Tax-Loss Harvesting

Tax-Loss Harvesting

Don’t miss the opportunity to save on your taxes

This time of the year, many people start thinking about year end tax planning. An often-integral part of tax planning involves the potential for tax-loss harvesting in your taxable portfolio. What we are going to discuss below can only be done in taxable accounts (i.e. individual, joint, UTMA’s, Trusts) and does not apply to IRA or other tax deferred accounts.
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Third Quarter 2018 Review

Third Quarter 2018 Review

Market Overview

We continue to see back and forth trade posturing between the United States and foreign trading partners and expect this to continue throughout the remainder of 2018. With that being said, the U.S. and Canada reached a deal after a lengthy negotiation. The new “United States-Mexico-Canada Agreement” (USMCA) is a reworking of NAFTA and hopes to bring more jobs into the U.S. Despite this trade uncertainty in quarter 3, the American economy advanced. In the 3rd quarter of 2018, U.S. stocks once again performed well seeing momentum from U.S. growth and strong earnings reports. The trade concerns and other political uncertainty has continued to put pressure on international markets. Emerging market stocks slid slightly while Europe continues to struggle as the United Kingdom’s negotiations to “Brexit” from the European Union leads to continued uncertainty for the region. Fixed income markets remain a challenging place to invest as interest rates continue to rise.

Equity Markets

Large U.S. companies continued their outperformance as the S&P 500 returned 7.2% for the 3rd quarter. The Dow Jones Industrial Average rose by 9%. Despite these returns, volatility declined resulting in a quarter where the S&P 500 did not have a single trading day where it closed with a 1% move up or down. Small cap stocks trailed larger companies but still posted a 3.2% return for the quarter. International stocks in developed markets declined (0.8%) for the quarter, lagging the United States. As discussed above, emerging markets also retreated with a negative (2%) return for the quarter. Foreign trade will likely remain a focus of the Trump administration into 2019 with further volatility in international markets also likely to continue.

Bond and Credit Markets

On September 26th, for the third time this year, policy makers voted to unanimously raise the federal funds rate 25 basis points to a range of 2.00% to 2.25%. It is expected that the Fed will look to raise rates once more before the end of 2018. While the President negatively reacts to these rate hikes, they are still considered historically low and a sign of a strong economy. Fed Chairman Jerome Powell stated that “this gradual return to normal is helping to sustain this strong economy for the longer run benefit of all Americans.” Most researchers believe that even with continued rate hikes, they are not expected to slow down a resilient economy. From an investment standpoint, these rate hikes pose challenges to bondholders as bond prices decline when interest rates rise. The broad based U.S. Aggregate Bond Index declined slightly by (0.2%). For the year the index is off by (1.6%). Municipal bonds rose 0.3% for the quarter. The yield curve remains very flat with a 38 basis point spread between the 2-year and 30-year U.S. Treasury bond.


Commodities declined for the quarter posting the longest losing streak in more than 3 years. The Bloomberg Commodity Index fell (2.5%) amid concerns over the Chinese demand outlook and continued trade friction. Gold posted its 6th straight decline in September while oil and natural gas prices continue to climb. The U.S. Dollar is a significant factor when it comes to commodity prices. The Dollar Index moved higher by 0.41% for the quarter and is now higher by 3.17% for the year.

Perspective For the Rest of the Year

The overwhelming media story for the 4th quarter is likely to be centered on the mid-term elections occurring in November. Democrats are forecast to make gains in the House while Republicans may fare better in Senate races. If Democrats are able to take control of Congress they could look to block President Trump’s policies essentially making him a lame duck president for the remainder of his term. Continued trade tension and this political uncertainty could cause the abnormally low volatility from the 3rd quarter to subside and investors should expect market fluctuation to normalize.

Year-End Tax Planning

At CRA Financial, we look to help our client’s create tax efficiencies where possible. This is done by looking at which mutual funds will be paying out capital gains distributions at the end of the year and also harvesting losses in non-qualified portfolios where appropriate. As always, we are here to help you with any questions. We look forward to continuing to service you and thank you for your trust in our team.

Respectfully submitted,
CRA Financial, L.L.C.

Contract with the Stock Market

Expertly Riding the Waves of VolatilityStock market prices

We have prepared this piece to reiterate what we should all know, understand, and believe if we are going to own stocks in our portfolios.  We look forward to continuing to educate you to help you stay well-informed and continue to watch our financial markets closely.

Why do we invest in stocks?

Quite simply, the reason we invest in stocks is because over the last 100 years they have illustrated again and again that if you invest for the long-term that you will, on average, receive about a 10% annual average return.  This 10% return is about 40-50% higher than the return from bonds and about 50-60% higher than the returns from cash over that same 100 year period.  Arguably, the excess returns over bonds and cash will be higher in the low interest rate environment we have become accustomed to for some time now. 
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New Rules for 529 Plans

Education Savings PlanEasing the burden of paying for education

The Tax Cuts and Jobs Act of 2017 will expand the use of 529 Plans to allow savers to accumulate money and pay for education on a tax-free basis. Before we discuss the changes let’s review the basics. A 529 Savings Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs.  You are not required to use the 529 in your domicile state and your plan, regardless of which state is the sponsor, can be used for any college in any state.  Contributions to a 529 Plan are invested and grow tax deferred.  If the funds are ultimately used for education, distributions come out federally tax-free. Contributions to the plan qualify for the $15,000 annual gift tax exclusion.  The Plan has to have a named donor and a designated beneficiary. The donor of a Plan retains control indefinitely and only the donor can request withdrawals and can close the account at any time.  However, if the funds are used for anything other than education, the earnings portion of the account is subject to income tax plus a 10% penalty.  Most plans allow for lifetime contributions of $300,000 or more.
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