Week in Review - June 25 - 29, 2018

Asset Class Performance

Today is the last day of the 2nd Quarter and it has been a volatile week in the market once again with trade worries dominating the headlines. Monday was the most active day with the Dow Jones Industrial Average down over 400 points before rebounding back to close down 328. The S&P 500 (a better gauge of market behaviour) was down roughly 1.3% on that day. As I write this on Friday morning Europe markets were up and US stock futures point to a stronger open, but that could all change quickly. Here are the numbers for the year:

Market Perf Pic.png

Client Questions

If I have multiple IRA accounts can I contribute the maximum to each one?
The maximum IRA contribution for 2018 is $5,500 ($6,500 for those 50 or older) and that is total contribution allowed regardless of the number of accounts you are contributing to. You can contribute to multiple accounts but you cannot exceed the above total limits. The IRS will eventually catch on to this and you will have to pay penalties for excess contributions, so make sure you stay below the limit.
 
What is the difference between a Traditional IRA and a Roth IRA?
Since the Roth IRA was introduced by the Taxpayer Relief Act of 1997 this has been a frequent question. Both of the IRA accounts have the same contribution limits (see above) but they differ in regards to tax treatment and eligibility. Anyone can contribute to a Traditional IRA and the money will grow tax deferred but you will be taxed on withdrawals, and those have to begin at age 70 ½. A Roth IRA will also grow tax deferred but withdrawals are not taxed, which depending on your situation could offer financial planning benefits. One cannot contribute to a Roth IRA if your modified adjusted gross income is over certain limits, which for single filers is $135,000 and for married filing jointly is $199,000 (phase out begins at $189,000). A contribution to a Traditional IRA may be tax deductible depending on your situation but a Roth IRA contribution is not tax deductible. Deciding which direction to go can be confusing but we help clients make that decision during the planning process.

If you have a question that you would like for me to cover please let me know.

Articles

As we come to the close of the first half of the year I wanted to provide some Mid-year portfolio steps that you should consider if you have not already done so. I will be having quarterly reviews over the next several weeks to touch on these very points. You can read the article here.

 

One of the steps in the article discusses having a rebalancing strategy. Here is an article on what that is and how to implement one.

 

What I read (or watched) this week

Here is a good article for those looking to get more out of their day. “Smarter, Not Harder: How to Succeed at Work” is from the Farnam Street Blog run by Shane Parrish and always has very good articles on a wide range of subjects.

With trade dominating market headlines this week I wanted to provide some articles covering trade and specifically tariffs. Let’s begin with an explanation: “What is a tariff? An economist explains.” Although there has been tariffs imposed or increased on hundreds of US goods the response by Harley Davidson to move some production to the EU was the one that caught people’s attention, including President Trump. You can read about it here: “Harley Davidson to move some motorcycle production out of US after EU tariffs.” Finally, if you really want to get in the weeds you can see how tariffs levels vary between countries: “Comparing Countries’ Tariff levels.”

I have to leave you with a feel-good video because that is why you are here, right? This is a Mercedes commercial but doesn’t show the car very much. Beautifully done.

If you have questions or feedback, let’s talk. Enjoy your weekend.

Bill Nickles

Past performance is no guarantee of future results. Prices and performance have been obtained from what we believe are reliable sources but accuracy cannot be guaranteed. As always, financial advice is very specific to the individual so please contact us if you have questions or would like to discuss your situation further.