Global equities extended their gains into January, with modest appreciation in the U.S. overshadowed by more substantial gains abroad. Gains were broad-based in the U.S., with energy the only material detractor, while small cap returns were tempered somewhat after a very strong post-election period. International shares benefitted from a mild weakening of the dollar, which had appreciated aggressively into year-end, as well as a pickup in growth expectations in 2017. Interest rates were largely unchanged during the month as few anticipate a hike at the FOMC’s February meeting. Accordingly, bonds delivered positive results, with corporate credit outpacing Treasuries.
Life Insurance Basics
Life insurance is an agreement between you (the policy owner) and an insurer. Under the terms of a life insurance policy, the insurer promises to pay a certain sum to a person you choose (your beneficiary) upon your death, in exchange for your premium payments. Proper life insurance coverage can provide you with peace of mind, since you know that those you care about will be financially supported after you die.
The post-election rally carried on through December, benefitting most equities and capping off a strong year. Bonds also benefitted, ending a multi-month slide, despite the Federal Reserve deciding to increase interest rates in December. We thought it would be interesting to share a few facts relating to the S&P 500 Index’s strong performance in ‘16: a) its 12.0% gain was comprised of 9.5% from appreciation and 3.5% from dividends, b) if you exclude the 3 best days of the year then the gain falls to 4.4%, c) if you exclude the 3 worst days of the year then the gain rises to 22.1%, d) the average annual return over the last 50 years is 10.2%, e) annual returns have been positive 13 of last 14 years, including 8 in a row (9 is the record), and 40 of the last 50 years (80%), and f) over the last 50 years, 53% of trading days have been positive and 47% negative (2016 was 52/48).
On December 14, the Federal Open Market Committee (FOMC) voted unanimously to raise the federal funds rate by 0.25% — to a range of 0.50% to 0.75%. This was the second increase since December 2008, when the benchmark rate was lowered to a near-zero level (0% to 0.25%) during the Great Recession.
The losses of October extended to the first week of November, with investors continuing to unload equities ahead of the U.S. presidential election. After the surprise of a Trump victory settled in, markets sharply changed course, with equities rallying through the month on the prospect of a pro-growth/business administration. Domestic stocks rose sharply, especially small caps and cyclical sectors (energy, industrials), while international equities suffered due to the overhang of an Italian banking crisis as well as the specter of trade wars with the U.S. Bonds experienced losses as growth/inflation forecasts picked up in conjunction with a Federal Reserve that appears more likely to raise interest rates in its December meeting.
On January 20, 2017, Donald J. Trump will be sworn in as the 45th president of the United States. Between now and then, attention should largely focus on efforts to facilitate an orderly transfer of power, but there will be no shortage of conjecture over what may happen after the inauguration. While changes are likely, the specifics and scope will take time to unfold. For now, here are three key financial issues to watch.
If you are the adult child of aging parents, you may find yourself in the position of having to assist them with handling their finances. Whether that time is in the near future or sometime further down the road, there are some steps you can take now to make the process a bit easier.
Global securities markets took a step back in October, as equity markets weighed the potential investment implications of a tight (and contentious) presidential race in the U.S. Bond markets, too, sold-off given continued rhetoric from the Federal Reserve all-but-stating that economic data is supportive of a possible interest rate hike in December. Financials were the lone bright spot during the month given that banks benefit directly from higher interest rates; healthcare stocks lost nearly 7% as policymakers mulled regulation to address recent drug price inflation. A steepening yield curve provided a headwind for bonds, compelling investors to sell corporate bond funds and other “bond surrogates” such as MLPs and REITs.
The Federal Reserve gave its strongest indication yet that it might raise rates in 2016, while OPEC reversed its two-year stance and announced that it would consider cutting crude oil production. The result was a somewhat rocky September, though global securities markets largely generated positive results. In the U.S., small caps continued to outperform, as did energy and tech sectors, while dividend oriented stocks and most bonds lagged due to investor concerns over rising rates. International equities continued to experience a strong post-Brexit rally, particularly in emerging markets which has benefitted from a recovery in corporate earnings after nearly five years of declines.
When an IRA owner dies, the IRA proceeds are payable to the named beneficiary--or to the owner's estate if no beneficiary is named. If you've been designated as the beneficiary of a traditional or Roth IRA, it's important that you understand the special rules that apply to "inherited IRAs."