We are less than a week away from Election Day. The presidential race and the race for control of the House and Senate remain very close. There is a good chance we won’t know the outcome on Election Day, and it may take many days to count the votes.
It’s possible that one candidate will gain a sizeable lead so that we will know the outcome sooner, but if not, below is a timeline for how the Presidential Election will play out over the next few months. There could be a lot of uncertainty in the days to come, and that may be reflected in a higher level of market volatility during that time.
What Happens Between Election Day and Inauguration Day
Sources: Capital Group, National Archives
For long-term investors, it is important to keep in mind that the political structure in Washington hasn’t had much of an impact on market returns. From 1933 to 2023, under unified and split governments, the average annual return for the S&P 500 has been between 11% and 14%. Under a split Congress, as we have today, the market has generated an average return of 13.7%.
In more recent times, markets have posted even better results one year after Election Day. Since 1984, the average return a year later has been 17.6%, with only one year (2000) being negative. At the end of the day, financial markets appear to care more about the certainty of election outcomes than about who occupies the White House.
S&P 500 Index Total Returns One Year After Election
Sources: RIMES, Standard & Poor’s. As of Sept. 30, 2024.
As the election cycle plays out, the noise and uncertainty can feel overwhelming and anxiety-provoking. In our view, long-term investors should ignore the noise and continue to focus on their financial goals and plan. Presidential elections historically have had very little impact on the stock market.
As we have continued to emphasize, stock markets are more influenced by corporate earnings, monetary policy and economic data than by the election outcome.
The balance of power in Congress may have much more of an effect on issues that matter to investors, such as tax policy, tariffs, the federal debt ceiling and foreign relations.
Consider the mythical investor who put $10,000 into the S&P 500 at the beginning of 1948 and did not care who was in the White House. If that investor kept their money in the market, that initial investment would grow to nearly $38 million! Had they invested the $10,000 with Republicans in office only, it would have grown into $310,000, and with Democrats in office only, the total would be $1.2 million.
Stay focused on the long-term goals and the bigger financial picture.
Time IN the Market Matters
Source: Schwab Center for Financial Research with data provided by Morningstar Inc. The above chart shows what a hypothetical portfolio value would be if an investor invested $10,000 in a portfolio that tracks the Ibbotson U.S. Large Stock Index on 1/1/1948 under three scenarios. The first two scenarios would occur if the investor only invested when one particular party was president. The third scenario is what would happen if an investor stayed invested throughout the entire period. Returns include reinvestment of dividends and interest. The example is hypothetical and provided for illustrative purposes only. It is not intended to represent a specific investment product. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Past performance is no guarantee of future results.
The CD Wealth Formula
We help our clients reach and maintain financial stability by following a specific plan, catered to each client.
Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.
We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.
It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.
Sources: Capital Group, Carson, CNBC, Fidelity, Schwab
Stocks reached new highs again last week, the fifth week in a row that the S&P 500 has had positive returns. The S&P now has reached 46 new all-time highs this year, which ranks as the ninth-most ever — and we still have two and a half months to go.
The current bull market is 2 years old as of last Saturday, following a 25% drop in stocks in 2022 that coincided with a steep drop in bond returns as well. Since 1950, the average bull market has lasted more than 5 years and has gained more than 180%. Based on history, we know the market does not go up in a straight line, and plenty of upside remains.
The Bull Market Is Still Young
S&P 500 bull markets from 1950 to today
Sources: Carson Investment Research, YCharts 10/7/24. *Most recent new all-time high was on 9/30/24.
For now, political uncertainty appears to be doing little to dampen enthusiasm for stocks. Strong economic growth has helped the S&P 500 reach its new highs; it is up over 20% for the year and is on track for the second straight year of double-digit gains.
Still, election anxiety may be on investors’ minds. The VIX, which measures market volatility, has risen about 25% since late September. Some of the increase is attributable to the election and concern that we may not know the outcome immediately following Election Day. Markets do not like uncertainty.
Every four years, investors may worry about what to do with their portfolio as the election nears. History shows that over the long term, the stock market tends to be relatively indifferent to who is in office.
Since 1926, the market has seen negative returns only three times in 17 presidential administrations. One came during the Great Depression under Herbert Hoover, and another came during the Great Recession under George W. Bush. During Richard Nixon’s time in office, the U.S. suffered through the Vietnam War and two recessions — and suffered average losses of only 1% per year.
Politics can bring out strong emotions and biases, but as we have said before, investors would be wise to tune out the noise and focus on the long-term fundamentals. Political opinions are best expressed at the polls, not through your portfolio. Historically speaking, election results have made almost no difference when it comes to long-term investment returns.
History also shows that stocks have done well regardless of which party is in control in Washington. Since 1933, there have been eight Democratic presidents and seven Republican presidents. The chart below shows how the market has performed on average under each scenario for the party in control of the White House and Congress. In that time, the worst average annual return was 11% — to the positive.
Investors who allow political opinions to harm their investing discipline have missed out on above-average returns during presidents they don’t like.
