Meydenbauer Blog
What Might Happen to Market Performance When The Federal Reserve Cuts Interest Rates?
By Sean McGowan – Managing Director
When the Federal Reserve (Fed) decides to cut interest rates, it often signals a significant shift in economic policy aimed at stimulating growth or responding to economic downturns. Understanding how these rate cuts may affect market performance is crucial for investors.
This blog post will explore the potential impact of Fed rate cuts on various aspects of the market, including stocks, bonds, and commodities.
1. Understanding the Role of Interest Rates
Interest rates are a powerful tool in the Fed's monetary policy arsenal. By adjusting the federal funds rate—the interest rate at which banks lend to each other overnight—the Fed influences overall economic activity. Lowering interest rates makes borrowing cheaper for businesses and consumers, encouraging spending and investment. Conversely, raising rates typically slows down borrowing and spending to combat inflation. This is considered an expansionary fiscal policy.
2. Historical Market Performance During Rate Cuts
Historically, market performance during periods of falling interest rates have has been mixed, depending largely on the underlying reasons for the rate cut. When the Fed cuts rates to preemptively support economic growth (a "mid-cycle adjustment"), markets often respond positively, at least in the short term.
Stock Market: In many cases, stocks rally following a rate cut, as lower borrowing costs improve corporate profits and consumer spending. However, if the falling interest rates are seen as a reaction to a deteriorating economic outlook, the initial rally may be short-lived, followed by increased volatility or a downturn.
Bonds: Lower interest rates generally lead to higher bond prices. When the Fed cuts rates, existing bonds with higher rates become more attractive, driving up their prices. The yields on new bonds issued will decrease proportionally with the new lower rates.
Commodities: The impact on commodities like gold, oil, and agricultural products can vary. Gold, for instance, often benefits from lower rates because it is seen as a hedge against currency devaluation. On the other hand, commodities dependent on economic activity, like oil, may suffer if rate cuts signal a slowing economy.
3. Short-Term vs. Long-Term Effects
Short-Term Impact: Right after a rate cut, equity markets often react positively due to increased liquidity and lower borrowing costs. Investors may also anticipate that lower rates will boost economic growth, corporate earnings, and, subsequently, stock prices. However, if the cut is perceived as a response to significant economic weakness, initial enthusiasm can quickly give way to concerns about the underlying health of the economy.
Long-Term Impact: Longer term, the impact of rate cuts depends on how effectively they stimulate economic activity. If rate cuts successfully spur borrowing, investment, and consumer spending, they can lead to sustained economic growth and a prolonged market rally. However, if rate cuts fail to revive the economy, or if they lead to inflationary pressures, the market may eventually decline.
In conclusion, Fed rate cuts are a powerful tool that can significantly impact market performance across various asset classes. While they often lead to short-term rallies, particularly in stocks and bonds, the long-term effects depend on a variety of factors.
By understanding the dynamics of how falling interest rates affect the market, investors can better position themselves to navigate the uncertainties and opportunities that arise during these periods of economic adjustment.
Wells Fargo did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author and are not necessarily those of Wells Fargo Advisors / Wells Fargo Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.
The Dangers of Financial FOMO
By: Alyssa Rustik, Financial Advisor
In the ever-evolving landscape of finance, one concept seems to consistently rear its head: FOMO, or the “fear of missing out”. While this phenomenon is often associated with social media and lifestyle trends, its presence in the realm of finance can have significant consequence for individuals and investors alike.If you haven’t yet seen the GameStop Documentary streaming on Netflix titled “Eat the Rich”, let me be the first to recommend it to you. This documentary manages to tell the complicated financial story, with a fair amount of humor and context, about the whirlwind rallies of the post-COVID 2021 stock market. From the dogecoin’s 12,000% climb in May of 2021 to the world of “meme stocks” like GameStop, rallies like this created a frenzy that saw investors rushing to get a piece of the profit.
