Adrian A. Hedwig
Financial Advisor, CUSO Financial Services, L.P.*
Available by appointment at all Salal Credit Union branches.
Virtual and phone meetings also available.
In the newsletter this month:
Quarterly Market Review: July-September 2021
Overall, the third quarter was a roller-coaster ride for the market. The Dow, the Russell 2000, the Nasdaq, and the Global Dow lost value, while the S&P 500 was able to eke out a quarterly gain. Treasury yields, the dollar, and crude oil prices ended the third quarter higher, while gold prices dipped lower. Financials, information technology, communication services, and health care ended the quarter in the black. Energy, industrials, and materials fell by at least 4.5%. Despite the downturns, the benchmark indexes remain well ahead of their 2020 closing values, led by the S&P 500, which ended the quarter nearly 15.0% over last year’s pace.
The yield on 10-year Treasuries fell 30 basis points. Crude oil prices increased $14.17 per barrel, or 24.0%, in the third quarter. The dollar lost nearly 1.0%, while gold prices advanced 3.6%. The national average retail price for regular gasoline was $3.175 per gallon on September 27, up from the August 30 price of $3.139 and higher than the June 28 price of $3.091.
July kicked off the third quarter with large caps outperforming small caps. The S&P 500, the Dow, and the Nasdaq advanced, reaching record highs along the way, while the small caps of the Russell 2000 fell over 3.5%. Treasury yields, the dollar, and crude oil prices also declined. Gold prices advanced. By the end of the month, over 80% of the S&P 500 companies that reported earnings exceeded expectations. COVID cases surged as the Delta variant spread across the country. Inflation figures continued to rise. The Consumer Price Index rose 0.9%, the Producer Price Index climbed 1.0%, both import and export prices advanced 1.0%, and retail sales increased 0.6%. The Federal Reserve noted that the economic recovery remained on track. Second-quarter gross domestic product advanced at an annualized rate of 6.5%, according to the initial estimate from the Bureau of Economic Analysis. Health care led the market sectors, followed by real estate, utilities, information technology, and communication services. Financials and energy lagged.
Equities continued their strong showing in August, recording several record highs during the month. Strong corporate earnings reports and improving economic conditions helped bolster investor confidence, despite the increasing prevalence of the Delta variant. Growth stocks outpaced value shares. Financials and communication services led the market sectors, while energy lagged. The Nasdaq paced the indexes, climbing 4.0%, followed by the S&P 500 (2.9%), the Russell 2000 (2.1%), the Global Dow (2.1%), and the Dow (1.2%). Ten-year Treasury yields jumped 7 basis points to close the month at 1.30%. The dollar rose by 0.6%, while crude oil prices fell 7.2% to $68.51 per barrel on the last business day of the month. Gold prices changed little, trading at $1,817.50 per ounce. The jobs sector improved, adding 943,000 new jobs. Wage gains were strong, while unemployment claims dipped.
Following a strong July and August, September saw the market struggle with volatility. Traders had other concerns to deal with, including slowing economic growth, elevated inflation, supply-chain disruptions, a global energy crunch, and China’s regulatory restrictions. In addition, investors are facing the prospects of the Federal Reserve beginning to wind down its stimulus measures. Each of the benchmark indexes lost value, with the Nasdaq falling more than 5.0% and the S&P 500 dipping 4.8%. Among the market sectors, energy climbed 8.5%, while the remaining sectors ended well in the red. Crude oil prices rose more than 9.0% to close the month over $75.00 per barrel. The dollar and 10-year Treasury yields advanced, while gold prices declined.
Stock Market Indexes
As of September 30
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Latest Economic Reports
- Employment: The pace of job gains slowed in August, as 235,000 new jobs were added, well off the pace set in July (943,000) and June (938,000). Through the first eight months of the year, monthly job growth has averaged 586,000. The unemployment rate declined by 0.2 percentage point to 5.2% in August. The number of unemployed persons edged down to 8.4 million, following a large (782,000) decrease in July. Both measures are down considerably from their highs at the end of the February-April 2020 period. However, they remain above their levels prior to the COVID-19 pandemic (3.5% and 5.7 million, respectively, in February 2020). In August, notable job gains occurred in professional and business services (74,000), transportation and warehousing (53,000), private education (40,000), and manufacturing (37,000). Employment in retail trade declined 29,000. Among the unemployed, the number of permanent job losers declined by 443,000 to 2.5 million in August but is 1.2 million higher than in February 2020. The number of persons on temporary layoff, at 1.3 million, was essentially unchanged in August. The number of persons not in the labor force who currently want a job declined by 835,000 in August to 5.7 million but remains higher than the level in February 2020 (5.0 million). The labor force participation rate in August, at 61.7%, was unchanged over the month and has remained within a narrow range of 61.4% to 61.7% since June 2020. The employment-population ratio, at 58.5%, was little changed in August. This measure is up from its low of 51.3% in April 2020 but remains below the figure of 61.1% in February 2020. In August, 13.4% of employed persons teleworked because of the pandemic, little changed from the prior month. In August, 5.6 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic, which is up from 5.2 million in July. Average hourly earnings rose $0.17 to $30.73 ($0.11/$30.54 in July). Earnings have increased 4.3% since August 2020. The average workweek in August was 34.7 hours, unchanged since June 2021.
