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The following program was prerecorded so our phone lines are not open. Most investors have heard the disclaimer, past performance is no indication of future results. We sure hope that's true for 2023. Hi, I'm Rob West. We're a couple of weeks into the new year and there's one thing most of us can agree on.

We'd sure like it to be better than last year, but will it? I'll talk about that today with Bob Dahl. Then we have some great calls lined up, but please don't call in today because we're prerecorded.

This is Faith and Finance Live, biblical wisdom for your financial decisions. Well our guest is my good friend Bob Dahl, Chief Investment Officer with Crossmark Global Investments and Bob, it's great to have you back with us on the program. Happy new year Rob and to all the listeners.

Happy new year to you. Now Bob, as you know, you usually give us a short term look at what's happening with the markets and the economy as a whole when you join us each week, but once a year you put your 10 predictions for the coming 12 months out and so because it's that time again, we thought we'd take a little bit more time and dive into those, but before we do, perhaps just give us a thumbnail sketch of what happened in 2022. It was quite a year. It was quite a year, one that many of us would like to forget given the negative signs in front of almost everything. For the stock market, Rob, you know it was a tug of war.

In fact, that was our theme coming into 2022. Between, on the one hand, the tailwinds associated with good earnings and the valuation headwinds associated with rising inflation and interest rates. In fact, the first six months of last year is the first time ever that the stock market went down more than 20% while earnings expectations were going up.

Strange period. We have lots of volatility all year long in both directions, mostly down in the first half and then both up and down in the second half as we watched and anticipated every breath of all central bankers it seemed. As you know, it was the first time in 50 years that stocks and bonds both had negative returns for the first three quarters of the year. We expected a down year, you remember our predictions for first of last year, but not 25% bear market. Ouch.

Really difficult period. Valuation compression, as I intimated earlier, as bond yields went up because inflation and concern about the Fed, that really summarized not only the year, but at least the first half of the year in spades. The price earnings ratio for the stock market, it gets high literally on January 3rd at 22 times earnings. And so far, the low has been October 12th, 15 times earnings. So a big decline in valuation levels from expensive to not cheap, but more reasonable.

Sentiment is measured by the bull bear ratio, fell to a bear market low of 0.57 in mid-October. As you know, Rob, when you get the reading below one, it's generally a good time to be buying for long-term investors. So the back and forth with the Fed, the anticipation, maybe the Fed's going to stop raising rates soon and we get a rally. We saw a big rally June to the middle of the summer and then another one in the back part of the year. But then the Fed would have a meeting and the air would come out of the balloon and the market would go back down. So the path of least resistance was sadly lower almost all year with a couple of important bounces along the way.

Wow, that's a great summary, Bob. And yeah, the big question now is where do we go from here? So let's dive into your first prediction for 2023 before we head into our first break. Your theme is the Fed calls to shots. I'm not surprised to hear that given the importance of the Fed as of late. But your first prediction is that the U.S. experiences a shallow recession as real GDP is in the bottom 10 of the last 50 years.

What do we need to know there? Yeah, so there are three possibilities for the economy. An outright normal average recession. We think that's not a high probability for lots of reasons, including cash on consumer balance sheets. The other extreme would be we kind of a soft landing and sail through. The in between is a recession, but not a big one. That's what we think is going to happen.

OK, very good. Well, we've got to hit our first break here. We're talking to Bob Doll today, chief investment officer with Crossmark Global Investments. Every year, Bob puts out his 10 predictions for the coming 12 months. It's a sought after analysis of where we could be heading over the balance of this year. We'll unpack the other nine predictions just around the corner. And then, of course, we're going to be turning our attention to some calls we've already lined up.

But let me remind you, we won't be taking your live calls because this program is prerecorded. Don't go anywhere, because we'll be right back after this brief break with more Faith and Finance Live. Welcome back to Faith and Finance Live.

I'm Rob West. You might be wondering, what is that name? Well, it's our new name.

