Broker Check

The RFG Weekly Wealth Report

January 07, 2019

U.S. markets experienced more wild sessions last week before ending in positive territory as the recent turbulence continued. In fact, we are currently in the middle of some of the most volatile market performance in more than eight years. For the week, the S&P 500 gained 1.86%, the Dow added 1.61%, and the NASDAQ increased 2.34%. MSCI EAFE stocks also increased, posting a 1.42% weekly gain.

While the results may not seem especially dramatic, the path to get there certainly was. On Thursday, January 3, domestic stocks plunged, as factory data and a tech warning spooked investors. Then, the next day, the S&P 500, Dow, and NASDAQ each gained at least 3.3%. Friday's performance marked one of the largest rallies since the beginning of this bull market. 


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What drove the market rally? 

Two key events contributed to the huge jumps on Friday: 1) the latest labor report and 2) comments from the Federal Reserve Chairman.

1. December's labor report exceeded projections.

Many people expected that the economy would add around 176,000 jobs last month. Instead, the latest data revealed that the increase was actually 312,000 new jobs in December - drastically beating expectations. Not only did last month's labor report show more jobs added than anticipated, but wage growth and labor market participation also increased.

Why does this data matter?

Investors have been very concerned that economic growth is slowing. This data helped quell worries that a recession is ahead.

2. The Fed shared new policy perspectives.

Fed Chair Jerome Powell told the American Economic Association that the Federal Reserve understands the market's worries and hasn't predetermined its future interest rate hikes.

Why does this update matter?

Some of the uneasiness the markets have shown recently are a result of concerns that the Fed is tightening monetary policy too quickly. Powell's comments indicate the Fed is sensitive to economic conditions, an update that many investors wanted to hear.

What is on the horizon?

A number of unresolved situations remain for the markets and economy. The government shutdown continues, and a solution doesn't appear imminent at the moment. Trade dynamics are also still an important consideration, especially since corporations are now issuing warnings that trade is affecting their profits. Meanwhile, U.S. officials will be meeting with China this week to talk once again.

For now, the volatility we are experiencing may continue. Remember, we're closely tracking developments to see how they may affect your financial life. If you have questions about how to weather these ups and downs, we are here for you.


How can I reduce my taxable estate?

There are many techniques available to reduce your taxable estate. Some of the most popular include:

Gifting assets: You are currently allowed to gift $15,000 annually to any number of individuals without reducing your estate tax exclusion. If you are married, your spouse is allowed to gift another $15,000 to the same individual

Establish AB or QTIP Trusts: Although the federal estate tax exemption is now "portable" for married couples, the state of Illinois, carries a lesser exemption that does not include portability, which is the ability of the surviving spouse to utilize the unused estate tax exemption of a deceased spouse. Properly creating and funding these trust vehicles can allow you to maximize both federal and state estate tax exemptions.

Transfer ownership of life insurance policies: By utilizing an owner outside of your estate, typically an Irrevocable Life Insurance Trust (ILIT), life insurance proceeds can bypass estate taxes. You must also live for 3 years after transferring ownership. This strategy can be used to accomplish a multitude of goals, such as funding your children's inheritance while you use a greater portion of your taxable estate to make charitable bequests.