Author Archives John Charles Kernodle

How Charitable Giving Can Help Fulfil Your Required Minimum Distribution

Posted by John Charles Kernodle on October 21, 2021  /   Posted in General

The golden years come with much more fun than just early bird specials, senior discounts, and a subscription to AARP. It’s time to finally enjoy and reap the benefits of your life’s work. Now that you’re (likely) in retirement, you may also be thinking of ways that you can give back or leave a legacy behind after you’re gone. Thankfully, there are a variety of ways that you can do this and enjoy additional benefits. If you’re 72 or older, you’re in luck, thanks to a creative way that allows you to give back and also fulfill your Required Minimum Distribution.

What is the Required Minimum Distribution (RMD) you ask? According to the IRS, “ Your required minimum distribution is the minimum amount you must withdraw from your account [IRA, 401(k), 403(b) and/or other defined contribution plans] each year.1” This previously took effect at the age of 70 ½ but has since been changed to 72 years old. The percentage and amount that you need to withdraw is based on age and distribution period. The IRS provides a nice little worksheet to help find the percentage that needs to be withdrawn2. It is important to note that your RMD is a collective, total amount that can be withdrawn from any of your defined contribution accounts. This means that if you have an old 401(k) and an IRA, you do not need to withdraw from both accounts. Your withdrawal can be from either one (or both) of your accounts, so long as the total withdrawal adds up to the required amount.

Defined contribution plans like those listed above are tax-exempt during your contributing years. At 72, you must begin withdrawing from these accounts, at which time you would typically begin paying taxes on your withdrawals. However, there is a creative tactic you can use to your advantage. Should you choose to make a charitable donation directly from a defined contribution account, you have the ability to fulfill your RMD needs. Plus, the donation is tax exempt. This would allow you to save a little, while also doing good at the same time. Additionally, this does not have to be done all at once or specifically at the end of the year. You are free to make the distribution(s) throughout the entire calendar year.

If you’re interested in learning more about how you can use your Required Minimum Distribution for charitable giving, the Strathmore Capital Advisor team is here to help. Contact us to learn more and start giving today.

How Biden’s New “American Families Plan” Tax Proposal Might Affect Your Financial Plan

Posted by John Charles Kernodle on September 28, 2021  /   Posted in General

Earlier in the year, President Biden proposed the Families Act, giving us a hint into what changes may be in store should a bill be passed. Now, however, Democrats on the House Ways and Means Committee have released their official tax proposals, providing much more insight into what the potential changes could entail and more importantly, how they might affect your financial plan.

Here are some of the key parts of that proposal.

1. Increased Tax Rates

As promised—and in keeping with the Biden Administration’s original proposed American Families Plan—the bill would include several tax increases, including those centered around the oft-mentioned $400,000 income mark:

  • First, the Bill lowers the amount of income needed to qualify for the top tax bracket to $400,000 for individuals and $450,000 for married couples.
  • On top of that, it proposes to reinstate the 39.6% top marginal tax rate, which was recently lowered 37% by the 2017 Tax Cuts and Jobs Act.
  • The legislation also increases the top capital gains rate to 25%.
  • And finally, it will apply a 3% surtax for ultra-high earners with over $5 million of income.

The Bottom Line: Putting aside the tax increases for corporations, individuals in the $400,000–$500,000 income range will perhaps see the most significant effect from these proposed changes, as their jump in tax percentage will be the highest. However, the fact remains that all those in the top tax bracket will feel the new taxes to some extent. Nonetheless, it may help to work with your advisor to better understand exactly how the changes will affect you and update your financial plan accordingly.

2. Closing Perceived “Loopholes”

Within the plan, an emphasis was also placed on closing perceived “loopholes” in the tax system. Notably, these include several changes to Traditional and Roth Investment Retirement Accounts (IRAs).

Changes to Roth Include:

  • Prohibiting Roth conversions of after-tax funds in retirement accounts;
  • After-tax 401(k) contributions will no longer be able to be converted to Roth, effective 2022; and
  • Prohibiting all Roth conversions for those in the top income tax bracket.