However, despite the risk of buying high and selling low, many people joined these rallies anyway. Why? Because of the psychological phenomenon known as FOMO. At its core, financial FOMO is the anxiety or apprehension that one feels when they believe others are making profitable investments or financial decisions, and they are not. It’s that feeling of urgency to jump on the bandwagon before it’s too late, driven by the fear of being left behind or missing out on potential gains.
However, succumbing to financial FOMO can lead to a myriad of pitfalls and dangers:
1. Impulsive Decision-Making: When driven by FOMO, individuals may rush into investment opportunities without conducting proper research or due diligence. This impulsive behavior can result in poor decision-making and ultimately, financial losses.
2. Chasing Performance: FOMO often leads individuals to chase the latest hot stocks or trends, regardless of the longevity or long-term suitability for their investment goals. This can result in buying at inflated prices and selling as a loss when the bubble eventually bursts.
3. Ignoring Risk: In a quest to avoid missing out on potential gains, individuals may overlook or underestimate the risks associated with certain investments. This can lead to exposure to undue risk and financial instability.
4. Emotional Rollercoaster: Succumbing to financial FOMO can result in heightened emotions such as anxiety, stress, and regret. These emotions can cloud judgement and hinder rational decision-making, further exacerbating the situation.
So, what can be done to mitigate the dangers of financial FOMO?
1. Spend time not money: In the words of Madonna, “we are living in a material world”, where material possessions are often equated with success or happiness. However, this constant desire for more “stuff” feeds our comparison culture and can lead to unsustainable spending habits. Never in history has it been easier for an individual to spend beyond their means. With one tap of a plastic card, you can unlock an instant dopamine hit that comes from buying that shiny new thing. However, that dopamine rush quickly fades, and it can feel like a never-ending cycle of falling short of fulfillment.
One of my favorite quotes comes from Sarah Ban Breathnach, the best-selling author of Simple Abundance, where she writes: “Not having money to spend, doesn’t mean we can’t have well spent moments every day”. While there is nothing wrong with buying material items, expensive clothes, or fun gadgets, shifting your focus to a pursuit of genuine experiences, authentic connections and personal growth can liberate you from the consumerist trap and contribute to longer-lasting fulfillment.
2. Cultivating a healthy financial mindset: When it comes to being “healthy”, students are taught all about physical health, mental health, and emotional health from an early age. It is built into our school curriculums and reiterated at each grade well into adulthood. However, financial health needs to be nurtured and tended to in a similar manner. At the core of achieving financial well-being lies a healthy attitude about money. Engaging in financial education and learning from your mistakes can all contribute to cultivating a resilient financial mindset.
To that end, regularly review your budget and credit card statements. If you do not have a budget, sit down, and make one. If you’re consistently paying out more than you’re earning, it’s time to have an honest talk with yourself about how to reset and get on a healthier financial path.
3. Seek out your Financial Advisor: If you find yourself struggling to manage financial FOMO, consider seeking guidance from one of us. As your advisors, we are here to not only look after your financial assets but also mentor you. When you seek guidance from us, we can provide objective advice and help you stay grounded in your investment approach.
We will be starting a new series on our blog called “Financial Education 101” where we will continue to have our newest financial advisor, Alyssa Rustik, write pieces to educate your children and grandchildren about how they can build a strong foundation, learn how to handle money wisely, and make smarter financial choices.
The Meydenbauer Newsletter Q2 Newsletter 2024
News & Updates from our team …
As we approach the two-year anniversary of the passing of our late partner, Paul Capeloto, we remember him with honor and affection. We often comment to each other how much he would have enjoyed the recognition and growth our team continues to earn and experience. Paul left a deep legacy in our community as well as with each of us individually.
His uncommon focus on building a multi-generational team, slow and steady investing and supporting growth for each member of our group is the strong foundation our team is built on.