That's right. MoneyWise Live is now Faith and Finance Live, a better expression of our heart here for this program. That is to begin with our faith and then allow our faith to inform our financial decisions. By the way, we're not here today, but we lined up some great questions in advance. Hey, coming up a little later in the broadcast, we'll actually take a few of your e-mails as well.

Those come to us at AskRobAtFaithFi.com. Let's head right to the phones. To Virginia we go. Hi, Gary. Thanks for calling, sir. Go ahead. How you doing, sir? I'm doing well. Thanks.

All right. I just told you the lady that got me on or answered a call. I went in the bank a while ago and put down 20 grand in a money market. My bank is my personal bank. But and she told me, she said, now this earned 2.9 interest daily.

And I've got to thinking about that. That's pretty good interest daily. Yes. Is that not right? Well, that's not what that's an annual amount, but it's adjusted daily and it's probably daily, perhaps daily compounding. But that yield that she's telling you is what you would earn over a year's time.

Well, that's still pretty good. That's better than putting it in a savings account, isn't it? Well, savings accounts right now, depending on where you're at, if you're at an online bank, you could get up to 3.6 percent FDIC insured savings accounts if you're willing to use an online bank without a brick and mortar option. And with money markets, there are some pretty compelling money market rates out there. For instance, Fidelity or Schwab have some great money markets. I know the Fidelity government money market right now, which is made up of government bills, bonds and notes, is paying 3.88 percent as of yesterday. I think I was just looking at it. So there are some other options out there that would require you to go beyond your local bank, Gary.

But it would require you open in another account and move into, you know, let's say an online bank for your savings and then linking it to your checking to get these higher yields, like the 3.6 percent you can get in liquid savings or 3.8 in government money market at something like Fidelity or Schwab. All right. I appreciate your information. All right, Gary. Very good. Like I told her, I said, I'm living the dream. So, you know, I'll see what happens. OK. Hey, tell me this. What does God have you up to these days?

What are you most excited about in this season of life? Hey, playing golf and giving him money every Sunday. Well, there you go. All day, all week.

Wait a minute. I'll play golf all week long. I told him, I said, you're going to get your 10 percent whether I win or lose. Lately, I've been winning. I love it. Well, hey, Gary, think about this.

Maybe maybe a bump that up one percent every year and maybe this year it's 11 percent. Keep your eyes open for where the Lord may use you, because here's the thing. Beyond your money, Gary, this is the season where you have the most wisdom and experience to offer in the Lord's service.

So perhaps look for unexpected ways you can serve the Lord, whether that's on the golf course or not. And if I can help you further along the way, sir, don't hesitate to call. God bless you. Hey, let's take some emails today. We hear from you every day with your emails to be read on the air.

You can send them along. If you have a question you want read on the air to ask Rob at faithfi.com. That's faithfi.com.

This one comes from Harvey. He writes, How can we contribute to ministries anonymously and still have a record of our giving for income tax purposes? This is a great question, Harvey, because it would seem like this would not be possible to give anonymously and still get a record for income tax purposes if you itemize, simply because if you're anonymous, how do they issue you a contribution statement, which is required by the IRS to document your giving? And the answer is, well, you can use one of my favorite tools for giving, and it's called a donor advised fund. Think of it like a charitable checking account where you actually make a gift to your donor advised fund, your charitable checking account when you make the gift in. And by the way, you can give to your donor advised fund not only cash, but assets as well.

You can make a gift into your donor advised fund of real estate or appreciated stock or a piece of art or even a portion of your business right into your donor advised fund. When you do that, you get the contribution receipt. You're actually making the charitable contribution the moment you put it in the donor advised fund. And so you get that one statement that you use on for your IRS. Now, what do you do with the money then?

Well, it sits there until you grant it out. You can only distribute it to a qualified ministry and not for profit organization like your church or some other 501c3 ministry that you support. And you'd simply click in online and make that distribution to the ministry of your choice, and they would send a check coming right out of your donor advised fund. So you got the contribution receipt and you get the deduction when you make the gift. And then when you give it out, you can either give it in your name or you can give it anonymously.