The chart below shows that if you invested $10,000 in 1961, it would have grown to more than $102,000 by 2023 if you invested only during a Republican presidency. If you invested the same $10,000 in 1961, that same investment would have grown to $500,000 if you invested only while a Democrat was in the White House. However, that $10,000 investment would be worth more than $5.1 million if you just stayed invested no matter who was in office.
Growth of $10,000 (1961-2023)
Sources: Schwab Center for Financial Research with data provided by Morningstar, Inc. The above chart shows what a hypothetical portfolio value would be if an investor invested $10,000 in a portfolio that tracks the Ibbotson U.S. Large Stock Index on Jan. 1, 1961, through the end of 2023 under three different scenarios. The first two scenarios are what would occur if an investor only invested when one particular party was president. The third scenario is what would occur if an investor had stayed invested through the entire period. The example is hypothetical and provided for illustrative purposes only. It is not intended to represent a specific investment product. Dividends and interest are assumed to have been reinvested, and the example does not reflect the effects of expenses, taxes or fees, and if it had, performance would have been substantially lower. Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. For additional information, see schwab.com/indexdefinitions. Past performance is no guarantee of future results.
Investors should not let their political opinions or emotions dictate their decisions. The markets really don’t care about the results or the daily micro-dramas in the presidential race. Markets are much more likely to be influenced by corporate earnings, economic data and monetary policy.
As James Carville said back in 1992, “It’s the economy, stupid.”
Unemployment remains near historic lows. Inflation has dropped from a post-pandemic high of 9% to 2.4%. The stock market is at new highs, and interest rates and energy prices are on the decline. Long-term investment strategies tend to perform well regardless of who occupies the White House.
The CD Wealth Formula
We help our clients reach and maintain financial stability by following a specific plan, catered to each client.
Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.
Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.
It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.
Sources: BlackRock, Capital Group, Carson, CNBC, Dimensional Funds, Fidelity, Schwab
After another rough start to the month of September, stocks have rallied and have remained positive for the last three weeks. The S&P 500 has been up 10 out of the last 11 months, and all three major U.S. stock market indexes are near all-time highs.
The big story last month was the Fed’s decision to cut interest rates for the first time since March 2020, when Covid-19 shuttered most of the world’s economy. The Fed reduced interest rates by 50 basis points on Sept. 18. Although it was widely expected that the Fed would cut rates, questions remained about the size and timing.
Did the Fed’s decision have anything to do with the election?
The Fed made the cut in its final meeting before the election in November; its next meeting will be Nov. 7, two days after the election. The Fed has consistently and repeatedly stressed that political considerations do not factor into its decision-making, regardless of what some media reports may say.
“We never use our tools to support or oppose a political party, a politician, or any political outcome,” Chairman Jerome Powell said at the Fed’s July press conference. “Anything that we do before, during or after the election will be based on the data, the outlook, and the balance of risks, and not on anything else.”
The Fed has shifted its focus from the fight against inflation to the health of the job market. For much of the past few years, unemployment has been so low and inflation so high that the Fed could focus predominantly on reigning in inflation. Now, unemployment has risen above to 4.2% from a low of 3.4%, and the pace of new jobs being added each month has slowed.
Are rate cuts near all-time market highs normal?
This is not the first time that the Fed has cut rates with the market at or near all-time highs. In fact, this most recently occurred in 2019. There have been 20 times that the Fed cut rates when the market was within 2% of all-time highs, and in each instance, stocks were higher a year later. Remember the adage: Don’t fight the Fed!
Fed Cuts Near All-Time Highs
S&P 500 returns after Fed cuts within 2% of an all-time high
Does this mean that the Fed thinks the economy is in trouble?
The economy continues to surprise to the upside. While the labor market has been cooling, it is important to remember that it is coming down from unusually high levels from the global pandemic. GDP growth for the last five years was revised from 9.4% to 10.7% and grew at 3% for the last quarter. Disposable income for households also was revised higher and as a result, the savings rate was revised up from 3.3% to 5.2% in the previous quarter.
Corporate earnings are expected to grow at double digits for the year and are expected to grow 15% for 2025. Looking at the chart below, only one of the six indicators used by the National Bureau of Economic Research for recession tracking reflects a potential recession.
Recessionary Indicators
National Bureau of Economic Research recession indicators for the United States (normalized to July 2022)
Sources: Bureau of Labor Statistics, Bureau of Economic Analysis, Federal Reserve, U.S. Census Bureau, iCapital Investment Strategy with data based on availability as of Sept. 4, 2024. Note: Data as of July 2024 for all indicators except for Real Manufacturing & Trade Sales, which is as of June 2024. Data is subject to change based on potential updates to source database. Analysis looks at the six indicators used by the NBER to define a recession in the United States. For illustrative purposes only. Past performance is not indicative of future results. Future results are not guaranteed.
What do rate cuts mean for consumers and investors?
It is important to remember that the Fed controls very short-term rates only. The Fed does not set interest rates for mortgages, CDs, or bonds. However, it can influence these rates through its actions. Consumers may feel the impact most immediately with lower interest payments on debt that is tied to the prime rate, like credit cards or auto loans.
Interest rates on longer-term debt, like mortgages, have already been falling in anticipation of lower rates coming. It is important to note that mortgage rates won’t keep pace with Fed rate cuts, and the days of 3% mortgages are a long way off — if they ever come again.
