Broker Check

The Weekly Wealth Report

May 17, 2021
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The Week on Wall Street

A surge in consumer inflation unsettled investors, leading to a turbulent week of trading on Wall Street.

The Dow Jones Industrial Average slipped 1.14%, while the S&P 500 fell 1.39%. The Nasdaq Composite index dropped 2.34% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 3.02%.

FACT OF THE WEEK

Amelia Earhart was an American aviator who set many flying records and championed the advancement of women in aviation. She became the first woman to fly solo across the Atlantic Ocean, and the first person ever to fly solo from Hawaii to the U.S. mainland.

Earhart set a number of aviation records in her short career. Her first record came in 1922 when she became the first woman to fly solo above 14,000 feet.

In 1932, Earhart became the first woman (and second person after Charles Lindbergh) to fly solo across the Atlantic Ocean. She left Newfoundland, Canada, on May 20 in a red Lockheed Vega 5B and arrived a day later, landing in a cow field near Londonderry, Northern Ireland.

Upon returning to the United States, Congress awarded her the Distinguished Flying Cross - a military decoration awarded for “heroism or extraordinary achievement while participating in an aerial flight.” She was the first woman to receive the honor.

MARKET MINUTE

Inflation Concerns

The market has been troubled recently by building inflationary pressures. Investors are concerned that rising prices may hurt corporate profits and force the Fed to tighten its monetary policy sooner than anticipated. Worse, investors fear the Fed may have to react more aggressively if it waits too long to act.

After back-to-back losses, the retreat in stock prices culminated on Wednesday, following the release of the higher-than-anticipated Consumer Price Index (CPI) report.

Stocks managed to claw back some of the week’s losses with a Thursday-Friday rebound, sparked by investors doing some bargain hunting.

Consumer Prices Spike

Wednesday’s release of April’s CPI inflamed investors’ inflation fears, as consumer prices rose 0.8% in April and jumped by 4.2% year-over-year. These numbers were above expectations.

April price increases were led by a remarkable 10% increase in used cars, with additional pockets of sharp increases, notably in transportation services and commodities. Perhaps equally concerning is that energy costs showed a decline during April, a price weakness that may reverse in the coming months.

Core inflation, which excludes the more volatile food and energy prices, was up a more modest 3.0% from April 2020.

FINANCIAL STRATEGY OF THE WEEK 

A living trust is a popular consideration in many estate strategy conversations, but its appropriateness will depend upon your individual needs and objectives.

What is a Living Trust? 

A living trust is created while you are alive and funded with the assets you choose to transfer into it. The trustee (typically, you) has full power to manage these assets. But using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.
A living trust will also designate a beneficiary, or beneficiaries, much like a will, to whom the assets are structured to automatically pass upon your death.

If you create a revocable living trust, you may change the terms of the trust, the trustee, and the beneficiaries at any time. You can also terminate the trust altogether.

Why Create a Living Trust? 

The living trust offers a number of potential benefits, including:

- Avoid Probate - Assets are designed to transfer outside the probate process, providing a seamless, private transfer of assets.

- Manage Your Affairs - A living trust can be a mechanism for caring for you and your property in the event of your physical or mental disability, provided that you have adequately          funded it and named a trustworthy trustee or alternative trustee.

- Ease and Simplicity - It is a simple matter for a qualified lawyer to create a living trust tailored to your specific objectives. Should circumstances change, it is also a straightforward      task to change the trust’s provisions.

- Avoid Will Contests - Assets passing via a living trust may be less susceptible to the sort of challenge you might see with a will transfer.

The Drawbacks of a Living Trust

Living trusts are not an estate panacea. They won’t accomplish some potentially important objectives, including:

- A living trust is not designed to protect assets from creditors. It is also considered a “countable resource” when determining your Medicaid eligibility.

- There is a cost associated with setting up a revocable living trust.

- Not all assets are easily transferred to a living trust. For example, if you transfer ownership of a car, you may have difficulty obtaining insurance, since you are no longer the owner. 

- A living trust is not a mechanism to save on taxes, now or at your death.

Please contact our office for more information about living trusts or any other topic.

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

Have a great week!