- The number of claims for unemployment insurance fell in September. According to the latest weekly totals, as of September 18 there were 2,802,000 workers receiving unemployment insurance benefits, down from the August 14 total of 2,862,000. The unemployment rate for the week ended September 18 was 2.0%, down 0.1 percentage point from the August 14 rate of 2.1%. During the week ended September 11, Extended Benefits were available in 9 states/territories: Alaska, California, Connecticut, the District of Columbia, Illinois, Nevada, New Jersey, New Mexico, and Texas; 44 states reported 1,059,248 continued weekly claims for Pandemic Unemployment Assistance benefits, and 46 states reported 991,813 continued claims for Pandemic Emergency Unemployment Compensation benefits.
- FOMC/interest rates: The Federal Open Market Committee met in September. While noting that the economy has continued to recover, the ongoing spread of the coronavirus, particularly the Delta variant, may be slowing the pace of recovery. With the goals of maximum employment and inflation running at 2.0%, the Committee decided to maintain the current target range for the federal funds rate at 0.00%-0.25%. However, the FOMC indicated that it may begin scaling back its purchases of securities as early as this November.
- GDP/budget: According to the third and final estimate from the Bureau of Economic Analysis, the economy accelerated at an annual rate of 6.7% in the second quarter of 2021 after advancing 6.3% in the first quarter. Consumer spending, as measured by personal consumption expenditures, increased 12.0% in the second quarter after rising 11.4% in the prior quarter. The personal consumption price index (prices for consumer goods and services) rose 6.5% in the second quarter after climbing 3.8% in the first quarter. Excluding food and energy, the price index increased 6.1%. In the second quarter, fixed investment climbed 3.3% following a 13.0% increase in the first quarter, and residential fixed investment fell 11.7% after increasing 13.3% in the first quarter. Exports rose 7.6% in the second quarter after decreasing 2.9% in the first quarter. Imports (which are a negative in the calculation of GDP) increased 7.1% in the second quarter (9.3% in the first quarter).
- The Treasury budget deficit was $170.6 billion in August following the July deficit of $302.1 billion. Following the latest increase, the budget deficit through the first 11 months of the current fiscal year widened to $2.7 trillion, roughly 10.9% lower than last year’s deficit over the same period. Compared to last fiscal year, government expenditures have increased 4.0% to $6.3 trillion, while receipts have increased 18.0% to $3.6 trillion.
- Inflation/consumer spending: Prices at the consumer level continued to advance in August. According to the latest Personal Income and Outlays report, consumer prices rose 0.4% in August after edging up 0.4% in July. Prices have increased 4.3% since August 2020. Excluding food and energy, consumer prices rose 0.3% in August (0.3% in July) and 3.6% since August 2020. Personal income increased 0.2% in August, while disposable (after-tax) personal income increased 0.1%. Consumer spending rose 0.8% in August following a -0.1% dip in July.
- The Consumer Price Index climbed 0.3% in August following a 0.5% jump in July. Over the 12 months ended in August, the CPI rose 5.3%. Prices less food and energy rose 0.1% in August, the smallest increase since February 2021. Energy prices increased 2.0%, mainly due to a 2.8% rise in gasoline prices. Food prices increased 0.4% (0.7% in July), and new vehicle prices rose 1.2% (1.7% in July). Over the 12 months ended in August, energy prices have risen 25.0%, food prices have increased 3.7%, and prices for used cars and trucks have climbed 31.9%.
- Prices that producers receive for goods and services continued to climb in August, increasing 0.7% after rising 1.0% in both June and July. Producer prices increased 8.3% for the 12 months ended in August, the largest yearly gain since November 2010 when 12-month data was first calculated. In August, prices for services rose 0.7% (1.1% in July), and prices for goods moved up 1.0% (0.6% in July). Producer prices less foods, energy, and trade services advanced 0.3% in August (0.9% in July) and have risen 6.3% since August 2020, the largest 12-month increase since August 2014.
