2024 Halftime Update ~ Your Estate Plan

Air travel hitting records almost daily serves as a reminder, time sure does fly! Of course, none of us need a reminder.

With the 1st half 2024 now in the books, lets take a brief dive into the markets.

Here’s how the major stock indexes finished as of the end of June.

The main index followed by most, is the S&P 500.  Let’s peak at the makeup of the index.  By sectors, Technology comprises 31.52% of the index, followed by Communication Services 9.28% for a total of 40.80%.

Six companies make up 29.56% of the index.  Microsoft 6.96%, Apple 6.30%, Nvidia 6.11%, Alphabet 4.23%, Amazon 3.64% and Meta 2.32%.  To state the obvious, 494 companies comprise the balance of 70.64% of the index.

Technology has certainly been a main ingredient to stock performance since the beginning of 2023, after a severe draw down in 2022.  Going forward, its hard to argue technology won’t continue to be a main driver of performance.

As technology innovation continues to change our lives, keep in mind, performance is not a straight line.  During the 2000-2002 correction, we witnessed technology dropping over 75%, then 40% in 2022.

In 2000, valuations were simply way ahead of themselves and in 2022, the Fed finally decided to wake up, after hitting the snooze alarm several times, raising rates quickly, shocking the markets. Is it different this time?  Will Technology simply continue to rise, lifting stock indexes and the assets holding them?

My answer and your answer can only be an educated guess, as we must keep in mind there are many issues that will impact stocks going forward.

Since the beginning of 2022, bonds have had a rough ride, taking a direct hit from the fast rise of inflation and interest rates.

Looking at rates in 2024, the 10-year bond began the year with a yield of 3.866%.  As of last Friday, the 10-year yield finished 4.392%.  Most US total bond indexes are flat for the year.

The direction of interest rates has a significant impact for most “conservative” bonds, such as US Treasuries.

The question, where do we go from here?  If inflation continues to abate, such as evidenced by last Friday’s Personal Consumption Expenditure (PCE) report, coming in flat for month, rates should stay range bond.  If we see the economy slow, as many believe will gradually happen, yields should inch lower.  If either occur, bond performance should be improved, offering the “old” benefit of asset allocation. 

If inflation turns hotter, yields should rise, again negatively impacting bond pricing.

Let’s hope for a smooth landing with the economy gradually cooling, interest rates moderating a bit with economic growth between 2 to 3% with inflation in the same range.

You have a properly executed Will, a Power of Attorney and an Advanced Health Care Directive.  The last time you checked, the beneficiaries of your retirement assets are in place.

Is this all you need?

I recall a seminar I did on tax planning; the attendees were very affluent.  I asked a them a question.  “How many of you will pass to your children/grandchildren significantly more assets than you inherited?”  All hands went up.

I then asked, “how many believe your children/grandchildren will manage those assets in a truly responsible manner?”  No hands went up.  I then asked it in different way, “how many are concerned their children will make mistakes.”  All hands rose, high!!

We raise our children and hope for the best.  We cannot however be assured divorce or something else negative won’t happen.  You worked so hard to accumulate your wealth and most of you have entrusted a financial advisor to assist in making sure your assets match your life goals, are truly diversified anticipating various potential possibilities.

It’s never a bad time to reassess the “personal” side of your estate plan.

A simple way to begin, take out a blank piece of paper, list the values of your assets separately.  Real estate, retirement accounts, non-retirement investment accounts, personal items, your business (if applicable) and anything else you own or control.  List all of your potential desired and non-desired beneficiaries.  Think through whom you want to receive each of your assets, the potential issues that may happen after they inherit

Afterward, revisit your list with your financial advisor to make sure you understand the issues.  The Secure Act recently passed by our government has changed the way many retirement account assets will be treated and there are potential wrinkles.  From there you will know if it makes senses to go back to your estate attorney to revisit your documentation.  Making sure your assets are first passed in the manner desired and then managed to protect your children is important.  Do not expect your children to have the same amount of life wisdom as you.  It’s simply not possible. 

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