Traditional IRAs will see two new rules for high-income taxpayers with more than $10 million of aggregated retirement account assets, including:

  • A prohibition on making new IRA contributions;
  • A new Required Minimum Distribution of 50% of the combined balances above $10 million and 100% of combined balances above $20M; and
  • Income associated with “carried interests” would be taxable at the ordinary income tax rate rather than the current law, which is set to the more preferred capital gains rate of 20 percent.

The bottom line: With several changes to the law around retirement accounts, a shift in strategy may be needed to keep some of your retirement investments optimized. It is important you speak with your financial advisor about how these changes may affect your financial plan and what your plan should be moving forward.

3. Estate Law Changes

The proposed bill also contains significant tax changes to estate law. A few notables include:

  • A 50% reduction in the estate and gift tax exemption. This reduction, however, will also coincide with an increase to the special valuation reduction for real property used in family farms and businesses from $750,000 to $11.7 million.
  • Intentionally Defective Grantor Trusts (IDGTs) are now included in their grantors’ estates.
    Grantor trusts would be included in the estate, including some Irrevocable Life Insurance Trusts (ILITs), Spousal Lifetime Access Trusts (SLATs) and Intentionally Defective Grantor Trusts (IDGTs).
  • Any sale between an individual and their own grantor trust will be treated as the equivalent of a third-party sale, and any transfers out of a grantor trust will be considered a taxable gift.

The Bottom Line: As with the changes to retirement accounts, these new estate laws may prompt some changes to your current financial or estate plan. Be sure to reach out to your financial advisor to see what those changes might be.

Sources:

  1. https://files.taxfoundation.org/20210513123909/Details-and-Analysis-of-Tax-Proposals-in-President-Biden%E2%80%99s-American-Families-Plan.pdf
  2. https://www.bkd.com/alert-article/2021/09/house-ways-means-committee-proposes-tax-increases

Are You Aware of the Child Tax Credit Changes?

Posted by John Charles Kernodle on August 03, 2021  /   Posted in General

New changes thanks to the American Rescue Plan Act – but just for 2021

The Child Tax Credit was introduced through the Taxpayer Relief Act of 1997 and it was a $500-per-child nonrefundable credit to provide tax relief to families. And over the past 20+ years, there have been a dizzying number of modifications that have increased the value of the tax credit as well as expanded its availability.

Well in 2021 – and only for tax year 2021 – thanks to the American Rescue Plan Act of 2021, there have been additional changes that will help families receive advance payments starting this summer. Here is what you should know (taken directly from the IRS).

The Child Tax Credit for Tax Year 2021 Only

“The expanded credit means:

  • The credit amounts will increase for many taxpayers.
  • The credit for qualifying children is fully refundable, which means that taxpayers can benefit from the credit even if they don’t have earned income or don’t owe any income taxes.
  • The credit will include children who turn age 17 in 2021.
  • Taxpayers may receive part of their credit in 2021 before filing their 2021 tax return.

For tax year 2021, families claiming the CTC will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021. They will receive $3,600 per qualifying child under age 6 at the end of 2021. Under the prior law, the amount of the CTC was up to $2,000 per qualifying child under the age of 17 at the end of the year.

The increased amounts are reduced (phased out), for incomes over $150,000 for married taxpayers filing a joint return and qualifying widows or widowers, $112,500 for heads of household, and $75,000 for all other taxpayers.

Advance payments of the 2021 Child Tax Credit will be made regularly from July through December to eligible taxpayers who have a main home in the United States for more than half the year. The total of the advance payments will be up to 50 percent of the Child Tax Credit. Advance payments will be estimated from information included in eligible taxpayers’ 2020 tax returns (or their 2019 returns if the 2020 returns are not filed and processed yet).

The IRS urges people with children to file their 2020 tax returns as soon as possible to make sure they’re eligible for the appropriate amount of the CTC as well as any other tax credits they’re eligible for, including the Earned Income Tax Credit (EITC). Filing electronically with direct deposit also can speed refunds and future advance CTC payments.

Eligible taxpayers do not need to take any action now other than to file their 2020 tax return if they have not done so.

