Author: Corrin Gibbs-Burke

Are You Financially Prepared to Start Your Own Business?

Posted on by Corrin Gibbs-Burke

Many people dreaming of starting their own business spend too much time in dreamland and not enough time in “planningland,” especially when it comes to the financial considerations. While most entrepreneurs are acquainted with the need to create a formal business plan and know it has financial components like statement projections and cash flow forecasts, it’s not uncommon that they neglect the personal impacts.

  • What kind of personal savings cushion should you accumulate beyond your capital contribution to the business?
  • What’s the opportunity cost of leaving a fulltime W-2 job to be a business owner?
  • What are the financial impacts on your family and other personal obligations?
  • How will the decision change your lifestyle now and affect retirement later?

Learn the important questions to ask before you commit to your entrepreneurial path so you can accomplish your dreams.

The Retractable (Debt) Ceiling

Posted on by Corrin Gibbs-Burke

The clock is ticking on US debt ceiling negotiations. Treasury Secretary Yellen informed Congress that cash balances are estimated to run out by early June, the socalled X-datei. With the deadline fast approaching, markets are sending signals about investor concerns. Treasury bills with maturity dates in mid-summer are seeing higher yields.While there is no playbook on how this showdown will unfold, sadly, this is not our first rodeo either.

We have been here before

Since the enactment of the debt ceiling in 1917, Congress has voted 102 times to either raise or suspend the limitii. This has taken place under both Democrat and Republican control.That’s not to say things have gone smoothly in the past either. In 2011, the debt ceiling debate went so far that the credit rating agency, Standard & Poor’s, downgraded the USS credit rating to AA+ from AAAiii. Standard & Poor’s cited the growing deficit and the prolonged debate as the reasons for the downgrade.In 2013 and 2018, debt ceiling standoffs led to government shutdowns. Each standoff, showdown, and shutdown led to short-term market disruptions for days or weeks and subsequently recovered.

Is this time different?

It feels that the political debate today is even more combative, with the potential for a stalemate ever greater than in the past. Sadly, that is not a new development in Washington. However, the one thing separating today’s debt debate from those of the past is the larger-than-ever national debt. US debt at $31.4 trillion, now stands at 120% of gross domestic product as of December 2022 and is projected to increase in the futureiv. The silver lining is that despite higher debt, the interest cost on our debt is lower than the outlays in the 1980s and 1990sv. Nonetheless, the potential costs ahead are higher than in years past.

What are the paths ahead?

If a deal is reached before the X date, Congress could suspend the debt ceiling for a short time to coincide with the end of the fiscal year. Alternately given the upcoming election year, the most likely scenario is a last-minute agreement to raise the debt ceiling. If a deal is not reached and all of the Treasury’s cash balances are drawn, the federal government will be forced to rely on incoming revenues to pay its bill.This would require a prioritization in payments with principal and interest payments to bondholders likely to continue while other payments like government salaries and social security benefits could be interrupted. If a bond payment is missed or delayed, that would constitute a technical default. The chances for a technical default, while not zero, remain low given the potential implications.A default is not a winning political outcome despite the hardline posturing from both parties to date. A default would mostly likely trigger a downgrade of US debt, increase the cost of borrowing, pressure the US dollar’s reserve currency status, and disrupt short-term funding in financial markets.The subsequent market fallout will likely apply significant pressure on lawmakers to find a quick resolution.

What should investors do?

Understandably, the debt ceiling drama has investors on edge. Investors should resist the urge to make impulsive portfolio decisions solely based on debt ceiling risks. Instead, they should remain focused on long-term goals and rely on diversification within their portfolio. For instance, consider precious metals like gold, currencies like the Japanese yen or, the Swiss franc, or even international equities where appropriate. However, given the potential for increased market volatility, investors should ensure they have ample liquidity to meet near-term spending needs. Finally, looking past the near-term volatility, history suggests that stock markets tend to rebound shortly following the resolution of the US debt ceiling crises.

As history is our guide, let’s hope the retractable (debt) ceiling is raised while finding a longer-term solution to the escalating debt and deficit.

Key Takeaways

  • The government’s borrowing limit is estimated to run out by early June.
  • Investors should prepare for potential volatility as increased partisanship in Congress will potentially only be resolved at the final hour.
  • Investors should not make impulsive portfolio decisions solely based on debt ceiling risks.

i https://home.treasury.gov/news/press-releases/jy1454

ii https://www.americanprogress.org/article/congress-must-raise-the-debt-ceiling/

iii https://www.cnbc.com/2011/08/06/sp-downgrades-us-credit-rating-to-aaplus.html

ivhttps://fred.stlouisfed.org/series/GFDEGDQ188S

v https://fred.stlouisfed.org/series/FYOIGDA188S

Important Information

This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax advice. The information in this report has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345.

Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results.Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss. Actual client results will vary based on investment selection, timing, market conditions, and tax situation. It is not possible to invest directly in an index. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Index performance assumes the reinvestment of dividends.

