should provide a boost to housing demand going forward.

Nonfarm payrolls and the unemployment rate are improving at a slower pace, but labor demand remains solid and the layoff trend is near its lowest level since 1973. Additionally, the labor force participation rate has picked up modestly. Compensation growth remains subdued, but if we see further tightening in labor markets, we could start to see some upward pressure on wages which could lead to higher inflation – a likely scenario for next year.

Overall, the risks to the U.S. Economy have increased due to a stronger dollar, tighter financial conditions from Brexit, and increased political uncertainty. Despite the slight slowdown, we still do not think a recession is on the horizon for the U.S.

WM July Chart 3Source: Ned Davis Research


Fixed Income

Bonds have been solid performers for the first half of this year. Yields have dropped 85 basis points. This may not seem like a lot, but it is a substantial change from the beginning of the year, especially considering our historically low interest rate environment.

Corporate bonds are a good place to be right now in the fixed income markets, as well as commercial mortgage backed securities and Treasury Inflation Protected Securities (TIPS).


Understanding Risk

What you probably already know about risk

Even though you might never have thought about the subject, you’re probably already familiar with many kinds of risk from life experiences. For example, it makes sense that a scandal or lawsuit that involves a particular company will likely cause a drop in the price of that company’s stock, at least temporarily. If one car company hits a home run with a new model, that might be bad news for competing automakers. In contrast, an overall economic slowdown and stock market decline might hurt most companies and their stock prices, not just in one industry.

However, there are many different types of risk to be aware of. Volatility is a good place to begin as we examine the elements of risk in more detail.

What makes volatility risky?

Suppose that you had invested $10,000 in each of two mutual funds 20 years ago, and that both funds produced average annual returns of 10 percent. Imagine further that one of these hypothetical funds, Steady Freddy, returned exactly 10 percent every single year. The annual return of the second fund, Jekyll & Hyde, alternated–5 percent one year, 15 percent the next, 5 percent again in the third year, and so on. What would these two investments be worth at the end of the 20 years?

It seems obvious that if the average annual returns of two investments are identical, their final values will be, too. But this is a case where intuition is wrong. If you plot the 20-year investment returns in this example on a graph, you’ll see that Steady Freddy’s final value is over $2,000 more than that from the variable returns of Jekyll & Hyde. The shortfall gets much worse if you widen the annual variations (e.g., plus-or-minus 15 percent, instead of plus-or-minus 5 percent). This example illustrates one of the effects of investment price volatility: Short-term fluctuations in returns are a drag on long-term growth. (Note: This is a hypothetical example and does not reflect the performance of any specific investment. This example assumes the reinvestment of all earnings and does not consider taxes or transaction costs.)

Although past performance is no guarantee of future results, historically the negative effect of short-term price fluctuations has been reduced by holding investments over longer periods. But counting on a longer holding period means that some additional planning is called for. You should not invest funds that will soon be needed into a volatile investment. Otherwise, you might be forced to sell the investment to raise cash at a time when the investment is at a loss.

Other types of risk

Here are a few of the many different types of risk:

  • Market risk: This refers to the possibility that an investment will lose value because of a general decline in financial markets, due to one or more economic, political, or other factors.
  • Inflation risk: Sometimes known as purchasing power risk, this refers to the possibility that prices will rise in the economy as a whole, so your ability to purchase goods and services would decline. For instance, your investment might yield a 6 percent return, but if the inflation rate rises to double digits, the invested dollars that you got back would buy less than the same dollars today. Inflation risk is often overlooked by fixed income investors who shun the volatility of the stock market completely.
  • Interest rate risk: This relates to increases or decreases in prevailing interest rates and the resulting price fluctuation of an investment, particularly bonds. There is an inverse relationship between bond prices and interest rates. As interest rates rise, the price of bonds falls; as interest rates fall, bond prices tend to rise. If you need to sell your bond before it matures and your principal is returned, you run the risk of loss of principal if interest rates are higher than when you purchased the bond.
  • Reinvestment rate risk: This refers to the possibility that funds might have to be reinvested at a lower rate of return than that offered by the original investment. For example, a five-year, 3.75 percent bond might mature at a time when an equivalent new bond pays just 3 percent. Such differences can in turn affect the yield of a bond fund.
  • Default risk (credit risk): This refers to the risk that a bond issuer will not be able to pay its bondholders interest or repay principal.
  • Liquidity risk: This refers to how easily your investments can be converted to cash. Occasionally (and more precisely), the foregoing definition is modified to mean how easily your investments can be converted to cash without significant loss of principal.
  • Political risk: This refers to the possibility that new legislation or changes in foreign governments will adversely affect companies you invest in or financial markets overseas.
  • Currency risk (for those making international investments): This refers to the possibility that the fluctuating rates of exchange between U.S. and foreign currencies will negatively affect the value of your foreign investment, as measured in U.S. dollars.