His uncommon focus on building a multi-generational team, slow and steady investing and supporting growth for each member of our group is the strong foundation our team is built on.
Paul often shared amusing stories of his early years as an accountant with Moss Adams starting off as an auditor. We’ve thought many times over the past few months that he must heartily approve of our recent addition of a Financial Advisor to our team, Alyssa Rustik.
Alyssa too, got her start with an accounting firm as an auditor. Like Paul, she began a similar career trajectory to his. Alyssa launched her career in public accounting at KPMG in Seattle and then Sydney, Australia. At KPMG, she developed a proficiency in highly regulated external audits as well as conducted financial due diligence for private clients in the technology and media sector.
Alyssa is a graduate of Gonzaga University with a Bachelor of Business Administration and Accounting with a Certificate of Finance. She was recruited her junior year of college by KPMG and has had a robust and diverse range of accounting experience with that company.
Alyssa too, got her start with an accounting firm as an auditor. Like Paul, she began a similar career trajectory to his. Alyssa launched her career in public accounting at KPMG in Seattle and then Sydney, Australia. At KPMG, she developed a proficiency in highly regulated external audits as well as conducted financial due diligence for private clients in the technology and media sector.
Alyssa is a graduate of Gonzaga University with a Bachelor of Business Administration and Accounting with a Certificate of Finance. She was recruited her junior year of college by KPMG and has had a robust and diverse range of accounting experience with that company.
We are pleased at the opportunity to continue to grow the expertise and capability of our team by having an advisor with a strong accounting background (not currently a practicing accountant). Alyssa is excited to join the Meydenbauer Wealth Management Group where she will guide in helping clients shape their financial future.
In her free time, Alyssa is an avid runner, traveler, and dog lover. She now lives in Redmond, Washington where she enjoys spending time with her husband Alex, her goldendoodle, Ziggy, and her large, blended family. Please join us in welcoming Alyssa to The Meydenbauer Group!
Another young associate Paul would be incredibly proud is Emily Christian for completing all of her licensing requirements and education as she now serves as a fully licensed Client Associate. Emily is not one to sit back and has just been nominated to the Wells Fargo Advisors Capstone CA development Program. We are very proud of her and appreciate her further enhancing her knowledge which overall, benefits the Team and our clients.
Paul would be absolutely over the top with the recognition our team has received as one of the best wealth management teams in the state AND our financial advisors, Sean and Tama, recognized as leading financial advisors. We could not be prouder that Tama has again been recognized as one of the 2024 Forbes Best-In-State Women Advisors. It is quite an honor, and we will never forget the ways that Paul sought to honor each of us when we excelled or received recognition. When one of our long-time clients was featured in the Wells Fargo annual report, he had the article framed and gifted to the team. As we’ve received accolades through the past couple of years, we always offer up a toast to Paul for his mentorship and inspiration.
Pictured: Emily Christian, Registered Client Associate, Alyssa Rustik, Financial Advisor, Diane Manterola, Senior Registered Client Associate, ,Nicole Christian, Senior Practice Coordinator, Tama Borriello, Managing Director, Sean McGowan, Managing Director, Kathryn Lamp, Client AssociateAlso mentioned earlier was Paul’s focus on slow and steady investing. That included avoiding complicated and expensive investment ideas and focusing equally on core investing that sought to deliver over time and smart saving and investment planning principals that may be often overlooked. Be sure and check out recent blog entries for highlighted reads highlighting these same themes: https://www.themeydenbauergroup.com/index.htm
As always it is the highest honor we have to serve you and your family. We are looking forward to offering continued excellence and trust in all that we do.
The Meydenbauer Wealth Management Group
2024 Forbes Top Women Wealth Advisors Best-IN-State: Awarded February 2024 Data compiled by SHOOK Research LLC based on the time period from 9/30/22-9/30/23. (Source. Forbes.com) The Forbes Top Women Wealth Advisors Best-in-State rating algorithm is based on the previous year’s industry experience, interviews. Compliance records, assets under management, revenue and other criteria by SHOOK Research, LLC. Investment performance is not a criterion. Self-completed survey was used for rating. This rating is not related to the quality of the investment advise and based solely on the disclosed criteria.