Investors have been anxious for the Fed to begin cutting rates. There have been 13 rate-cut cycles since World War II, with an average S&P 500 return after the first rate cut of 14%. It is not just stocks that stand to benefit from lower rates. As the Fed lowers rates, cash yields will drop in tandem. Investors faced with lower rates on cash have been moving into stocks and bonds to replace the lost yield.
Historically, bonds have been at their strongest in periods of rate cuts since bond prices rise as yields fall. Average returns for the U.S. Aggregate Bond Index have outpaced cash proxies in rate-cutting periods over the last 40 years.
Falling Rates Have Supported Bond Returns
Average annualized monthly returns during rate-cutting cycles
Sources: Capital Group, Bloomberg. Based on average monthly returns during rate-cutting periods from September 1984 through Sept. 11, 2024.
Where do we go from here?
The market is pricing in that by this time next year, the Fed will have cut interest rates eight to 10 times, and the benchmark rate will be at 3%. That would be much lower than today’s rates but still higher than any time from 2009 to 2021.
October typically has been the worst month during an election year, and we wouldn’t be surprised to see some volatility during the month. However, the good news is that November and December do quite well in election years as the uncertainty of the election is removed. Investors have been rewarded for staying invested amid the constant negative sentiment and worry.
The CD Wealth Formula
We help our clients reach and maintain financial stability by following a specific plan, catered to each client.
Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing; we are anticipating and moving to those areas of strength in the economy — and in the stock market.
We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.
It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.
Today is North Texas Giving Day, an important occasion in our community — and an annual reminder to think about making charitable donations for both philanthropic and tax purposes! No matter what your interests are, making gifts to causes you care about can be one of the most meaningful uses of your money.
In the end, what really matters is helping an organization that matters to you. The tax benefits from a donation are just icing on the cake.
Charitable giving can offer a financial benefit for you and your family as well as the intangible rewards that come with helping others. Most donations to charitable organizations come in the form of checks or credit card payments. However, there may be more efficient ways to donate, which in turn can help both the charity and your pocketbook.
Understanding the benefits for different types of donations is important.
Cash, Check or Credit Card
These are the most simple and straightforward ways to donate to charity. It is important for you to keep a receipt from the charity or a bank record to substantiate cash gifts.
For contributions made in 2024, the annual income tax deduction limit for cash gifts to public charities is 60% of adjusted gross income (AGI). If you make contributions in excess of those limits, you can carry over the excess for up to five years until it is all used, but not beyond that time.
If you do not have appreciated assets to give or if you want to give cash, you may find that the total of your itemized deductions will be slightly below the standard deduction. In that case, it could be beneficial to combine or bunch several years of tax contributions into one year.
Appreciated Stock
With the stock market gains over the last two years, donating appreciated assets such as stock can have tremendous advantages. Donors can deduct gifts of stocks that have been held more than a year (long enough to qualify as long-term capital gains) at the fair market value, rather than at the purchase price.
The downside is that your deduction can offset only up to 30% of your AGI. If you donate stocks you have held for less than one year, you will receive a deduction for their cost basis, rather than fair market value. However, the deduction can offset up to 50% of AGI.
Often, donors may gift the stock with the biggest winnings, which maximizes savings on capital gains, and then buy back the same stock with cash — which in turn raises the cost basis. If you happen to own a stock or mutual fund for more than one year and do not have the cost basis, this holding can be ideal for donation to charity.
The chart below shows the difference between selling appreciated stock and then donating cash to charity, compared to gifting appreciated stock. Not only would the individual save on taxes, as the charity does not pay capital gains tax, but the charity would also receive additional monies!
This example is hypothetical and for illustrative purposes only. The example does not take into account any state or local taxes or the Medicare net investment income surtax. The tax savings shown is the tax deduction multiplied by the donor’s income tax rate (24% in this example) minus the long-term capital gains taxes paid.
IRA Qualified Charitable Distributions (QCD)
This is an option only for donors over the age of 70 1/2. Qualified Charitable Distributions allow individuals to donate up to $105,000 annually (up from $100,000 last year) directly from an IRA. Donor Advised Funds are excluded from this charitable donation; it must go to a qualified charity.
The QCD reduces the value of the IRA and does not count towards the donor’s taxable income. It also counts toward satisfying the annual required minimum distribution. In 2024, donors can also direct a one-time QCD of up to $53,000 to a charitable remainder trust or charitable gift annuity.
Donor Advised Fund (DAF)
Picture a donor advised fund as your family foundation, without the headache and administrative hassle of setting up a family foundation. A donor advised fund is a charitable account established at a public charity or community foundation that allows donors to recommend grants over time. The donor decides the timing of the donation, the charity that will receive the donation and the amount of the donation made from the DAF. The donor claims the tax deduction upon funding of the donor advised fund.
There is not a requirement that the DAF must distribute 5% of the fund each year, which may allow the DAF to grow, expanding the available dollars to donate to charities. Donor advised funds also can be a charity beneficiary of IRA assets.
At CD Wealth Management, charitable giving plays a significant part in our company’s culture. We believe in giving back to the community, with our time as well as our pocketbook. We support many causes in the Dallas/Fort Worth Metroplex and encourage our team members to get involved.
