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Over the Top

US stocks outpaced non-US stocks in the first seven months of 2023, adding another data point to a decade-long stretch of US market dominance. While some investors may see this as further reason to question the benefit of global diversification, it’s important to note how much of this year’s US advantage stemmed from a handful of stocks. The top seven contributors to the US market—Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta—have returned a collective 66.3%, accounting for a sizable
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Focus on the Horizon: Tuning Out the Noise with Valuations and Returns

Valuations of publicly traded companies are a frequent topic of conversation among investors and for good reason. Valuation ratios tell us the price of stocks relative to fundamentals like earnings, sales and book value. In other words, valuation ratios are an excellent way to understand the long-term attractiveness of groups of stocks relative to: one another their historical norms. A large body of academic evidence ties valuation levels and long-term expected returns, and intuitively, that the price we pay for
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Sale to an Intentionally Defective Grantor Trust (IDGT)

Key Takeaways When looking to transfer large amounts of assets to future generations, selling assets to an intentionally defective grantor trust (IDGT) may create greater tax savings than other gifting strategies. With an IDGT, the grantor is considered the owner for income tax purposes and pays taxes on the income produced by the trust, but the trust assets are not considered owned by the grantor for estate tax purposes. Selling highly appreciating or income-producing assets to an IDGT effectively “freezes”
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Beware of Sample Periods

Anyone who’s ever bought a used car knows the importance of avoiding a cherry-picked depiction of history. Low mileage and regular oil changes don’t matter much if the seller fails to mention the car was once submerged in floodwater. Many investors have been drawn to the shiny-object stocks of the S&P 500 index on account of their recent performance—since 2010, the large cap S&P has outperformed US small cap value stocks(1) by an annualized 1.7 percentage points(2). However, this impressive
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Stock Gains Can Add Up after Big Declines

Sudden market downturns can be unsettling. But historically, US equity returns following sharp declines have, on average, been positive. A broad market index tracking data since 1926 in the US shows that stocks have tended to deliver positive returns over one-year, three-year, and five-year periods following steep declines. Cumulative returns show this trend to striking effect, as seen in Exhibit 1. On average, just one year after a market decline of 10%, stocks rebounded 12.5%, and a year after 20%
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Do Downturns Lead to Down Years?

Stock market declines over a few days or months may lead investors to anticipate a down year. But the US stock market has had positive annual returns in many years despite some notable dips. Intrayear declines for the index ranged from 3% to 49%. Many years with large intrayear declines saw positive annual returns. In 17 of the last 20 years, US stocks ended up with gains for the year. Tumbles may be scary, but they shouldn’t be surprising. And
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Why Has it Been So Hard to Slow Inflation?

Following the most aggressive interest rate increases in the last 40 years, the Fed decided to leave rates unchanged in June, framing the decision as a pause. Although history shows that changes in the Fed’s policy typically take six to 18 months to work through the economy, the Fed’s rate hikes have created a dichotomy between different sectors. Spending on services, which constitute about 78% of GDP, continues to be strong and expansionary even as economic growth has slowed.* As
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The FOMO Worth Your Attention

Fear of missing out. It’s the acronym for a behavioral phenomenon where people worry they’re missing out on something important they believe may help improve their lives —information, the novel features offered by the latest smartphone or the desire to be part of an exciting shared experience like a pop star’s three-hour concert. We’ve also heard much about FOMO in the investment world over the past few years. Many will recall the so-called meme stocks or cryptocurrencies, but we can
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The Big Challenge for Commercial Real Estate

Given the uncertainties in both stock and bond markets this year and the increasing likelihood of a recession by year’s end1, it’s not surprising to see headlines focused on the real estate sector and its lagging performance. Let’s put context around these trends to evaluate the best course of action. What is driving the poor performance in real estate markets? Despite concerns, the overall real estate sector is slightly up for the year so far. That’s because the sector tracks
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The Evolution and Advantages of Directed Irrevocable Trusts with Separate Trustee and Investment Advisor Responsibilities

Irrevocable trusts have become an integral part of estate planning, providing individuals with a reliable means of managing, protecting, and distributing assets. These trusts and the laws that govern them have undergone significant evolution over the years, transforming the landscape of estate planning and asset management. One notable innovation is the emergence of directed irrevocable trusts with separate trustee and investment advisor responsibilities. Unlike traditional irrevocable trusts where the trustee and investment advisor are the same entity, this new approach
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