So Harvey, that would be a great way for you to accomplish both of these things at the same time. Now, where would I go to set that up? My favorite option is what's called a giving fund. It's the what they call donor advised funds at the National Christian Foundation. And you can open a giving fund quickly online.

I do it all the time. I did one from open one for my mom just the other day. It took just a few minutes at ncfgiving.com. By the way, the National Christian Foundation, one of the largest charities in the world, although they just facilitate giving literally billions of dollars flows through NCF to churches and more than 40,000 ministries every year. ncfgiving.com.

It was actually founded by Ron Blue, you might know that name, and the late Larry Burkett, along with an attorney named Terry Parker decades ago. And it's an incredible organization and you can set up your giving fund there today. Again, ncfgiving.com.

Just click open a giving fund and you'll be all set. Harvey, thanks for writing to us. If you have a question, send it to askrob at faithfi.com. All right, we're going to be turning our attention next to some calls we've already lined up. But let me remind you, we won't be taking your live calls because this program is prerecorded. Don't go anywhere because we'll be right back after this brief break with more Faith and Finance Live. Hey great to have you with us today on Faith and Finance Live. I'm Rob West, your host. Our team is away from the studio today, so don't call in. But coming up a little later, we'll have more of your questions right here on the program.

Hey, in the new year, it's naturally a good time to review your budget. And we'd love for you to check out the FaithFi app to do that. That's faithfi. You'll find it at faithfi.com. Not only can you manage money like other leading apps using our tried and true digital envelope system, but you'll also get access to leading biblical financial resources and a community of like-minded believers asking questions, sharing ideas every day as they encourage one another on their stewardship journeys. No other finance app offers all of these elements in one place specifically built for God's people. So just head to faithfi.com. That's faithfi.com and click the app button to get started. And when you use the app, you're helping to fund in part our outreach to share God's financial principles with others.

By the way, check out the brand new website, all the great content, the community, the app when you visit our website, faithfi.com. You know, often we see financial decisions as being complicated. We just don't know where to turn as we're thinking about managing God's money well. And we can boil it down really into five simple principles. It's the principle of living within our means.

That's number one. That's the key to every financial success. Number two, avoiding debt, not because it's a sin, but because it changes the relationship. And that's why there's clear warnings in scripture about the use of debt, because we know that the borrower is slave to the lender and it's in a way presuming upon the future when we borrow. So we need to be very careful and on our guard about the use of debt and seeking to get out of debt over time.

So live within our means, avoid debt. Number three is set long term goals. You know, the longer term, the perspective, the better the decision we're going to make today. You know, we sacrifice in the short term because the long term is clear. We have goals that align with our values and priorities as Christians.

We know where we're headed. We want to be able to give more, spend time with our family and take a vacation to build memories. Or we want to be able to fund a college education or be able to support ourselves in retirement when we're no longer working or redirecting our energy away from paid work and service to the Lord. All of those goals are funded because we make short term sacrifices.

But if we don't understand what the goals are and why we made them and how they align with who God has created us to be, then it's very difficult to give up things in the short term. So we need to set long term goals. So avoid the use of debt. Live within your means.

Set long term goals. Have some margin. You know, margin is what's left over after all the bills are paid. The challenge is so often we live right up to the edge, paycheck to paycheck, living and spending every dollar and not having anything left over.

Well, without margin, it's really difficult to be able to fund those goals, whether that's something short term like your emergency savings or something medium term like buying a car and a house or maybe saving for retirement. And then finally, we want to give generously. You know, giving breaks the grip of money over our lives. When we give, it causes our hearts to be calibrated to the Father so that we have the opportunity to participate with Him in His activity. It's a blessing to be able to partner with the Lord and to give and demonstrate our trust in Him because when we loosen the grip we have on what He's entrusted to us and we give it away, we're saying, God, I'm trusting that you're going to continue to provide for me because if I didn't, I'd have to close that fist and clinch every dollar that I have. But because we trust Him and because we know He's called us to be a generous people, then we can give freely and know that God will provide. And what we'll discover is this little secret.

