January, 2017 trustinmutual.comwealth of knowledge

Trust and InvestmentsConcierge BankingRetirement Plan Services

trustinmutual.com

In this issue....

Now That It’s Over It’s Always Mutual Economic and Market Review

- written by Shayne Nagy, CTFA

Here we are; we have survived a contentious and ugly presidential contest, and it’s time to look forward to determining what the impact might be to all of us from a � nancial perspective. Although we do not know de� nitively what proposed policies will survive the congressional wrangling that is likely to take place in the coming months, we do know what President-Elect Donald Trump has posted on his website as faras tax policy prescriptionsare concerned.

My single resource for this article was donaldjtrump.com, and I would encourage those of you who want to see his proposed policies in more detail to visit the site. My intent is to give you a general view of both his personal and corporate tax proposals,

which may help you get a sense of where tax policy could be headed. Please be advised; this is politics, so it’s entirely possible that all or none of these proposals will become a reality.

Personal TaxesDonald Trump proposed a reduction in the rates and number of tax brackets. For those married � ling jointly, he would introduce three brackets instead of the current seven. The rates would be 12% on the � rst $75,000, 25% from $75,000 to $225,000, and 33% on amounts over $225,000. Brackets for single � lers would be exactly ½ of these amounts.

Capital gains structures would be retained (including a maximum rate of 20%). Carried interest, which is a popular method used by hedge fund managers to reduce their tax burden by classifying their earnings as capital

gains, would be eliminated. The 3.8% additional tax on investment income would be repealed along with the alternative minimum tax (“AMT”).The Trump Plan would raise the standard deduction to $30,000 for those married � ling jointly from the current $12,600. This would reduce the number of individuals taking itemized deductions. The standard deduction for single � lers would be $15,000. Itemized deductions would be capped at $200,000 for joint � lers and $100,000 for single � lers. Under the Trump proposal, personal exemptions and head of household � ling status would be eliminated.

Estate taxes would also be eliminated under the Trump Plan, but capital gains, held until the date of death for estates above $10 million, would pay capital gains taxes on appreciated assets when they are sold.

(continued on last page)

Now That It’s Over: Part 1

- submitted from an interview conducted by Vince Turner

Joey Cole Kubesch � ashed a mischievous grin, as though she was telling the story for the very � rst time. She was not, of course. Not by a long shot. Kubesch, the Peru, Indiana resident, unwrapped this tidbit of oral history hundreds of times with friends and strangers alike. And yet her eyes dance as she sits among the memorabilia and shares an important moment from the early life of legendary composer andsongwriter Cole Porter.

“Meet me at the brewery, I want to take you for a ride,” coal and timber magnate J.O. Cole barked tersely. He saw his grandson as a future lawyer, not an entertainer. As the horse-drawn carriage made its way down Strawtown Pike, the frustrated patriarch pointed toward a dilapidated building that served as the Miami County poorhouse and warned, “this is where you will be if you don’t give up those silly tunes!” Joey and Sid, her husband of 54 years, giggle and nod toward each other as they embrace the irony of this dire warning. They have become caretakers of both the Cole Porter legacy and his historic estate.

Turns out the kid did pretty well for himself. Porter was born in Peru, Indiana, but his mother Kate soon realized her only son’s dreams and talents would need to be cultivated elsewhere. Cole was classically trained at Worster Academy in Massachusetts and later studied at Yale and Harvard. At � rst, he tried to honor his grandfather’s wishes, but the New York nightlife and the songs in his heart proved too much to resist.

Cole Porter emerged as one of the greatest in� uences in American music history. “Kiss Me Kate” ran for more than 1,000 shows on Broadway, 400 more in London and earned the very � rst Tony Award presented for best musical. His other works included, “Anything Goes” and “Silk Stockings.” More than 1,500 songs are credited to Cole. “Night and Day,” “Begin the Beguine,” “I’ve Got You Under My Skin” and “You’re the Top” are among the most beloved.

“I love the way it has lasted over the years,” Joey Kubesch says of the music and its impact. “He put his heart and soul into it. I think that’s why it has gone on. He wrote words and music that touched people.”Her smile grows even wider as she notes that each of her daughters used Porter’s “After You, Who?” to dance

with Sid at their respective weddings. Even the rugged, retired Air Force pilot had to wipe away a tear.Kubesch has been a passionate protector of the Porter legacy for all of her adult life. Her father and Cole were � rst cousins, and when his mother Kate died in 1952, Porter asked the family to take care of his beloved, boyhood Westleigh Farms, located just outside of Peru on Frances Slocomb Trail. They did.

When Porter died in 1964, he passed the property, shown below, to them.“He loved this place,” Kubesch explains. “Even though he lived in New York and Paris, he had a fondness for the country. He could relax here.”

Kubesch is also the driving force behind a collaborative effort to restore Cole Porter’s actual birthplace. The home had been divided into apartments and fallen into disrepair before it was seized by the city when police discovered it was being used as a meth lab.

Kubesch rolled up her sleeves, led a fundraising effort to purchase the building, and joined the community team overseeing its restoration.Today, it is a charming bed-and-breakfast museum.

(continued on last page)

It’s Always Mutual: Joey Cole Kubesch

wealth of knowledge

- written by David Riggs, CTFA

Although the 3.5% pace of growth for the U.S. economy in the third quarter of 2016 was much greater than the slug-gish � rst two quarters and above the post-World War II average, expectations for the yet-to-be-reported fourthquarter remain in the low 2% range where the economy has been mired or many years.

