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Weekly Market Recap

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Equity markets around the world rallied once again last week, driven by continued strength in earnings, notable progress on vaccine distribution, dovish commentary by Fed Chairman Jerome Powell, and some progress towards another round of economic stimulus in the US.

On the vaccine front, Sinovac Biotech announced that its vaccine was approved for use in China, Pfizer’s vaccine was approved for use in Japan, and the Biden administration announced that the US had reached deals with both Pfizer and Moderna for another 100 million vaccine doses from each company. Dr. Anthony Fauci now expects that any American who wants a vaccine will be able to get one in the spring (possibly as early as April).

Treasury markets responded to all of this good news by sending yields higher, with the 30-year breaching 2% for the first time since Feb 19th of last year (the same day equity markets reached their pre-pandemic peak). Meanwhile the 2s10s curve reached 110 basis points, the highest level since the pandemic began. Investment grade corporate credit spreads tightened by 2bp, not enough to offset the move in rates. Muni and high yield bond spreads tightened more vigorously, pushing prices higher in those markets.

Oil extended its 2021 rally, with WTI finishing the week up another 4.6%. As a result, the energy sector extended its lead as the best-performing sector so far in 2021, while utilities were the worst performer last week.

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#4 in the Book of Lists and #1 in our Clients’ Hearts

We are honored, once again, to be listed among Utah’s top Registered Investment Advisors in Utah Business Magazine’s 2020 Book of Lists publication.

Albion Financial Group has been ranked on these lists on numerous occasions and we are grateful for the recognition of our dedication to our clients. Additionally, several individuals from our team have been recognized for their excellence on the magazine’s popular 40 UNDER 40 and Premier Advisors lists.

As Albion now approaches our fortieth year in business, we are proud of our pioneering fiduciary legacy and the life-long guidance we provide to the individuals and families within our client community.

Read our story to learn more about Albion Financial Group.

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Weekly Market Recap

Every Monday morning, download our Weekly Market Recap for Commentary and Data, with Economy and Earnings, Equity Valuation, Interest Rates, and Inflation, including infographic charts.

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FAQ: Bitcoin 101

Bitcoin, and more broadly cryptocurrencies, are seeing increasing news coverage. This has left many wondering: “What is bitcoin and how does it work?” For those trying to better understand bitcoin and cryptocurrencies, here’s our understanding on a handful of frequently asked questions:

What is bitcoin?

Bitcoin is a digital “currency” that can be used to purchase goods and services (only at select locations, for now), or held as a store of speculative value. There are many differences between bitcoin and traditional currency, but the principal difference is that bitcoin is not issued by a government or regulated by a government entity.

Where did bitcoin come from?

This is where it gets a bit mysterious. Bitcoin was created by “Satoshi Nakamoto”, an unknown individual or group of individuals. Under this pseudonym a white paper was circulated in 2008 that first described the concept for a transparent, visible peer-to-peer payment system authenticated by a vast network that does not require the presence of a third party middleman – such as banks or other financial institutions. By combining cryptography and unique software protocols, Satoshi Nakamoto originated a payment system that allowed participants to transact directly with one another.

How is it possible to make currency transactions without banks?

Bitcoin transactions have been made possible with the encryption technology underpinning cryptocurrencies known as “blockchain.” Blockchain is a global Internet-wide distributed network that is at its core a decentralized accounting ledger recording every bitcoin transaction. The blockchain ledger is shared by way of an extensive network and the information therein is validated by network “miners” every ten minutes by solving mathematical puzzles using very fast computers and high amounts of electricity. This network validated ledger is crucial as it ascribes proof of ownership to digital assets like bitcoin. If the ledger proves ownership, participants can have trust when making transactions.

Tying together the concept of bitcoin and blockchain, think of it this way – the bitcoin “coins” themselves are simply seats within the aforementioned blockchain ledger. Anyone can buy into or sell out of this ledger at any time – with no prior consent, and with little-to-no fees. Therefore, when buying a bitcoin you are essentially acquiring one of a number of fixed slots within this ledger. You leave the ledger by selling your bitcoin to someone else who wishes to buy in.

