Yesterday’s vote by the British electorate to end its 43-year membership in the European Union seems to have taken just about everybody by surprise, but the aftermath could not have been more predictable. The uncertainty of how, exactly, Europe and Britain will manage a complex divorce over the coming decade sent global markets reeling. London’s blue chip index, the Financial Times Stock Exchange 100, lost 4.4% of its value in one day, while Germany’s DAX market lost more than 7%. The British pound sterling is getting crushed (down 14% against the yen, 10% against the dollar).
Dave Butler, Head of Global Financial Advisor Services, offers a sports example to help investors apply discipline in a stressful market by answering the question, “What do you regard as the most difficult period in the financial markets during your 25 years in the investment business?”
We all do it. But what do we really know about investing? A recent article from Business Insider about investing wisdom features a lot of interesting (and often overlooked) facts and figures, plus some insights from Warren Buffett, Jeremy Siegel, William Bernstein, Nobel laureate Daniel Kahneman and a few economists you may have heard of.
Years ago, the way to most efficiently save on estate taxes was to set up credit shelter trusts that would pour assets from one spouse to another when death occurred, so that both spouses would get the maximum estate tax exemption. In those simpler days, people who didn’t have to pay estate taxes didn’t have to file an estate tax return.
Congress just made it a little easier for people to give money from their IRAs to charities. This strategy, called a Qualified Charitable Distribution (QCD), was made permanent in 2016 and allows IRA account owners older than age 70.5 to give some or all of their Required Minimum Distributions (RMDs) from the IRA to a charity. The strategy is not available to anyone who is not subject to RMDs.
While many market participants were waiting for the “inevitable” rise in short-term interest rates expected when the Federal Reserve tightened its monetary policy, some investors may have missed the increase in short-term rates already underway as a result of market forces.
The US economy and broad market showed modest gains during the year, although investor discipline was tested by news of a global economic slowdown, rising market volatility in China and emerging markets, falling oil and commodities prices, and higher US interest rates.
The New Year is a customary time to speculate. In a digital age, when past forecasts are available online, market and media professionals find it harder to hide their blushes when their financial predictions go awry. But there are ways around that.
Have your long-term financial goals changed in the last three days?
Are American companies less valuable because investors in China are panicking?
Is there any reason to think that because Chinese investors are panicking, that Chinese companies are less valuable today than they were a few days ago?
Wednesday the U.S. Federal Reserve Board started the long process of ending its intrusion into the interest rate markets, by allowing rates to rise. This was the first time the Fed raised rates since 2006, and for some it will mark the beginning of the final chapter of the Great Recession.