Investments in equities, bonds, options, and other securities, whether held individually or through mutual funds and exchange traded funds, can decline significantly in response to adverse market conditions, company-specific events, changes in exchange rates, and domestic, international, economic, and political developments.

Bloomberg® and the referenced Bloomberg Index are service marks of Bloomberg Finance L.P. and its affiliates, (collectively, “Bloomberg”) and are used under license. Bloomberg does not approve or endorse this material, nor guarantees the accuracy or completeness of any information herein. Bloomberg and AssetMark, Inc. are separate and unaffiliated companies.

AssetMark, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission.

©2023AssetMark, Inc. All rights reserved.105476| C23-19748| 03/2023| EXP03/31/2025

AssetMark, Inc.

1655 Grant Street10thFloorConcord, CA 94520-2445800-664-5345

Demise of the US Dollar: Greatly Exaggerated or Destiny?

Posted on by Corrin Gibbs-Burke

Dollar Fears

After a decade of relative strength, the US dollar has declined sharply over the last six months. This has coincided with media reports that the world may reduce dollar usage. We examine the US dollar from two perspectives – as a medium of global trade and as a reserve currency. Short-term, we see a mixed environment for the greenback; longer-term, the effects of dedollarization are likely to be both positive and negative.

What is the Petrodollar system?

The Petrodollar system was created in the 1970s by the United States and Saudi Arabia. The system is an agreement between the US and OPEC1, which among other things2, requires OPEC member countries to use the US dollar when they sell oil. The Petrodollar has been dented over the last several years, as some non-OPEC oilproducing countries have been transacting in currencies other than the US dollar3. Earlier this year, Saudi Arabia made headlines when it announced it was open to selling oil in non-US dollar currencies. More recently, several non-OPEC countries4 announced they have been discussing an alternative currency to the Petrodollar. Clearly, if the Petrodollar falls, that would mean a sea change in global politics and economics. However, settling on an alternative currency for oil transactions would be very challenging.

Any alternative currency would need to be relatively stable and easily exchangeable for other currencies or assets. Surprisingly, the number of currencies that meet these criteria is relatively small. Not coincidentally, these are some of the same characteristics of reserve currencies.

What is a reserve currency?

A reserve currency is a currency that is widely held by central banks and other institutions. These entities hold reserves to help manage exchange rates and facilitate global trade. The four largest reserve currencies are the US dollar (58% of global reserves), the euro (20%), the Japanese yen (6%), and the British pound (5%)5.

While there are no official criteria for reserve currency status, reserve currencies tend to have the following:

• Stable economies and political systems: reserve currencies should be effective stores of value (i.e., have relatively stable exchange rates).

• Free capital flows: reserve currencies should be easily exchanged for another currency or asset and easily moved from one country to another.

• Robust financial system: reserve currencies should have liquid, transparent, and well-governed capital markets in which to invest, including a deep sovereign bond market.

While the Petrodollar system creates a natural demand for US dollars, the US also scores highly on the three criteria above. In our view, the most significant risks to the US dollar’s reserve status are not external factors but internal factors relating to reserve currency criteria. Specifically, the stability of our political system has been called into question with issues around the peaceful transfer of power and the ability of our government to effectively legislate.

Similarly, concerns about high government debt levels (and a potential government shutdown this year) have raised concerns about the stability of our economy.

De-dollarization?

Given the developments with the Petrodollar and the concerns mentioned above, the world is likely to diversify some of its exposure away from the US dollar. However, we believe the move is likely to be slow for three reasons.

First, the dollar remains the dominant currency for international trade. Outside of Europe, over 70% of exports are conducted in dollars. This “network effect” is very slow to change. Secondly, the dollar is also the dominant currency in global banking, with about 60% of foreign bank deposits and loans denominated in US dollars6.

Lastly, countries’ supply and demand change slowly. Developed nations like the US tend to have higher domestic demand than developing countries, meaning we import more goods than we export7. The US, for example, imports about $1.2 trillion more than we export. This $1.2 trillion gap needs to be invested in US dollar-denominated assets. Currently, no other sovereign bond market is deep enough to handle this level of investment8. Outlook for the US dollar? Near term, the US dollar may weaken for the normal reasons currencies fluctuate in value (differences in interest rates, economic growth, and inflation rates across countries)9, but we don’t see a clear-cut bear case.

Further, the US dollar remains one of the most reliable safe-haven currencies in the world. Longer term, it seems likely that global diversification away from the greenback will reduce demand for US dollars. It is not clear to us if the US economy benefits from a consistently strong dollar. Too much demand for dollars results in lower US interest rates. Persistently low-interest rates tend to facilitate debt accumulation and asset bubbles, while also punishing US savers.

A structurally lower dollar might require a painful adjustment, but several issues impacting the US economy (e.g., the income gap, position of US manufacturers) would likely improve.

