Stocks Closed At A Record High; Should You Worry?

The Standard & Poor's 500 closed the week at an all-time high on Friday of 3,013.77. With the economy in its eleventh-year of expansion showing some possible signs of slower growth, should you be fearful?

To answer, take a look at this chart showing just how spectacular America's blue-chip publicly-held companies performed for the decade ended June 30th, 2019.

The worst total return of the broad array of asset classes, represented by the indexes shown, was the Goldman Sachs Crude Oil Index. A dollar in the crude index declined in value to 34-cents in the same period.

A Goldman Sachs global stock index that excludes U.S. stocks grew to $1.74.

The U.S. has led the world's global economic comeback since the global financial crisis in 2008. A dollar invested in the S&P 500 stock index, as the country struggled to emerge from The Great Recession, grew to $2.63 on June 30th, 2019.

Of course, investors in U.S. stocks in the period following the financial crisis had no idea The Great Expansion was about to begin. They took a risk. It's paid off.

Past performance does not guarantee your future results. The economic expansion is the longest in modern U.S. history and signs of slower growth have appeared in recent data. However, a recession is not on the horizon. Uncertainty about the future is a permanent condition.

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Investments with higher return potential carry greater risk for loss. Investing in small companies involves greater risks not associated with investing in more established companies, such as business risk, significant stock price fluctuations and illiquidity.

Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, the relative lack of information about these companies, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.

US Large Cap represented by S&P 500 Total Return Index. US Mid Cap represented by S&P MidCap 400 Total Return Index. US Small Cap represented by S&P Small Cap 600 Total Return Index. Non-US Developed represented by MSCI EAFE Index NR USD. Emerging represented by MSCI EM Index GR USD. Real Estate represented by S&P Global REIT Index TR USD. Natural Resources represented by S&P North American Natural Resources Total Return Index. Commodities represented by Deutsche Bank Liquid Commodity Optimum Yield Diversified Commodity Index Excess Return. US Bonds represented by Barclays US Aggregate Bond Index TR USD. TIPS represented by Barclays US Treasury US TIPS Index TR USD. Non-US Bonds represented by Barclays Global Treasury Index TR. Cash represented by USTREAS Stat US T-Bill 90 Day TR.

This article was written by a veteran financial journalist based on data compiled by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation. Tax laws are subject to change. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. No one can predict the future of the stock market or any investment.

Your Alma Mater Or Your Family?

The new tax law doubles what you can leave loved ones' tax free when you die and that's really bad for your alma mater. Tax breaks for donations to your alma mater may no longer make the grade with you. Here's why:

Estate Tax Exemption Rises. The Tax Cuts And Jobs Act (TCJA) doubles a married couple's estate's tax-exemption to $22 million. Alums now want to maximize their exemptions by leaving $22 million to their children, nieces, nephews and other loved ones before even thinking about a donation to favorite old schools.

Larger Standard Deduction. The TCJA upped the standard deduction from $13,000 to $24,000 for married couples and most Americans no longer will itemize deductions. But that also means you no longer may deduct college donations. Younger alumni will never get into the habit of contributing to their alma mater, disrupting the finance of U.S. educational institutions.

Athletic Deduction Nixed. Before the TCJA, many colleges targeted contributions from alumni who might qualify for good seats at games. The old law allowed donors to deduct 80% of such gifts. Now, the deduction is zero.

Taxing Endowments. Under the new tax code, schools with endowments of $500,000 per student or more and 500 students or more face a 1.4% levy on income. Only a small number of schools are subject to this new tax, but it is a consideration in making college donations.

The Plus Side. The TCJA is not entirely bad for all education-minded donors. Some plusses:

• If you itemize, you may now deduct up to 60% of your adjusted gross income on donations to qualified charities, including your old school. That's up from 50%.
• You can "bunch" donations you pledge to give over several years. The deduction can exceed the write off under the standard deduction.
• You can contribute via a donor-advised fund, which entitles you to a large immediate deduction on annual donations you pledge to make over a period of years. If you suddenly strike it rich, this is a great way to go.

Old Ivy has been around since before the income tax and has managed to flourish, but the new economics of supporting education is disrupting the finances of major educational institutions and the effects are yet to be felt. If you have questions about donating money to a school or your priorities in planning your estate, please contact us.