During the holiday season every year, we make a donation in each of our team members’ names to their charity of choice as a form of gratitude that also helps a great cause. It is part of who we are as a firm — and who we are as individuals.
Please do not hesitate to reach out to us to discuss options to help you determine the best way to make the most of your charitable donations. Remember to visit the North Texas Giving Day website and look for your favorite charity. (Please note: all funding options above may not be available.)
The CD Wealth Formula
We help our clients reach and maintain financial stability by following a specific plan, catered to each client.
Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.
We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.
It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.
Last week in Jackson Hole, Wyo., Fed Chair Jerome Powell gave the all-clear sign that the Federal Reserve is ready to begin cutting interest rates. The Fed has a mandate to foster economic conditions that achieve both stableprices and maximum sustainable employment.
Achieving price stability means inflation is tracking at the target 2% inflation rate, while maximum sustainable employment refers to the unemployment rate — the Fed has set a target of 4.1%. The current unemployment rate is 4.3%, above the Fed’s target.
Powell gave the following key messages at Jackson Hole:
• Inflation is under control and on a path back toward the Fed’s target rate of 2%. • It’s time for monetary policy to adjust, meaning a long-awaited interest-rate cut at the Fed’s September meeting. The only question will be whether the cut is for 25 or 50 basis points. • Instead of inflation, labor market conditions are now a top priority for the Federal Reserve. • If we see further weakening in labor markets, the Fed will look to reduce rates further.
What does this mean for the market — and your pocketbook — now that the Fed has said rate cuts are on the horizon? From a stock market perspective, the Fed has had 14 cycles since 1929 in which it has started to cut interest rates. While not a huge sample statistically, this data still lets us look back and see how markets have performed.
Keeping in mind that past performance does not indicate future results, the S&P 500 has posted positive returns 12 months after the first rate cut 86% of the time. The two instances of negative returns do not resemble the current economic environment: the dot-com implosion and the subprime mortgage crisis. In the 12 times when the market was up, the average return was over 18%.
Why would the market typically go up following interest rate hikes?
Interest rates influence how stock prices and valuations are perceived. Interest rates can affect both price to earnings multiples (P/E) as well as valuations of future earnings. As rates come down, borrowing costs for companies go down, which in turn helps reduce costs and raises profit margins.
All else being equal, if profit margins are higher and costs lower, companies deserve a higher multiple, or P/E ratio, which in turn justifies higher stock prices. From a valuation perspective, a company’s future earnings are based on what is called discounted cash flows: looking at future cash flows and discounting those back to today’s dollars to come up with a price estimate.
If interest rates are lower, the rate to discount the cash flows is lower, in turn producing higher present values of future cash flows, leading to higher stock prices.
S&P 500 Return 12 Months After First Rate Cut
Sources: Charles Schwab, Bloomberg, the Federal Reserve. Data from 8/9/1929 through 7/31/2020. Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. Past performance is no guarantee of future results.
What do lower rates mean for your pocketbook?
Short-term investments like CDs, Treasury bills and money markets that have grown so much in popularity over the last two years will become less attractive. When the Fed cuts rates, it is cutting short-term rates. Money market rates will drop in tandem with the interest rate reductions.
If your money market fund has been earning 5% and the Fed cuts rates by 50 basis points, you should expect your money market to yield 4.5% after the rate cut. Investors will be faced with the question of what to do next as CDs, Treasuries and bonds mature while rates are going down.
Returns After Inflation, 1926-2023
Sources: Morningstar 2024 and Precision Information, dba Financial Fitness Group 2024. Stocks are represented by the Ibbotson Large Company Stock Index, which tracks the monthly return of S&P 500. Bonds are represented by the 20-year U.S. government bond, cash by the U.S. 30-day Treasury bill minus inflation as shown by the Consumer Price Index. Assumes reinvestment of income and no transaction costs or taxes. Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment.
Over the long term, cash has barely kept up with rising prices, while stocks and bonds have delivered average annual returns that have exceeded the rate of inflation. Cash is not a substitute for bonds, even though it helps with portfolio volatility.
Having too much cash creates its own risks, including not earning enough to cover future inflation — but also not providing enough protection against the inevitable downturn in stocks. Historically, when the economy slows and rates come down, attractive short-term rates also come down.
However, that doesn’t mean that longer-term yields will fall in tandem, and it may make sense to extend the duration or maturity of the current bond portfolio to lock in higher yields. While yields on newly issued bonds will come down along with interest rates, the interest or “coupon” that a bond pay remains unchanged until the bond matures or is redeemed by the issuer. That makes it possible for investors in longer-dated bonds to enjoy today’s relatively higher yields, even after rates come down.
Interestingly, bonds have been the only asset class since 1950 to produce double-digit returns during recessions. While the money market, CDs and short-term bonds still look attractive right now, the economy continues to grow, and we are not in a recession.
With the Fed likely to cut rates in September and then again in either November and/or December, investors who stay only in short-term investments may risk missing an opportunity to lock in higher yields. As bonds or CDs come due, it is important to continue to invest those monies into longer-dated maturities, depending on cash needs, to protect against future rate declines.