It's that there's incredible joy in giving and partnering with God in His activity. So hopefully those five principles applied here in a new year will help you get on a solid financial footing. All right, let's head back to the phones. To Kentucky we go. Hi, Elijah. Thanks for calling. Go ahead. Hey, Rob.

Excellent program. Well, thank you, Elijah. What are the advantages and disadvantages of buying a home in cash or finance it? Yeah, well, you know, the advantage of buying with a loan is that, you know, homeownership wouldn't be possible for most folks without it. It's the largest purchase most of us will ever make, especially given what's happening with housing prices in the last decade since the Great Recession and the financial crisis of 2008 and 2009. We've seen a massive run up in housing prices, and it's not driven by systemic, you know, any kind of issues other than supply and demand.

I mean, I don't think we're experiencing a bubble of any sort. We really have a shortage of homes in this country of at least two million homes. As the millennials are reaching the baby, you know, the age where they're having babies, we have a lot of more people working from home and moving out of densely populated urban areas to suburban areas.

And we need more single family homes. So because of that, it's just pushed the affordability of homes out of reach for most folks such that if they don't borrow, they wouldn't be able to access that. Now, the other benefit we often hear about having a loan is the deductibility of the interest. The challenge is 80 to 90 percent, according to the latest data, of Americans now take the standard deduction.

So because the standard deduction is so high, they're really not itemizing on their taxes, and therefore there's not any specific benefit in terms of being able to deduct mortgage interest. So that really has gone by the wayside. You know, the other argument that's made against or for having a loan is being able to take and deploy that money. If you have it, when you had the ability to buy with cash, you could do either be able to deploy that in the stock market.

And there's something to be said about that. That was certainly more true when we had the interest rates that we had previously, you know, two point seven five three percent. If you could borrow, you know, under three percent, take that same money and then invest it, you know, with a long term strategy, you should be able to do much better in the stock market.

And I would concur with that today. That's certainly a bit more challenging, especially with after tax returns. When we're borrowing at seven percent plus, rates have kind of ticked back down slightly to under seven. But still, that makes that far more challenging. On the flip side, Elijah, I think the benefit of buying with cash or trying to pay it off as quick as you can is the first of all, the peace of mind that comes from being unencumbered, just having the flexibility and owning your home outright and not being servant to the lender.

And in this case, you know, there's something to be said about that. And if you have a conviction around being debt free, I would say don't even think twice about it. Just pay it off if you have the ability to do so. I think for most folks, though, the happy middle is to prioritize getting out of debt completely, including your home, but do it over time and try to sync up the payoff of the mortgage at least by the time you're entering retirement, because that's going to keep your expenses as low as possible by you getting rid of that mortgage. So whatever that takes, maybe that's sending an extra payment or two a year. I would run an amortization schedule and try to time the payoff of that mortgage for the time that you're entering retirement.

But at the end of the day, if the Lord gives you a conviction to be debt free and own that home freely and you have the ability to do so, I do it without thinking twice about it. I hope that helps. We appreciate your call. Folks, we're going to pause for a break, but let me remind you, we're not actually live today, but we have lots of great information coming your way. So please stay tuned. Hey, great to have you with us today on Faith and Finance Live.

I'm Rob West, your host. Sharon called a moment ago and couldn't hold as she was wondering about using an IRA or a 401k and how to choose between the two. Here's my thoughts on that, Sharon. Both 401ks and IRAs have valuable tax benefits. You can contribute to both types of accounts.

The main difference is the 401k is offered by your employer, whereas the IRA is individual in your name only. So the only way to contribute to a 401k is through salary deferral. That is money coming out of your paycheck and automatically being contributed to the 401k. The reason I typically like to start with the 401k is because there's often matching that's done in your 401k contribution. So a typical employer might fund or match up to 3%, for example, of your contribution. So for every dollar you put in up to 3% of your pay, they're going to match it dollar for dollar. Well, that's a 100% return on your money right out of the gate. You're not going to get that in the stock market.

