Financial Markets and the Economy
Stocks extended their rally in the second quarter, boosted by cooling inflation, the prospect of a shift in monetary policy, and enthusiasm over artificial intelligence. The Dow Industrials added more than 3%, while the S&P 500 gained over 8%. The NASDAQ Composite, which led in the first quarter, led again, rising nearly 13%. The stock market’s climb did not come without occasional bumps along the way, including a drawn-out political battle over raising the debt ceiling. One key driver was the fight against inflation. Year-over-year inflation broke lower in the April and May reports.
Another driver was corporate reports: 78% of S&P 500 companies reported a positive earnings surprise, while 75% reported a revenue surprise. It was the best performance relative to estimates since the fourth quarter of 2021. The earning season also saw a dramatic development and a heightened focus on artificial intelligence, with 110 companies mentioning AI on conference calls. This was a 41% increase from the prior quarter. The excitement over AI centers on its potential economic opportunities. One investment bank says AI may boost productivity by 1.5% annually for the next 10 years. In July, companies will start to report their Q2 results, which will provide fresh insights into the economy’s health.
Also, the two-day Fed meeting ends on July 26. Investors will learn whether the Fed plans to increase rates or hold steady. At the June meeting, the Fed elected to pause on rate hikes, deciding to assess the economic impact of the cumulative interest rate increases that started last year. The Fed will also give its outlook for inflation in the second half.
Planning
In the upcoming months, the focus of our meetings will shift primarily to estate planning. One important piece of an estate plan that we will discuss is the people who will actually put the plan in motion – including trustees, trust protectors, and personal representatives. One anecdote that illustrates this important point actually comes from former chief justice of the Supreme Court Warren Burger.
When Warren Burger died in 1995, he left a 176-word will that gave no specific power to his executors. As a result, he reportedly cost his estate tens of thousands of dollars in attorney’s fees. Judge Burger’s case shows that even law-savvy individuals can make mistakes when it comes to writing their own legal documents. But giving executors the proper power is only one piece of the puzzle. Notably, the same questions apply to selecting a trustee. How do you choose a trustee? Can anyone do it? What makes an individual a good choice?
Many people choose a spouse, sibling, child, or close friend as trustee. In most cases, the job is fairly straightforward. Still, you might give special consideration to someone who is well organized and capable of handling financial matters. Someone who is respected by your heirs and a good communicator also may help make the process run smoothly. Above all, a trustee should be someone trustworthy (no pun intended!) since this person will have a legal responsibility to manage your money, help pay your debts (including taxes), and distribute your assets to your beneficiaries as stated in your trust.
If your estate is large or you anticipate a significant amount of work for your trustee, you might think of naming a bank, lawyer, or financial professional. These individuals will typically charge a fee, which would be paid by the trust. In some families, singling out one child or sibling as trustee could be construed as favoritism, so naming an outside party may be a good alternative.
Whomever you choose, discuss your decision with that person. Make sure the individual understands and accepts the obligation – and knows where you keep important records. Because the person may pre-decease you – or have a change of heart about executing your wishes – it’s always a good idea to name one or two alternative trustees.
The period following the death of a loved one is a stressful time and can be confusing for family members. Choosing the right trustee can help ensure that the distribution of your assets may be done efficiently and with as little upheaval as possible.
Please do not hesitate to reach out if you have questions about your personal cybersecurity, planning, or anything else.
Sincerely,
Waypoint Capital Advisors