Eligible taxpayers who do not want to receive advance payment of the 2021 Child Tax Credit will have the opportunity to decline receiving advance payments. Taxpayers will also have the opportunity to update information about changes in their income, filing status or the number of qualifying children. More details on how to take these steps will be announced soon.

The IRS will provide more information about advance payments soon.”

What Should You Do?

Taxes are complicated enough, so make sure you consult your tax professional for guidance, especially with respect to whether or not you qualify.

And make sure you talk to your financial advisor in order to confirm that the tax decisions you make are consistent with your overall financial plan.

Source: irs.gov

Social Security: Is Your Age a Retirement Numbers Game?

Posted by John Charles Kernodle on July 27, 2021  /   Posted in General

When preparing for your retirement, think about how much income you may need each year to fund the lifestyle you want. To help maintain your living standard, you may need to save enough money to supplement other sources of retirement income, such as a company pension and/or Social Security. It is also important to be aware of how your age factors into your retirement decisions. Here are some important age milestones to consider:

Age 55. If you take an early retirement, quit, or are otherwise terminated from employment, you can generally withdraw money from 401(k), 403(b), and profit-sharing plans without being subject to a 10% Federal income tax penalty for early withdrawals. As specified in IRS Publication 575, the following apply: you must reach age 55 by December 31 of the year you leave the workforce; money must be distributed to you from your employer’s plan and cannot be transferred to an Individual Retirement Account (IRA); early withdrawals are subject to the plan’s provisions; and only money from your last employer’s plan qualifies (not funds from previous employers). You may take early distributions from a traditional IRA without penalty, provided you receive “substantially equal periodic payments.” Since certain rules govern this provision, be sure to consult a qualified tax professional.

Age 59½. Generally, you can withdraw money from traditional IRAs and qualified retirement plans after the age of 59½ without being subject to the 10% tax penalty, if plan-specific qualifications are met. Ordinary income tax is due if your contributions were tax deductible. No income tax or penalty applies to distributions from a Roth IRA, provided you have reached age 59½ and have owned the account for at least five tax years.

Age 60. Widows and widowers may be eligible for Social Security benefits. For the most up-to-date information, visit the Social Security Administration’s website at www.ssa.gov.

Age 62. Some companies may allow retirement at 62 with full pension plan benefits. This is also the earliest age for receiving regular Social Security benefits, but the benefit amount is permanently lower than its potential maximum.

Ages 62–64. For those who are working and collecting Social Security benefits while younger than full retirement age—the age at which an individual is eligible to receive full Social Security benefits—the earnings threshold is $18,960 for 2021. One dollar in benefits is withheld (a “give back”) for every $2 earned above that amount. A portion of benefits may also be taxed as income based on a complex formula that includes wages and tax-exempt income.

Age 65. Many company pension plans provide full benefits at this age. However, the age may vary by the company plan. Medicare eligibility also generally begins at age 65.

Ages 65–67 (or the year in which full retirement age is attained). Traditionally, full retirement age was 65. However, for those born between 1938 and 1959, full retirement age has been rising incrementally, and for those born in 1960 or later, the age for receiving full benefits is 67. The lower earnings threshold amount still applies for years prior to full retirement age, and a second earnings threshold rule applies for the year in which full retirement age is attained.

For those who are working and receiving Social Security benefits, there is a benefit give-back in 2021 of $1 for every $3 over $50,520 earned in the months prior to attaining full retirement. Once full retirement age is attained, the earnings threshold no longer applies, and a portion of benefits may be taxed as income based on a complex formula that includes wages and tax-exempt income.

Age 70½. Required minimum distributions (RMDs) from qualified retirement plans, such as a 401(k) or IRA, must generally begin by April 1 of the calendar year following the year in which you reach age 70½. Roth IRAs, however, are not subject to the age 70½ mandatory distribution rules.

You have worked many decades to accumulate assets to prepare for enjoyable “golden years.” Be sure to consult with qualified tax and financial professionals to help you stay on track to achieving your retirement goals.

Financial Planning is More Than Investing

Posted by John Charles Kernodle on July 23, 2021  /   Posted in Newsletter

When we talk about financial planning, I suspect many people default to thinking we’re only talking about investing. But at Strathmore Capital, we know from personal experience that it includes so much more. A recent story I heard about a friend of a friend makes it all too clear that while investing decisions matter, we can’t afford to ignore the other parts of our financial lives.

