The S&P 500 just closed with its second best quarter in 30 years. The rapid rise and recovery of the US stock market over the past 3 months has been thanks in large part to the $1.6 trillion stimulus package from the Federal Reserve and Congress.

While positive market sentiment may be forecasting continued economic optimism over the long term, the short term may bring increased stock market volatility as caution surrounds reopening of the US & global economies, a second wave of COVID cases in the US, and job reports.  

As planners, we are mindful of the factors that are in our control and how they impact wealth accumulation and preservation of investment plans and portfolios.    

FORWARD LOOKING CONSIDERATIONS FOR WEALTH MANAGEMENT

November Election

We have written in the past about the folly of timing markets on election outcomes. While we do not advocate for drastic alterations to investment allocations based upon a Republican or Democratic led government, we are keenly aware of proposed tax law changes and their potential impact on investors.

Changes in capital gain rates, ordinary income tax rates, and estate tax exemptions are all important planning considerations that are currently being given consideration by both political parties. Any meaningful or material changes in policies may illicit adjustments in retirement saving strategies, charitable gifting strategies, or planned estate transfers to inheritors.

Interest Rates

Low interest rates have been a boon for equities and borrowers, but low rates may become a detractor for cash savers and those with bond heavy portfolios. Bonds serve a dual purpose of providing stability relative to stocks, along with a fixed income component in the way of recurring bond payments. As rates have gone down, so have the fixed payments that bonds provide.

With the prospect of low interest rates hanging around for some time, investors will need to become more thoughtful about how they allocate to bonds as an asset class. For cash savers, prolonged low rates may be a cause to revisit cash as a viable saving strategy.

Thoughtful Portfolio Management

As markets move strongly in one direction or the other, opportunities present themselves for prudent portfolio management. In addition to the selection of investments within a portfolio, we continue to monitor investment portfolios for opportunities to tax loss harvest, rebalance, and reposition individual strategies with minimal or no tax impact. A well thought out investment plan means not being caught off guard by changes in the economic or investment landscape.  

Thank you for your trust,

Aaron Brickley, CFP CPWA