The S&P 500 Index returned +18.5% through the first six months of this year, following a -13.5% fourth quarter of 2018. On a year-over-year basis, the market has returned a still strong, but more modest +10.4%. The market hit a rough patch in May, down 6.4%, when trade negotiations between the US and China stalled. Also in May, the Trump Administration imposed more aggressive sanctions on China’s leading telecom equipment manufacturer, Huawei, and threatened to impose tariffs on Mexico.

Multi-Generational Tax Planning

How hard is it to do multi-generational tax planning with the 2020 national election run-up showing such diverse views of potential tax policy? We try to keep two rules of thumb in mind when planning. Don’t be “too smart by half” which we believe means don’t make what can be simple too complicated and, the best tax advice ever given, “don’t be greedy”.

So what is the good news about retirement plans and savings? On the private side, which by the way makes up two thirds of US GDP, there is good news. Seventy-five percent of retirees tell the Federal Reserve’s Survey of Consumer Finances that they have “at least enough to maintain their standard of living”. Eight of ten and six of ten of retiree households and of working age households, respectively, tell Gallup they have enough money to “live comfortably”. [1]

What should be the focus of an investment newsletter? We agree that imparting insights about what the next one to three-year period may bring is both interesting and useful. What if what an investor should be doing over the next 10 to 20 years is actually “set in stone”? Well, then, reinforce the 10 to 20-year strategy without being pedantic (page 1, we hope) and provide the one to three-year insights and tactical advice elsewhere in the newsletter.

The behavior of equity markets in the first quarter of 2019 was nearly the mirror image of the fourth quarter of 2018. Global equities rallied strongly with U.S. stocks leading the way, reversing the sharp U.S.-led downturn in the fourth quarter. After falling by -13.52% in the fourth quarter of last year and by -4.38% for all of 2018 including dividends, the Standard & Poor’s 500 Index returned +13.65% in the first quarter of 2019, its best quarterly return in ten years. The S&P 500 ended the quarter just 3.3% shy of its all-time closing high established on September 20, 2018.

A long term investor usually has two time horizons in mind when thinking about investing – what will happen over the next twelve months (tactical) and what will happen over the next twenty years (strategic).  Tactical thinking should take into account liquidity needs over the next year, current fundamental or valuation concerns and/or a buying reserve for expected opportunities. The strategic is normally the easier question to answer because of market history.

As with many debates, the argument over “active” versus “passive” investing seems too simple.  We’d actually like to highlight three investment categories, delineated by expected return.  We think that we are the middle category of “passive” investors “actively” picking stocks. 

Is the Stock Market More Volatile Due to Its Focus on Economic Conditions?

There has been no shortage of uncertainty lately. The Government partial shut-down, the US-China trade war, and Brexit have featured most prominently in the financial headlines. Rising interest rates and a weak stock market have only added to the worry that a greater market downturn could be around the corner.

Déjà vu on Marginal Tax Rates?

From 1940 to 1980 the United States highest individual marginal tax rate never went below 70%.[1]  We have been there before.

“When top rates were high there was always a large gap between the stated rates and what the highest earners actually paid as a percentage of their income.”