Key takeaway

Global diversification away from the US dollar seems likely over time. Shorter-term, we see a mixed environment for the dollar. Longer-term, de-dollarization is likely to be a negative for the dollar; the impact on the US economy, however, will likely be both positive and negative.

1 Organization of Petroleum Exporting Countries

2 Saudi Arabia agreed to sell its oil in US dollars and invest those dollars in US Treasuries, in exchange for US

military support and weapons.

3 Venezuela for example, began accepting euros, Chinese yuan, and other convertible currencies for its oil exports

in 2018, before entering OPEC.

4 Brazil, Russia, India, China, and South Africa

5 While the US dollar share of foreign exchange reserves has declined, the decline has not been dramatic. 10 years

ago, the USD share was 61%. Source: Bank of International Settlements.

6 Source: US Federal Reserve.

7 Conversely, developing economies like China and India tend to produce more than they can consume, so they

export those goods to developed with higher domestic demand, like the US.

8 US Treasury market is about $10 trillion. The Japanese Government Bond market is about $7 trillion (but they

own most of it). All other countries have sovereign bond markets of less than $2 trillion. Source: Bloomberg.

9 Among G-10 currencies, the US dollar ranks 2nd best, 5th best, and 6th best, on relative interest rate, growth, and

inflation rates, but it ranks very low on trade and budget balances.

Important Information

This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax advice. The information in this report has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345.

Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results.Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss. Actual client results will vary based on investment selection, timing, market conditions, and tax situation. It is not possible to invest directly in an index. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Index performance assumes the reinvestment of dividends.

Investments in equities, bonds, options, and other securities, whether held individually or through mutual funds and exchange traded funds, can decline significantly in response to adverse market conditions, company-specific events, changes in exchange rates, and domestic, international, economic, and political developments.

Bloomberg® and the referenced Bloomberg Index are service marks of Bloomberg Finance L.P. and its affiliates, (collectively, “Bloomberg”) and are used under license. Bloomberg does not approve or endorse this material, nor guarantees the accuracy or completeness of any information herein. Bloomberg and AssetMark, Inc. are separate and unaffiliated companies.

AssetMark, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission.

©2023AssetMark, Inc. All rights reserved.105476| C23-19748| 03/2023| EXP03/31/2025

AssetMark, Inc.

1655 Grant Street10thFloorConcord, CA 94520-2445800-664-5345

Fed Decision – Aiming for Stability

Posted on by Corrin Gibbs-Burke

 The road so far 

Over the last two weeks, the FDIC assumed control of Silicon Valley Bank and Signature Bank. Both banks had experienced losses in their fixed-income portfolios and were unable to attract sufficient capital to meet the withdrawals of their depositors1. 

In an effort to increase confidence in the banking system, US regulators provided banks with access to capital through several lending facilities. They also guaranteed all of the deposits of the two banks beyond the $250,000 FDIC insured level. A few days later Credit Suisse, the second-largest Swiss bank, experienced its own funding crisis. The Swiss National Bank (the central bank of Switzerland) hastily arranged the sale of Credit Suisse to UBS (the largest bank in Switzerland). 

This set the stage for the Fed’s interest rate decision on March 22, 2023. The Fed had already raised by 4.5% over the last year in an effort to lower inflation. This rapid increase in interest rates was a significant driver of the recent stresses in the banking system. 

The Fed’s message 

The Fed raised interest rates by 0.25%, meeting market expectations. It is likely that they did not want to surprise investors by raising rates more (or less) than expected. A pause in rate hikes could suggest the Fed was extremely worried about financial stability (which would worry many investors), while a larger-than-expected rate hike could suggest the Fed was ignoring financial stability (which would also worry investors). 

Chairman Powell opened his statement by pointing out that growth has been “modest” and that job gains had picked up. He then highlighted that the “US banking system is sound and resilient” but stated that recent developments in the banking system would likely result in “tighter credit conditions,” which will weigh on economic activity, hiring, and inflation. In describing future rate hikes, they replaced the term “ongoing” rate hikes with “some additional policy firming may be appropriate.”

Carry on 

The Fed reminded us that even amidst an ongoing (albeit appears to be improving) banking crisis, inflation and growth still matter. In our view, the current stress in the banking system will likely reduce future bank lending and therefore, future economic growth. While not desirable on its own, lower economic activity should also reduce inflation. 

Clearly, a banking crisis is not the preferred path to lowering inflation, but this episode did show that regulators (and industry leaders) learned many lessons from the Global Financial Crisis. In my view, those lessons made this crisis much less severe, and I would expect we’ll learn a few lessons from this crisis as well. For better or worse, this is the messy, scary, and sometimes painful process of adding resilience to our financial system. 

As stability returns to the financial markets, investors will begin to re-focus on the economic cycle. Inflation is still too high, and growth is still surprisingly resilient. 

For now, the key takeaways are: 

1)There will likely be additional issues with regionalbanks, but the financial system has survived andshown its resilience.

2)Lower credit creation implies lower near-term paths forboth growth and inflation.