President-Elect Donald Trumpcampaigned on a message of lower corporate taxes, reduced regulations and robust economic growth. It appears the market took him seriously asdomestic stocks soared after the November election. The S&P 500 Index jumped 6.2% after Election Day,reaching new all-time highs and

� nished the year with a gain of 9.5%. With dividends, total return was 12.0%. The Russell 2000 Index of small-cap stocks was the real, full-year standout with a gain of 21.3%.

Bonds, which tend to act differently than stocks, declined in price after theelection as interest rates increased rather substantially. Rising rates resulting from higher expectations for growth and

in� ation next year made Novemberthe worst month on record for thebond market. In December the Federal Reserve � nally began, what is expected to be, the � rst in a series of hikes in the short-term interest rate they control, known as the Fed Funds Rate. The yield on the 10-year U.S. Treasury Note, which serves as a benchmark, nearly doubled from an all-time low of 1.34% in July and closed 2016 at 2.45%.

Higher rates push bond prices down. So, the average bond fell 5.1% from the peak in July and closed the year up just 0.1%. When interest payments are included, bonds averaged a total return of 2.7% in 2016 as represented by the Barclays U.S. Aggregate Bond Index. The bright spot in the bond category was lower rated, high-yield bonds which

tend to follow the stock market and gained 17.1% for the year.

There seemed to be more uncertainty about the economic situation overseas with the U.K. exiting the European Union, weakening supportive factors on the continent and slower growth in China. Developed Markets managed a gain of just 1.5% including dividends while Emerging Markets fared better rising 11.6%.

Commodities continued to rebound in 2016, but most of the increase was attributable to a 45% gain in crude oil. Gold’s gain moderated from 24.3% at mid-year to just 8.5% at year-end. Interest rate-sensitive Real Estate Investment Trusts also trimmed anearlier double-digit advance to a still respectable 8.1% on the year.

It remains to be seen if the incoming government’s policies can producethe kind of environment that willfoster the economic growth the stock market seems to be expecting.At MutualWealth, we are hopeful forthe future, but continue to suggest that a diverse portfolio is the best way topreserve and grow wealth over time. We look forward to a prosperous and happy New Year for all in 2017!

Asset CategoriesYear of 2016

Stock Market Indexes - Total Return

S&P 500 11.96%

Europe-Australia-Far East 1.51%

Emerging Markets 11.60%

SmallCap 21.31%

Market Neutral Funds 1.61%

Bear Market Funds -22.19%

Long/Short Equity Funds 2.03%

Bond Market Indexes - Total Return

U.S. Aggregate 2.65%

U. S. Treasury 7-10 Year 1.05%

U.S. Credit 5.63%

U.S. Corp High Yield 17.13%

U.S. Mortgage Backed 1.67%

Municipal Bond 0.25%

Emerging Market Gov. (LC) 5.86%

Other

Gold 8.46%

Commodities Index 11.37%

U.S. Real Estate Index 8.09%

Oil 45.03%

David Riggs, CTFA,Vice President, Trust Investment Of� cer765.213.2702david.riggs@bankwithmutual.com

Past index performance and returns are historical and do not guarantee or predict future results. This information may not be relied upon as estment advice.

Economic and Market Review of 2016

wealth of knowledge

trustinmutual.com

As proud as the Kubesch family is about preserving the past, they are equally committed to the future.The Cole Porter Scholarship has been presented to � ne arts students from Miami County’s three high

schools since 1968. The top recipient receives $10,000 over four years; another $7,500 goes to the runner-up. Judy Widmer, who works out of the MutualWealth of� ce in Fishers, helps the family with this special project.

“There is wonderful musical talent around Peru,” Kubesch explains. “The schools do a beautiful job of promoting their music programs and give the kids many, many opportunities to perform and grow. We like being a part of that. The June Cole Porter festival brings in people from all around the country.”

Cole Porter was a jet-setter before there were jets. A � amboyant lifestyle and the glitterati of New York and Hollywood are an integral part of his legend. Joey Cole Kubesch, the guardian of his good name, is a down-home, Indiana farm girl as comfortable with a show cow as her cousin was with show business.

It is the perfect match. One might say “It’s De-lovely!”

Excerpts taken from the interviewwith Joey Cole Kubesch, conducted by Vice President, Regional Manager,Vince Turner, on December 2, 2016.

Business TaxesTrump’s Plan would lower the corporate tax rate from the current 35% to 15% and eliminate corporate alternate minimum tax or AMT. He would propose a one-time 10% repatriation tax on all corporate pro� ts currently held in other countries. Companies engaged in manufacturing in the United States could opt to expense capital investment in the year of the outlay as opposed to the current depreciation schedules, according to the Trump Tax Plan. This change would allow corporations engaged in manufacturing to accelerate the tax savings early on when investing in physical plant and equipment.

There is a catch, however; companies electing this treatment of deducting capital investment would lose the ability to deduct interest expense. Companies would have a three-year period in which to make their determination, after which their election would be permanent.

In summary, while none of these proposals are guaranteed to become law, it is important to get a sense of where the president-elect will attempt to steer policies that affect the taxes we pay. Time will tell how much of this will be acceptable to the House and Senate. I intend to update you with part two of this discussion in July when there should be greater visibility

to these proposals andtheir acceptance in Congress.

Shayne Nagy, CTFAVice President, Trustshayne.nagy@bankwithmutual.com574.273.7612

Now That It’s Over: Part 1 (continued)

It’s Always Mutual (continued)