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The Markets

What in the world?

A lot happened last week. Some of the notable events included:
 
• Trade talks between the United States and China. The talks were described as “frank, efficient, and constructive,” although significant issues have yet to be resolved.
• A Federal Open Market Committee meeting. The Federal Reserve indicated it expects to raise rates during 2018, but did not do so last week.
• Low unemployment in the United States. U.S. unemployment fell to 3.9 percent, which is the lowest it has been since 2000. Typically, low employment is a sign of a strong economy.
• Sky-high rates in Argentina. In an effort to shore up the nation’s currency, Argentina’s central bank “…hiked rates to 40 percent from 33.25 percent, a day after they were raised from 30.25 percent.”
• Katy Perry roasted Warren Buffett. Katy Perry revealed the ‘Left Shark’ – a backup dancer famous for being out of sync during Perry’s 2015 Super Bowl performance – was Warren Buffett.*

What do asset managers and researchers make of the current state of world economies and markets? A portfolio manager cited by Barron’s said, “…until proved otherwise, we remain in a long bull market, and there is an absence of indicators outside of the equity market itself (most notably in credit markets or financial conditions) to suggest this has ended.”

Michael Wilson, Chief U.S. Equity Strategist at Morgan Stanley has a different opinion. “Even strong earnings results haven’t been able to boost most stocks into positive territory. Why? Because rising interest rates have reached a point at which they have become a constraint on valuations.”

Some researchers are concerned about growth outside the United States. Alvise Marino, an FX strategist for Credit Suisse told The Wall Street Journal, “This is really a Goldilocks [U.S. employment] report…But investors are worried that global growth is not as strong as some had thought.”

We’re tracking events and their potential impact on markets, and we’ll keep you informed. 

* Warren Buffet wasn’t really the Left Shark. Her comments were part of a humorous video. 
MYTH BUSTED

Founders of new companies aren’t who many people think they are. Sure, you’ve read stories about entrepreneurs who leave college to found companies that become behemoths. In fact, The Thiel Fellowship encourages young people to skip college and, “Pursue ideas that matter instead of mandatory tests. Take on big risks instead of big debt.”

While helping young people pursue new ideas is admirable, research from the Massachusetts Institute of Technology (MIT) and the National Bureau of Economic Research (NBER) suggest a different age group is more likely to found successful fast-growth companies:

“Our primary finding is that successful entrepreneurs are middle-aged, not young. Taking numerous measures to identify potentially high-growth firms as well as studying ex-post growth of each firm, we find no evidence to suggest that founders in their 20's are especially likely to succeed. Rather, all evidence points to founders being especially successful when starting businesses in middle age or beyond…Across the 2.7 million founders in the U.S. between 2007-2014 who started companies that go on to hire at least one employee, the mean age for the entrepreneurs at founding is 41.9. The mean founder age for the 1 in 1,000 highest growth new ventures is 45.0. The most successful entrepreneurs in high technology sectors are of similar ages. So, too, are the most successful founders in the entrepreneurial regions of the U.S.”

Almost one-fourth of new entrepreneurs are ages 55 to 64, reports Entrepreneur.com. They often have financial stability, professional support networks, and experience – all things The Thiel Fellowship tries to provide to younger founders.

What’s the point of this story? Age is just a number. People of all ages have great ideas and great potential. 

Weekly Focus – Think About It  

“The critical ingredient is getting off your butt and doing something. It's as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.” 
--Nolan Bushnell, Entrepreneur
Will I have to pay taxes on my 401(k) plan if I quit my job?

If you decide to leave the company that holds your 401(k) plan, you have four options for dealing with your funds, and the tax implications depend on which option you choose. These options include:

Leave the money with your old plan (if eligible).
Move the money to a new employer's plan (if eligible).
Move the money into a rollover IRA.
Cash out the 401(k), taking a distribution.
The rules are also different if you have borrowed from your 401(k) and leave your job prior to repaying the loan.

1. Leave the Money Alone
There are no real tax implications for leaving your 401(k) funds parked in your old employer's plan. Your money remains and grows tax-exempt until you withdraw it. The plan is not required to let you stay if your account balance is relatively small (less than $5,000), but the company that holds the plan assets generally allows participants to roll the 401(k) plan assets into a traditional IRA within the company.