2024 – 2nd Quarter Blog Post
With apologies to Richard Carlson, author of the well-known 1997 novel “Don’t Sweat the Small Stuff”, financial planning and investing is one of those activities where the ‘small stuff’ can make all the difference. While the ‘big stuff’ such as asset allocation and risk management are all important aspects of growing your nest egg, often the ‘small stuff’ gets overlooked.
As we all know, hindsight can be brilliant when applied to past decisions. However, wouldn’t it be nice to get it right the first time? Here are five small but impactful decisions that you can make that do not require any hindsight. In fact, these can help you avoid some of our most observed common financial mistakes.
1. Too many eggs in one basket - Having too much of your wealth in one single asset should be a pre-recorded message for many of us “west coasters”. The first stock I ever bought in my twenties was Microsoft and after we have witnessed the growth of that company, and other tech-oriented companies over the decades the above advice can ring hollow. Yes, there is a lot of potential wealth to be built in company stock and longtime held stock. Yes, there are capital gains taxes to pay if sold. And on the other side of the coin, yes, it is okay to take a win. When you know that you have played the risk game and won, why not lock in some profits, and possibly redeploy into a lower risk investment?
2. There is always a chance of rain -Carry umbrella coverage that really covers your assets. This is so often overlooked, I almost listed it as number one on the list. We’ve had clients discover the hard way due to an auto accident or insurance claim against their business that they were not insured enough personally. Umbrella insurance is one of the least expensive ways to make sure that your hard-earned assets are safe from litigation and settlements.
3. Taking advantage of a personal tax break - Tax planning between your retirement year and ages 70 (social security begins) and 73 (when IRS Required Minimum Distributions – RMD) begin is an overlooked opportunity for potentially taking advantage of a lower income tax rate. This is an opportunity within a limited window of time that can save you money that would otherwise have gone to taxes. Work with your financial advisor and accountant to determine optimal tax brackets and take advantage of this “sweet spot” for both ordinary income distributions from a retirement plan at a lower tax bracket, as well as the 0% - 15% tax bracket on capital gains if applicable.
4. Smart giving – Another way to reduce/eliminate taxes is to use your RMD amount from an IRA as a charitable contribution. The contribution counts towards satisfying your RMD requirement (thus reducing taxes) and potentially reduces the balance of your retirement plan (if using the approach from age 70 and ½) from future RMD’s. If you already make charitable contributions to an approved charity and are over the age of 70 and ½, it can be a smart tax planning technique (depending on your charitable deduction levels, so consult with your CPA). Also, in the “smart giving” section is to be aware of the one-time tax benefit of setting up a Donor Advised Fund (DAF), which then allows you to gift over future years while maximizing the deduction in a higher tax year.
5.Convert an old 529 plan into a Roth for the beneficiary. There is a list of requirements around this, but if you have set up a 529 college savings plan that is more than 15 years old, you may be able to convert a portion to a Roth retirement plan on behalf of the beneficiary. This is a great way to get started saving for retirement. Contact our team with questions on eligibility.
Wells Fargo Advisors does not provide tax or legal advice.
Sweat the Small Stuff
Five observations on smart planning to be aware of
By
Tama Borriello
Managing Director – Investments
With apologies to Richard Carlson, author of the well-known 1997 novel “Don’t Sweat the Small Stuff”, financial planning and investing is one of those activities where the ‘small stuff’ can make all the difference. While the ‘big stuff’ such as asset allocation and risk management are all important aspects of growing your nest egg, often the ‘small stuff’ gets overlooked.