If I want to buy bitcoin, how would I make a purchase? Do I need to buy a whole coin?

There are many exchanges out there that allow participants to deposit US dollars (or other widely accepted global currencies) directly from traditional bank accounts in exchange for bitcoin. Some cryptocurrency exchanges also have mobile apps allowing participants to buy bitcoin anytime, anywhere.

Additionally, participants need not buy a whole bitcoin to participate. The smallest unit of bitcoin, a “satoshi”, is the size of one hundred millionth of a single bitcoin (0.00000001 BTC).

What are the risks to purchasing and holding bitcoin? The current price seems high!

It depends on the type of risk one is referring to. Let’s start with general cybersecurity threats. Cryptocurrency exchanges, including those which trade bitcoin, have been hacked before, and will likely be hacked again. Perhaps the most notable example was in 2014 when “Mt. Gox”, the largest bitcoin exchange at the time, failed as a direct result of hackers and vast bitcoin theft. Security surrounding cryptocurrency exchanges have notably improved since Mt. Gox’s failure. Individuals can use bitcoin digital wallets and vaults that are encrypted with a secure network key which dramatically reduces the possibility of being hacked.

Another key risk worth touching on is the possibility of loss of capital for those speculating on its price. Bitcoin has experienced a monumental run as of late. There are a variety of opinions and market variables as to why this has occurred. Will this price rally continue, or crash? Nobody knows for sure. However one way to think about it is, by design, bitcoin was given a finite supply – determined at inception to be 21,000,000 bitcoins – and we are now seeing growing awareness leading to rising demand. This basic supply / demand dynamic may help describe, at least at some level, recent price moves in bitcoin. That being said, just because more cryptocurrency enthusiasts are now entering the market seemingly pushing up prices does not mean everyone should take a position. With a greater understanding of bitcoin – both its potential opportunities and risks – paired with careful holistic wealth advice, more educated decision making can be made on potential bitcoin / cryptocurrency participation.

We hope that this FAQ provides a helpful introduction to bitcoin / cryptocurrencies, and perhaps even sparks your desire to want to learn more. The investment team at Albion Financial Group is well versed in bitcoin / cryptocurrencies and blockchain technology. Please reach out to us at 801-487-3700 or info@albionfinancial.com if we can answer your bitcoin, investment, or financial planning questions.

Disclaimer: Information provided is for educational purposes only. This is not a recommendation to buy or sell any security or cryptocurrency. There are significant risks associated with cryptocurrency that are unique and must not be taken lightly. It is critical that you perform your own due diligence prior to engaging in any buy or sell transaction. The value of bitcoin, or any cryptocurrency can, and may, ultimately go to zero.

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2021 Planning Guide: What You Need to Know

A quick reference for tax rates, savings and retirement contributions, college savings strategies, as well as Social Security and Medicare information.

Everyone’s financial situation is unique – the information found in the 2021 Planning Guide should only be used as a foundation for discussing your individual circumstances with a CERTIFIED FINANCIAL PLANNER™ practitioner, legal or tax professional.

The wealth advising team at Albion Financial Group understands the complexities of the current wealth management environment and would be honored to discuss your financial situation and strategies that may help you reach your personal financial goals.

Please give us a call at (801) 487-3700 or email dpope@albionfinancial.com.

We wish you a prosperous 2021.

Devin Pope, CFP®, MBA
Senior Wealth Advisor
Albion Financial Group

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Conference Call Recording – November 5, 2020

Listen back to Albion’s November conference call.

  • 00:00  John Bird, President & CEO – Introduction
  • 03:27 Jason Ware, CIO – Markets & Economy
  • 11:54 Doug Wells, Partner – Planning Strategies
  • 26:09 Q & A
  • 27:28 How is potential regulation of “Big Tech” affecting our investments?
  • 33:23 What should I be doing to protect my portfolio in the context of so much ambiguity?
  • 41:21 Who can I talk to if I am anxious about my portfolio for any reason?
  • 43:18 With the ongoing pandemic and a potential change of president, are there investment changes I should make?
  • 48:48 Conclusion
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Conference Call Recording – October 6, 2020

Listen back to Albion’s October conference call.
00:00 – John Bird, President & CEO: Introduction
14:01 – Jason Ware, CIO: Markets and Economy
28:17 – Liz Bernhard, Senior Wealth Advisor: Planning and Tactics
41:44 – Q&A

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Planners’ Corner – August 20, 2020

Should I refinance?