- Housing: Existing home sales fell 2.0% in August following two consecutive monthly gains. Over the past 12 months, existing home sales dropped 1.5%. The median existing-home price was $356,700 in August ($359,900 in July), up 14.9% from August 2020. Total housing inventory at the end of August dropped 1.5% from July’s supply and is down 13.4% from one year ago. In August, unsold inventory sat at a 2.6-month supply at the present sales pace, the same figure recorded in July but down from 3.0 months in August 2020. Sales of existing single-family homes also decreased in August, falling 1.9% after increasing 2.7% in July. Year over year, sales of existing single-family homes fell 2.8%. The median existing single-family home price was $363,800 in August, down from $367,000 in July.
- New single-family home sales increased for the second consecutive month in August, advancing 1.5% after climbing 1.0% in July. Despite the recent monthly increases, sales of new single-family homes have decreased 24.3% from August 2020. The median sales price of new single-family houses sold in August was $390,900 ($390,500 in July). The August average sales price was $443,200 ($446,000 in July). The inventory of new single-family homes for sale in August represents a supply of 6.2 months at the current sales pace, up slightly from the July revised estimate of 5.7 months.
- Manufacturing: Industrial production increased 0.4% in August after advancing 0.8% (revised) the previous month. Late-month shutdowns related to Hurricane Ida held down the gain in industrial production by an estimated 0.3 percentage point. Manufacturing output rose 0.2% in August after rising 1.6% in July. In August, mining fell 0.6%, reflecting hurricane-induced disruptions to oil and gas extraction in the Gulf of Mexico. The output of utilities increased 3.3%, as warm temperatures boosted demand for air conditioning. Total industrial production in August was 5.9% higher than its year-earlier level and 0.3% above its pre-pandemic (February 2020) level.
- New orders for durable goods increased 1.8% in August after advancing 0.5% in July (revised). Transportation drove the August increase, with new orders climbing 5.5% after decreasing 0.4% in July. Excluding transportation, new orders edged up 0.2%. Excluding defense, new orders advanced 2.4% after dipping 0.5% in July. New orders for nondefense aircraft and parts jumped 77.9% in August after falling 36.3% the previous month. Goods declined 8.0% following a 1.6% increase in July. New orders for capital goods reversed a 3.1% drop in July, increasing 6.7% in August. The advance was driven by a 9.0% rise in orders for nondefense capital goods. New orders for defense capital goods fell 8.3%.
- Imports and exports: August import prices decreased for the first time since October 2020. The import price index declined 0.3% in August following increases of 0.4% in July and 1.1% in June. Import prices rose 9.0% over the 12 months ended in August (10.1% for the 12 months ended in July). This is the smallest 12-month increase since March 2021. Import fuel prices fell 2.3% in August — the first monthly decrease since October 2020. The August downturn in fuel prices was mostly driven by a 2.4% decline in petroleum prices. Despite the decline in August, import fuel prices advanced 56.5% for the year ended in August. Nonfuel import prices dipped 0.1% in August after ticking up 0.1% in July. Export prices increased 0.4% in August after increases of 1.1% in July and 1.2% in June. For the year ended in August, the price index for exports rose 16.8%. Agricultural export prices rose 1.1% in August following a 1.7% decline in July. Nonagricultural exports rose 0.2% in August after increasing 1.4% in July.
- The international trade in goods deficit was $87.6 billion in August, up $0.8 billion, or 0.9%, from July. In August, exports increased $1.1 billion, or 0.7%, while imports rose $1.9 billion, or 0.8%. For the 12 months ended in August, exports have risen 25.6%, while imports have increased 17.8%.
- The latest information on international trade in goods and services, out September 2, was for July and showed that the goods and services trade deficit decreased by 4.3% to $70.1 billion. July exports rose 1.3%, while imports declined 0.2%. Year over year, the goods and services deficit increased $131.0 billion, or 37.1%, from July 2020. Exports increased $205.0 billion, or 16.8%. Imports increased $336.0 billion, or 21.3%.
- International markets: Whether it’s transitory or not remains to be seen, but several countries are experiencing accelerated inflation. Germany, Europe’s largest economy, saw inflation grow at a record pace in September, climbing 4.1% following a 3.4% jump in August. French inflation hit a near 10-year high of 2.7% in September. Like the case in many countries, surging energy prices are driving the inflation spike in France. Nevertheless, if inflation continues to climb, pressure will be on the European Central Bank to determine how to proceed with its asset purchases going forward. China, the world’s second-largest economy, is attempting to contain the financial fallout from the default or bankruptcy of mega-developer Evergrande. Also last month, the People’s Bank of China, which has targeted bitcoin since 2013, declared that all crypto-related activities are illegal in China. For September, the STOXX Europe 600 Index fell about 3.8%; the United Kingdom’s FTSE declined 0.8%; Japan’s Nikkei 225 Index rose 3.5%; and China’s Shanghai Composite Index was essentially unchanged from August.