So I would absolutely take advantage of that match. Beyond that, you could contribute to an IRA simply because number one, you've got unlimited investment options, so more flexibility. But number two, you can choose a Roth IRA, which allows you to put in after-tax money that's going to grow tax-free. So you might start with the matching portion of your 401k, then fully fund your Roth, and then if you still have more to contribute, and by the way, I'd use 10-15% of your pay as a target for all of your retirement contributions, whether that's 401k, IRA or both. If you still have some more room to get up to that 10-15% after you've maxed out the IRA, then I'd flip back to that 401k because the last benefit of the 401k is the contribution limit is much higher.

For instance, you can put in $22,500 into a 401k this year if you're under age 50, and you can put in only $6,500 in an IRA under age 50. So hopefully that helps you. Both of them treated the same.

You're going to be able to put a lot more away in a 401k, and let's prioritize the match first. Thanks for calling today, Sharon. I'm sorry we couldn't get you on the air.

Virginia. Hi, Carol. Thanks for calling. Go right ahead.

Hi, Rob. Thanks for taking my call. I've been trying to get through to you.

Well, I'm delighted you did. Alrighty. How can I help you? Well, I've been in the stock market for years, and you know, I have lost a lot of money since June.

My question is, how can I prevent this? Can I move my money somewhere else without losing, had to pay taxes on it or vice versa? Sure. Let's explore that a bit.

I just have a few questions. What type of account do you have, Carol? Is it a taxable account? Is it a retirement account of some kind?

It's retirement, and it's IRA and other things, and it is money that I had given to him to go in with my investments. I'm with Edward Jones. I'll tell you that much. Okay, sure. And is everything in one IRA, or do you have multiple accounts? I have multiple accounts.

Okay. And I'm interested in the types of accounts. So you have an IRA in your name. What else do you have? Well, it's a diversified.

I have all kinds. I had a lot of stock with a telephone company, and I gave that to him. And my portfolio was way up there, and I've already lost over $250,000. It keeps dropping. Yeah.

No, I understand, and that's concerning. Not the investments, though, that are in it. So let's not think about the stocks or the mutual funds, but I'm looking at the account types first, because I want to help you think through the tax implications. Is everything inside that IRA, or do you think you have maybe a taxable account in addition to that? No, I don't have a taxable account.

What I have to do, I have to draw an RDM every year. I don't pull any money from the account until the end of December. And my IRA keeps dropping. I had quite a bit of money in the stock fund. Yeah. What do you think is total in that portfolio today? Right now? Yes, ma'am.

Probably around $900,000. Okay. And you had it as high as, what, 1.1 or 1.2?

I had 1.165. Okay. All right.

Yeah. Well, here's the reality. The key is to make sure that you have the right mix of investments. The challenge with 2022, Carol, is that not only were stocks falling just given the fact that we had been on a massive run the decade and even beyond that before last year, but we also got into a situation where because the economy was raging and inflation got out of control and there's a lot of reasons for that that have to do with monetary policy and a whole host of other issues, including to some degree the pandemic, the inflation was run away at 40-year highs. And because of that, we've seen a massive rise in the interest rates as the Fed is trying to put the brakes on this economy to get inflation back into where it closes close to their target as they can, which is 2%.

It got all the way up to north of 8%. And they're going to have to, in a sense, force us into a recession. They try to engineer what they call a soft landing and avoid a recession.

We'll see. We'll probably have somewhat of a mild recession this year. And because of that, with the rates rising so quickly, the bond portion of your portfolio, the prices were declining. Even though the yields were increasing, you were losing value on the prices of those bonds. And so all that together has resulted in you losing some money. Now, here's the key is, it's not realized until it's sold, number one.

Number two is, if we're patient, this should come back. And what we may have uncovered here, Carol, last year is that perhaps you were a bit too aggressive. And that's not your fault.

If this was being managed by somebody, perhaps the allocation of these investments, the portfolio was a bit too aggressive for your age, goals and objectives, your risk tolerance. And maybe we've uncovered that just through the volatility that you experienced. But I don't think this is the time.