As we all know, hindsight can be brilliant when applied to past decisions. However, wouldn’t it be nice to get it right the first time? Here are five small but impactful decisions that you can make that do not require any hindsight. In fact, these can help you avoid some of our most observed common financial mistakes.
1. Too many eggs in one basket - Having too much of your wealth in one single asset should be a pre-recorded message for many of us “west coasters”. The first stock I ever bought in my twenties was Microsoft and after we have witnessed the growth of that company, and other tech-oriented companies over the decades the above advice can ring hollow. Yes, there is a lot of potential wealth to be built in company stock and longtime held stock. Yes, there are capital gains taxes to pay if sold. And on the other side of the coin, yes, it is okay to take a win. When you know that you have played the risk game and won, why not lock in some profits, and possibly redeploy into a lower risk investment?
2. There is always a chance of rain -Carry umbrella coverage that really covers your assets. This is so often overlooked, I almost listed it as number one on the list. We’ve had clients discover the hard way due to an auto accident or insurance claim against their business that they were not insured enough personally. Umbrella insurance is one of the least expensive ways to make sure that your hard-earned assets are safe from litigation and settlements.
3. Taking advantage of a personal tax break - Tax planning between your retirement year and ages 70 (social security begins) and 73 (when IRS Required Minimum Distributions – RMD) begin is an overlooked opportunity for potentially taking advantage of a lower income tax rate. This is an opportunity within a limited window of time that can save you money that would otherwise have gone to taxes. Work with your financial advisor and accountant to determine optimal tax brackets and take advantage of this “sweet spot” for both ordinary income distributions from a retirement plan at a lower tax bracket, as well as the 0% - 15% tax bracket on capital gains if applicable.
4. Smart giving – Another way to reduce/eliminate taxes is to use your RMD amount from an IRA as a charitable contribution. The contribution counts towards satisfying your RMD requirement (thus reducing taxes) and potentially reduces the balance of your retirement plan (if using the approach from age 70 and ½) from future RMD’s. If you already make charitable contributions to an approved charity and are over the age of 70 and ½, it can be a smart tax planning technique (depending on your charitable deduction levels, so consult with your CPA). Also, in the “smart giving” section is to be aware of the one-time tax benefit of setting up a Donor Advised Fund (DAF), which then allows you to gift over future years while maximizing the deduction in a higher tax year.
5.Convert an old 529 plan into a Roth for the beneficiary. There is a list of requirements around this, but if you have set up a 529 college savings plan that is more than 15 years old, you may be able to convert a portion to a Roth retirement plan on behalf of the beneficiary. This is a great way to get started saving for retirement. Contact our team with questions on eligibility.
Wells Fargo Advisors does not provide tax or legal advice.
The Meydenbauer Newsletter
Q1 Newsletter 2024
Nicole Christian-Practice Coordinator, Tama Borriello–Managing Director, Diane Manterola-Senior Registered Client Associate, Sean McGowan-Managing Director, Kathryn Lamp-Client Associate and Emily Christian-Client Associate
News & Updates from our team …
Our team and principal partners have had quite a bit of recognition from various sources over the past few years, and most recently from Forbes. In reading about the methodology that company independently uses to build their “best of” lists, they mention that based on their research, “…the very best advisors are laser focused on having a positive impact on their clients’ lives; they want to add meaning and help them live better lives.”
We could not have articulated better, the ethos of our team and results of our partner, Sean McGowan as he exemplifies an advisor who is focused on impactful guidance that is always in our clients’ best interests. Congratulations to our partner, Sean McGowan, acknowledged as one of Forbes Best – In – State Wealth Advisors for 2023. This is a tremendous accomplishment, and it is a testament to his hard work, dedication, and commitment to our clients. Sean has taken leadership in his approach of taking the time to understand individual needs and circumstances to help individuals and families reach their goals. As anyone knows who reaches out to him, he is always available with good advice and good cheer!
