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May 2024 Newsletter

Back-Again!


Aaaand we’re back. We took a few months off, but we are pleased to present you with the latest edition of the Dyer & Co. Newsletter. In this issue we're tackling a variety of topics relevant to your financial well-being. We explore tax planning strategies to consider with the potential changes to the gift and estate tax exemption. We delve into the world of bonds, explaining why interest rates matter and how they can impact your portfolio. We also have a "second opinions" section to empower you when evaluating your financial advisor. And we introduce our summer intern, Eli, who brings a unique perspective and a passion for service.

Wealth Transfer Considerations


The Tax Cuts and Jobs Act (TCJA) set the gift and estate tax exemption amount at $11 million in 2018. Without action from Congress, that amount will revert to the 2017 limit of $5 million adjusted for inflation on January 1, 2026.


If this happens, we will be sure to talk about it. At that time you may wish to check in with your estate planning attorney to see how your planning documents are affected. 


In the meantime, these strategies remain wise moves for making intergenerational wealth transfers:


In 2024 you can give someone up to $18,000 without eating up the lifetime exemption amount. So a married couple could give each of their children $36,000 tax-free. The same goes for grandchildren or anyone else for that matter. With gifts to three kids and seven grandchildren, for example, you could reduce your taxable estate by $360,000 this year.


Tuition payments present another opportunity to help children and grandchildren while reducing your taxable estate. The key here is that tuition payments must be made directly to the institution.

Interest Rates and Bond Prices: Beauty is in the Eye of the Bondholder


There is an inverse relationship between interest rates and bond prices. If you owned an ABC Corp. bond at the beginning of 2022, it’s likely you were fine with the fact that it only paid 2%. That was what was available at the time. But as you may recall the Federal Reserve raised rates dramatically that year in an effort to curb inflation. 


By the end of 2022, you could find corporate bonds paying over 5%. What happens to the value of your ABC Corp. bond that only pays 2%? Yep. It goes down because you and everyone else wants the 5% bonds now (five being more than two). And the longer you have to wait until the bond matures, the more sensitive it is to rate changes. You’re less upset about the lower rate if it matures next week. But it’s a different story if it matures in 20 years. The value of a short-term bond wavers. A long-term bond gets whacked.


This is why the classic 60/40 portfolio (60% stocks, 40% bonds) performed so poorly in 2022. Stock prices fell at the same time interest rates shot up. Stocks and bonds had a bad year.


Nowadays you hear talking heads trying to predict the Fed’s next move. The challenge is to cool inflation and cool the economy with higher rates without driving the economy into a recession. Conventional wisdom is that we are close to the end of rate hikes. There are hopes that interest rate cuts aren’t far off. A rate cut will have the inverse effect on bond investors. 


Let’s say you now own XYZ Inc. 5% bonds. A hypothetical drop in interest rates means that only 4% bonds are available in the marketplace now. The value of the XYZ Inc. 5% bond goes up. And the longer the maturity, the greater the price increase.


That’s why–when it comes to interest rates–beauty is in the eye of the bondholder.

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Ask Me Anything:



Second opinions are part of our service model. Sometimes our clients just want to know how to evaluate their new or existing advisor. Here is a list of questions that you can ask: 


1. How long have you been an advisor?


2. Why did you choose this career?


3. What licenses and professional designations do you hold? Are you planning to add any new ones? How do you stay up to date on your industry?


4. Do you have an area of focus?


5. Are you a fiduciary to your clients? How do you disclose conflicts of interest?


6. How are you compensated?


7. Are you compensated differently on different products you might recommend?


8. How do you design portfolios?


9. May I see a sample of an Investment Policy Statement you use with clients?


10. How many clients do you have?


11. How often can I expect to hear from you/meet with you?


12. What would I find if I looked you up at https://brokercheck.finra.org/ ?


What do you think of this list? Anything you would add? Anything you’d like to ask us?

