After years of ultra-low inflation, costs are rising at their fastest rate since 2008. The poster child this time around is lumber, where prices have risen more than 85% this year and 280% in the past 12 months. 
So you might not want to rush into building that new home, or even that deck you’ve been planning. But what does consumer price inflation mean for you as an investor? 
First of all, inflation helps to explain why tech and other high-flying “growth” stocks have had a rough year. Rising inflation is seen as a headwind for stocks generally because it increases companies’ costs—everything from wages to materials to borrowing costs. That puts pressure on earnings growth—and fast earnings growth is a core attraction of companies like Netflix, Amazon and Facebook.
Companies like these are heavily represented in market indexes like the S&P 500 and the Nasdaq, and their recent performance has dragged these indexes down. At the same time, “value” stocks, like utilities, consumer staples and banks, have mounted a big comeback this year as investors have dumped growth stocks. Value stocks tend to trade at lower prices relative to their earnings, sales and other fundamentals. They also tend to carry low debt and pay dividends, and they’re known to withstand inflation better than growth stocks. 
I believe that inflation is likely to persist throughout 2021 and maybe longer, in large part because of the $7 trillion in pandemic stimulus money the federal government has pumped into the economy. Likewise, I think the rotation from growth stocks to value stocks has legs. I wouldn’t be surprised to see some tech stocks pull back 10% from their highs in coming weeks, while some value stocks soar. So for many investors, it’s time to rebalance away from high-flying growth stocks and toward value investments. 
That doesn’t mean you should get out of the market altogether; doing so is almost always a mistake because no one can predict when markets will rise and fall. Nor should you dump all your growth stocks and back the truck up for value stocks. Selling appreciated stocks triggers taxes, for one thing. For another, many growth stocks are worth holding on to—particularly those that have the potential to be transformative over time. A little over 20 years ago, was just an online book seller; it went on to disrupt the way consumers buy just about every kind of good, and today it’s a behemoth. 
No one can identify the next Amazon with any certainty, of course. But investing in a number of less-mature companies with promising stories increases your odds of owning a stock that can really impact your investment portfolio if you’re patient. This is where a seasoned investment advisor who really knows how to analyze companies can make a difference. 
While investors are rotating to value stocks, and selectively holding on to growth stocks, one area to be extremely cautious about is long-term bonds. Inflation can decimate the value of fixed-rate bonds because it erodes the buying power of the income stream the bonds provide. 
Instead, look to short-duration bonds of five years or less. Fixed-income investments with variable interest rates are also inflation resistant because their payments can adjust upward. 
As with stocks, a really skilled investment advisor can identify durable sources of fixed income in different market environments. And he or she can help you stay calm and rational when markets are volatile, stress increases, and your fear and greed instincts rear their heads. But you need to be smart about choosing which advisor to work with. As I wrote a few years ago, most advisors are actually brokers, who are legally permitted to place their financial interests ahead of yours. Registered Investment Advisors like Copeland Wealth Management have chosen to operate under a legal framework that requires us to put your interests first. 
Please don’t hesitate to contact us if you’d like to discuss inflation and your investments.

If you follow the news, you know that inflation is rising, and so are long-term interest rates.

It's been so long since both of those things happened, in a significant, long-term way, that
many people unsure what to do with the information. Here's my take on why we're seeing inflation and interest rates rising, and what you should do in response.

The economic recovery is accelerating, both because the Covid-19 vaccines are helping consumers return to their normal behavior, and because of the continuing, multi-trillion-dollar stimulus from the federal government. As consumer demand picks up, it's spurring price inflation. In March, consumer prices rose .6%, their biggest gain since 2012.

Accelerating inflation, meanwhile, is pushing long-term bond rates higher. Essentially, the bond market is predicting that higher future prices of goods and services will make bonds' fixed income payments less valuable. Accordingly, bonds are trading at lower prices. Bonds' yields move in the opposite direction of their price, which is why yields have been rising. The benchmark 10-year Treasury is now yielding about 1.6%, up from half a percentage point in August of 2020.

Rising Treasury yields rise are mortgage lenders' cue to charge higher interest on their loans. That means taking out a new mortgage loan or refinancing an existing one could soon get more expensive. The rate increases generally don't apply to short-term consumer loans such as home equity lines of credit. That's because these loans are pegged to short-term interest rates controlled by the Federal Reserve, and the Fed has vowed to keep short-term rates low indefinitely.

