Coming into 2023, there wasn’t much to be excited about. The prior year saw dismal returns for both stocks and
A year ago, we had a fairly pessimistic outlook on the economy and capital markets. The prospects and implications of
Using 529 plans to save for college education can be low-cost and tax efficient. However, some people have shied away
Early last year, it was common knowledge that we were about to enter a recession. In fact, many in the media were calling it the most anticipated recession ever. Despite the certainty, we’re still in an economic expansion, and now many prominent economists, including those in the Fed and Treasury, are saying a recession is no longer in the cards.
That certainly sounds like good news, particularly when you consider that past recessions have generally been accompanied by stock market downturns. However, we’re not so sure we’re out of the woods.
With persistent inflation driving up the cost of just about everything, particularly home values, people are often surprised when they receive a 1099-S and find out they may have to pay capital gains on the sale of their home. Today’s rules are a result of the Taxpayer Relief Act of 1997.
According to the law, you can exclude up to $250,000 ($500,000 if married) worth of profit when selling your primary residence. Profit being defined as the sale price minus the price you paid plus the cost of any improvements made to the home (so keep receipts when you make home improvements).
After three consecutive quarters of positive returns, stocks were unable to keep the streak alive and edged slightly lower in the third quarter. Most of the negative performance occurred in September, which was the worst month for the stock market this year. Bond returns were also negative this quarter, while liquid alternatives provided a welcoming boost to returns.
Returns in the first half of the year were dominated by a handful of well-known, mega-cap technology stocks, which contributed to large-cap stocks’ vast outperformance over small-cap and international stocks. This trend reversed somewhat in the third quarter as returns were generally similar across asset classes. Emerging Markets had the best performance among stocks for the quarter with a loss of “only” 2.9%, while small-cap stocks fared the worst with a decline of 4.9%.
The stock market has had a stellar first half of the year. But that’s only true if you were in the right part of the market. The overall US stock market gained 17% so far this year. International stocks were up a solid, but much lower 12%. US small-cap stocks were up only 6%. And deep value stocks rose a paltry 1%. It was the proverbial tale of two markets. The best of times for some, but not so much for others.
Is it possible to have too much money? The answer is yes if the subject is estate taxes. Currently few of us have to worry about Federal estate taxes since the exemption is so high, but that is set to revert back to its former limit at the end of 2025. This means a reduction of approximately 50% from today’s generous level.
Reinsurance funds, those that invest in relatively obscure catastrophe bonds and quota shares, have provided uninspiring returns over much of the past decade. From 2014 to 2022, the Swiss Re Cat Bond Index, which measures the returns of the catastrophe bond market, returned an annualized 3.7%, far below its long-term average of 6.8%. However, the cat bond market got off to a hot start in 2023. It returned 10.5% in the first half of the year, which is the index’s strongest start to the year in over 20 years.
Stock market returns for the second quarter bear a striking resemblance to what occurred in the first quarter: US, international, and emerging market stocks were all positive, large-cap stocks outperformed their small-cap counterparts, developed international markets outpaced emerging markets, and most factor funds lagged behind the overall stock market. Technology, communications, and consumer discretionary sectors continued to lead the way by returning over 10% for the quarter and over 30% for the year-to-date period.
For the past several years, it has been impossible to get any sort of return on cash balances. The Fed Funds rate was literally zero for a while, and banks, money market funds, and CDs all paid close to zero percent interest on cash balances. You could leave money in your bank account because there wasn’t much opportunity cost.
However, that has changed over the past year as the Fed has aggressively raised short-term interest rates.
If the overall stock market falls from here, which we consider fairly likely, value and international stocks will probably also decline. However, their low valuations should help insulate them from severe declines, and we expect that they will outperform growth-oriented stocks. So, today may not be the day they ring the bell to signal the market bottom, but for certain market sectors, this will likely be an attractive buying opportunity when we look back from a decade in the future.
Gold has started to rise lately, and with inflation still running hot, we know conversations will shift to gold before
We are in a highly regulated business, which causes a few headaches, but also offers our clients important protections. There are certain disclosures that we are required to make regularly regarding our policies and procedures, including
Stock and bond markets enjoyed some relief to close out 2022 after dismal returns for most of the year. The S&P 500 gained 7.6% for the fourth quarter while the Bloomberg U.S. Aggregate Bond Index rose 1.9%. Despite the rebound, 2022 was one of the worst years for both bonds and the traditional 60% stock/40% bond portfolio in recent history.