3)Long-term investment plans incorporate all types ofeconomic conditions, including this one. The biggestrisk to achieving long-term success is abandoning awell-constructed investment plan at the wrong time.

We encourage investors to look through this period of volatility and maintain discipline to their long-term investment plans.

 Key Takeaways 

  • Recent stresses in the banking system, includingepisodes at Silicon Valley Bank, Signature Bank,and Credit Suisse, have put the markets on edge.
  • The Fed raised interest rates by 0.25%, meetingmarket expectations. They emphasized financialstability while acknowledging that inflation andgrowth have slowed.
  • Despite a stressful couple of weeks, the financialsystem was resilient. We encourage investors tolook through this period of volatility and maintaindiscipline to their long-term investment plans.

 1 While meeting regulatory requirements.  

Important Information

This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax advice. The information in this report has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345.

Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results.Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss. Actual client results will vary based on investment selection, timing, market conditions, and tax situation. It is not possible to invest directly in an index. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Index performance assumes the reinvestment of dividends.

Investments in equities, bonds, options, and other securities, whether held individually or through mutual funds and exchange traded funds, can decline significantly in response to adverse market conditions, company-specific events, changes in exchange rates, and domestic, international, economic, and political developments.

Bloomberg® and the referenced Bloomberg Index are service marks of Bloomberg Finance L.P. and its affiliates, (collectively, “Bloomberg”) and are used under license. Bloomberg does not approve or endorse this material, nor guarantees the accuracy or completeness of any information herein. Bloomberg and AssetMark, Inc. are separate and unaffiliated companies.

AssetMark, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission.

©2023AssetMark, Inc. All rights reserved.105476| C23-19748| 03/2023| EXP03/31/2025

AssetMark, Inc.

1655 Grant Street10thFloorConcord, CA 94520-2445800-664-5345

Banking Crisis Averted, But Risks Remain

Posted on by Corrin Gibbs-Burke

 Why did this happen? 

In its simplest form, banks gather deposits from clients (individuals and corporations), and they pay those clients a short-term interest rate. They then invest some of those deposits in fixed income securities, like US Treasuries or mortgage-backed securities. Depending on the duration of their fixed income portfolios, like many investors’ fixed income portfolios, some banks experienced substantial market declines during 2022. With a smaller fixed income portfolio, they have less money to repay their depositors, should they want to withdraw their money. If one depositor wants to withdraw their money, it’s not really a problem. But if enough depositors want to withdraw their money, you have a bank run. In the case of SVB, run risk was higher given the depositor concentration with Venture Capital–backed companies. The intersection of these risk can result in liquidity risk, which is at the core of the issue today. 

 How did the government act? 

The government acted quickly to bolster confidence in the banking system. Key actions over the weekend included: 

Protecting depositors – The Treasury pledged to fully protect all Silicon Valley Bank (SVB) and Signature Bank deposits. This will help minimize the impact on SVB’s technology-heavy client base, and it also should help reassure depositors of other banks as well. 

Ensuring bank liquidity – Reminiscent of the alphabet soup of acts we saw during the global financial crisis (GFC), the Fed is creating a program to support other banks in a similar situation to SVB. The “Bank Term Funding Program” (BTFP) will offer loans to banks and treat all collateral at 100% of its face value. For example, if a Treasury bond was purchased for $100 and has declined in price to $90, the Fund will treat the bond’s value at $100 for collateral purposes. This temporarily eliminates the fixed income portfolio loss issue discussed earlier. The loans are good for one year, allowing banks to raise additional capital or seek financial partners. Importantly, the Fund is designed to be large enough to protect all uninsured deposits in the wider US banking system. 

These actions focus on protecting depositors and the confidence of the banking system; these programs do not protect shareholders or debt holders. 

What should I do? 

This is not the global financial crisis. Banks are better capitalized, the government has learned a lot of hard lessons on how to handle bank failures, and the root causes of today’s issues are very different. All that being said, we expect some additional fallout from this episode, and we expect some continued market volatility as the ramifications of last week’s events are fully understood. 

On the bright side, the Fed can now understand that its rate-hiking cycle has destabilized the financial system. Promoting financial stability is one of the Fed’s core functions, in addition to its dual mandate of price stability and full employment. As such, we expect the Fed to be more cautious in future rate hikes, potentially leading to a more stable rate environment. 

In every economic cycle and every market cycle, there are risks, and there are opportunities. Last week reminded us that some risks can spiral out of control if they are not contained. Thankfully, quick action from the Fed, Treasury, and FDIC substantially reduced the risk of a financial crisis. But risks remain, and today’s risks are tomorrow’s opportunities. Perhaps that’s the nature of market cycles. Just as we encourage investors to stay invested through recessions and bear markets, we encourage investors to remain disciplined in their long-term investment plans.

Important Information

This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax advice. The information in this report has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345.

Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results.Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss. Actual client results will vary based on investment selection, timing, market conditions, and tax situation. It is not possible to invest directly in an index. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Index performance assumes the reinvestment of dividends.