Ultimately, you're the steward and have to make this decision. But I don't think this is the best time to begin to make making a lot of changes in the portfolio. Because when we do that, we're going to lock in these losses and we prevent the ability for this to recover, which I suspect you've already seen some recovery from last fall. And even though if we hit a recession, I think a mild recession is priced into this market. We could see some more downside, but eventually the market will recover ahead of the economy. And I think that's the time perhaps later this year or even early into next year for you to think about perhaps sit with your advisor.

If you're going to stay with that advisor, if you're going to make a change, work with your new advisor to determine how do I get a bit more conservative here so that I don't see these kinds of fluctuations the next time we get into a situation like this economically where the market is selling off? Let me ask you this, Carol, are you pulling other than your RMD each year, are you living on an income from this account? No, I have been in the stock market since I was 50 years old.

Okay. And I'm now 78. I have never pulled anything from it other than until I got 70 and a half.

I had to do that RDM. But I'm not into aggressive funds because that's the first question I asked him. And I meant what they call the protective fund. Like a point stock's not doing good.

There's supposed to be an advisor there that moves it to where the next one is, blah, blah, blah. But anything, what I read yesterday, JP Morgan says this stock market's going to even get down 20% again. In June, it dropped down 20%.

And that's where I lost most of my money. Yeah, and you're down a little more than 20% now, which is a little surprising depend, you know, given that, you know, he said that you are in a fairly conservative posture. I'm not familiar with the actual investments in the allocation and the investment strategy he's describing. But I think the idea here is that it, you know, 70, you said you're 78 years old, is that right? Right. Next month I will be. Okay.

So you know, what I would expect is no more than 30%, typically in a portfolio at your age in stocks, and the rest in fixed income or stable type investments about 70%. And that should smooth out, you know, some of these ebbs and flows where I would have hoped you wouldn't be down quite that much. Could we be down a good bit more this year?

Sure. Anything is possible, especially if we hit a deeper recession than expected. So the question you have to answer is, do I want to kind of ride this out, especially given the fact that I don't need this money? So you still have the ability to take the long view.

If the Lord tarries and you're in good health, you might need this money to last for the next 20 years or more, Lord willing. And if that's the case, then you've got time on your side for this recover. And I think at that point, you know, perhaps you look at saying, let's take a deeper dive into this and talk about if I'm so conservative, why did I see, you know, 20, 25% downside in this portfolio? And what can I do to avoid that in the future?

That's what I need to ask them, right? Why am I losing this much money if I'm conservative? Exactly. And recognize that, you know, fixed income portfolios were under pressure last year just because of what I said about the dramatic rise in the interest rates over a very short period of time.

But there are other ways through other investment strategies, you know, absolute return strategies and others that, you know, you can offset that even when rates are rising as quickly as they have been. The good news is you've been a wise steward and faithfully managing what God's given you. You've got quite a bit of a nest egg here. You don't need it.

Your income is covered. And so we have the ability to kind of wait this thing out. But I think if you're not getting satisfactory answers on why this was more volatile than you would have expected, I think it's time to either understand that, talk about the changes that would be made at the appropriate time as some of these investments recover and look at the potential to make a change on this. Let's do this. I've got to wrap the program. You stay on the line.

We'll talk a bit more off the air just to finish up. Before we go, let me remind us why we do what we do here on this program every day. We gather for faith and finance live because we recognize we all have a high calling. We're money managers for the King of Kings, which means we're to be found faithful as we manage God's resources, faithfulness, obedience over a long period of time, applying the wisdom of God's word to every area of our lives.

And that includes our finances. So thanks for being here today. Thanks for calling and for writing and for your emails. We love to do what we do and serving you to be wise stewards of God's money. I want to say thanks to my team today, Clara, Deb, Amy, and Jim. Couldn't do it without them. Faith and Finance Live is a partnership between FaithFi and Moody Radio. We'll see you next time. God bless you. Bye-bye.