Happy March and welcome to the second installment of our Quarterly Download! Read on for our thoughts on the two year anniversary of the pandemic, ESG investing, and updates about new Miracle Mile family members!
We are pleased to share the next installment of our Quarterly Download. Read on for our thoughts on the two year anniversary of the pandemic, ESG investing, and updates about new Miracle Mile family members!
Last Friday marked exactly two years since the World Health Organization (WHO) declared COVID-19 a global pandemic prompting the equity markets to enter the fastest (and shortest) bear market on record. Here are several important financial concepts that proved crucial during the pandemic:
The best decision in investing is usually to do nothing. No matter how dire a market downturn may seem in the moment, it is almost always better to stick to your long-term investment plan. After the March 2020 market collapse, it only took five months for the S&P 500 to return to its pre-pandemic high, and it went on to double in value over the following two years.
Tax-loss harvesting matters and should be done when markets are down, not simply at the end of the calendar year. Opportunistic tax management (“realizing” losses to offset current/future gains) is especially valuable in market downturns. The pandemic and the current sell-off provide great opportunities to lower your future tax bill.
Carefully consider your assumptions when creating a financial plan. Future portfolio returns, cash flow needs, tax rates, and inflation are all key inputs into a good financial model. Make sure you have a significant cushion to allow for sudden changes such as inflation spiking from 1.2% in 2020¹ to 7% in 2021¹.
Continuously review your strategy and stress test it. Periodic evaluations of your long-term financial plan enable you to factor in changes to your life goals and economic environment. Financial decisions should clearly incorporate dollars and cents but they should also take into account your personal values, legacy goals, and emotional needs.
Virtual flexibility is here to stay. While the advice we give our clients has not changed, the way in which we give it has. Over 60% of client meetings are now done over Zoom, and we remain flexible to work and meet with clients in the office, over Zoom, or at your favorite restaurant.
KEY TAKEAWAYS
Here are some things of note from this quarter:
How to Incorporate Charitable Giving into Your Financial Plan: As the pandemic recedes, now is a great time to consider giving some of your excess liquidity to your favorite charities that may need it now more than ever.
A great option is to set up a Donor Advised Fund (DAF), which is essentially a tax-free brokerage account that enables you to secure a charitable deduction immediately upon contribution.
DAFs allow for the contribution of appreciated securities instead of cash, leading to savings in capital gains taxes. These savings paired with the charitable deduction can equate to ~70%-80% tax savings², all while making a positive impact on the world.
DAFs also provide the flexibility to make the distributions to charities at some point in the future.
We also employ a number of specialized strategies (charitable lead/remainder trusts, foundations, etc.) and are happy to discuss which is the right fit for you.
Inflation and Rising Interest Rates: Last week, Federal Reserve Chair Jerome Powell and the FOMC (Federal Open Market Committee) went forward with their widely anticipated 0.25% rate increase, and signaled at least 6 more rate hikes in 2022.
Powell mentioned the Russia-Ukraine conflict as a potential source of risk to the economy, but his primary goal is price stability.
The rate hikes were in line with expectations, and we see the U.S economy as strong enough to no longer need monetary support given a tight labor market and a cash-heavy consumer base.
We continue to maintain portfolio overweights in holdings that should benefit as interest rates rise, such as energy and transportation stocks, real estate, and lower duration fixed income.
We will continue to keep you informed on important market developments and portfolio shifts through our Investment Strategy Group’s flash communications.
Investing with a Conscience: Incorporating environmental, social, and governance (ESG) factors into one's investment process has reached critical mass over the past several years and has become an important consideration in portfolio construction going forward.
Using ESG strategies allows participants to invest in line with both their financial goals and personal values, focusing on issues such as clean energy, gender diversity, human rights, and board governance.
ESG strategies have evolved significantly over the past several years with the proliferation of high-quality, cost-effective fund options. Their exposure to clean energy and technology has enabled many of them to outperform their non-ESG peers with the notable exception of the past several months as oil has spiked.
Overall, we view ESG as being in the early-mid stages of transformation, but suitable for most clients who want to align their money with their values. We also expect the industry to continue to evolve with more consistent industry standards and better, more transparent impact investing options.
Please feel free to reach out if you want to learn more about how we utilize ESG strategies in portfolios and whether it might be a good option for you.
MIRACLE MILE HIGHLIGHTS
We are thrilled to add another Miracle Mile baby into the fold. Congratulations to our ownDimitry Farberov and his wife Rozaliya for bringing little Ami into the world!
We’re happy to welcome Ben (left) andEmil (right) to Miracle Mile! Ben is joining us as an Advisor in our New York office and Emil has joined the trading team as an Associate Trader. Both of them are bilingual… cruise their bios to find out which languages they speak!
FIRM RECOGNITION
Our team has been consistently recognized as leaders in our industry. Just last week, Kevin Koehler, our Director of Investment Strategy, presented on alternatives at the Private Wealth Management Summit, and earlier this quarter, our founder Brock Moseley spoke at the LA RIA summit.
Disclosures: Miracle Mile Advisors LLC (“MMA”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where MMA and its representatives are properly licensed or exempt from licensure. The information is illustrative, and is provided for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor. The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. All investments include a risk of loss that clients should be prepared to bear. The principal risks of MMA's strategies are disclosed in the publicly available Form ADV Part 2A. Past performance shown is not indicative of future results, which could differ substantially. This message is confidential and subject to terms at: https://miraclemileadvisors.com/disclosures/ including on awards/rankings, confidentiality, legal privilege, viruses and monitoring of electronic messages. If you are not the intended recipient, please delete this message and notify the sender immediately. Any unauthorized use is strictly prohibited.
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