The CD Wealth Formula
We help our clients reach and maintain financial stability by following a specific plan, catered to each client.
Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.
We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.
It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.
Sources: CNBC, Fidelity, Morningstar, Schwab
This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.
Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.
Past performance is not a guarantee of future results.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. CD Wealth Management and Bluespring Wealth Partners LLC* are affiliates of Kestra IS and Kestra AS. Investor Disclosures: https://bit.ly/KF-Disclosures
*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.
Fidelity Investments and Fidelity Institutional® (together “Fidelity”) is an independent company, unaffiliated with Kestra Financial or CD Wealth Management. Fidelity is a service provider to both. There is no form of legal partnership, agency affiliation, or similar relationship between your financial advisor and Fidelity, nor is such a relationship created or implied by the information herein. Fidelity has not been involved with the preparation of the content supplied by CD Wealth Management and does not guarantee, or assume any responsibility for, its content. Fidelity Investments is a registered service mark of FMR LLC. Fidelity Institutional provides clearing, custody, or other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC.
Last week, stocks had their best week of the year. The S&P 500 rose eight days in a row, the first eight-day streak since November. In the last four years that saw an eight-day win streak, the average return was over 26% for the year.
As of now, the S&P 500 is up almost 18% through mid-August.
It wasn’t that long ago that the stock market saw a pullback that led some investors to a mild freak-out in anticipation of a worst-case scenario. The headlines were dominated by fears of a recession, the Fed being behind the curve on interest rate cuts and the yen carry trade ending.
Two weeks later, stocks are back near all-time highs, led by a broad-based rally of small caps, large-cap stocks, mega-cap stocks and international stocks. A run of favorable economic data across producer price index (PPI), consumer price index (CPI), retail sales and jobless claims is driving the rally.
More often than any other month, August is when we tend to see these types of out-of-the-blue events.
As the chart shows, this year saw the seventh-largest August crisis that caused extreme fear and volatility since 1990. The good news: Investors got through all of them, and we don’t expect this time — or the next time — to be any different.
Even the best years in the market have bad days and scary headlines. Does this mean that we are completely out of the woods with regards to market weakness or volatility? Not at all; the months leading up to elections often can be volatile.
There’s Something About August
S&P 500 returns in volatile Augusts (1990-present)
The last few weeks have been a good reminder of the adage that what matters is time in the market and not timing the market. The worst time to sell is in a market panic, no matter how long or brief that panic may be. If you get scared and decide to get out of the market, you probably will miss some of the best days of the year.
If you had invested $10,000 into the S&P 500 in 2004 and stayed invested over that entire time, the investment would be worth almost $64,000. If you tried to time the market or got scared and got out during one of the above August scares, and you missed the best 10 days, the return would be less than half that total. It gets worse from there.
What we see so often is that once an investor decides to sell out of the market, it becomes very difficult to get back in.
Fear takes over, and you think that the market can only go one direction — down. Fearful investors assume that even if the market bounces, they can’t get back in as they were by buying back in at a higher level than where they sold.
If you wait to get more clarity or less uncertainty, you will probably miss the best days — and that will cost you in the long run.
Time In the Market, Not Timing the Market
Performance of $10,000 invested in the S&P 500 the past 20 years (2004-2023)
The current economy’s underlying fundamentals are sound, but a large disconnect remains between the stock market, the economy and people’s sentiments about the economy. The job market has started to cool off since the remarkable strength of the pandemic. The number of job openings continues to trend downward.
Inflation has cooled significantly, but not quite to the level that the Fed wants to see. What’s more, consumer prices are still higher than they were several years ago, and people continue to feel it in their pocketbooks. Food prices have risen more than 25% since January 2020.
It also costs more to borrow money today than it used to. We became used to low interest rates for homes and credit cards. High rates combined with higher home prices have made buying a home much harder.
Finally, most people who are invested in stocks are invested through their 401K or retirement accounts. The growth in the market is not helping those individuals with increased costs of living, which may be why most don’t feel so great about the current economy even as the market hits new highs.
It is so important to keep your eye on the prize and focus on the big picture; economic growth remains strong, and the real economy continues to grow, which in turn, fuels the market to move higher.
The CD Wealth Formula
We help our clients reach and maintain financial stability by following a specific plan, catered to each client.
Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.
We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.
It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.
Sources: Carson, Fidelity, JP Morgan, Opco
This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.
Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.
Past performance is not a guarantee of future results.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. CD Wealth Management and Bluespring Wealth Partners LLC* are affiliates of Kestra IS and Kestra AS. Investor Disclosures: https://bit.ly/KF-Disclosures
*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.
Fidelity Investments and Fidelity Institutional® (together “Fidelity”) is an independent company, unaffiliated with Kestra Financial or CD Wealth Management. Fidelity is a service provider to both. There is no form of legal partnership, agency affiliation, or similar relationship between your financial advisor and Fidelity, nor is such a relationship created or implied by the information herein. Fidelity has not been involved with the preparation of the content supplied by CD Wealth Management and does not guarantee, or assume any responsibility for, its content. Fidelity Investments is a registered service mark of FMR LLC. Fidelity Institutional provides clearing, custody, or other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC.