Mortgage rates are at historic lows. According to Bankrate, the national benchmark rate for a 30-year fixed refinance mortgage is 3.16% and a 15-year fixed refinance mortgage is 2.62% (8/27/2020). It is worth noting that rates for refinancing tend be a bit higher than for purchases. Many clients are wondering if they should refinance and it seems like the answer would be, “yes,” however, not unlike many financial planning questions we address, the real answer is, “it depends.”

Yes, refinancing at a lower rate will reduce your monthly payment. But, it may not reduce the total payment you make over the life of your loan. One of the most determinate variables in the refinancing equation is how long you’ve had your current mortgage.

For example, we have a client who was looking to refinance a few months ago. They were 10 years into a 30-year fixed mortgage at 4.375% and were looking to refinance into a new 30-year fixed loan at 3.5%. Sounds like a good move, right? Their monthly payment would drop by $400 which is a savings they would feel right away. But, over the life of the loan, they would actually end up paying an additional $15,000 of interest. Why? Because more of the monthly payment goes towards interest in the early years of a mortgage. When you refinance, you restart the interest clock. In our client’s example, they already paid 10 years of interest. If they continued paying on their current loan at 4.375%, they would pay a total of $128,000 in interest over the life of the loan. If they refinanced at 3.5%, they would end up paying a total of $143,000 in interest.

If the client chose to invest their monthly savings ($400) they could potentially earn more than the additional interest of $15,000 thus making the refinance a more attractive option.

For simplicity sake we are not accounting for closing costs, but they do have an impact on the refinancing decision. Additionally, a new refinance fee – called the “adverse market” fee – is set to go into effect on December 1st of this year. It will add a 0.50% charge to the vast majority of refinances. The fee is applied to the total loan amount. For example, if you take out a $300,000 mortgage, you will pay an additional $1,500 in closing costs.

So, should you refinance? Again, the answer is, “it depends.” How long have you been paying on your current mortgage? If you haven’t had your current mortgage for very long, a refinance is likely more compelling, especially if you can do it before the new fee goes into effect later this year.

Other important questions. How much lower will the rate be with a refinance? What will you do with the monthly savings? Are you trying to shorten the term of your loan?

We have helped many clients work through refinancing decisions. Please reach out if you have questions about your current mortgage or other loans. We are happy to help you determine the best decision for your individual circumstance.

by Liz Bernhard & Danielle Gregory, August 2020
Senior Wealth Advisors at Albion Financial Group
www.albionfinancial.com | 801-487-3700

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Planners’ Corner – May 15, 2020

Often, the Planners’ Corner is used to provide straight forward, actionable guidance from our planners and advisors. In these extraordinary times, it’s a piece of behavioral psychology that will beset the following text. We are working hard to provide insights into the changing world around us using a plethora of mediums – conference calls, blog posts, emails, phone calls, video chats, TV appearances, social media posts, etc. Yet we can’t discount that the world has seemingly tempered to a halt. As a community, we do our best to make do, but sometimes fear and anxiety permeate our best efforts at normalcy.

It was once thought that ostriches buried their heads in the sand to avoid danger. Although a reasonable assumption, it’s wrong. This hasn’t stopped the term “ostrich effect” from bleeding into the study of behavioral finance. The misconception about why ostriches bury their heads in the sand, led to a broad definition describing this effect as “avoiding exposing oneself to [financial] information that one fears may cause psychological discomfort.” As with every story, there are two sides – some tend to find themselves falling victim to the over monitoring of finances in periods of high uncertainty and volatility. Coined the “meerkat effect” due to a change in behavior that resembles more of a hyper-vigilant meerkat than a head in the sand ostrich. Regardless of whether we act more like ostriches, meerkats, or just humans – our built-in psychology can reinforce negative emotions in times of uncertainty.