The story starts out simple enough. A successful man in his 30s remarried after a divorce. His new wife had been married before, too, and they both had children from those relationships. After three years together, things were going really well. They had no reason to think their life together wouldn’t continue as expected. Until it didn’t.

The woman who had the seizure never intended to slam her SUV into this young man’s car. It was a horrible accident that affected everyone involved. As difficult as it was to deal with losing a spouse, there was more to come for this young widow that made the situation even more painful and stressful.

After his first divorce, this young man changed the beneficiary of his life insurance policy from his ex-wife to his mother. As they were going through his papers, his now-widow discovered two things:

1) His mother was still the beneficiary of his life insurance policy

2) He’d written a to-do list that included changing the policy to name his wife

It won’t surprise you to discover what happened next. Legally, the widow had no claim to the policy, and the mother wasn’t inclined to honor the wishes of her son. She justified the decision with an explanation that she’d expected her son to help her in old age.

So, at a time when the family needs to come together, this family was arguing over money. The blame came down to a to-do list with an important, but not obviously urgent, a task left undone. I’m willing to bet too many of us have at least one of those important things left undone in our lives. We tell ourselves we’ll get to it—eventually.

One of our jobs at Strathmore Capital is to close the gap between “done eventually” and “done now.” We make it a point to understand everything about your financial life. It’s our job to ensure things like changing a beneficiary don’t get left in a stack of papers on a desk.

The story I shared above has a little bit of a silver lining. The mother-in-law agreed to use some of the life insurance to pay the balance on the home mortgage. While it doesn’t solve all the widow’s immediate financial concerns, it will help as she attempts to launch a new business. But I think it’s a safe bet that this young woman will do everything in her power to never leave something so important lingering on a to-do list.

I hope this newsletter gives you a nudge to remember that we’re here to help you with more than investing. We’re also committed to making sure your financial intentions are respected and become a reality for you and your family. As always, don’t hesitate to let me know if you have questions.

Asking the Right Questions About Bitcoin

Posted by John Charles Kernodle on April 19, 2021  /   Posted in Newsletter

Many of us know the story of Dutch speculators in 17th-century Netherlands spending a lot of money on tulip bulbs. Prices spiked between December 1636 and February 1637 on the then-rare striped variety. This short-lived market boom affected some personal fortunes and undermined trust when buyers couldn’t come up with the money to complete the exchange.

In this instance, we’re looking at an example of a luxury good masquerading as an investment. But a quick trip through investing history reveals more than one smart investor lured into thinking they had the inside track on the hot new thing. In the 1800s, we see another example with the downfall of the South Sea Company, which managed to entangle Sir Isaac Newton and many other investors.

Newton’s story will sound familiar. He managed to get out before the bubble burst with a 100% profit. But within months, he bought shares at the top of the market before going on to lose more than $3 million. Again, we’re not short on stories, which leads to today’s current fascination with things like Bitcoin.

There are several well-done explainers, so I won’t wade into the deep end trying to explain what crypto assets[1] do or what they’re for. Instead, I think it’s valuable to understand what they represent in the big investment picture, while keeping a fundamental question in mind: does this fit into my overall investment strategy?

For example, Bitcoin and other cryptocurrencies purport to be currencies (i.e., a medium that may be exchanged for goods and services). Traditional currency markets can be tricky, even for experienced financial professionals, and they may not be suitable investments for your portfolio.  If traditional currencies wouldn’t be a good fit for your portfolio, what makes cryptocurrencies different?

There are also concerns regarding the impact that cryptocurrencies (particularly Bitcoin) may be having on the environment.  Before becoming available for purchase and sale, cryptocurrencies are initially created through a technical process called mining, which requires significant amounts of computing power.  A recent study noted that as of April 2020, China accounts for over 75% of Bitcoin mining activity, primarily due to cheaper electricity and large areas of undeveloped land.[2]  This same study also concluded that the energy consumption of global Bitcoin mining activity and its corresponding environmental impacts have become “a non-negligible issue.”  This poses a question of whether Bitcoin is compatible with environmental, sustainability, and governance (ESG) strategies.

