One of the questions we hear in almost every client meeting of late is, “How can the market be going up when things are so bad out there?” Rather than try to identify and debate each item that could be referred to as ‘bad’, we think it would be more instructive to revisit market dynamics and the true drivers of stock prices that investment managers refer to when they talk about the strong underlying fundamentals behind this market.
Earlier this month, Equifax disclosed that as many as 143 million people were affected by a data breach that occurred from mid-May through July. The hackers were able to access people’s names, Social Security numbers, birth dates, addresses, driver’s license numbers, credit card numbers, and dispute documents containing personal identifying information. Below is the link to a great article addressing the next steps you need to take to protect yourself.
In July, the trustees who oversee the Social Security program released their 2018 projections in regards to Social Security and Medicare. Millions of Americans are projected to receive their biggest increase in Social Security in January of 2018. Payments are expected to increase 2.2%, about $28 a month for the average recipient. This increase comes after years of minimal increases for those receiving benefits. In 2017, the benefit increased by 0.3%. In 2016, there was no increase at all. The trustees are also projecting that Medicare Part B premiums should remain unchanged next year. Why are Social Security payments increasing? What is causing the increase in these payments?
The stock market continued its stair-step higher in Q2 amid slow but steady economic growth, decreasing inflation pressures, and low volatility on both the interest rate-front as well as equities. GDP growth started off this year on a lackluster note, but growth picked up in Q2 and is estimated to be stronger again in Q3. And this has come without rising bond yields and without escalating inflationary pressures, leaving investors to wonder if we are back in a “Goldilocks economy” like the one that characterized much of the mid- to late-1990s?
President Donald Trump and his administration have released their proposed tax plan. The plan, which was released earlier this year on April 26th, was announced by Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn and states the following four goals:
1. Grow the economy and create millions of jobs
2. Simplify the burdensome tax code
3. Provide tax relief to American families, specifically middle-income families
4. Lower the business tax rate to one of the lowest in the world
Medicare is the federal health insurance program for people aged 65 and older. It is also available to certain younger people with disabilities and those with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant). Medicare consists of 4 parts:
• Part A – Hospital Insurance
• Part B – Medical Insurance
• Part C – Medicare Advantage Plans
• Part D – Prescription Drug Coverage.
For the vast majority of Americans, you are automatically signed up for Medicare Part A and Part B starting the first day of the month you turn 65 (or the first day of the month prior if your birthday is on the 1st.)
The Department of Labor Fiduciary Rule
In 2016 the Department of Labor released its final rule amending the definition of a fiduciary on retirement accounts. This proposal, often called the “Conflict of Interest Rule” or “Fiduciary Rule,” requires all financial professionals who work with retirement plans or provide retirement planning advice to act as a fiduciary. Being a fiduciary requires a financial professional to act solely in the best interest of his or her client, putting their client’s interest before their own at all times. A fiduciary is both legally and ethically required to meet the requirements of this status. This is a much higher obligation to abide by than the suitability standard that is still widely used in the industry. This new rule is scheduled to be phased in starting April 10, 2017.
Before we discuss the Trump rally and if it has legs, it is instructive to recap 2016 and how our views and portfolio positioning played out relative to the markets. One of the things our firm does differently than most is how we proactively manage risk in client accounts.
When we see red flags beginning to surface in the financial markets, we take steps to adopt a more defensive posture to protect capital and avoid large losses. Over the years clients have repeatedly told us that they much prefer to focus on capital preservation when things look rocky, even if that means we may leave a little upside on the table as a result.
You have spent years accumulating assets in your IRA. If you contributed to a traditional IRA, you took a tax benefit during the year you made the contribution(s) by deducting this amount on your tax return. Your earnings can potentially grow tax-deferred until you withdraw the money. If you contributed to a Roth IRA, you made contributions with after tax dollars. These contributions can potentially grow tax-free and are tax-free at withdrawal. Unfortunately, you cannot keep the funds in your retirement account indefinitely. Below are guidelines for IRA withdrawals.