Quote of the Week

“Three grand essentials to happiness in this life are something to do, something to love, and something to hope for.” – Joseph Addison

Technical Corner  

U.S. stocks finished lower last week with the S&P 500 declining for five straight days. Finally, the markets are responding to slowing global growth.

Several world central banks are easing their stances towards rate hikes or taking new measures to boost their economies. The European Central Bank guided for steady rates through the end of 2019, on top of providing additional funding to banks. The Bank of Canada acknowledged it had underestimated the depth of the slowdown, hinting that it will be patient in hiking rates. Also, the Chinese government announced plans to cut taxes, increase loans to small businesses, and boost infrastructure investment in an effort to support growth.

As a result of these actions, the U.S. dollar strengthened against other currencies, presenting a headwind for our domestic markets. Remember if our dollar is strong, it makes our goods we sell overseas more expensive. The path for our equity markets will likely be more difficult for the balance of the year than it has been for the first two months of 2019.

As I have stated before the labor market has gotten really tight raising wage growth to a cycle high at plus 3.4%. With the economy slowing, company revenues are declining, and wages at the cycle high, corporate profits will start getting squeezed. When profits go down stock prices will ultimately follow. The mathematical analysis from Hedgeye which I have mentioned before calls for S&P 500 earnings growth to fall -5% to -8% year over year for 2019.

All told, the downside risks to the U.S. economy are mounting, and the Real GDP nowcast dropped to a new low of 2.86% year over year and 1.34% for the first quarter this year. Even if Mr. Trump gets his China deal, the trend is in place and will be hard to turn around. Also, remember that any trade deal has to be passed by Congress. If the deal doesn’t include protection for intellectual property and the ability for U.S. companies to do business in China on a level playing field basis, I promise you that the Democratic House of Representatives will not pass the treaty.

Name Wkly %Chg YTD %Chg 12-mo%Chg
Dow Jones Industrials  -02.66 +09.10 +0.45
Nasdaq Composite  -03.12 +11.65 -2.02
S&P 500  -02.55 +09.42 -1.56
MSCI EAFE* -01.09 +0804
10-yr Treasury Yield -00.14 -00.07

Stephanie’s Thoughts – Five Questions about Long-Term Care

1. What is long-term care?

Long-term care refers to the ongoing services and support needed by people who have chronic health conditions or disabilities. There are three levels of long-term care:

  • Skilled care: Generally round-the-clock care that’s given by professional health care providers such as nurses, therapists, or aides under a doctor’s supervision.
  • Intermediate care: Also provided by professional health care providers but on a less frequent basis than skilled care.
  • Custodial care: Personal care that’s often given by family caregivers, nurses’ aides, or home health workers who provide assistance with what are called “activities of daily living” such as bathing, eating, and dressing.

Long-term care is not just provided in nursing homes–in fact, the most common type of long-term care is home-based care. Long-term care services may also be provided in a variety of other settings, such as assisted living facilities and adult day care centers.

2. Why is it important to plan for long-term care?

No one expects to need long-term care, but it’s important to plan for it nonetheless. Here are two important reasons why:

The odds of needing long-term care are high:

  • Approximately 52% of people will need long-term care at some point during their lifetimes after reaching age 65*
  • Approximately 8% of people between ages 40 and 50 will have a disability that may require long-term care services*

*U.S. Department of Health and Human Services, November 14, 2017

The cost of long-term care can be expensive:

For many, the cost of long-term care can be expensive, absorbing income and depleting savings. Some of the average costs in the United States for long-term care* include:

  • $6,844 per month, or $82,128 per year for a semi-private room in a nursing home
  • $7,698 per month, or $92,376 per year for a private room in a nursing home
  • $3,628 per month for a one-bedroom unit in an assisted living facility
  • $68 per day for services in an adult day health-care center

*U.S. Department of Health and Human Services, October10, 2017

3. Doesn’t Medicare pay for long-term care?

Many people mistakenly believe that Medicare, the federal health insurance program for older Americans, will pay for long-term care. But Medicare provides only limited coverage for long-term care services such as skilled nursing care or physical therapy. And although Medicare provides some home health care benefits, it doesn’t cover custodial care, the type of care older individuals most often need.

Medicaid, which is often confused with Medicare, is the joint federal-state program that two-thirds of nursing home residents currently rely on to pay some of their long-term care expenses. But to qualify for Medicaid, you must have limited income and assets, and although Medicaid generally covers nursing home care, it provides only limited coverage for home health care in certain states.

4. Can’t I pay for care out of pocket?

The major advantage to using income, savings, investments, and assets (such as your home) to pay for long-term care is that you have the most control over where and how you receive care. But because the cost of long-term care is high, you may have trouble affording extended care if you need it.

5. Should I buy long-term care insurance?

Like other types of insurance, long-term care insurance protects you against a specific financial risk–in this case, the chance that long-term care will cost more than you can afford. In exchange for your premium payments, the insurance company promises to cover part of your future long-term care costs. Long-term care insurance can help you preserve your assets and guarantee that you’ll have access to a range of care options. However, it can be expensive, so before you purchase a policy, make sure you can afford the premiums both now and in the future.

The cost of a long-term care policy depends primarily on your age (in general, the younger you are when you purchase a policy, the lower your premium will be), but it also depends on the benefits you choose. If you decide to purchase long-term care insurance, here are some of the key features to consider:

  • Benefit amount: The daily benefit amount is the maximum your policy will pay for your care each day, and generally ranges from $50 to $350 or more.
  • Benefit period: The length of time your policy will pay benefits (e.g., 2 years, 4 years, lifetime).
  • Elimination period: The number of days you must pay for your own care before the policy begins paying benefits (e.g., 20 days, 90 days).
  • Types of facilities included: Many policies cover care in a variety of settings including your own home, assisted living facilities, adult day care centers, and nursing homes.
  • Inflation protection: With inflation protection, your benefit will increase by a certain percentage each year. It’s an optional feature available at additional cost, but having it will enable your coverage to keep pace with rising prices.

Your insurance agent or a financial professional can help you compare long-term care insurance policies and answer any questions you may have.

Deductions for Long-Term Care Insurance Premiums: 2018 & 2019
Age 2018 Limit 2019 Limit
40 or under $420 $420
41-50 $780 $790
51-60 $1,560 $1,580
61-70 $4,160 $4,220
70+ $5,200 $5,270

Long-term care is not just provided in nursing homes–in fact, the most common type of long-term care is home-based care.

Understandably, many people put off planning for long-term care. But although it’s hard to face the fact that health problems may someday result in a loss of independence, if you begin planning now, you’ll have more options open to you in the future.

©2019 Broadridge Investor Communications Solutions, Inc

By the Numbers

“COMING SOON? – 10% of 281economists surveyed in February 2019believe the United States will be in a recession by 12/31/19. 42% of the group believe a recession will have started by12/31/20 (source: National Association for Business Economics).” –  Michael A. Higley, BTN 03-11-2019

If you have friends or family in need of financial life planning services,

It would be the honor of Laurence Lof Financial Advisors to assist them.

We value your referrals!

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These are the opinions of Larry Lof and Stephanie Mayoral and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

The S&P 500 is an index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.

Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

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