Investors woke up Monday morning to a sudden global panic, cratering the value of stocks, currencies and even cryptocurrencies. The Dow fell over 1,200 points at the open, the S&P 500 dropped over 200 points, and the NASDAQ was down over 1,000 points, more than a 6% pullback. Japan’s Nikkei Index fell more than 12%, its largest one-day drop in almost 40 years, following an interest rate hike by the Bank of Japan last week.
The NASDAQ is officially in correction mode, down more than 10% from its all-time high. The S&P 500 is down 9% from its recent high, set three weeks ago, and it has fallen the last three weeks. This is only the second pullback of 5% or more this year; most years see more than three 5% pullbacks on average.
As great as 2023 was, investors should remember we saw a 10% correction from late July until October. On average over the last 70+ years, the market has seen a 10% correction at least once per calendar year — and a 15% correction every 18 months.
Volatility Is the Toll We Pay To Invest
S&P 500 per year (1950-2022)
It is important to look at what caused the sudden market volatility and the recent pullback in the stock market:
1. Last week’s jobs report caused concerns of a recession. A few data points last week showed signs of a weakening economy: jobless claims at their highest level in a year, weak manufacturing data, Friday’s non-farm payroll number missing by a large margin and the unemployment rate at 4.3%, its highest level since 2022. While the labor market has cooled, the economy remains on good footing, as preliminary GDP numbers were strong.
2. The Fed did not reduce interest rates and will wait until September. We have been seeing improving data showing inflation is under control. Higher rates have impacted the housing market and small business investment. The Fed has two mandates: keep prices under control and maintain full employment. Ten-year Treasury yields have fallen below 4%, and for the first time in more than two years, the yield curve is no longer inverted. The bond market is signaling that it is time for the Fed to begin cutting interest rates — and maybe that it has waited too long.
3. Carry trade may be ending. The Bank of Japan raised interest rates for the first time in 17 years, to .25% from 0%. It also acknowledged that more rate hikes may be coming this year. Japanese investors have been borrowing money at zero rates and investing those monies into higher-yielding or riskier assets both domestically and overseas. This is called a “carry trade.” The rate hike in Japan was a taken as a signal that the carry trade strategy is approaching its end, and investors are now reversing their positions. As they reverse their trades, they are selling those riskier assets, such as U.S. stocks, to pay off the borrowed money in Japan. It is unknown how long the unwinding of the carry trade may last and how much more potential downside there may be.
4. Warren Buffett disclosed that he sold half of his long-term position in AAPL. While we don’t know the entire reason Buffett unloaded half of his Apple stock, the stock remains his largest holding at over $84 billion. This could be positioning for a higher capital gains rate in the future, or it could be market valuation — or his opinion of the Apple stock valuation. Either way, the disclosure over the weekend on top of weaker jobs data and what was happening in Japan caused additional stress to the trading of the Magnificent Seven stocks.
5. The hype over AI is showing cracks. The S&P 500 and NASDAQ are both up more than 9% on the year, even after the sharp sell-off. Stocks have benefited from strong corporate earnings and continued excitement over artificial intelligence’s growth and potential. Nvidia has been the clear leader for AI chips. Rumors began circulating Monday that it is delaying its next-generation AI chips by at least three months, which could alter its earnings as well as other mega-cap tech stocks such as Microsoft, Google and Meta.
It is important to remember that market pullbacks are normal and that the market does not go up in a straight line.
The average market pullback in a calendar year going back to 1980 is more than 14% in any one year. But what you notice in the chart below is that there are many more positive years than negative years in the S&P 500, and only in one instance — the Great Financial Crisis — have we seen multiple down years in a row.
We repeat the drumbeat that what matters is time in the market and not time out of the market. While we have seen increased market volatility, this is normal and part of long-term investing in the stock market.
Putting 2024 in Perspective
S&P 500 Index max pullback per calendar year
Source: Carson, YCharts 8/5/2024 (1980-current)
The CD Wealth Formula
We help our clients reach and maintain financial stability by following a specific plan, catered to each client.
Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.
We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.
It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.
Sources: AAM, Carson, CNBC, Fortune, Forbes, Washington Post
This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.
Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.
Past performance is not a guarantee of future results.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. CD Wealth Management and Bluespring Wealth Partners LLC* are affiliates of Kestra IS and Kestra AS.
We are less than 100 days from Election Day. Whenever a presidential election rolls around, it is common to hear it described as “unprecedented.” Presidential elections always add an extra element of uncertainty to investing. On top of assessing the path of the Federal Reserve, the stability of profits and the consumer, investors must grapple with a barrage of headlines about the election.
Uncertainty can create opportunity. Investors often make their worst mistakes during uncertain times, and it can sometimes take years for their portfolios to recover.
As seen in the chart below, many geopolitical events have impacted portfolios in the short term over the last 120 years. Over the long run, however, the market has trended higher.
Investors sometimes get tunnel vision when it comes to the stock market and may only see what is right in front of them: an election, war or a pandemic, for example. When you stretch out your time horizon, the odds move in your favor; roughly 75% of single years have positive returns, nearly 90% of five-year periods are positive, and 100% of 20-year periods are positive!