Unlike traditional stocks, Bitcoin and other crypto assets require a digital wallet in order to be held.  As of today, you cannot directly hold Bitcoin in a typical brokerage account (although there are services that attempt to streamline the process, a digital wallet is still required).  The “account number” for a digital wallet is usually delivered in the form of a set of cryptographic keys, which are lengthy, alphanumeric sequences that must be managed and safeguarded, lest the wallet be compromised or access to it be lost.

Additionally, as with virtually all investments, investing in Bitcoin carries its own risks.  Crypto assets are generally considered quite volatile, and Bitcoin is no exception.  Figure 1 below shows the 60-day volatility of Bitcoin over the course of its lifetime.  For comparison, Figure 2 shows the GARCH volatility estimate[3] for the US dollar from April 1, 2007 through March 31, 2021.[4]  Over this time period, the dollar’s volatility reached an apex of 18.26% on December 19, 2008.  Meanwhile, Bitcoin’s volatility has routinely crossed 10%, stretching beyond 20, 60, and even 100% over its lifetime.  Do other investments in your portfolio experience similar volatility?  Should they?

Bitcoin 60-day price volatility, shown over the lifetime of Bitcoin.

Figure 1: Bitcoin 60-day price volatility, shown over the lifetime of Bitcoin.  The red line is the BTC/USD price volatility, while the blue line is the Bitcoin price in USD.

Source: https://charts.woobull.com/bitcoin-volatility/

USD Index GARCH volatility, shown from April 1, 2007 to March 31, 2021.

Figure 2: USD Index GARCH volatility, shown from April 1, 2007 to March 31, 2021.

Source: https://vlab.stern.nyu.edu/analysis/VOL.DXY%3AFOREX-R.GARCH

To be clear, this newsletter isn’t an argument against crypto assets, blockchain, or other new financial technologies.   Instead, it’s a reminder that history is littered with people who thought they’d found the next big opportunity only to discover the tradeoffs or losses were much greater than expected. Now, Bitcoin, non-fungible tokens (NFTs), and other financial tools sit in the spotlight.  In fact, several prominent financial news channels have begun listing the price of Bitcoin alongside mainstream indices, such as the Dow and S&P 500.  However, when it comes to evaluating Bitcoin as an investment opportunity, there are far more moving parts than its recent popularity and prominence.

The point remains that no matter the investment decision, we still need to ask the right questions and make decisions based on what will get us closer to our financial goals. Of course, for most of us, these decisions will never make headlines or encourage people to call us financial geniuses. But they will get us closer to what we’ve decided matters most to us.

[1] Cryptocurrencies are only one class of crypto product out there.  There are also security tokens, utility tokens, and tokenized assets, to name a few.

[2] Policy assessments for the carbon emission flows and sustainability of Bitcoin blockchain operation in China, Jiang et al., available at https://www.nature.com/articles/s41467-021-22256-3.pdf.

[3] The generalized autoregressive conditional heteroskedasticity (GARCH) process is a broadly accepted method of estimating volatility in financial markets.

[4] This time period is intended to track the lifetime of Bitcoin, but it was extended to 2007 in order to illustrate the impact of the global financial crisis of 2008 and 2009 on the US dollar’s volatility.

The commentary, analysis, opinions, advice, and recommendations represent those of Strathmore Capital Advisors, Inc. (“Strathmore”) and are subject to change at any time without notice. The opinions referenced are as of the date of publication and are subject to change to due changes in the market or economic conditions and may not necessarily come to pass.  Strathmore reserves the right to modify its current investment strategies based on changing market dynamics or client needs.

This document may contain certain information that constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology. No assurance, representation, or warranty is made by any person that any of Strathmore’s assumptions, expectations, objectives, and/or goals will be achieved. There is no guarantee of the future performance of any Strathmore portfolio. This material is for information use only and should not be considered financial advice. The data presented has been gathered from sources believed to be reliable; however, their accuracy, completeness, or reliability cannot be guaranteed. We make no warranties and bear no liability for your use of this information.