Investments in equities, bonds, options, and other securities, whether held individually or through mutual funds and exchange traded funds, can decline significantly in response to adverse market conditions, company-specific events, changes in exchange rates, and domestic, international, economic, and political developments.

Bloomberg® and the referenced Bloomberg Index are service marks of Bloomberg Finance L.P. and its affiliates, (collectively, “Bloomberg”) and are used under license. Bloomberg does not approve or endorse this material, nor guarantees the accuracy or completeness of any information herein. Bloomberg and AssetMark, Inc. are separate and unaffiliated companies.  

AssetMark, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. 

©2023AssetMark, Inc. All rights reserved.105476| C23-19748| 03/2023| EXP03/31/2025

AssetMark, Inc.

1655 Grant Street10thFloorConcord, CA 94520-2445800-664-5345

Dooming Debt or Déjà Vu?

Posted on by Corrin Gibbs-Burke

 What is The Debt Ceiling? 

On January 19, the US government reached its legal $31.4 trillion (T) debt limit1. The debt ceiling is about paying the bill on purchases already made, just like paying your credit card bill. The difference, however, is when individuals reach their credit limit, they can no longer make new purchases on that credit card. In the case of Congress, when it reaches the debt ceiling or its credit limit, it can continue to spend. That is because Congress is not bound by the debt ceiling; instead, the Treasury department, which is responsible for the financing of or paying the government’s bills, is bound by the debt ceiling. In short, the debt ceiling is often confused as a vehicle to control future spending, which it is not. Instead, it’s simply the way to pay our past-due bills. 

History of US debt 

The US has carried debt since its inception. The US national debt has increased from $908B in 1980 to nearly $31T in 20222. Notable recent events triggering large spikes in the debt include the Afghanistan and Iraq Wars, the 2008 Great Recession, the 2017 Tax Cuts, and the COVID-19 pandemic. 

The debt ceiling was put in place in 1917, allowing the government to issue bonds to finance participation in the First World War. Since WWII, the ceiling has been raised or suspended 102 times3. This has happened across both Republican and Democratic control of Congress, as the national debt has continued to rise as spending has exceeded revenues. Importantly, the US has never defaulted on its debt, thus retaining its stature within the global financial system.

 While the US has never defaulted on its debts, it did have a close call in 2011, when Congress increased the ceiling just two days before the Treasury would run out of the means to pay bills owed. Days later, the rating agency Standard & Poor’s downgraded the US credit rating to AA+4 (from AAA), just like a knock on one’s credit score after missing to pay one’s bills. 

The result of the downgrade on the US dollar and stock markets was swift but short-lived. The dollar sold off, and stocks (S&P 500 Index) fell 6% on the day of the announcement5. However, a year later, the S&P 500 gained 20%6. Within the bond market, we saw a strong rally in Treasuries, which led bonds higher. This rally in bonds, while counterintuitive, was likely caused by simultaneous fears of a European sovereign debt crisis, which led investors to still lean on the US Treasury market despite the downgrade. 

How Much Debt is Too Much? 

Undoubtedly, $31T in debt is a shockingly large number. Naturally, the question many investors have is how much debt is too much. Is there a tipping point at which it becomes a big problem for a country? The answer to that question requires understanding debt relative to the economy, as well as the interest cost on the debt. 

While the debt has grown, so has the economy as measured by gross domestic product (GDP). US GDP has grown from $2.7T in 1980 to $26.1T in 2022, and the US remains the largest global economy7. Comparing a country’s debt to its GDP is considered a better indicator of a country’s fiscal situation than just the national debt number because it shows the burden of debt relative to the country’s total economic output and, therefore, its ability to repay it. The US debt-to-GDP ratio surpassed 100% in 2013 when both debt and GDP were approximately $16.7T, and it now stands at 124% as of 20228. For comparison, Japan’s debt-to-GDP ratio has been over 200% since 20139. Clearly, countries don’t strive to have a greater than 100% debt-to-GDP ratio. However, if the economy can continue to grow, its large debt alone doesn’t mean imminent doom. 

Second, looking at the interest we pay on debt today shows that despite rising interest rates, the interest cost remains below the mid-1980s and 1990s when the total debt was smaller than today10. In other words, the US can still afford to pay its debts even though interest rates and the amount of debt have risen.

What’s Next? 

Now that the debt ceiling limit has been reached, the Treasury will run down its cash balance and use “extraordinary measures” to keep paying the bills. It is estimated that the Treasury has enough funds to keep the US from defaulting until June 202311, but there is a lot of uncertainty around that date. 

Congress is in charge of suspending or raising the debt limit, and a full-throttle drama will likely ensue as political parties demand concessions as they try to negotiate a deal. If Congress does not suspend or raise the debt ceiling before it reaches a critical point, it would raise the risk of a hit to the economy, similar to 2011, as well as the risk of default. That said, given the 102 times since WWII when policymakers have reached a consensus, we hope history is a guidepost that we will avoid a worst-case scenario of default, and any potential damage could be short-lived. 