- Consumer confidence: According to the latest report from The Conference Board, consumer confidence declined in September for the third consecutive month. The Consumer Confidence Index® stands at 109.3, down from 115.2 in August. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, fell to 143.4 in September from 148.9 the previous month. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, registered 86.6 in September, down from 92.8 in August. According to the report, consumer confidence waned, as the spread of the Delta variant deepened concerns over the state of the economy and short-term growth prospects. Nevertheless, consumer confidence is still high by historical levels, while these declines in confidence suggest consumers have grown more cautious and are likely to curtail spending going forward.
Heading into the fourth quarter of 2021, several economic indicators have improved, while a few have waned. Real estate and manufacturing slowed from the pace set earlier in the year. GDP posted strong data for the second quarter, although some estimates suggest that the third quarter will not be quite as strong. On the jobs front, there were nearly 11 million jobs available but nearly 8.7 million unemployed actively looking for work, further widening the gap between job openings and hires.
Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI, Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Forecasts are based on current conditions, subject to change, and may not come to pass. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities and other bonds fluctuates with market conditions. Bonds are subject to inflation, interest rate, and credit risks. As interest rates rise, bond prices typically fall. A bond sold or redeemed prior to maturity may be subject to loss. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 largest, publicly traded companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.
Following the Inflation Debate
During the 12 months ending in June 2021, consumer prices shot up 5.4%, the highest inflation rate since 2008.1 The annual increase in the Consumer Price Index for All Urban Consumers (CPI-U) — often called headline inflation — was due in part to the “base effect.” This statistical term means the 12-month comparison was based on an unusual low point for prices in the second quarter of 2020, when consumer demand and inflation dropped after the onset of the pandemic.
However, some obvious inflationary pressures entered the picture in the first half of 2021. As vaccination rates climbed, pent-up consumer demand for goods and services was unleashed, fueled by stimulus payments and healthy savings accounts built by those with little opportunity to spend their earnings. Many businesses that shut down or cut back when the economy was closed could not ramp up quickly enough to meet surging demand. Supply-chain bottlenecks, along with higher costs for raw materials, fuel, and labor, resulted in some troubling price spikes.2
CPI-U measures the price of a fixed market basket of goods and services. As such, it is a good measure of the prices consumers pay if they buy the same items over time, but it does not reflect changes in consumer behavior and can be unduly influenced by extreme increases in one or more categories. In June 2021, for example, used-car prices increased 10.5% from the previous month and 45.2% year-over-year, accounting for more than one-third of the increase in CPI. Core CPI, which strips out volatile food and energy prices, rose 4.5% year-over-year.3
In setting economic policy, the Federal Reserve prefers a different inflation measure called the Personal Consumption Expenditures (PCE) Price Index, which is even broader than the CPI and adjusts for changes in consumer behavior — i.e., when consumers shift to purchase a different item because the preferred item is too expensive. More specifically, the Fed looks at core PCE, which rose 3.5% through the 12 months ending in June 2021.4
The perspective held by many economic policymakers, including Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen, was that the spring rise in inflation was due primarily to base effects and temporary supply-and-demand mismatches, so the impact would be mostly “transitory.”5 Regardless, some prices won’t fall back to their former levels once they have risen, and even short-lived bursts of inflation can be painful for consumers.
Some economists fear that inflation may last longer, with more serious consequences, and could become difficult to control. This camp believes that loose monetary policies by the central bank and trillions of dollars in government stimulus have pumped an excess supply of money into the economy. In this scenario, a booming economy and persistent and/or substantial inflation could result in a self-reinforcing feedback loop in which businesses, faced with less competition and expecting higher costs in the future, raise their prices preemptively, prompting workers to demand higher wages.6
Until recently, inflation had consistently lagged the Fed’s 2% target, which it considers a healthy rate for a growing economy, for more than a decade. In August 2020, the Federal Open Market Committee (FOMC) announced that it would allow inflation to rise moderately above 2% for some time in order to create a 2% average rate over the longer term. This signaled that economists anticipated short-term price swings and assured investors that Fed officials would not overreact by raising interest rates before the economy has fully healed.7
In mid-June 2021, the FOMC projected core PCE inflation to be 3.0% in 2021 and 2.1% in 2022. The benchmark federal funds range was expected to remain at 0.0% to 0.25% until 2023.8 However, Fed officials have also said they are watching the data closely and could raise interest rates sooner, if needed, to cool the economy and curb inflation.