Past performance is no guarantee of future results. Investments are subject to risk, and any of Strathmore’s investment strategies may lose money.  Diversification does not eliminate the risk of experiencing investment losses.

Strathmore is a registered investment adviser under the Investment Advisers Act of 1940.  Registration does not imply a certain level of skill or training. More information about Strathmore, including fees, can be found in Strathmore’s ADV Part 2, which is available free of charge.

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Taylor Faw Joins Strathmore as Chief Compliance Officer

Posted by John Charles Kernodle on January 27, 2021  /   Posted in General

Taylor FawStrathmore Capital Advisors is pleased to welcome Taylor Faw to our team as Chief Compliance Officer.

Prior to joining Strathmore, Taylor was a Lead Compliance Associate with Fairview Investment Services, LLC in Raleigh, North Carolina. He worked with a variety of investment advisers and investment companies to develop, implement, and maintain compliance programs and initiatives. Before working for Fairview, Taylor served as an Assistant Attorney General in the Enforcement Division of the South Carolina Securities Division. With the Securities Division, he focused on cases involving more advanced technological aspects, including market manipulation and digital assets. Taylor has a deep passion for informing and educating individuals to help them better succeed within their industry.

Taylor received his BS in Business Administration from the University of South Carolina’s Darla Moore School of Business in 2011. He also received his JD from the University of South Carolina School of Law in 2014.  He has previously served on the South Carolina Bar’s Judicial Qualification Commission, as well as the Enforcement Technology, Investment Adviser Training, and Enforcement Zones Project Groups with the North American Securities Administrators Association (NASAA).

As CCO at Strathmore Capital Advisors, Taylor will oversee all compliance-related initiatives such as annual statements, audits and reviews, marketing and social media, as well as growing his passion for educating others within the space.

Asking the Right Financial Questions

Posted by John Charles Kernodle on January 27, 2021  /   Posted in Newsletter

Any time we experience a significant event in the U.S., I often hear the question, “How will the markets react?” At these moments, the talking heads will go on TV and attempt to reassure investors that they have access to the investing Magic 8 Ball. They know how the markets will react, and they’re more than happy to tell you about it.

The problem is that the talking heads and the financial press aren’t asking the right question. We already know how the market will react. At some point, they’ll go up. At some point, they’ll go down. That’s how markets work. Attempting to predict what the markets will do next ignores investing fundamentals people like Benjamin Graham, Warren Buffett, and John Bogle have tried to pound into investors’ heads for decades.

The questions that matter are your questions. How much can you reasonably save in a year? How close are you to retiring? How do you want to use your money? Do you have others dependent on you for their financial security? All these questions share a common theme: It’s about you.

They also get to the heart of what matters most to individual investors. And yet, the financial press prefers to talk about an unknowable future that can’t be forecasted. Because markets can’t be predicted, it gives each round of “experts” more opportunities to pontificate. That’s why there’s a big difference between someone who tries to predict the markets to earn a headline and what we do at Strathmore Capitol to help you and your family. In fact, I think it’s fair to say it’s the exact opposite, and I hope it’s a philosophy that comes through every time we discuss your investment strategy.

The questions we care about answering are your questions. We use those answers to ensure we provide investment advice that fits your needs. The big question of the day for us isn’t what the markets might do next week but whether we’ve answered your questions in a way that helps you feel confident about reaching your goals.

There’s a reason that investing disclosures must include the line, “Past performance is no guarantee of future results.” No matter how good someone thinks they are about predicting what the market will do, there are no guarantees. But that hard truth doesn’t fit neatly in a headline. That’s why it’s so frustrating to hear people focus on questions that go beyond things investors can control.

As advisors, we want you to ask questions. But the right questions will have nothing to do with something so superficial as, “How will the markets react?” Instead, we’ll work with you to ask the questions that help secure your financial future.

With the start of a new year, I also want to wish you and yours a safe and healthy 2021. The last year has been a difficult one for us all. But I’m confident we’ll see good things happen during the next 12 months, and I look forward to answering your questions.