1 https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/debt-limit 

2 https://fiscaldata.treasury.gov/datasets/historical-debt-outstanding/historical-debt-outstanding 

3 https://privatebank.jpmorgan.com/gl/en/insights/investing/tmt/debt-ceiling-drama-what-you-need-to-know 

4 https://www.atlantafed.org/cenfis/publications/notesfromthevault/1108 

5 FactSet 

6 FactSet 

7 https://fred.stlouisfed.org/series/GDP 

8 https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/ 

9 https://www.fitchratings.com/research/sovereigns/japan-debt-trajectory-at-risk-as-possibility-of-tightening-rises-18-01-2023 

10 https://fred.stlouisfed.org/series/FYOIGDA188S 

11 https://privatebank.jpmorgan.com/gl/en/insights/investing/tmt/debt-ceiling-drama-what-you-need-to-know  

Important Information

This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax advice. The information in this report has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345.

Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results.Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss. Actual client results will vary based on investment selection, timing, market conditions, and tax situation. It is not possible to invest directly in an index. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Index performance assumes the reinvestment of dividends.

Investments in equities, bonds, options, and other securities, whether held individually or through mutual funds and exchange traded funds, can decline significantly in response to adverse market conditions, company-specific events, changes in exchange rates, and domestic, international, economic, and political developments.

Bloomberg® and the referenced Bloomberg Index are service marks of Bloomberg Finance L.P. and its affiliates, (collectively, “Bloomberg”) and are used under license. Bloomberg does not approve or endorse this material, nor guarantees the accuracy or completeness of any information herein. Bloomberg and AssetMark, Inc. are separate and unaffiliated companies.

AssetMark, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission.

©2023AssetMark, Inc. All rights reserved.105476| C23-19748| 03/2023| EXP03/31/2025

AssetMark, Inc.

1655 Grant Street10thFloorConcord, CA 94520-2445800-664-5345

Opportunity in Growth, Value, or Both? 

Posted on by Corrin Gibbs-Burke

Defining Growth & Value 

For many, the growth and value styles of investing may be foreign terms. Let’s begin with defining them. 

Growth companies tend to be those with revenues growing faster than their broader markets. They do not typically pay dividends and historically have been more volatile. Growth stocks are usually priced higher than the broader market because investors are willing to bet on their potential for continued earnings growth. In other words, pay up now for higher earnings later. 

In contrast, value stocks are generally considered cheap compared to the broader market or their own intrinsic value. They tend to be more mature companies with less opportunity for earnings growth and compensate investors with dividend payments and the opportunity for the stock price to “correct” back to its perceived true value. 

Do they work equally? 

Looking back over the past 20 years (as shown in Figure 1), we saw the domination of the growth style. As a result, heading into 2022, many investors found themselves under-allocated to parts of the market that had underperformed in recent years, such as value stocks, and holding an overweight to those areas that had experienced a long stretch of outperformance, such as growth stocks. 

That starting position was a disadvantage to many investors as several long-term trends were 

reversed. In 2022, value stocks, which feature sectors like energy, delivered strong returns, while US growth stocks, which feature many stocks in the technology sector, struggled in comparison as the tailwind of falling interest rates dissipated. 

While the broad trend favored growth stocks over the last two decades, looking closely shows that in the last three years, we’ve seen five significant and pronounced changes in leadership. This leads to the next question of whether there are specific environments that favor one style over the other. 

Environments for Growth & Value 

Growth stocks tend to do well when interest rates are low or falling. Low interest rates mean the cost of doing business is cheap, so it’s easier for these companies to reinvest, expand, and finance their growth. What makes growth stocks potentially attractive is the prospect of higher earnings in the future, a delayed return of cash flows for investors. This means growth stocks tend to be more interest rate sensitive, so periods of rising rates can be challenging as the cost of capital increases. Contrast this with value stocks, which characteristically tend to pay dividends. Since investors receive their anticipated earnings from traditional value stocks via dividends much 

sooner, this equates to less interest rate sensitivity. All else held equal, a rising interest rate environment could make value stocks more attractive than growth. 

Positioning the Portfolio 

As we move through a slowing growth environment with an elevated risk of recession due to higher interest rates and continued geopolitical risks, heightened volatility is expected to remain. Under these conditions, portfolios that have been overweight growth stocks could look to balance that by adding value stocks or strategies to provide greater ballast within portfolios. 

Tilting the portfolio towards one style or another could benefit portfolios, but not having exposure to a style when the market turns could be detrimental to the long-term goals of a portfolio. History has shown it’s inherently hard to time the markets, but it is easy to have time in the markets and maintain diversification across both growth and value. Ultimately deciding which style is better could be like choosing between two of your favorite superheroes—Spiderman and Wonder Woman. Each one has unique strengths and weaknesses, and as we enter a complex environment ahead, it is likely you need both. 

