In Perspectives

In the years following the global financial crisis of 2007-2008, central banks around the globe led by the U.S. Federal Reserve took unprecedented steps to stimulate economic growth through exceptionally low interest rates and quantitative easing (QE) programs designed to push liquidity into the hands of individuals and businesses.  While the effectiveness of these programs will no doubt remain debatable for some time to come, the direct impact on savers and fixed income investors was unmistakable, as low interest rates pushed many conservative investors to take on more risk than they would like in order to find more attractive returns.

As the recovery has taken firmer hold in recent years, the Fed has looked to unwind these extraordinary measures and allow the economy to stand on its own feet, first by gradually tapering off QE and finally, in December 2015, by raising interest rates off the zero bound for the first time since the crisis. At that time, the FOMC announcement indicated that four additional interest rate hikes would likely be warranted in 2016, implying that we should have expected to see the next hike in Q1.

However, the stock market turmoil that erupted in the first quarter along with a patch of weaker than expected economic data has had many observers now considering whether any rate hikes were likely this year at all.   The sentiment has shifted for the better over the past few weeks, as financial conditions in the U.S. appear to have improved across the board with February’s jobs report showing strong gains and recent inflation measures ticking upwards.  Nevertheless, the Fed is unlikely to raise rates at their meeting this week, preferring to wait to see whether the recent readings prove consistent over the coming weeks and months.

Outside the U.S., economic conditions appear more tenuous, and central banks continue to take aggressive action.  Mario Draghi of the European Central Bank (ECB) last week announced a series of measures intended to further stimulate the European economy.  These measures included expansion of their QE program, offering very low-cost funding to banks in exchange for increasing lending, and pushing interest rates further into negative territory.  The Bank of Japan (BOJ) has also chosen a policy of negative interest rates, hoping to stimulate consumption and investment.

The upshot of these central bank policies at home and abroad is that higher interest rates are likely to remain elusive for the foreseeable future, and the struggle for fixed income investors to earn even modest returns may continue for some time.  Now that financial markets have calmed somewhat as we approach the end of the first quarter, we believe this is a prudent time for investors to revisit their financial goals with their advisors and reconsider strategic investment plans in light of lower return expectations over the next 3-5 years.

It may be appropriate for some investors to shift their focus solely from generating income toward seeking total return, which includes both income and capital appreciation.  Additionally, some alternative asset classes such as real estate investment trusts (REITs) and energy master limited partnerships (MLPs) typically pay higher income levels than traditional stock or bond investments and may be appropriate for inclusion as part of a diversified portfolio, as long as the investor can stomach the increased volatility.  Unfortunately the traditional trade off between risk and reward is still in play, and each investor will have to carefully consider whether taking on additional risk is warranted when seeking higher returns.   If you are concerned about meeting your financial goals in today’s challenging investment environment, we encourage you to reach out to us for an evaluation.

Legacy Trust and Your Right to Financial Privacy

At Legacy Trust we have established policies and practices that respect the financial privacy of all individuals who use our trust company. We believe it is critical to comply with the laws and regulations designed to secure your financial privacy. Your relationship with us as our client is very important to us, and we want you to understand our policies and practices about handling your information.

This Policy applies to you – This Policy applies to our relationships with individual clients who inquire about or obtain products or services from us for personal, family and household purposes.

Strict security measures – We take the security of information very seriously. We have established security standards and procedures to prevent access to client information. We maintain physical, electronic and procedural safeguards to guard client information.

Limited employee access – We have established procedures to limit employee access to information to only those employees with a business reason for accessing such information. We educate our employees about the importance of confidentiality and client privacy. We take appropriate disciplinary measures to enforce employee responsibilities regarding client information.

Why we collect information – We collect information about you to:

  • accurately identify you;
  • protect and administer your records, accounts and funds;
  • help us design or improve our products and services;
  • understand your financial needs;
  • save you time when you apply for new products and services; offer you quality products and services; and comply with certain laws and regulations;

We collect information – We collect and maintain your personal information so that we can provide investment management and other services to you. The types and categories of information that we collect and maintain about you include:

  • Information we receive from you to open an account or provide investment advice or other services to you (such as your home address, social security number, telephone, financial information and investment objectives).
  • Information that we generate to service your account or from our transactions with you (such as account statements and other financial information).
  • Information on your transactions with nonaffiliated third parties.

We have established procedures so that the financial information we collect is accurate, current and complete. We are committed to work with you to promptly correct any inaccurate information.

Our selective sharing of information – In order for us to provide investment management and other services to you, we do disclose your personal information in very limited instances, which include:

  • Disclosures to nonaffiliated companies as permitted by law, including those who help us service your account (such as providing account information to brokers and custodians).
  • Other limited disclosures as permitted by law, for example, required reports to government entities.

We do not share your information with third parties for marketing purposes. We do not sell your information.

Former clients – If you end your relationship with us, we will continue to adhere to the privacy policies and practices described in this notice.

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USA PATRIOT Act

Important Information About Procedures For Opening A New Account

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.

What this means for you: When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

We apologize for any inconvenience this may cause; however, federal law prohibits us from waiving these requirements.

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