Political opinions are best expressed at the polls — not through the portfolio. It is crucial to keep your political feelings from overruling your investing strategy. Investors who allow political opinions to harm their investing discipline may have missed out on above-average returns during political administrations they may not like.
With the intensity of feelings on both sides, it is natural for investors to assume that the news of the day — the election’s eventual outcome — could have major impacts on sentiment and prices in the financial markets.
The stock market is not partisan. Although popular myths suggest that one party or the other is better for market returns, historical data shows otherwise.
The S&P 500 has averaged positive returns under every partisan combination, as the chart below shows. There also is evidence that a divided government has correlated with stronger market returns — probably because gridlock creates less policy uncertainty, and markets do not like uncertainty.
If you had invested $1,000 in the S&P 500 starting in 1953 and only invested under Republican presidents, you would have just under $30,000 today. If you did the same thing but for only Democrat presidents, you would have just over $60,000. However, if you stayed invested no matter which party was in office, your $1,000 investment would be worth close to $1.7 million today.
No matter which side you sit on, this election cycle is likely to bring more surprising headlines and plenty of emotional ups and downs. It can be tempting to put your money where your convictions are — whether you are optimistic or pessimistic about the November election — but history shows that doing so is not the best economic move for your long-term financial health.
Average Annual S&P 500 Performance
(1933-2022, excluding 2001-2002)
Past performance is no guarantee of future results. Data excludes 2001-2002 due to Senator Jeffords changing parties in 2001. Calendar-year performance from 1933 through 2022. Source: Strategas Research Partners, as of Nov. 5, 2023.
Despite heightened political uncertainty, the economic backdrop remains positive. Market moves are more likely to be driven by market and economic fundamentals like corporate earnings, interest rates and other economic factors. GDP remains strong, the Fed is likely to reduce interest rates, and corporate earnings are expected to grow at double digits in 2024.
Over the past 40 years, there has been only one instance when market returns were negative 12 months after an election — the tech bubble in 2000. This is not to downplay the importance of an election, but instead to remind us that the economy does not change course based on an election result.
Through good times and bad, economic progress and the ingenuity of American companies have led to innovation, increased productivity and earnings growth — ultimately driving markets higher. Once political uncertainty is out of the way, markets tend to return to focusing on fundamentals, and right now, the fundamentals look pretty good.
The CD Wealth Formula
We help our clients reach and maintain financial stability by following a specific plan, catered to each client.
Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.
We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.
It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.
Sources: Capital Group, Carson, JP Morgan, Strategas Research
This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.
Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.
Past performance is not a guarantee of future results.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. CD Wealth Management and Bluespring Wealth Partners LLC* are affiliates of Kestra IS and Kestra AS. Investor Disclosures: https://bit.ly/KF-Disclosures
*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.
Fidelity Investments and Fidelity Institutional® (together “Fidelity”) is an independent company, unaffiliated with Kestra Financial or CD Wealth Management. Fidelity is a service provider to both. There is no form of legal partnership, agency affiliation, or similar relationship between your financial advisor and Fidelity, nor is such a relationship created or implied by the information herein. Fidelity has not been involved with the preparation of the content supplied by CD Wealth Management and does not guarantee, or assume any responsibility for, its content. Fidelity Investments is a registered service mark of FMR LLC. Fidelity Institutional provides clearing, custody, or other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC.
Now that we’re past the halfway point of 2024, we wanted to take this occasion to look back at the articles we’ve produced for our clients so far this year and share the five most popular pieces, in case you missed any of them — or if you want to revisit and share them with friends and family.
Twice a month, we thoughtfully craft these pieces with our clients in mind, broaching subjects we think are relevant and interesting. This is not syndicated content. We want you to find value in these letters — especially in times like these.
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1. Understanding How a Living Trust Can Help Your Estate Planning
June 20 | A living trust is a flexible, popular tool that allows the estate to avoid probate and lets you control asset distribution after your death. Read more
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2. Another Milestone for the Dow: What Could Happen Next?
May 23 | The Dow’s rise to 40,000 is a reminder that when it comes to investing, patience is the key. Read more
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3. Here’s Why Investors Shouldn’t Panic Over the Market’s New Year’s Hangover
Jan. 12 | We talk regularly about not timing the market, and we don’t see these circumstances any differently. Read more
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4. Here’s How We’re Rebalancing the Portfolio as We Enter the Second Quarter
March 15 | We think much of the pain from rising interest rates is behind us — and the key to navigating volatility remains being in a diversified portfolio. Read more
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5. Investor Outlook: A Strong May, the First 100 Trading Days and 4 Scams to Watch
June 6 | S&P 500 companies are enjoying their best earnings season in almost two years. Read more
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P.S. Looking for more? Here are the five articles that are most popular this year on our website (no matter when they were published).
We help our clients reach and maintain financial stability by following a specific plan, catered to each client.
Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.
We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.
It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.
This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.
Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.
Past performance is not a guarantee of future results.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. CD Wealth Management and Bluespring Wealth Partners LLC* are affiliates of Kestra IS and Kestra AS. Investor Disclosures: https://bit.ly/KF-Disclosures
*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.
