Broker Check

The Weekly Wealth Report

November 30, 2020

The Week on Wall Street

Stocks surged last week, ignited by another COVID-19 vaccine announcement, encouraging economic data and easing political uncertainty.


On November 2, 1988, Cornell University researchers uncovered an unknown virus lurking in their computer systems. Within four hours of discovery, the “Morris worm” virus invaded several other university systems as well as the ARPANET, an early version of today’s internet. Twelve days later, the Software Engineering Institute (SEI), a research center connected with Carnegie Mellon University, set up the Computer Emergency Response Team (CERT).

In 1988, the National Computer Security Day (CSD) sprang into action on November 30 to bring awareness to computer security while encouraging heightened attention from throughout the holiday season – when people are typically more focused on the busy shopping season than thwarting security threats. By 2003, CERT and the U.S. Department of Homeland Security joined forces to create the National Cyber Awareness System.


The Dow Jones Industrial Average added 2.21%, while the S&P 500 Index climbed 2.27%. The Nasdaq Composite Index, which has led all year, gained 2.96%. The MSCI EAFE Index, which tracks developed overseas stock markets, rose 1.54%.

Dow Breaks 30,000

For the third consecutive week, markets opened on Monday to another announcement of a potential COVID-19 vaccine. Stock prices found additional support on news that President-elect Biden would be nominating Janet Yellen, the former Chair of the Federal Reserve, to be Secretary of the Treasury.

Investors reacted well to the choice, encouraged by her previously voiced support for more significant fiscal stimulus and relieved that a candidate who is less antagonistic to the industry was selected. Positive momentum continued into the following day, driving the Dow Jones Industrial Average, S&P 500, and the Russell 2000 to record high levels, with the Dow closing above the 30,000 milestone.

Stocks eased off their highs in pre-Thanksgiving trading, though they recovered some of those losses on Friday, as the S&P 500 and NASDAQ Composite closed with fresh record highs.

A Microcosm of the Economy

The economic outlook has been challenging to figure out due to conflicting signals. One day there is a historic jump in economic growth; another day sees a record high in new COVID-19 infections.

Last week was a good illustration of this. Reports of healthy consumer spending, a substantial rise in durable goods orders, and sales of new homes remaining near almost-14-year highs were balanced by a jump in new jobless claims, a decline in household income, and continued state and local COVID-related restrictions.

The recent investor response indicates their choice to see the glass half full and look past the economy's near-term challenges.



Maximize your generosity in the current environment with these gifting strategies.

World events can strike different chords for different people, even within our own families.

If you find yourself wanting to help your loved one through economic uncertainty, you're not alone. CNBC's Millionaire Study, a recurrent survey, found 22% of millionaires had assisted their adult children since the start of the COVID-19 pandemic, and 21% had given help to other family members.

It goes the other way, too. Among millennials, the oldest of whom are approaching 40, 19% provided some support to a parent even before the pandemic, CNBC reported. In total, about 13% of Americans provide financial assistance to a parent.

Luckily, recent changes to tax laws surrounding gifts, in conjunction with historically low-interest rates, make it more comfortable now than almost ever to help your family members in the short term – and set them up for the long-term, after the economic volatility has passed. The following strategies may help you meet your goals.

Simply cash

Since 2018, individuals have had an optional allowance amount of up to $15,000 to give annually without accruing a tax liability. These annual limits generally apply to single gifter-giftee pairs, so if you are married, your spouse could provide an additional $15,000 and remain below the annual exclusion limit.

Further, if you want to share your generosity with the recipient's spouse, partner, child, or other trusted relation, you could gift them $15,000 as well.

Giving over $15,000 per recipient won't necessarily bring you new tax liabilities, at least not now, but will require you to file a gift form with your tax return, and it will count against your lifetime gift limit, which is currently $11,580,000 for an individual and double that for a married couple, which has implications when it comes to your estate.

Of course, tax laws change, and this life-time-limit will expire by the end of 2025, so consult your financial advisor and tax professional to run through scenarios that might be more advantageous in the current climate.

A loan between friends (or family)

While you may want to loan your family member what they need and have them pay it back when it's convenient for them, the IRS is a bit more rigid when it comes to transactions that could look like gifts, so it's best to have
the appropriate documentation in place.

Now might be an opportune time to issue a loan to a family member without feeling the point of the tax¬man's sharpest pencil (and his rules regarding below-market loans). The reason? The minimum interest rate, known as the Applicable Federal Rate (AFR), is historically low.

In July 2020, the short-term AFR hit 0.18%, which applies to loan terms that are shorter than three years. For mid-term loans – with payback between three and nine years – the rate was 0.45%, and for long-term loans with a repayment schedule longer than nine years, the rate was 1.17%, lower than what you'd expect to see from a commercial lender.

Just make sure the loan is a bona fide creditor-debtor agreement with payment schedules, record-keeping, a promissory note, and, optionally, a collateral agreement, Forbes magazine recommends. Consult with your attorney to draw up the documents and oversee the process.

Transferring with equities

If market volatility has taken a bite out of your investments but not your lifestyle, there's another way to offer your family members a long-term opportunity, especially if they've had to dig into their retirement support.

During volatile market periods, there could be moments when your good stocks face the same kind of downward pressure as all the others. On the bright side, though they may have higher value later, they could serve as an undervalued gift. The annual gift exclusion limit of $15,000 and a lifetime limit of $11,580,000 could go a lot further than it did at the hottest point in the market.

For example, say an individual bought stock XYZ for $20/share a few years ago. In December, it was priced at $50/share but hovers around $35 now. If the shares are gifted, those potentially undervalued shares can be removed from the current value from his estate, and the recipient of the shares will hopefully have time to benefit from the stock's future growth.

Gift recipients rarely need to worry about paying gift taxes, but they may need to pay income taxes depending on the change in the value of gifted equity when they sell. Many times it makes sense to gift appreciated assets instead to avoid rules around a dual basis.

The IRS also has particular rules around gifting to those in negligible tax brackets (like minors or children in college), which could trigger the so-called kiddie tax. Because this area can get a little complicated, it's best first to consult a tax professional and your financial advisor.

Family money matters

As the adage states, if and when a mixture of family and money should occur, each situation should always be treated with care, even with several practical options. But open communication, well-defined limits and expectations, and third-party advice can help slacken the situation's natural tension. Here are some tips from professionals:

Know what you can give. Although it may feel worth it to delay retirement to help your family member, for example, know that you may be giving up years when your health, wealth, and time are at their peak.

Be clear. Setting terms, goals, and upfront timelines will clear up confusion and help to formulate expectations. For some financial assistance types, like an intra-family loan, these terms will be in writing – but have a plan if things don't work out as expected.

For less-structured assistance, like cash, it will be up to both sides to prevent future resentment. Bring in a professional. When it comes to decisions like these, it's always best to have a cool-headed, objective third party to help out while getting started.

As always, please let us know if there is anything we can help with along the way or any financial concerns you may have.