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It wasn’t that long ago when our money and assets were safe, or at least there was a high degree of perceived safety.

Investment accounts were secured by SIPC insurance. The same could be said about FDIC-insured bank accounts. And, if you spotted a fraudulent charge on your credit card, all that was required was a quick phone call to the number on the back of your card, and it was removed.

Sure, there were fraudsters and scammers, but potential access to your personal finances was much more limited.

Those same SIPC, FDIC, and credit card protections remain in place today. Unfortunately, the advent of the Internet, social media, and a global reach have led to a proliferation of scams that can quickly deliver a knockout blow to your savings.

While you need not be in a perpetual state of readiness, a healthy level of vigilance and skepticism can go a long way. It will protect your savings and prevent you from becoming a victim of fraud.

How can you avoid becoming a victim? The FTC highlights four elements that can help you spot a scam.

1. Scammers PRETEND to be from an organization you know. They may claim to be from the Social Security Administration, the IRS, a bank, a well-known company such as PayPal, Netflix, or Amazon, or your local utility. A personal recent experience for us was a scam from our favorite place, Costco.

Never give someone your password, bank information, PIN number, social security number, or personal identifying information. Never settle a debt or problem over the phone from an unexpected call that came your way.

Many solicitors are scammers looking for money. If you pay these criminals, they will come back in a short period of time, claiming another discrepancy was found and another payment is needed.

2. Scammers say there’s a PROBLEM or a PRIZE. You’ve won a big prize, just make a good faith down payment to receive your winnings. If you do, you’ll never see that money again.

3. Scammers PRESSURE you to act immediately. Whether a scammer or salesperson, pressure to act immediately is a red flag. Hang up the phone. You are in control. Don’t cede that control to someone else.

4. Scammers tell you to PAY in a specific way. They may insist you send money through a money transfer company or put money on a gift card. Then, they will ask you to give them the number on the back of the gift card. Or, someone will send you a check, request you to deposit it, and ask you to send them some of the money.

That check will bounce after you’ve delivered the cash to the scammer.

Major scams targeting older Americans

Older adults lost $600 million to fraud in 2020, when the pandemic fueled spikes in almost all top categories of fraud, federal officials say.

Whether it is Zoom phishing emails, Covid-19 vax card scams, phony online websites, or romance scams, please be leery when you venture online or on social media sites. Recently, the AARP highlighted some of the avenues fraudsters use to take your money.

For example, “You receive an email, text or social media message with the Zoom logo, telling you to click on a link because your account is suspended or you missed a meeting,” says Katherine Hutt, national spokesperson for the Better Business Bureau. “Clicking can allow criminals to download malicious software onto your computer.”

Others will exploit what might be called the flavor of the month or topic of the day. Recently, the government said it will offer free Covid test kits. You can obtain yours at covidtests.gov/. The site takes you directly to special.usps.com/testkits to order.

But criminals attempt to impersonate these sites by adding a few letters or a word like “free” within the link. The link appears legit, but it’s not. The fraudulent site will encourage you to divulge personal information.

While we won’t touch on every scam, we wanted to highlight romance scams, which led the way in 2020.

According to AARP, the scam works like this. You place your profile on an online dating site, and a potential partner entices you with his or her charm, intelligence, and good looks. But you don’t live in the same city or state.

Though you become attached, you never seem to be able to meet this person. Eventually, an emergency, business crisis, or some type of problem “unexpectedly” surfaces, and you are asked to send money.

Give them cash and they will continue to prey on you until you figure it out.

It seems obvious, but never underestimate how easily you can be tricked when love and your emotions are in play.

Avoid being defrauded by following several common sense tips offered by the FTC.

1. Block unwanted calls and text messages.

2. Don’t give your personal or financial information in response to a request that you didn’t expect. Legitimate organizations won’t call, email, or text to ask for your personal information.

3. If you get an email or text message from a company you do business with and you think it’s real, it’s still best not to click on any links. Instead, contact them using a website you know is trustworthy. Don’t call a number they provided or the number from your caller ID.

4. Resist the pressure to act immediately. Legitimate businesses will give you time to make a decision.

5. Know how scammers tell you to pay. Never pay someone who insists you pay with a gift card, by using a money transfer service, or by setting up a PayPal account. Additionally, never deposit a check and send money back to someone.

