Market-Moving News[i]

Rising market

The S&P 500 and the NASDAQ recorded their seventh positive week out of the past eight, with both indexes pushing their record levels higher. The NASDAQ posted a 3.3% total return while the S&P 500 added 1.6%; the Dow was an outlier with a 0.5% decline.

Inflation easing

A monthly inflation reading only slightly beat expectations, but it was enough to help fuel stock market gains on Wednesday and lift prospects for a possible interest-rate cut in coming months. The Consumer Price Index recorded no change in May relative to the previous month; on a 12-month basis, May’s inflation figure was 3.3%, better than economists’ forecasts for 3.4%.

Growth’s dominance

Fueled in part by technology stock gains and enthusiasm over artificial intelligence, a U.S. large-cap growth index again outperformed its value counterpart by a wide margin, extending the growth style’s year-to-date leadership. Over the past four weeks, the growth index has gained around 6.0% versus a 3.3% decline for the value benchmark. 

Bonds’ bumpy ride

Another week of shifting interest-rate expectations produced relatively big moves in the bond market. The yield of the 10-year U.S. Treasury bond fell to 4.21% on Friday, down from 4.43% at the end of the previous week and well below a recent high of 4.62% on May 29. Yields of 30-year and 2-year notes posted similar weekly declines.

European decline

An index that tracks large-cap European stocks dropped 2.4% for the week and European government bond yields fell in the wake of European Parliament election results that created new challenges for mainstream political parties. French and Italian stocks were among those that sustained the biggest declines. 

Fed stays the course

For its seventh meeting in a row, the U.S. Federal Reserve on Wednesday kept its benchmark interest rate unchanged. While Chair Jerome Powell said a monthly inflation report released earlier in the day was better than expected, the latest Fed projections suggest the possibility of just one interest-rate cut this year, down from the three cuts that the Fed had projected as recently as March. 

Sentiment sours

Inflation’s persistence appears to be weighing on U.S. consumers, as a measure of consumer sentiment fell to the lowest level in seven months. Friday’s preliminary reading from the University of Michigan’s sentiment survey fell to 65.6 from 69.1 in May. Survey participants’ inflation expectations rose slightly. 

Brighter global outlook

The World Bank lifted its full-year 2024 outlook for global economic growth, owing in part to recent improvement in the U.S. outlook. The bank now expects global GDP to post a 2.6% annual growth rate, up from a January forecast of 2.4%. U.S. growth is forecast at 2.5%—nearly a full percentage point higher than the bank had predicted five months ago. 

The Week Ahead:  June 17-21

• Monday
  • No major reports scheduled

• Tuesday
  • Retail sales, U.S. Census Bureau
  • Industrial production and capacity utilization, U.S. Federal Reserve
  • Business inventories, U.S. Census Bureau

• Wednesday
  • Juneteenth holiday, U.S. financial markets closed
  • Housing Market Index, National Association of Home Builders

• Thursday
  • Housing starts, U.S. Census Bureau
  • Weekly unemployment claims,, U.S. Department of Labor

• Friday
  • The Conference Board Leading Economic Index for the U.S.
  • Existing home sales, National Association of Realtors

Philosophy Quote of the Week[ii] 

You can do it

 “Fortune doesn’t have the long reach we suppose, she can only lay siege to those who hold her tight.  So, let’s step back from her as much as possible.”

 Seneca, Moral Letters, 82.5b-6

Tax Tips[iii]

Estate taxes, planning and inheriting property

With tax season behind you, now is the perfect time to consider your estate plan.

• No estate plan? Establish one as soon as possible!  If you die without an estate plan, the state where you reside determines allocation of inheritance.  Wills and trusts set the rule of who will inherit what and who will take care of whom in the event of a death or disaster.
• Do not ignore estate planning just because your estate is under the estate tax threshold.
• Create a will and/or a trust. There is not a one size fits all answer to which is best for each person or family.  These documents can specify heirs, allocation of assets, and denote representatives or guardians of you and/or your minor children.
• Considerations of a will and trust include privacy, timing of inheritances, costs, maintaining family harmony, financial position for minors, protecting stepfamily members, asset protection, and probate avoidance.
• Medical power-of-attorney and living wills provide for your wishes to be carried out if you cannot communicate them at the time.
• Legal and financial power-of-attorney grants permission to someone to carry out your desires if you cannot communicate with them at the time.
• Update your beneficiary designations on insurance and retirement accounts, which ensures heir receive moneys quickly.

Trust Considerations

• Some trusts state that upon the death of either spouse, your assets are to be placed into two separate trusts. This is typical of most A/B Trusts, Living Trusts, Revocable Trusts, and Family Trusts.  This means that when one spouse passes there is an A Trust and a B Trust established.  The A Trust is the Survivor’s Trust and the B Trust is the Decedent’s Trust.  Frequently people believe if they have a small estate and if there are children or grandchildren involved, they do not have to worry about creating two separate trusts upon the death of their spouse; even though the trust documents state this should be done.  Ensure that two trusts are created if your trust language tells you to do so – especially for second marriages and blended families.
• There is a federal estate tax exemption in place, which is $13.61 million in 2024. When someone dies, they can shift their unused estate exemption to their spouse.  That spouse will have the ability to shelter over $27.22 million in 2024 from federal estate taxes.  Prepare an estate tax return when a spouse passes, regardless of the size of their estate.  Wealthy clients understand the need for preparing these returns while the “average” family does not feel that since they do not have a large estate, they do not need to file the return.  This omission can impact tax issues with a subsequent marriage, if that results in marrying into a larger estate.
• Ensure your trust review is less than five years old. If you do not have a trust in place, create one!!  This is especially important if you are married, own a home or have children.  A trust is a great way to keep the transfer of assets private, to prevent family feuds, and to quickly transfer assets at no or low cost.  The cost of preparing a trust may also be a tax deduction.