The Election Matters Little to Your Portfolio

Posted by John Charles Kernodle on October 10, 2020  /   Posted in Newsletter

It’s only October, and I suspect we know that 2020 will appear in history books for many reasons. From a global pandemic to our 2020 election, we’ve seen story after story flood our timelines and try to snag our attention. Today, I want to focus on a question we’re hearing more often at Strathmore Capital Advisors: “How will the presidential election affect the stock markets?”

I understand why this question is top of mind for many of you. You’ve worked hard, set goals, and made it a point to create a financial plan. The uncertainty of a presidential election can feel like it will undermine your efforts. But here’s the critical point I want to leave with you today.

The noise about this election has been loud and never-ending for months now. However, who we elect as president is just one of many, many factors that contribute to what we see happening in the market. So, while the talking heads continue to suggest that everything hangs in the balance with this election, the connection between the outcome and the stock markets is weak at best.

History tells us something much different. Consider the length of a U.S. president’s term. At four years (or eight years over two terms), we’re talking about a small window of time. The ability of any individual president to affect the long-term direction of the markets remains questionable.

For instance, if we go clear back to President Truman, we see a steady uptick in the value of stocks across both Republican and Democratic presidencies. Of course, we’ve seen markets wiggle and jump around since 1945, including several recessions and market corrections. But that movement creates the very value we’re trying to capture by investing in stocks.

The key point remains: We have no reason to think that who wins the election this year will matter more to the markets than the winner of any prior election.

I know that 2020 has proven a challenge for us all. But for this issue, I believe the more important point remains. A successful financial plan depends in large part on things within our direct control. We can’t predict what the markets will do or how people will vote. We can control how much we save, how much we invest, where we invest, and how we behave. All those factors matter so much more in the long-term than what happens in November.

That said, I do encourage you to vote. We’re very blessed to live in a country that guarantees the right of its citizens to select its elected leaders. But as you cast your vote, please know that the outcome will remain only one of many factors that we’ll weigh in the future to help you make the best financial decisions possible.

Picking Winners and Losers

Posted by John Charles Kernodle on September 10, 2020  /   Posted in Newsletter

Our world looks a lot different than it did seven months ago. Some of those changes are probably temporary. But other changes may prove more long-term or even permanent. One of those changes that sticks out is the work-from-home (WFH) trend.

This movement isn’t new to our current situation, but the widespread adoption, for at least the short-term, happened faster than expected. Some companies are talking about bringing workers back to the office during 2021, but other companies are making big structural changes. For instance, Pinterest paid $89.5 million to cancel the lease on its new San Francisco office.

Pause for a moment and consider that a company considered it more cost-effective to spend almost $90 million to leave an office space. Other companies, including Apple, Facebook, and Twitter, plan to continue offering WFH options for employees even after social distancing needs come to an end.

So, why should this matter to you? It’s a classic example of the domino effect. When one big trend starts to take hold in the economy, it affects other areas of the economy, too. Changes in how and where people work have affected and will continue to affect the different industries. For example, travel (airlines, hotels, rental cars), food (restaurants, grocery stores), clothing (business attire, casual wear), and digital services (video conferencing, internet providers) are just a few of the industries that will experience both positive and negative outcomes.

When we see a systemic change like this one (42% of the U.S. labor force now works remotely), how on Earth could anyone predict the winners and losers? The short answer: You can’t. That’s why Strathmore Capital’s investing strategy focuses on owning a broad and diversified portfolio of the global markets.

We don’t know yet how much business travel will return to “normal” or if people will continue to do more video conferencing. We don’t know how quickly restaurants will return to full, in-house dining. Plus, if fewer people are working in offices, what will happen to the business lunch?

There are hundreds of other examples of what might happen, but you get the idea. There’s a lot we don’t know about what the future holds, and WFH is just one of those variables. But utilizing a disciplined, long-term investment strategy means you don’t have to guess how any single variable will affect your portfolio. It leaves you with more time to focus on the goals that matter most to you.

Please know that no matter what trends may hit the headlines next, we’re here to help answer your questions and make sure your portfolio continues to match your goals. At Strathmore Capital, we’re committed to helping you navigate both the ups and downs that come our way.

There is value in having a financial plan and working with a close-knit team to stay on track. Please let us know if someone you know might enjoy speaking with the professionals at Strathmore Capital Advisors.

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