Fidelity Investments and Fidelity Institutional® (together “Fidelity”) is an independent company, unaffiliated with Kestra Financial or CD Wealth Management. Fidelity is a service provider to both. There is no form of legal partnership, agency affiliation, or similar relationship between your financial advisor and Fidelity, nor is such a relationship created or implied by the information herein. Fidelity has not been involved with the preparation of the content supplied by CD Wealth Management and does not guarantee, or assume any responsibility for, its content. Fidelity Investments is a registered service mark of FMR LLC. Fidelity Institutional provides clearing, custody, or other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC.
As part of the financial planning process, we discuss the pros and cons of trusts — and your options in creating them: whether they are revocable or irrevocable, how much control a trust has, and what the long-term goal of a trust is. The term “trust” can be confusing for many regarding an estate plan, as there are many different types of trusts. Numerous estate planning tools can help make your estate run more smoothly while you are alive — and after your death.
People use trusts to keep control of their money and property and to designate who receives money and property when they die. A living trust is ineffective until the person who creates the trust puts their money or assets into it. Then, the trustee has authority over the assets.
There are three main roles under trusts:
• Grantor, Settlor or Trustor: the person who makes the trust. • Trustee: the person who makes decisions about property and money in the trust. In a revocable trust, the person who made the trust (grantor) typically also is the trustee. If it is a joint trust, there can be co-trustees, such as a spouse. • Beneficiaries: the people who receive money or property from the trust. The person who makes the revocable trust could also be the beneficiary while they are alive. After the grantor passes, the people who receive money or benefits from that trust are the residual beneficiaries.
A living trust can also be called a revocable trust or revocable living trust. A revocable trust can be amended or terminated at any time, but upon the death of one or both creators of the trust, it can then become irrevocable. Think of this type of trust as an extension of yourself (or your spouse if it is a joint trust).
There is no separate tax identification number and there are no tax benefits. You are still filing these assets as if they are owned in a regular joint account. You may be able to transfer most types of assets — such as your home, bank accounts, brokerage accounts and investment properties — into a revocable living trust.
The trust owns the property in title, but you maintain control of the assets and in most cases, you can use the trust property in the same way you had before transferring it into the trust.
What are the main reasons to use a revocable living trust?
There are two main benefits of utilizing a revocable living trust: to avoid or reduce the probate estate and to control the distribution of your assets.
Probate is the court-supervised process of administering your assets after your death. The process can be time-consuming and expensive, and the assets could remain tied up in court with your heirs not having access to funds in a timely manner. (During the pandemic, for example, probate courts fell significantly behind schedule, and assets were tied up for longer than expected.)
As your will goes through the probate process, it is made public. Anyone could go to the courthouse and read the will to see who gets your assets. If you put your assets in a revocable trust, however, your assets and beneficiaries remain private.
When assets go through probate, the court ultimately decides who gets what assets. If your assets are held in a living trust, however, you can avoid probate and control the timing and distribution of the assets. When you pass away, the person you appoint successor trustee will be legally responsible for distributing the assets according to the terms you specify in the trust document.
What are other considerations of a living trust?
• There are costs associated with setting up a living trust, such as paying an estate attorney to draft the legal documents. Another potential cost is changing ownership of certain assets, such as real estate. If you are moving your home into the revocable trust, a deed must be filed, and that may cost money as well.
• There are typically no income tax benefits associated with a living trust. Even though the assets have been transferred into a trust, you still will be subject to income taxes generated by the trust.
• A living trust is only one part of an overall estate plan. You still will need to take precautions such as preparing your last will and testament, establishing power of attorney, outlining medical directives, creating a living will and assigning HIPPA authorization.
Living trusts are among the most flexible and popular estate-planning vehicles. They are revocable, and you can change them as often as you would like. They can preserve your privacy, allowing the estate to avoid the probate process and enabling you to control how your assets will be distributed after your death — very similar to your retirement accounts.
Please let us know if you have any questions about revocable living trusts. We are always happy to discuss the pros and cons and help you decide if they are a sensible alternative for you.
The CD Wealth Formula
We help our clients reach and maintain financial stability by following a specific plan, catered to each client.
Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market.
We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.
It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter. In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.
Sources: Forbes, JP Morgan
This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.
Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.
Past performance is not a guarantee of future results.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS) an affiliate of Kestra IS. CD Wealth Management and Bluespring Wealth Partners LLC* are affiliates of Kestra IS and Kestra AS. Investor Disclosures: https://bit.ly/KF-Disclosures
*Bluespring Wealth Partners, LLC acquires and supports high quality investment adviser and wealth management companies throughout the United States.
Fidelity Investments and Fidelity Institutional® (together “Fidelity”) is an independent company, unaffiliated with Kestra Financial or CD Wealth Management. Fidelity is a service provider to both. There is no form of legal partnership, agency affiliation, or similar relationship between your financial advisor and Fidelity, nor is such a relationship created or implied by the information herein. Fidelity has not been involved with the preparation of the content supplied by CD Wealth Management and does not guarantee, or assume any responsibility for, its content. Fidelity Investments is a registered service mark of FMR LLC. Fidelity Institutional provides clearing, custody, or other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC.