 Key Takeaways 

  • Growth and value investing are two distinctinvestment styles. Growth focuses on fast growingcompanies that typically have higher prices today forhigher earnings later. Value focuses on more maturecompanies that are discounted to their perceivedvalue and tend to pay a dividend.
  • Growth tends to do better in low or falling interestrate environments while value tends to better inrising rate environments.
  • Portfolios may be imbalanced due to growth’sdomination over the past decade. Considerrebalancing the portfolio across growth and value.

Important Information

This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax advice. The information in this report has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345.

Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results.Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss. Actual client results will vary based on investment selection, timing, market conditions, and tax situation. It is not possible to invest directly in an index. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Index performance assumes the reinvestment of dividends.

Investments in equities, bonds, options, and other securities, whether held individually or through mutual funds and exchange traded funds, can decline significantly in response to adverse market conditions, company-specific events, changes in exchange rates, and domestic, international, economic, and political developments.

Bloomberg® and the referenced Bloomberg Index are service marks of Bloomberg Finance L.P. and its affiliates, (collectively, “Bloomberg”) and are used under license. Bloomberg does not approve or endorse this material, nor guarantees the accuracy or completeness of any information herein. Bloomberg and AssetMark, Inc. are separate and unaffiliated companies. 

AssetMark, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission.

©2023AssetMark, Inc. All rights reserved.105476| C23-19748| 03/2023| EXP03/31/2025

AssetMark, Inc.

1655 Grant Street10thFloorConcord, CA 94520-2445800-664-5345

Three Takeaways from 2022 

Posted on by Corrin Gibbs-Burke

Last year was an exceptional year, and not in a good way. There was no shortage of worries during the year from COVID-19, the Ukraine war, and the most central story of all: inflation and interest rates. In this edition of On the Mark, we identify the impact of inflation on markets and whether investors should expect more of the same or changes in 2023. 

Stocks and bonds fell 10% for the first time on record 

In 2022, the Federal Reserve (Fed) switched its narrative from transitory inflation to one committed to taming the inflation beast. The Fed raised interest rates seven times from 0.0% to 4.25-4.5% in merely 10 months. This surge in interest rates hurt both stocks and bonds. Stocks, as represented by the S&P 500 index, fell 18.1%, its worst year since 2008 and the sixth worst on record. Meanwhile, bonds, as represented by the Bloomberg US Aggregate index, had its worst year since the inception of the index in 1976, falling by 13.1%i. 

 Losses in stocks are not new. Losses within bonds are less common but also have occurred previously. What made 2022 unique is how sharply stocks and bonds fell simultaneously. Last year was only the sixth time since 1926 that both the S&P 500 and Bloomberg US Aggregate declined. What’s truly remarkable is that it was the only time in history where both stocks and bonds each fell by more than 10%, as seen in the below chart. 

 Key Takeaways 

o2022 was an exceptionally bad year as inflation andhigher interest rates wreaked havoc on markets.

o2022 is the only time in history where stocks andbonds each fell by more than 10% and eventraditional inflation hedges failed to protect portfolios.

oLooking ahead to 2023, the singular focus oninflation will likely shift to growth and likely bringingnew surprises for investors.

Boring was beautiful 

While it was a hellish year for stocks, not all stocks fared the same. Over the past decade, fast-growing technology companies dominated returns when compared to those of more “boring” companies. That trend reversed course sharply in 2022 as investors were more focused on companies that made goods and have shown resiliency through varied economic cycles. The Nasdaq index, often synonymous with technology stocks, fell 32.5%, while the blue-chip stocks listed on the Dow index fell 6.9%, marking 

a difference of nearly 26%. It’s not that technological innovation is no longer valuable, but many of these companies were priced for perfection, and higher interest rates called into question earnings potential for many of these companies that were still years away from profitability. 

Source: FactSet. 

Traditional inflation hedges did not work either 

Last year wasn’t challenging for only stocks and bonds. It also was a surprisingly challenging year for investments that were considered inflation hedges. Real estate, gold, and even bonds aimed at protecting against inflation, known as Treasury Inflation-Protected Securities (TIPS), all lost money in 2022ii. Even claims of cryptocurrency as an inflation hedge proved false. Bitcoin was down 75% from its peak toward the end of 2021iii. Except for commodities, there was no place for investors to hide. 

Looking ahead to 2023 

In 2022, the only thing that mattered to markets was inflation and the Fed’s focus on taming the inflation beast. This singular focus will shift in 2023 from inflation to growth since inflation has likely peaked and is falling, and the economy is slowing. 

For riskier investments like stocks, even if the economy avoids an official recession, profit growth for companies likely will slow in 2023. Additionally, stock investors probably will become more focused on which companies can better weather that slowdown, a continuation of the trend we saw in 2022. However, while caution is warranted, economic uncertainties should not be used as a market timing tool. Markets are forward-looking and will likely bottom before the worst of the economic news is over. 

Bonds, on the other hand, are unlikely to repeat the carnage of 2022. Higher starting yields should provide a better buffer from additional rate hikes. In fact, investors finally have reasonably attractive opportunities within bonds as they wade through continued uncertainty. 

