Market Recap – July Rotation
Major Benchmark Returns in July 2024
Momentum picked up in July as investors rotated from growth and high-flying tech companies into other corners of the market such as small cap, value, and dividend stocks. Both CPI and PCE reports further cleared the path for a September rate cut, which Fed Chairman Powell signaled in his FOMC press conference on July 31st.
As long as data continues to indicate decent economic growth (strong consumer spending, low unemployment rate, solid corporate earnings), the stock market should be able to march higher in the second half of the year.
New Election Dynamic
July saw two historic events that profoundly reshaped this year’s presidential election. First, Donald Trump survived an assassination attempt and briefly appeared to have booked his second stay in the White House. However, just days later, Joe Biden dropped out of the race and endorsed VP Kamala Harris, reinvigorating the Democratic party and renewing both parties’ emphasis on swing states.
It remains to be seen who Harris will select as her running mate and what her top priorities would be as POTUS. If Harris carries on the policies of the Biden/Harris administration, she and Trump will diverge on a number of tax and economic issues including tax rates, estate tax, tariffs, and environmental regulation, among others. However, despite the turmoil surrounding the election, the President doesn’t have as much influence on the market as we might think. As the chart below illustrates, it’s time in the market that matters most, not the President’s political party.
Tax Updates – RMD Rule Finalized
On July 18, 2024, the IRS issued its Final Regulations relating to the SECURE Act. In the Final Regulations, the IRS confirmed the requirement for Non-Eligible Beneficiaries to take RMDs annually in years 1-9 after inheriting an IRA, in addition to the requirement to empty the account within ten years. However, RMDs are waived in 2021-2024 due to confusion surrounding the new rules. The 260-page document also offers guidance for a slew of other circumstances. In short, these regulations introduce significant complexity when it comes to tax planning around retirement accounts.
According to IRA expert Ed Slott, the best advice may be to ignore the RMD rule altogether. Keep in mind that the “M” in RMD stands for “minimum,” not “maximum.” Instead of thinking only about minimum distributions, IRA beneficiaries should consider taking maximum advantage of low tax brackets and spreading the income over ten years.
No two situations are alike. Please reach out to us for an in-depth review of how these new rules might affect you.
Estate Planning Ideas – Visualize Your Documents
Estate planning can be a confusing, daunting, and exhausting exercise. Perhaps participating in a triathlon seems more surmountable. What if you could turn the mundane documents full of legal jargon into simple words and flowcharts? We are now able to transform trust documents, wills, powers of attorney into an easy-to-understand visual summary that can be shared with your loved ones and fiduciaries. Ask us for a sample report and see it for yourself!
We’ll be back next month!