The bottom line: You should make real estate decisions sooner rather than later. You might be able to manage the $1,185 monthly payment on a $300,000, 30-year loan at 2.5%, but not a $1,520 monthly payment, at 4.5%, for example. And over 30 years, that higher-rate loan would add in excess of $100,000 to your total payments.

Rising Treasury yields also have implications for the stock market, which makes this a good time to review your investment portfolio. As Treasurys' yields rise, so does their attractiveness as a safe alternative to stocks. That can create volatility in the stock market.

Which stocks are most vulnerable to this volatility? Generally speaking, I believe it's those that have been the past year's highest fliers. Big gainers are always the most prone to sharp pullbacks, possibly as much as 10% to 20%. If you own some of the hotter stocks from the past year or so, their price appreciation means they now likely account for a larger percentage of your portfolio than they originally did. And that means your portfolio is much more risky than it should be.

Investors should review their holdings, potentially take some money off the table and redeploy it into undervalued companies, especially those that might pay a dividend. Think insurance companies, banks energy companies, for example.

If you need to do selling within taxable accounts, do not delay doing it because you're afraid of the tax bill. A big pullback could wipe out much more than you'd likely owe in taxes. And as you review your investments, you might even find that you're closer than you anticipated to being able to retire. You won't know until you take a close look and run all the calculations. That's where we can come in. Don't hesitate to call if you'd like to review your investments and your financial plan.

The technology and work-from-home stocks that have powered the market since early in the pandemic have suddenly come back down to earth. Names like Zoom, DocuSign, Amazon and Tesla have all fallen sharply since the beginning of the month.

But that doesn't mean the bull market is over. It simply appears that investors are transitioning from high-flying growth names to less-flashy—and cheaper—stocks that the long rally had left behind. The major market indexes tell the story: From February 24 through March 8, the tech-heavy Nasdaq was down 7.3%, and the S&P 500, whose biggest components include Apple, Microsoft and Amazon, was off 2.6%. Meanwhile the Dow Jones Industrials Index, led by unglamorous names like UnitedHealth, Goldman Sachs and Home Depot, was down by a mere half percentage point.

Investors understand that they've driven up values on the high-flyers well above historical averages, to unsustainable levels. Amazon shares, even after the past couple of weeks, are still selling for more than 70 times the company's earnings, and Apple is trading at 31 times. Compare that with big Dow Industrials names UnitedHealth, trading at 22 times earnings, and Goldman Sachs, at a mere 13.5.

Having ridden the pandemic-era growth stocks as far up as they can for now, investors have decided to take money off the table and redeploy it into cheaper stocks that have room to run.

Areas to look at include value stocks in general—slower growers with attractive valuations—as well as hospitality, airlines, cruise lines and energy companies. Financials are another promising sector: Banks are reasonably priced and stand to benefit from increased consumer and business demand, as well as rising interest rates.

But as we noted in our November blog, it probably doesn't make sense to sell off your winners wholesale, even as the laggards make up ground. Many of the past year's fast growers are good companies whose price could resume appreciating over the long run, albeit more slowly than we've seen over the past year.

Meanwhile, it's important to remain prepared for volatility. That means keeping your investment portfolio diversified, being patient, and investing based on companies' underlying strengths. It's been relatively easy to make money in the stock market over the past year, but that's no longer the case. As we move forward, the gap between winning and losing stocks will likely widen, so smart decisions are critical. Please don't hesitate to reach out to us if you'd like to review your investments.

In the past few weeks, news outlets have been full of stories about GameStop and other stocks going through the roof thanks to massive buying pushes coordinated online. There have been just as many stories about these stocks later crashing to Earth.

Should you get involved with these kinds of bets? For many, it's tempting.

GameStop was the biggest of the recent stories, which have all revolved around so-called short squeezes. Short squeezes happen when a stock's price jumps higher, and traders who had bet that it would fall must scramble to buy more shares in order to avoid even greater losses. This self-reinforcing dynamic pushes the stock ever higher, until the bubble bursts and the stock price plummets.