However, you won't be able to make additional contributions to the plan. And because you are no longer an employee plan participant, you may not receive important information about material changes to the plan or its investment choices. Also, if you elect to leave your funds with your old plan and then later attempt to move them, it may be difficult to get your old employer/plan provider to release the funds in a timely manner.

2. Move the Money to a New Plan
You are not required to pay taxes on your 401(k) nest egg if you move it into a new plan. While 401(k) funds are eligible under ERISA to be transferred from one plan to another, but 401(k) plans are not required to accept transfers. Your eligibility to pursue this option depends on your new company's plan rules. Additionally, things can be tricky if the new plan is not a 401(k), as not all defined-contribution plans are allowed to accept 401(k) funds.

3. Establish a Rollover IRA
If you don't have the option to transfer to another employer-sponsored plan, or you do not like the fund options in the new 401(k) plan, establishing a Rollover IRA for the funds is a good alternative. You can transfer any amount, and money continues to grow tax-deferred. It is important, however, to elect to perform a direct rollover. If you take control of your 401(k) funds in an indirect rollover, your old employer is required to withhold 20% of it for federal income tax purposes, and possibly state taxes as well.

4. Cash Out and Take a Distribution  
You will pay income taxes at your current tax rate on distributions from your 401(k). Plus, if you are under the age of 59½, your distribution is considered "premature," and you'll lose 10% of it to an early withdrawal penalty.

The Bottom Line
If you have an existing 401(k) loan, regardless of the above options you elect when you quit your job, all outstanding 401(k) loan balances must be repaid (usually by the October of the following year, the deadline to file extended tax returns). Any money not repaid is treated as an early withdrawal by the IRS and you pay taxes on the amount in addition to being hit with the early withdrawal penalty.

Information Provided By: Investopedia
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* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer. 

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
You cannot invest directly in this index.

* The Standard & Poor's 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Past performance does not guarantee future results.
* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

*This newsletter was prepared by Peak Advisor Alliance

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Stock investing involves risk including loss of principal.

* This information in not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

* The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basked of consumer goods and services.
 
* Harmonized Indexes of Consumer Prices are measures of consumer price inflation that have been standardized across multiple countries based on European Union definitions. A monthly report compiles HICP trends for 16 economies, alongside conventional Consumer Price Indexes (CPI) as measured by national governments.
  
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Sources: https://www.investopedia.com/ask/answers/100314/will-i-have-pay-taxes
-my-401k-plan-if-i-quit-my-job.asp
http://montereyprivatewealth.com/blog/2014/2/25/what-you-should-know-
about-401k-rollovers
http://www.barrons.com/mdc/public/page/2_3064-485653.html (Click on “U.S. &
Intl Recaps,” then "Keeping up with the facts")
https://www.washingtonpost.com/news/wonk/wp/2018/05/02/federal-reserve-
keeps-interest-rates-unchanged-but-sees-moderate-growth-and-rising-inflation
-ahead/?noredirect=on&utm_term=.2876d51ebc37
https://www.investopedia.com/news/downside-low-unemployment/
http://www.bbc.com/news/business-44001450
https://www.wsj.com/livecoverage/berkshire-hathaway-2018-annual-
meeting-analysis (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-07-18_WSJ-Warren_Buffett_Holds_Court_at_Berkshire_Hathaways_Annual_Woodstock
_for_Capitalists-Footnote_5.pdf
https://www.barrons.com/articles/a-sampling-of-advisory-opinion-1525478403
(or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary
/05-07-18_Barrons-A_Sampling_of_Advisory_Opinion-Footnote_6.pdf
https://www.morganstanleyfa.com/public/projectfiles/onthemarkets.pdf
https://www.wsj.com/livecoverage/april-2018-jobs-report-analysis
http://thielfellowship.org (Click on down arrow)
http://mitsloan.mit.edu/uploadedFilesV9/180325%20Age%20and%20
Successful%20Entrepreneurship.pdf (Page 5)
https://www.entrepreneur.com/article/294799
https://www.entrepreneur.com/slideshow/300234#1