4 Minute Read
Good afternoon and Happy Spring! A beautiful few days in the forecast in upstate New York, golf courses are starting to open, and Syracuse came out with a great performance and win in the opening round of the NCAA tournament! Things are certainly looking up after a long and challenging year for all of us.
I wanted to touch on a few items in terms of annual IRA contributions, updates to tax filing, and some of my thoughts around the markets. I hope you find this information helpful, and as always, if you have any questions please do not hesitate to contact our office.
Tax & IRA Updates:
After a strong start to the year, markets have cooled off recently as bond yields have spiked; more on that later.
The S&P 500 is up around 4.5% on the year, US Value companies have outpaced US Growth companies year to date in a reversal of what we saw in 2020, and Small US companies have outpaced them both. Diversification and rebalancing continue to be an important staple our ongoing portfolio management process.
Currently, the metric I am most closely following is inflation and bond yields. As the economy continues to recover, and as these tax credits/stimulus get to consumers, inflation and higher bond yields could follow. What does this mean for investments?
Longer duration bonds could go down, we are positioning client portfolios by keeping our durations shorter in maturity. As an example, TLT (we do not hold this fund in client accounts), a 20+ year treasury bond fund is down over 14% year to date.
Growth company values can decline. A key calculation in determining the value of a growth oriented company is closely tied to yields. If yields go up, valuations go down and vice versa. The Russell 1000 Growth index is up 1.19% for the year while the Russell 1000 Value index is up over 11%.
Cash savings could lose purchasing power. With bank yields low, any significant pickup of inflation will hurt those with significant cash savings as purchasing power would decline. If you have significant cash savings, consider opening an investment account with monthly contributions to take advantage of dollar cost averaging and help protect against rising inflation.
As I always advise, there is no way to predict how the markets will perform over short periods of time. Who would have thought the S&P 500 would be up over 18% in 2020 in the face of a global pandemic and contentious election season.
We could see a strong economic recovery and record GDP numbers, and a flat market in 2021, there is just no way of really telling. Diversification, quality investments, and ongoing rebalancing (especially during times of market weakness) continue to be an excellent way to grow capital over longer periods of time.
If you have any questions at all, please do not hesitate to contact the office. If you would like to schedule a meeting, you can use the blue button below which is directly linked to my calendar. Have a great Spring!