What You Need to Know!

The world has changed in rapid fashion from canceling worldwide sporting events to limiting our travel and gatherings with large scale crowds.  This has caused an obvious disruption in the financial markets and probably will lead to some magnitude of economic downturn or even minor recession.  We say minor because in a large way this will be a self-induced slowdown in order to combat the spreading effects of the virus.  Once the containment sets in, economic activity will start to rebound and we will have more monetary stimulus at our backs to aid in the recovery.  In our earlier letter we projected that governments would step up their efforts to inject confidence either by monetary or fiscal action.  This is exactly what has happened in the United States.  The Federal Reserve added enormous stimulus to the short-term REPO market to ensure credit markets do not freeze up.  Next week the Federal...

It was just two weeks ago the markets were looking at all time highs and consensus was building about an economic recovery continuing based on higher earnings forecasts.  We don’t often experience black swan events but the coronavirus outbreak, by definition, could be possibly considered the black swan event of 2020.  It is early in the outbreak, but markets are seemingly reacting as if some level of economic downturn or recession is on the horizon.  We won’t know for sure what the toll will be on the economy or financial markets until later this year.  We can draw from several historical virus pandemics to get an idea of what happened to economic activity, but every situation and recovery is different.  Here are our quick thoughts on what has transpired so far and what our team at Coral Gables Trust is doing about it.   Government Action   It didn’t take long...

While the holidays were unfolding, Congress was busy signing into law the SECURE Act (Setting Every Community Up for Retirement Enhancement) which has made several important changes concerning defined contribution and defined benefit plans, IRAs and 529 plans.  Most provisions in the law became effective on January 1st, 2020.  Below are some general topics and answers on the main highlights of the new law:   Inherited IRAs Any inherited IRAs that were received prior to 1/1/2020, no changes are required to the current distribution schedules in place.  Going forward, however, fewer beneficiaries will be able to extend distributions over their lifetime (a.k.a “the Stretch IRA”).  In most situations there will now be a requirement that all assets must be withdrawn from the inherited IRA within 10 years.  Some of the exceptions to this rule include surviving spouses, minor child, a disabled or chronically ill individual and beneficiaries who are no more...

What a difference 60 days makes.  It wasn’t that long ago when the tariff fight was in full force dominating the daily headlines resulting in directionless markets.  With really no hope for a deal, recession fears were starting to build based on a slowing global growth picture.  Investors were pouring into bonds like they were going out of style and the low volatility/defensive portions of the equity markets were investors preferred hiding place. Granted, things are still not resolved, but there is a little more clarity today than yesterday causing a change in sentiment.  We are a few weeks away from seeing a “phase 1” completion of the trade deal which has been all the news the market needed in order to reignite animal spirits early in the fourth quarter.   As we write, the S&P 500 has hit a new intraday high. On top of the tariff fight de-escalation, the Federal...

Q3 2019 - Will FED Cuts be Enough to Fight the Global Cold?    Commentary by the Trust Investment Committee    Despite the yield curve frenzy, escalating trade tensions and Washington rhetoric the third quarter came and went without much to be disappointed about. The major U.S. indices remain resilient and are only a couple percent from record highs set in July. The S&P 500 returned +1.68% for the quarter and is higher by +20.55% YTD, however, we have to be mindful that the S&P 500 is essentially flat year over year when factoring in the fourth quarter of 2018. The technology heavy NASDAQ enjoyed a quarterly gain of +0.17% and is higher by +21.46% YTD. On the economic front, employment data released for the quarter was good enough to keep the unemployment rate below 4% and wage growth at reasonable levels, however, the job market is showing early signs of...

Market Insight by Mason Williams   The Federal Reserve cuts interest rates again by 0.25%   The Federal Reserve finds itself in a no-win situation.  Criticism is running heavy in both directions. The market bulls and Trump administration want faster rate cuts to get ahead of a slowing global economy while a large wave of market participants wonder why we are cutting rates at all given the positive economic backdrop.  In either case, Federal Reserve Chairman Jerome Powell continues to march forward with a “data dependent” outlook on policy.  The Federal Reserve cut its target rate last week, as expected, by 0.25% to a range of 1.75% to 2.00%.  This was the second rate cut of 2019.     Future rate cuts are uncertain at best.  At this point in the cycle, should the Federal Reserve be cutting rates? Certainly, some of the Federal Reserve Committee members don’t believe so.  It...

Last summer, Fidelity Investments became the first financial company to offer no-fee index mutual funds, and quickly attracted about $1 billion into two portfolios. This has several implications for wealth management companies, and for investors.   The funds the company is offering — one each focusing on U.S. and international stocks — are passive funds; they are built to mirror a market index. Active strategies, on the other hand, comprise stocks chosen by an advisor and their team of analysts.   Passive funds are a lot cheaper than active funds, and over the past five years, they’ve had a stronger growth rate, partially because the fees are lower. They are the go-to product for millennials who have just begun investing. The thinking goes: ‘When the market is as strong as it is, why would I pay someone more to choose stocks for me?’ This product is starting to creep into the...

Advice on amassing sufficient assets and investing them well to build a healthy retirement is easy to find. Books, online resources, lectures, magazine articles, a talk with your financial advisor — even blogs like this — can be invaluable tools for the investor just starting out and those who want to proactively manage their financial futures.   But what about that day, six months after your 70th birthday, when you’re facing the prospect of taking annual required minimum distributions from your IRA or 401(k)? The Internal Revenue Service demands that you withdraw a percentage of your tax-sheltered funds — the amount will vary depending on myriad factors including the type of plan you have, your life expectancy, and the age of your spouse, and other considerations — and pay taxes on those withdrawals.   Guidance at that juncture is somewhat harder to find, but here are some factors we at Coral...

A constant dilemma in the world of wealth management is whether it’s wise to stick with the security of U.S. stocks or venture into the international marketplace in search of potential opportunities. This seems especially relevant now, when tough talk on tariffs threatens to roil the seas of international trade and usher in unintended consequences. We at Coral Gables Trust Company have always preached that diversifying one’s portfolio — both geographically, between companies, and across investment vehicles — is the wisest move and the surest path to achieving your goals. But when, how much, and where to diversify? The following are some things to consider. The international space has been hard over the past three or four years. We in the U.S. got our act together quickly after the 2008 financial crisis. We jumped into recovery mode right away, whereas the international markets were not as swift to respond. There is...

This week we've invited Mason Williams, our Chief Investment Officer, at Coral Gables Trust Company to give us a quick insight and share his predictions on the latest local and national job report numbers for South Florida. Yes! Florida continues to be a robust State for jobs. I was recently asked at a conference would South Florida continue to show job growth in Q4 of 2018 and into 2019? Yes! I responded. Because of its strong and steady annual job growth rate of 2.4% compared to the national rate of 1.9% over the past year, and because of the state unemployment rate of 3.8% matching the national average of 3.8%. Yes! Florida is and will continue to be job strong.  When we look at the South Florida/Miami-Dade metro area key indicators, the unemployment rate of 3.9% is also in-line with the state and national average.  And further north, the Broward metro region...