Over the past twenty plus years, our team has quietly focused on providing exceptional service and best interest advice to our clients. We have never considered our approach as anything but the only way to service our clients. We were recently asked to participate in a company forum to discuss our holistic approach and how that has benefited and streamlined life for many of our clients. Both Nicole and Sean spoke at the forum and shared our simple path to truly listening and understanding to help our clients plan for both the expected future, as well as the unexpected. Sean recently wrote in our blog about his own unexpected events and the importance of planning for all events in a prudent manner. (see below)
The Meydenbauer Group
PM-08162025-6409014.1.14
• The Forbes Best-in-State Wealth Advisors rating algorithm is based on the previous year’s industry experience, interviews, compliance records, assets under management, revenue and other criteria by SHOOK Research, LLC. Investment performance is not a criterion. Self-completed survey was used for rating. This rating is not related to the quality of the investment advice and based solely on the disclosed criteria.
Thoughts On Financial Strategy Going Forward...
By
Tama Borriello
Managing Director – Investments
And
Sean McGowan
Managing Director - Investments
2023 was a year in which traditional indicators pointed to mediocre stock market returns with hardly any of Wall Street’s experts predicting the notably strong results the market experienced.
2023 was also unusual in that more than half of the 23.8% gain in the S&P 500 was driven by five stocks. Rallies in those companies accounted for nearly 55% of the gains in the S&P 500. To put a finer point on it, just three S&P 500 sectors (Tech, Communication Services and Consumer Discretionary) accounted for nearly 80% of the entire index gains. This has primarily been driven by the business case for Artificial Intelligence (A.I.) and excellent earnings associated with these companies.
While market concentration is at all-time highs, we also observe that valuations of the above listed companies are not exceeding historical metrics, and one could argue that their forward PE’s (Price to Earnings metrics) are still appealing - relatively speaking. They certainly have real earnings being generated. After watching a few market cycles in our careers with similar jubilation though, we are also paying close attention to the other 495 stocks in the S&P 500 and are willing to ask the questions, “What could go wrong?” or “What could improve returns for the other S&P 500 companies?”. While we cannot predict the future, we can orient a portfolio to take advantage of the ebb and flow of market cycles.
While we do see that there are real earnings behind the outperformers of the stock market, we also observe the following. Today we are approaching a juncture in the market where the multiple is not only high, but also rare. As of February 23rd, the S&P 500 was trading at 23 times 2024 S&P 500 EPS of $243/share. We are also taking into consideration a recent rebound in important inflation metrics, the Fed extending the timing of rate cuts from March to June, reducing the targeted number of rate cuts we expect to see in 2024, and weaker consumer spending.
So, the next question many are asking is what to do with a traditional balanced and diversified portfolio when just a few stocks are comprising the bulk of the return in the market? Our investing process has always focused on balanced diversification, and this is the way we manage our personal investments as well. We believe that approach pays off over time and helps to offset market risk. When we hear, “It’s different this time”, we remember the last few markets euphoria that resulted in painful portfolio losses. We have sought to replace holdings where we can improve risk metrics or take advantage of valuations while focusing on the following:
We believe this is a time to stick to your plan, stay consistent with your portfolio guidelines and focus on prudent opportunities. In an economic world of a 5.33% fed funds rate, core inflation above 3.8%, slightly slowing economic growth, commercial real estate risks, two major global conflicts and a market environment of new highs… this seems like a time to stay the course with one’s allocations.
As for our team and strategic investment planning on behalf of you and your family, we are devoted to working through market uncertainties and value the trust you have put in us.
You have our unwavering support in our commitment to guiding you and your family’s nest egg through the unknowns of the stock market and vital financial life decisions.
Wells Fargo Advisors did not assist in the preparation of this report and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors or its affiliates. Past performance is no guarantee of future results. Additional information is available upon request.
www.newyorkifed.org/markets/regerence-rates/effr
ycharts.com/indicators/us core inflation rate#:~:text=US%20Core%20Inflation%20Rate%20is,the%20health%20of%20the%20economy
Are you prepared?
