May 2021

Monthly Market Recap

from Clint Edgington, CFA

April continued the streak of strong performance across most asset classes, with the S&P 500 clocking in at an 11.3% gain for the year.  While the market was troubled with the thought of increased interest rates last month, the Federal Reserve continued their position of being highly accommodative.  While this doesn’t always affect all parts of the yield curve, it did in April with the 10-year Treasury note’s yield decreasing slightly to 1.6%.  These lower interest rates, coupled with consumers opening their wallets contributed to the equity markets hitting all-time highs. 

With increased consumer spending and a large infrastructure stimulus package in the pipeline, some market participants are foreseeing significant inflation ahead.  Interestingly, commodities seem to be pricing in much higher prices than bond market participants.  April showed this in spades with commodities (in particular, lumber) having a torrid month.

Tax Increases on the Horizon

By Anne Zavaglia, CFP® 

President Biden has been a proponent of raising taxes on those earning more than $400k per year. This is in addition to reverting the Estate and Gift Tax rates to pre-2009 levels, when tax rates were 45% and the exemption amount was $3.5mill per individual.  The President also supports eliminating the step-up in basis on inherited assets, as well as raising the capital gains tax rate on those earning $1 million dollars or more per year. Several bills have been introduced in the Senate with similar measures.

Changes In Store for Estate & Gift Tax Planning

By Anne Zavaglia, CFP® & Clint Edgington, CFA

There are several bills that have been introduced in the Senate that would have a serious impact on the estate tax and assets that are passed to heirs.  These potential changes may become a reality if the American Jobs Plan and American Families Plan, which were recently introduced by President Biden, are signed into law later this year.  

Tom Sigmund, an estate planning attorney with Kegler Brown Hill & Ritter, reflected, “These legislative changes will completely change the landscape of estate and gift tax planning as we know it now. The proposed legislation requires the immediate attention of moderately wealthy individuals and their advisors including their lawyers, accountants, life insurance agents, and financial planners. Further, the non-tax impact of these changes on a client’s estate plan needs to be understood. Often the estate tax exemption amount drives the amount of property that passes to a non-spouse, especially in second marriages. Our clients’ family may be in for a rude awakening if the estate tax exemption is reduced to the very low levels proposed and more assets than desired pass to a surviving spouse of a blended family.”

Growing Interest in Socially Responsible Investing

U.S. assets invested in socially responsible strategies topped $17.1 trillion at the start of 2020, up 42% from two years earlier. Sustainable, responsible, and impact (SRI) investments now account for nearly one-third of all professionally managed U.S. assets. This upward trend suggests that many people want their investment dollars to pursue a financial return and make a positive impact on the world.

How Well Do You Understand Retirement Plan Rules?

Qualified retirement plans, such as IRAs and 401(k)s, have many rules, and some of them can be quite complicated. Take the following quiz to see how well you understand some of the finer points.