6. Stop and talk to someone you trust.

Finally, avoid the temptation of telling a scammer what you think of him or her. In researching this article, we came across those who regretted such action. Yes, they may have been an ocean away from the scammer, but that didn’t prevent a vindictive fraudster from placing the victim’s phone number on numerous fake ads or overwhelming them with robocalls.

Remember, they are sophisticated criminals that have access to the latest technology.

If, unfortunately you find you have become a victim, you can report the incident to the FTC at https://reportfraud.ftc.gov/#/

Just remember: Delete suspicious emails, ignore suspicious texts, hang up, and don’t argue with scammers.

Market Look-back: A Bumpy January

There are plenty of reasons why inflation is at a 40-year high: easy money and low interest rates, rising wages, supply chain disruptions, and fiscal stimulus that has fueled demand for consumer goods. And all of this is happening at a time when food and energy costs are rising. This perfect storm has led to the highest inflation in over 40 years, putting stress on markets and consumers alike.

Last year, the Fed insisted the jump in inflation would be temporary–“transitory” was its word of choice. But inflation proved to be more troublesome than they expected, transitory was retired, and the Fed quickly pivoted.

Gone are pledges to keep the fed funds rate at near zero through at least 2023.

Instead, Fed Chief Powell seems determined to bring inflation back under control, and that means the Fed is contemplating a series of rate hikes in 2022.

His more aggressive approach created volatility in January, as investors attempted to price in several rate hikes this year.

Table 1: Key Index Returns

MTD % YTD %
Dow Jones Industrial Average -3.3 -3.3
NASDAQ Composite -9.0 -9.0
S&P 500 Index -5.3 -5.3
Russell 2000 Index -9.7 -9.7
MSCI World ex-USA* -3.3 -3.3
MSCI Emerging Markets* -1.8 -1.8
Bloomberg US Agg Bond TR USD -2.2 -2.2

Source: Wall Street Journal, MSCI.com, Morningstar
MTD returns: Dec 31, 2021—Jan 31, 2022
YTD returns: Dec 31, 2021—Jan 31, 2022
*In US dollars

Let’s look at recent history and briefly dive into the numbers so we may paint a picture. During the 2004 to 2006 rate-hike cycle, then-Fed Chairman Alan Greenspan said rate increases were likely to be “measured,” as he embarked on a series of quarter-point rate hikes.

His goal: reassure investors and avoid rocking financial markets.

Fed Chief Janet Yellen and later Powell also soothed anxieties by signaling rate hikes would be “gradual” when rates slowly began to increase in late 2015. “Gradual” wasn’t as opaque as “measured,” but the goal was the same: reassure investors.

Greenspan and his successor Ben Bernanke raised the fed funds rate from 1% to 5.25% in a predictable series of quarter-percent increases.

Yellen and Powell hiked the benchmark rate from 0%-0.25% to 2.25%-2.50% through an uneven series of quarter-point increases, or 25 basis points (bp). One bp = 0.01%.

Party like it’s 1994

At Powell’s late-January news conference, he wasn’t making any promises on how quickly rates might rise. He wouldn’t rule out a rate hike at every meeting, beginning in March (there are eight scheduled meetings each year, including January). He didn’t dismiss the possibility of a 50bp increase. And, there was no mention of ‘gradual’ or ‘measured.’

The last time the Fed was truly aggressive was back in 1994, when the Fed implemented several 50bp increases and one 75bp hike. Rates doubled from 3% to 6% in one year.

During each of those tightening cycles, including 1994, inflation was under control. The Fed acted preemptively. Today, it is reacting to high inflation.

We are not saying we’re going to see a repeat of 1994. One key measure from the CME Group suggests five 25bp rate hikes this year. But it’s simply a projection. And projections can change based on how the economy progresses.

Powell warned that inflation could remain stubbornly high this year. Or, it’s possible supply chains will settle down and lessen the need for a strong central bank response. (Federal Reserve, St. Louis Federal Reserve)

The Fed’s challenge: engineer a soft economic landing, which brings down inflation without throwing the economy into a recession.

Barring a significant health crisis or a major geopolitical event, the Fed’s new posture will probably be the focus this year.

We trust you’ve found this review to be educational and helpful. If you have any questions or would like to discuss any matters, please feel free to give us or any of our team members a call.

As always, we’re honored and humbled that you have given us the opportunity to serve as your financial advisors.

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