By Sean McGowan
I had an unfortunate mountain biking accident recently that made me re-think things in life. One would surmise many of you have had inflection points that have hit you for one reason or another.
A notable one for a family member of mine is when my mother-in-law was recently diagnosed with cancer. We talked, as our team is her financial advisors, and she said she wanted to beat the cancer and then get to really living. She booked a tropical vacation and another European vacation for soon after her chemo was to be considered over. Her words, “this reminds me to get to living”.
While I was in throws of my recent calamity in the emergency room, my financial planning brain had a different response and one I think many would benefit from hearing.
My thoughts did of course go to the, “I’ll be missing out on that this summer” and similar dialogue. However, as I listened to the doctors and nurses around me and heard the word “lucky” repeatedly I quickly shifted to my planning brain and was thinking about things quite differently.
As noted by the ER doctor, my bicycle helmet likely saved my life, or at least staved off brain trauma. So, what if it had not? This opens a financial planners can of proverbial worms!
Does my spouse know where I put the life insurance policy papers? Did I sign up for long term disability at the last HR enrollment period? Does my wife know where I hid the key to the safe to get out our Wills? For that matter, does my son know how to run the lawn mower?!?!?!
My brain started thinking deeper and deeper about what I possibly put off in planning expecting that nothing bad ever happens to me. Or, as the old country song from Travis Tritt goes, “I’m 10 feet tall and bulletproof”.
Reality is, even as a tenured financial advisor, I had not kept up on these things. These “things” our group deals with every day and should be honed personally. Sincerely, a lot of this is just good communication. But, once again something we all take for granted.
While I sat with my thoughts, I remembered a plan our team devised a few years back to help clients know who to talk to and where things are located. Thus, an idea for everyone to remedy at least some level of confidence when things go awry.
Thus, make a list and give a copy to your partner or another trusted person. That list should contain account numbers and contact information for each account, as well as information on wills, trusts, attorney names, etc.
Obviously, there is a lot more data you can add to the list like logins or passwords. However, even a short list like this can help your family or friends tremendously.
The Meydenbauer Newsletter 3
www.thejoybusdiner.com
We have enjoyed hearing of the diverse and wonderful ways friends and clients of our esteemed colleague, Paul Capeloto, have been honoring him. Recently we learned that a nonprofit in Arizona, that seeks to prepare high quality meals for those that are fighting life threatening illness, received a notable donation in honor of Paul. If you happen to be in the Phoenix area, make time for lunch at Joy Bus and you can also toast Paul’s plaque on the wall, while supporting a cause that we know Paul would have been thrilled about.
News & Updates from our team …
We are again very proud to have our partner, Tama Borriello, acknowledged as one of 2023 Forbes Top Women Wealth Advisors for a third year in a row as “Best in State”.
While accolades are always nice, this recognition, combined with last month’s announcement of The Meydenbauer Group award, 2023 Forbes Best-in-State Wealth Management teams, illustrates what we do and why we do it – to serve our clients first and foremost.
Our entire team takes many hours of continuing education each year in order to maintain and enhance our legal licensing and certifications through CIMA (Certified Investment Management Analyst) and the CFP Financial Planning Board.
In addition to all of that, Diane Manterola, Senior Registered Client associate, was nominated for our firms Excel Education Program and passed with flying colors. Like everything else Diane does, she conquered this endeavor with professionalism and enthusiasm. To top it all off, we just celebrated a golden birthday with her and we all continue to relish the cultural legacy of our tight knit team having celebrated over twenty years of milestones with each other and our amazing clients. Cheers to everyone from the birthday girl…
We are continuing to grow our team and mentor the next generation. We welcome Kathryn… After getting her bachelor’s degree in Business Management and her Certificate of Finance from Post University, Kathryn decided to pursue a career in financial services. As she studied, she realized that she enjoyed helping others get their finances in order. She believes that financial planning can be the tool to help others meet their goals and dreams. She began as a teller with Wells Fargo and quickly became a personal banker. Since then, she has continued to grow and expand her knowledge and is excited to join the Meydenbauer team in supporting and caring for our clients.