Finally, 2022 was a reminder of the importance of having a well-thought-out financial plan. It is a reminder that no matter how good or bad any single year proves to be, it should not derail one’s investment goal. Investing is a multi-year process and should accommodate even an exceptionally bad year. To that end, good riddance to 2022. Be glad it’s behind us.

 Key Takeaways 

2022 was an exceptionally bad year as inflation andhigher interest rates wreaked havoc on markets.

2022 is the only time in history where stocks andbonds each fell by more than 10% and eventraditional inflation hedges failed to protect portfolios.

Looking ahead to 2023, the singular focus oninflation will likely shift to growth and likely bringingnew surprises for investors.

i FactSet 

ii Gold represented by Bloomberg Sub Gold; Real Estate represented by S&P 1500 Equity Real Estate Investment Trusts 

iii Coindesk  

Important Information

This is for informational purposes only, is not a solicitation, and should not be considered investment, legal or tax advice. The information in this report has been drawn from sources believed to be reliable, but its accuracy is not guaranteed, and is subject to change. Investors seeking more information should contact their financial advisor. Financial advisors may seek more information by contacting AssetMark at 800-664-5345.

Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results.Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss. Actual client results will vary based on investment selection, timing, market conditions, and tax situation. It is not possible to invest directly in an index. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Index performance assumes the reinvestment of dividends.

Investments in equities, bonds, options, and other securities, whether held individually or through mutual funds and exchange traded funds, can decline significantly in response to adverse market conditions, company-specific events, changes in exchange rates, and domestic, international, economic, and political developments.

Bloomberg® and the referenced Bloomberg Index are service marks of Bloomberg Finance L.P. and its affiliates, (collectively, “Bloomberg”) and are used under license. Bloomberg does not approve or endorse this material, nor guarantees the accuracy or completeness of any information herein. Bloomberg and AssetMark, Inc. are separate and unaffiliated companies. 

AssetMark, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission.

©2023AssetMark, Inc. All rights reserved.105476| C23-19748| 03/2023| EXP03/31/2025

AssetMark, Inc.

1655 Grant Street10thFloorConcord, CA 94520-2445800-664-5345

Beautiful Change

Posted on by Corrin Gibbs-Burke


Change is not something one chooses on a regular basis. In fact, most people avoid change at all costs. But change is something that inevitably is a part of life. So, what if instead of resisting change, we allow ourselves to see it as beautiful. So often as we move through change and outside our comfort zones, the other side is beyond what we could have imagined! In a good way!

For me, there is so much change happening being a parent of young children. I sometimes catch myself thinking how I wish I could freeze time and keep them this age always. I laugh as I realize I have thought that at every age. And what I have found is that at every age there is something wonderful about it.  Each age is just as wonderful as all the others.  My oldest daughter is going to 6th grade this year and has not been placed with her best girlfriends. Last year she was with both. That is major change, and being a parent, you certainly worry about friend groups and hope your children are getting their social needs met at school. So, at first, I was a little nervous and worried and then I reframed my thought to be one that says, “this is an opportunity for my daughter to cultivate an abundance of new friendships”. The change could, in fact, be beautiful! I am looking forward to hearing how her first day and the rest of her year unfolds.

I have seen clients and friends go through divorce to only come out of the dark times to a beautiful outcome. It may take some time to heal and journey through that challenging period, but the change was indeed beautiful in the end. Often, we may have to journey through a more challenging time to reach the beauty on the other side. That difficult time, however, is what can allow us to see the beauty that may have been right in front of our eyes the whole time. We may just need a perspective shift.

When I first started Money Coaching, I thought everyone would welcome a new money perspective. That everyone I talked to would be excited to take the Money Quiz on my website, have a complimentary consultation and move forward with coaching and uncover and change their Money Story. What I have found oddly enough, is that many people are resistant to uncover what their Money Story is and to effectively change it. However uncomfortable their current money situation may be! Why? It is not easy for many people to talk about money. It is arguably the last remaining taboo out there. But once someone begins unraveling their Money Story, talking about it and discovering what it is and where and why their story is showing up as it is, the biggest most beautiful changes can occur! Money relates to so many aspects of our life on so many levels. Do you think it is worth spending more time with yours and creating the Money Story you have always dreamed about? There is no reason to stay in your Money Comfort Zone when the other side of that comfort zone may hold such Beautiful welcomed Change!

Please take the Money quiz and learn more about the ways to begin understanding your Money Story!

Podcast: Small Business As Usual 19-6, Emotions Behind Money

Posted on by Corrin Gibbs-Burke


Problems in business with money? Maybe it’s all in your head. Corrin Gibbs Burke CFP®, CMC®, explains the emotional side of what none of us can live without, and how using archetypes helps us understand pitfalls and tendencies that interfere with small business success.

Visit CEDF website to listen to podcast: Small Business as Usual – Emotions Behind Money