Introducing The Dyer & Co. Summer Intern:


This summer I (Gray) wanted a thought partner who could help me explore ways to create a more uniform marketing and client experience here at Dyer & Company. I found all that and more when Eli responded to my posting at the Davidson College Center for Career Development.

Eli is currently studying economics and data science at Davidson College. Originally from Pittsburgh, Pennsylvania, he has lived in places like Tampa, Florida, Washington D.C., and Vienna, Virginia, due to his father’s 20-year career in the Marine Corps. Growing up in a military family has instilled in him a deep passion for serving and a strong desire to give back and help others. Although he knew early on that he didn’t want to pursue a military career, he has carried the values of discipline, dedication, and service into his academic and personal life. 


Combining his interest in finance with his passion for service, Eli is excited to join the team and contribute wherever possible. He is eager to expand his knowledge and skills as he enters the industry, and I am excited to have him on board. Outside academics, Eli is an avid soccer player and runner, demonstrating his commitment to staying active and healthy. He is also a creative, self-taught photographer who takes photos for Davidson athletics sports teams. 


Please join me in welcoming Eli to the team! In fact, let us know if you would be interested in having a short conversation with Eli this summer to discuss your experiences with personal finance, financial planning, investing, and working with financial advisors.

By the Numbers:


  • S&P 500 is up 11.39% year-to-date, reaching an all-time high of 5,325.49 this month.
  • Dow Jones Industrial Average: Closed above 40,000 for the first time last week.
  • As we went to print, the NASDAQ had reached an all-time high of 16,998.38 on the heels of eye-popping, AI-driven earnings from chip maker Nvidia (NVDA).
  • Federal Reserve: The Fed minutes hinted at a possible slower pace of interest rate hikes, with some estimates suggesting a quarter-point increase in the coming months, instead of the previous half-point hikes, due to concerns about slowing economic growth.
  • Job Market: Job growth continued in the US, though at a slightly slower pace compared to earlier months. The latest report showed 220,000 new jobs added in April, down from an average of 500,000 in the previous six months (Source: Bureau of Labor Statistics). This could indicate a cooling labor market, but the unemployment rate remains low at 3.8% (Source: Bureau of Labor Statistics), highlighting a relatively healthy job environment overall.
  • Retail Sales: Retail sales figures came in mixed. E-commerce sales remained strong, reflecting continued consumer comfort with online shopping. However, in-store sales showed some weakness, potentially due to inflation and higher interest rates impacting spending habits on discretionary items (Source: Census Bureau).
  • Inflation: Inflation data remained elevated, though there might be signs of a peak with some price measures, like used car prices, showing a slight moderation. The latest Consumer Price Index (CPI) came in at 8.2% year-over-year in April (Source: Bureau of Labor Statistics). This is a key metric for the Fed, and its future decisions on interest rates will depend on the trajectory of inflation.
  • Housing Market: Mortgage rates continued to climb, with the average 30-year fixed-rate mortgage exceeding 5.5% for the first time since 2011 (Source: Freddie Mac). This could significantly impact housing affordability and market activity. With record highs already achieved in stock markets, a slowdown in housing could be a signal of a broader economic shift.
  • Global Economy: The IMF revised its global growth forecast slightly upwards to 3.6% for 2024, citing China's reopening after COVID lockdowns and some economic resilience in developed economies (Source: International Monetary Fund). This is positive news, but ongoing geopolitical tensions, particularly the war in Ukraine, and global supply chain disruptions remain risks to the global economic outlook.
  • The Takeaway: A good financial plan considers your unique circumstances and long term goals in such a way that you don’t have to read this section unless you want to.

We wish you a safe and happy Memorial Day weekend as we give thanks to those who sacrificed their lives for our country. Remember, a sound financial plan is built on your unique goals and circumstances. If you have any questions or would like to discuss your financial situation, please don't hesitate to contact us. Also, be sure to let us know if you'd be interested in a conversation about personal finance with our summer intern, Eli.

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Thank you for reading. If you liked this content, please share with a friend. You can always reach us by replying to this email or at 704-323-6872.

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