The relationship between risk and reward

In general, the more risk you’re willing to take on (whatever type and however defined), the higher your potential returns, as well as potential losses. This proposition is probably familiar and makes sense to most of us. It is simply a fact of life–no sensible person would make a higher-risk, rather than lower-risk, investment without the prospect of receiving a higher return. That is the tradeoff. Your goal is to maximize returns without taking on an inappropriate level or type of risk.

Understanding your own tolerance for risk

The concept of risk tolerance is twofold. First, it refers to your personal desire to assume risk and your comfort level with doing so. This assumes that risk is relative to your own personality and feelings about taking chances. If you find that you can’t sleep at night because you’re worrying about your investments, you may have assumed too much risk. Second, your risk tolerance is affected by your financial ability to cope with the possibility of loss, which is influenced by your age, stage in life, how soon you’ll need the money, your investment objectives, and your financial goals. If you’re investing for retirement and you’re 35 years old, you may be able to endure more risk than someone who is 10 years into retirement, because you have a longer time frame before you will need the money. With 30 years to build a nest egg, your investments have more time to ride out short-term fluctuations in hopes of a greater long-term return.

Reducing risk through diversification

Don’t put all your eggs in one basket. You can potentially help offset the risk of any one investment by spreading your money among several asset classes. Diversification strategies take advantage of the fact that forces in the markets do not normally influence all types or classes of investment assets at the same time or in the same way (though there are often short-term exceptions). Swings in overall portfolio return can potentially be moderated by diversifying your investments among assets that are not highly correlated–i.e., assets whose values may behave very differently from one another. In a slowing economy, for example, stock prices might be going down or sideways, but if interest rates are falling at the same time, the price of bonds likely would rise. Diversification cannot guarantee a profit or ensure against a potential loss, but it can help you manage the level and types of risk you face.

In addition to diversifying among asset classes, you can diversify within an asset class. For example, the stocks of large, well-established companies may behave somewhat differently than stocks of small companies that are growing rapidly but that also may be more volatile. A bond investor can diversify among Treasury securities, more risky corporate securities, and municipal bonds, to name a few. Diversifying within an asset class helps reduce the impact on your portfolio of any one particular type of stock, bond, or mutual fund.

Evaluating risk: where to find information about investments

You should become fully informed about an investment product before making a decision. There are numerous sources of information. In addition to the information available from the company offering an investment–for example, the prospectus of a mutual fund–you can find information in third-party business and financial publications and websites, as well as annual and other periodic financial reports. The Securities and Exchange Commission (SEC) also can supply information.

Third-party business and financial publications can provide credit ratings, news stories, and financial information about a company. For mutual funds, third-party sources provide information such as ratings, financial analysis, and comparative performance relative to peers.

Note: Before investing in a mutual fund, carefully consider its investment objectives, risks, fees and expenses, which can be found in the prospectus available from the fund; read it and consider it carefully before investing.


This information is provided by The LBA Group for the personal use of our clients. It should not be construed as investment, tax or legal advice. Please be sure to consult your CPA or attorney before taking any actions that may have tax consequences and contact The LBA Group | LBA Wealth Management regarding any investment decisions.
This communication is strictly intended for individuals residing in the state(s) of FL. No offers may be made or accepted from any resident outside the specific states referenced.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.