1. RECENT INTEREST RATE MOVES
The 10 Year Treasury hit an all-time low of 1.36% on July 8th of this year. Since then, interest rates have climbed over 70%. As of the end of November, the 10 Year Treasury rate is 2.36%. This relatively quick and drastic move is having quite an effect on bond markets. The Barclays Global Aggregate Bond Index has dropped by more than 6% over that time. We have strategically positioned client Capital Preservation portfolios to outperform the index in periods of rising interest rates, as recent performance illustrates. We are continuously analyzing the risk exposures within client fixed income allocations and will be closely monitoring future rate movements.
2. MUTUAL FUND DISTRIBUTIONS
Most mutual funds make distributions to shareholders in December. The funds pay out embedded capital gains, both short and long term, and/or underlying dividends realized throughout the year. These endof-the-year distributions can be very frustrating to investors who newly purchased a mutual fund. An investor could buy a mutual fund in November, have a negative return over that one month, but still pay a capital gains tax if the fund distributes gains in December. We are mindful of this tax nuance and are strategic when implementing new or additional client funds. For longer term investments, we weigh the impact of selling ahead of the mutual fund distribution (thereby avoiding the gain and associated tax) versus the tax consequences thereof. This trade off is unique for each client and is something we are analyzing as we approach the year’s end. To read more, click here.
3. CHARITABLE GIVING
Over the years, we have seen an incredible increase in charitable giving during the holiday season because we serve very generous clients. If you are planning to give this year, there are a number of options and vehicles available, some of which offer generous tax deductions, especially if the receiving charity has 501(c)3 status. Some giving options are: through IRA distributions, from a charitable trust, use of highly appreciated assets, a donor advised fund, or charitable foundation. We are happy to evaluate and recommend the best method for your situation, as well as facilitate the gifting for you. Just as reminder, the earlier you start the gifting process, the higher likelihood it will get completed prior to year-end. If you are interested in discussing further, please give your Wealth Manager a call, and we would love to help!
4. THE U.S. DOLLAR
The U.S. Dollar has experienced a drastic decline in purchasing power (about 95%) over the last 100 years. Monetary policy actions by the Federal Reserve have contributed meaningfully to this decline. Over the next few years, inflation may be dramatically higher due to the low interest rate policy and potential fiscal stimulus, which will result in a faster erosion of purchasing power. In our opinion, it is not a viable long-term investment strategy to keep a substantial percentage of investor wealth in cash. Rather, we believe a well-diversified portfolio preserves purchasing power and provides growth over the long-term.
5. WEALTH PLANNING
At True North Advisors, we take a holistic approach to wealth management. More specifically, we provide conflict-free advice and guidance for all aspects of your financial picture so you can lead a more fulfilled life. Investment management is just one component of our service offering; we are also highly credentialed and experienced in wealth planning. We are here to guide you through any life event whether it is corporate benefits and compensation planning, education planning for children or grandchildren, insurance in all its forms, estate planning, charitable giving, and more. If you are interested in learning more, please let us know and we can create a plan tailored for you.