The GameStop saga began in early January, when an online community of investors in a Reddit forum turned their sights to the videogame retailer, which Wall Street hedge funds had heavily shorted, or bet against. Over the next few weeks, the so-called Reddit army of small investors, joined by some big, sophisticated players, binged on GameStop shares, pushing their price from $17.25 to near $400. The craze also targeted movie theater chain AMC, which shot from around $3 to nearly $20 in the course of a few days. In the most recent example of the trend, shares of cannabis company Tilray more than doubled, to $64.

In all of these cases, the stocks' run has resembled a toddler's sugar rush, followed by the inevitable crash. Within a matter of days, Tilray lost all of its recent gains. Likewise, AMC shares plunged from around $19 to $5.50. And GameStop dropped from nearly $400 per share to around $50.

Yes, there were winners, who got in early and sold before the crashes. But these short squeezes produced a lot more losers, who bought in as the stocks were running up, only to ride them down again. As usual, the deep-pocketed, sophisticated Wall Street investors likely made out best. As in a casino, the house always ends up as the biggest winner.

You can be sure there will be more GameStop-type situations going forward. There will be lots of hype, and stories about regular people making enough of a profit to pay off their debt or buy Teslas. But short-term trading is a zero-sum game, and someone is always left holding the bag—and the news media isn't interested in their stories. Another phenomenon you don't hear about is how often the winners, emboldened by their success, take more bets and wind up humbled.

The truth is that the short-term trading waters are full of sharks, super-smart professionals armed with sophisticated software, whose every waking moment is spent seeking out opportunities at the expense of amateurs. You can be sure they are raptly following the message boards alongside the do-it-yourselfers, perhaps even participating in them with an eye toward "pump-and-dump" schemes.

My strong advice is to not swim in shark-infested waters. If you're serious about building wealth in the stock market, make long-term investments based on stocks' fundamentals, such as revenue, debt, management and so on. There is always a way for patient investors to make money without taking on extreme risk. Please reach out if you'd like to discuss where the best opportunities for long-term investing lie right now.

It wasn’t quite a Blue Wave, but the Democrats will control Washington after all—and the market is giving an early vote of approval.


In a surprising turn of events, Democrats Raphael Warnock and Jon Ossoff defeated their Republican opponents in Georgia’s runoff elections for Senate on Jan. 5. That means the Democrats, with 50 of the Senate’s 100 seats, will effectively control the chamber with Vice President Kamala Harris holding the tiebreaking vote.


After winning the presidency and holding the House of Representatives in November, the Democrats are in full control of the legislative agenda for the first time since 2011. The major stock market indexes are signaling enthusiasm. Six days after the Georgia election, the S&P 500 and the Dow Industrials were both up 2%. The Nasdaq index of technology stocks closed down 0.6% the day after the election on fears of tougher regulation. But five days later, swept up in the euphoria, it was up as well, by a total of 3%.


Investors expect a blue Washington to mean more stimulus spending and higher taxes. And while many on Wall Street had feared the prospect of higher corporate and household taxes, it appears that investors see the trillions of dollars in stimulus money sought by Biden as outweighing the potential tax hikes. They also see Washington taking up stimulus legislation before turning to tax legislation.


While markets have been rising in unison so far, I believe the best approach going forward will be to buy stocks of individual companies based on both their long-term prospects and their ability to weather the turmoil we’re likely to see in coming months. More than 250,000 new Covid-19 cases are now being reported daily, up 37% from two weeks earlier; average daily deaths are up 48% over the same period. 


While the distribution of the highly effective vaccines is good news, the rollout has been disappointing. At the current rate, it will take an estimated three years to achieve so-called herd immunity, depriving the virus of new hosts and effectively shutting it down. Thus, I expect a continuing health crisis, with the possibility of widescale business shutdowns, in the months to come. The market may be highly volatile as events unfold on both the pandemic and legislation fronts. 


Investors who bought up stocks in anticipation of the government spending may “sell the news” once the legislative agenda turns to taxes. In part to pay for support to households, small businesses and local governments, Biden wants to raise income taxes on households earning more than $400,000 a year, to hike capital gains tax rates and to increase corporate tax rates.


You can bet that the markets won’t like that part of the Democrats’ agenda as much as they like the stimulus. The key then will be knowing what to buy and when to buy it. If you’d like to discuss your investments, please don’t hesitate to get in touch.