Whether we like it or not, some aspect of the ostrich effect influences us within or outside of our financial lives – avoiding listening to a voicemail because we know its contents are undesirable, not checking financial statements for fear of unpleasant details, putting off an uncomfortable phone call, or unnecessarily rescheduling a filling at the dentist. We, as humans, experience this effect even with the most minor unpleasantries. Financial health is no minor detail. It’s easy for financial advisors and investment gurus to repeat the same truisms over and over in times like this to aid clients who are wading in murky waters. However, we should never discount the unprecedented nature of this pandemic as it relates to all of our ever-changing situations.

So why do ostriches bury their head in the sand? They dig holes to keep their eggs, and occasionally insert their heads into the ground to turn the eggs. They are nurturing, not hiding. This is time we can spend nurturing our financial eggs, controlling what we can control. Below are 5 steps we can take, together, to manage our financial and mental health during and after the novel coronavirus:

Talk to us, talk to others – We do our best to reach out to all clients personally, both prior to and during this time. Discussing finance, family, friends, canceled trips, or plans for the future are all suitable topics. We are here to listen to you, regardless of the topic. Communicating with our clients does as much for us as it does for you – we all need the personal connection right now. Remember to connect with those you love via phone or video chat or catch up with someone you haven’t spoken to in years.

Automate – Finances can fall by the wayside when our health is at risk. Manually making transfers, withdrawals, paying bills, and contributing to retirement accounts can feel tedious and stressful right now. Let us help you automate your financial life so that you can focus on what’s important.

Plan with real data – Financial planning is probably not near the top of many lists right now. However, I would be hard-pressed to find a better time to properly plan. Working together to understand and finetune your entire financial picture can be a great way to confront both sides of this psychological coin. Planning with estimates is good, planning with data is better. When we understand what is coming in versus what goes out while factoring in all assets you have, we can act faster with real data in times of need (good or bad). Please reach out to discuss formal planning and we will work together to realize its benefits.

Get informed – We work with some of the most intelligent clients out there, but no one knows everything about everything. Albion employees are working as a cohesive unit from home to deliver the most relevant insights and information for our clients. Following us on social media, attending our conference calls, keeping up with the blog, and dissecting our emails are great ways to understand where we stand on the most important topics facing the world today. We can’t cover everything, but we are willing and able to research or answer any tough questions that you have – don’t hesitate to make us your first call.

Take it slow, make a list – Whether we are busy or finding ourselves with too much free time, trying to tackle everything at once can be draining. We are here every day working to ensure your success but might not wholly understand what concerns you have for one reason or another – everyone has different worries and wants. Making a list of things we have been actively avoiding or overanalyzing is a logical first step. Acting on and completing this list over time yields the desired outcome. Small steps turn into big leaps with time.

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COVID-19 Relief: Yellow Ribbon Network

The Yellow Ribbon Network is an online platform for veterans, active military and their families in need of counseling and resources to help with finances, housing, employment or education. The Yellow Ribbon Network has partnered with AFCPE® (Association for Financial Counseling & Planning Education®), whose mission is to ensure the highest level of knowledge, skill and integrity of the personal finance profession. AFCPE® aims to empower people to achieve lasting financial well-being through financial counseling, coaching, and education.

Together, The Yellow Ribbon Network with AFCPE® are currently offering free financial counseling to anyone who has experienced a negative change in income and/or budget due to COVID-19. This partnership has come about due to the widespread economic impact that COVID-19 has had on individuals and families. While the government has worked to expand public benefits and has distributed stimulus checks, there is still a great deal of financial stress and uncertainty for many people. The goal of this partnership is to help individuals navigate their financial situation in the short and long term.

The certified financial counselors and coaches will help you to make a plan and will provide you with unbiased, trustworthy advice. These sessions are available virtually – and are free.

An AFCPE® certified professional will never sell you products. They can help you to address your spending and savings plans, overcome debt, work through ineffective money management behaviors, and/or create a specific plan during this time of uncertainty. Your financial counselor will work closely with you to help you through today’s challenges and to develop a strong financial foundation for the future.

A member of the Albion Team donates her time as a volunteer CFP with the AFCPE.If you have additional questions about this service, please click the following link:

https://www.yellowribbonnetwork.org/COVID-19