Property and Assets

• Some parents think they are doing their children a favor later in life when they list their children as joint owners on their property, checking accounts, savings accounts, automobiles, and houses. This can cause significant problems.
• If a gift is made prior to the death of a parent, the basis of the inheritance is what the parent paid for it. For example, if a parent paid $100,000 for a home and the child was put on the deed with the parent, when the parent passes the child’s basis for the home is $100,000.  If the child sells the house, anything they receive over $100,000 is taxable gain.
• An alternative to a gift is to give the child a Power of Attorney that allows them authority to manage the property in the event of incapacity.
• Then prepare a will or trust and designate who will inherit the assets upon the parent’s death. The children receive the property at a stepped-up basis (fair market value or what it can sell for); which means little or not tax is paid when the child sells the property.
• If you put children’s names on property and they go through a divorce or lawsuit, it is possible that your property could also be lost or disposed of because the courts will assume the property is owned jointly by the parent and the child. Adverse judgments can hurt the parent legally and financially.

Health Tip of the Week[iv]

6 tips to keep your brain healthy, by Kelsey Kidd

Changes to your body and brain are normal as you age. However, there are some things you can do to help slow any decline in memory and lower your risk of developing Alzheimer's disease or other dementias.

Here are six things I recommend to my patients in order of importance:

1. Exercise regularly.

Exercise has many known benefits, and regular physical activity also benefits the brain. Multiple research studies show that physical active people are less likely to experience a decline in their mental function and have a lower risk of developing Alzheimer's disease.  These benefits result from increased blood flow to your brain during exercise. It also tends to counter some of the natural reduction in brain connections that occur during aging, reversing some of the problems.  Aim to exercise several times per week for 30 to 60 minutes. You can walk, swim, play tennis or do any other moderate aerobic activity that increases your heart rate.

2. Get plenty of sleep.

Sleep plays an important role in your brain health. Some theories state that sleep helps clear abnormal proteins in your brain and consolidates memories, which boosts your overall memory and brain health.  Aim for seven to eight consecutive hours of sleep per night, not fragmented sleep of two- or three-hour increments. Consecutive sleep gives your brain the time to consolidate and store your memories effectively. Sleep apnea harms your brain's health and could be why you may struggle to get consecutive hours of sleep. Talk with your health care team if you or a loved one suspects you have sleep apnea.

3. Eat a Mediterranean diet.

Your diet plays a large role in your brain health. Consider following a Mediterranean diet, which emphasizes plant-based foods, whole grains, fish and healthy fats, such as olive oil. It incorporates less red meat and salt than a typical American diet.  Studies show people who closely follow a Mediterranean diet are less likely to have Alzheimer's disease than people who don't follow the diet. Further research is needed to determine which parts of the diet help brain function the most. However, we know that omega fatty acids found in extra-virgin olive oil and other healthy fats are vital for your cells to function correctly, appear to decrease your risk of coronary artery disease, increase mental focus and slow cognitive decline in older adults.

4. Stay mentally active.

Your brain is similar to a muscle — you need to use it or lose it. There are many things that you can do to keep your brain in shape, such as doing crossword puzzles or Sudoku, reading, playing cards or putting together a jigsaw puzzle. Consider it cross-training your brain. Incorporate different types of activities to increase the effectiveness.  Most health care teams don't recommend the paid brain-training programs available. These programs often overpromise results or focus on memorization skills that aren't useful in everyday life. Your brain can get just as good of a workout through reading or challenging yourself with puzzles. Finally, don't watch too much TV, as that is a passive activity and does little to stimulate your brain.

5. Remain socially involved.

Social interaction helps ward off depression and stress, which can contribute to memory loss. Look for opportunities to connect with loved ones, friends and others, especially if you live alone. Research links solitary confinement to brain atrophy, so remaining socially active may have the opposite effect and strengthen the health of your brain.

6. Keep your blood vessels healthy.

The health of your arteries and veins is important to your heart health but it is also critical for brain health. Get your blood pressure, blood sugar and cholesterol checked regularly and take steps to keep your numbers within a normal range.  Increase your physical activity, eat a Mediterranean diet and decrease your sodium consumption to lower blood pressure and cholesterol values. Finally, tobacco and alcohol use are impactful on brain health as well, so only drink alcohol in moderation and don't smoke. Moderate drinking is defined as up to one drink per day for women and up to two drinks per day for men.

Kelsey Kidd is a nurse practitioner in Neurology in Mankato, Minnesota.

[i]https://www.jhinvestments.com/weekly-market-recap#investment-returns, accessed 06.17.2024.

[ii] Holiday, Ryan.  The Daily Stoic:  366 Meditations on Wisdom, Perseverance, and the Art of Living.  Kindle edition, page 183.  Accessed 06.17.2024.

[iii] Hockensmith, Robert F.  52 Ways to Outsmart the IRS, Weekly Tax Tips to Save You Money.  Kindle edition, pages 105-110, accessed 06.17.2024.

[iv]https://www.mayoclinichealthsystem.org/hometown-health/speaking-of-health/5-tips-to-keep-your-brain-healthy.  Accessed 06.17.2024.