Kathryn currently lives near Seattle and spends her time exploring state and federal parks throughout Washington with her mother and sister. (She has a long list of favorite national and state parks but would place Fort Vancouver and Fort Casey near the top of the list!) When not out in nature she spends her time cooking, baking, and working on quilt making, especially the design and piecing aspect.
Looking ahead…
· Don’t miss our ongoing and active blog at our team website. We continue to delivery timely market, financial planning, and other insights:
Team website:
https://www.themeydenbauergroup.com/index.htm
Blog location:
https://www.themeydenbauergroup.com/The-Meydenbauer-Blog.htm
The Forbes Best-in-State Wealth Management Teams rating algorithm is based on the previous year’s industry experience, interviews, compliance records, assets under management, revenue and other criteria by SHOOK Research, LLC. Investment performance is not a criterion. Self-completed survey was used for rating. This rating is not related to the quality of the investment advice and based solely on the disclosed criteria.
The Forbes Top Women Wealth Advisors Best-in-State rating algorithm is based on the previous year’s industry experience, interviews, compliance records, assets under management, revenue and other criteria by SHOOK Research, LLC. Investment performance is not a criterion. Self-completed survey was used for rating. This rating is not related to the quality of the investment advice and based solely on the disclosed criteria.
CAR-0423-02534
Washington State Capital Gains Tax “Excise Tax”
By Sean McGowan
Just recently the Washington State Supreme Court made a decision to uphold the state's new capital gains tax as an “excise tax”.
Washington State Legislature passed ESSB 5096 (RCW 82.87) which creates a 7% tax on the sale or exchange of long-term capital assets such as stocks, bonds, business interests, or other investments and tangible assets.
This tax only applies to individuals. However, individuals can be liable for the tax because of their ownership interest in a pass-through or disregarded entity that sells or exchanges long-term capital assets. The tax only applies to gains allocated to Washington state.
There are deductions and exemptions available that could lower the taxable amount of long-term gains, including an annual standard deduction of $250,000 per individual. In the case of spouses or domestic partners, the combined standard deduction is limited to $250,000 whether they file joint or separate returns.
The tax takes effect on Jan. 1, 2022, and the first payments are due on or before April 18, 2023.
Many ask, for what the tax is being used for and revenue collected from this tax will fund the education legacy trust account and common school construction account.
While this decision may have significant implications for high-net-worth individuals and investors in Washington state, there are some strategies that can help mitigate the impact of this tax. Washington’s capital gains tax is imposed on individuals only and not on business entities. However, the tax may be applicable to gains from pass-through entities. Below are some strategies to consider that may help to alleviate the tax burden.
- Review stock holdings and consider long-term loss (short term gains and losses are not factored into the tax) harvesting to reduce capital gains.
- Delay recognition of short-term capital losses until they qualify as long-term to offset the capital gains.
- Think about bundling charitable donations… Instead of giving the same sum over multiple years, consider “bundling” donations into a one large donation. Also consider donating appreciated securities instead of cash. To qualify for the charitable deduction for WA capital gains tax computation purposes, donations must be to 501(c)(3) organizations directed or managed in Washington state and be greater than $250,000 per year. The charitable donations deduction cannot exceed $100,000 per year. Amounts are adjusted for inflation annually.
- Make sure appropriate federal treatment is taken on the return, for example Section 1202 small business stock exclusion or opportunity zone investment deferral.
- Implement long-term capital gains smoothing strategies to stay below $250,000.
- Review current gift planning.
- If traveling frequently for your job or spend most of the year in another state, review their residency with your tax advisor.
The Meydenbauer Group