Projections are based on current conditions, are subject to change, and may not come to pass.
1, 3) U.S. Bureau of Labor Statistics, 2021; 2) The Wall Street Journal, April 13, 2021; 4) U.S. Bureau of Economic Analysis, 2021; 5-6) Bloomberg.com, May 2, 2021; 7-8) Federal Reserve, 2020-2021
Tips for Managing an Inheritance
As the beneficiary of an inheritance, you are most likely to be faced with making many important decisions during an emotional time. Short of meeting any required tax or legal deadlines, don’t make any hasty decisions concerning your inheritance.
Identify a Team of Trusted Professionals
Tax laws and requirements can be complicated. Consult with professionals who are familiar with assets that transfer at death. These professionals may include an attorney, an accountant, and a financial and/or insurance professional.
Be Aware of the Tax Consequences
Generally, you probably will not owe income tax on assets you inherit. However, your income tax liability may eventually increase. Any income that is generated by inherited assets may be subject to income tax, and if those assets produce a substantial amount of income, your tax bracket may increase. This is particularly true if you receive distributions from a tax-qualified retirement plan such as a 401(k) or an IRA. You may need to re-evaluate your income tax withholding or begin paying estimated tax.
You also may need to consider the amount of potential transfer (estate) taxes that your estate may owe, due to the increase in the size of your estate after factoring in your inheritance. You may need to consider ways to help reduce these potential taxes.
How You Inherit Assets Makes a Difference
Your inheritance may be received through a trust or you may inherit assets outright. When you inherit through a trust, you’ll receive distributions according to the terms of the trust. You may not have total control over your inheritance as you would if you inherited the assets outright.
Familiarize yourself with the trust document and the terms under which you are to receive trust distributions. You will have to communicate with the trustee of the trust, who is responsible for the administration of the trust and the distribution of assets according to the terms of the trust.
Even if you’re used to handling your own finances, receiving a significant inheritance may promote spending without planning. Although you may want to quit your job, or buy a car, a house, or luxury items, this may not be in your best interest. Consider your future needs, as well, if you want your wealth to last. It’s a good idea to wait at least a few months after inheriting money to formulate a financial plan. You’ll want to consider your current lifestyle and your future goals, formulate a financial strategy to meet those goals, and determine how taxes may reduce your estate.
Develop a Financial Plan
Once you have determined the value and type of assets you will inherit, consider how those assets will fit into your financial plan. For example, in the short term, you may want to pay off consumer debt such as high-interest loans or credit cards. Your long-term planning needs and goals may be more complex. You may want to fund your child’s college education, put more money into a retirement account, invest, plan to help reduce taxes, or travel.
Evaluate Your Insurance Needs
Depending on the type of assets you inherit, your insurance needs may need to be adjusted. For instance, if you inherit valuable personal property, you may need to adjust your property and casualty insurance coverage. Your additional wealth from your inheritance means you probably have more to lose in the event of a lawsuit. You may want to purchase an umbrella liability policy that can help protect you against actual loss, large judgments, and the cost of legal representation. You may also need to recalculate the amount of life insurance you need because of your inheritance. The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased.
Evaluate Your Estate Plan
Depending on the value of your inheritance, it may be appropriate to re-evaluate your estate plan. Estate planning involves conserving your money and putting it to work so that it best fulfills your goals. It also means helping reduce your exposure to potential taxes and creating a comfortable financial future for your family and other intended beneficiaries.
Some things you should consider are to whom your estate will be distributed, whether the beneficiary(ies) of your estate are capable of managing the inheritance on their own, and how you can best shield your estate from estate taxes. If you have minor children, you may want to protect them from asset mismanagement by nominating an appropriate guardian or setting up a trust for them. If you have a will, your inheritance may make it necessary to make significant changes to that document, or you may want to make an entirely new will or trust. There are costs and ongoing expenses associated with the creation and maintenance of trusts and wills. Consult with an estate planning attorney for proper guidance.
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (member FINRA / SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The credit union has contracted with CFS to make non-deposit investment products and services available to credit union members.
Articles prepared for Salal Investment Services by Broadridge Investor Communication Solutions, Inc. Copyright 2021. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. This communication is strictly intended for individuals residing in the state(s) of CA, IL, IA, MN, NV, OH, OR, VA, and WA. No offers may be made or accepted from any resident outside the specific states referenced.