Life with Money | One Step Forward

The fragility of market recoveries; plus a silver lining in a down market.

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Life with Money

As occurred in July through mid-August of this year, stock markets around the world have seen significant gains in October and November 2022. The total US stock market rose about 8% in October and 5% in November. International stocks increased 3% in October and 13% in November. Bond prices have also gone up recently, with gains between 1.5% and 4% for November depending on maturity and credit risk. These bond price increases have accompanied substantial declines in interest rates, with the benchmark 10-year Treasury falling from 4.3% in mid-October to 3.7% at the end of November.

What’s been driving these gains?

As always, many factors come into play, but the most significant appear to be the recent declines, albeit modest, in inflation rates around the world. This has encouraged hopes among investors that the US Federal Reserve and other central banks will begin to moderate recent interest rate increases in their attempts to slow inflation.

The big question is whether these gains will persist and mark the beginning of a recovery from the still-significant declines of 2022. Or will they disappear in the face of higher inflation and/or other factors, as they did over the summer?

Park Piedmont Advisors (PPA) doesn’t make predictions about short-term market price movements. There are simply too many moving pieces that we know about, along with a long list of possible factors that we don’t yet know anything about. That’s why we encourage our clients to stick with asset allocations appropriate to their long-term financial situations, making changes as situations change, not in response to markets rising or falling over weeks or months.

Reach out to Park Piedmont Advisors if you have questions or concerns as we go through these challenging, uncertain times together.

Tax Loss Harvesting: Silver Lining in a Down Market

With stock and bond prices still down significantly for 2022, one opportunity for a “silver lining” comes in the form of tax loss harvesting. This involves selling investments in taxable accounts that have declined in price, thereby “realizing” losses. (Tax loss harvesting doesn’t apply to retirement accounts like 401Ks and IRAs.) These losses can be used to offset gains from sales of capital assets, including investments and real estate. If the losses exceed the gains for a specific year, you can typically deduct up to $3,000 of ordinary income on your tax return for that year. Any losses beyond the offset of gains and the annual deduction for the current year can be “carried forward” indefinitely. It’s a good idea to check with your tax professional before deciding whether, and if so, how much, tax loss harvesting to pursue in a particular year.

If you decide to do some tax loss sales, Park Piedmont Advisors typically recommends reinvesting the sale proceeds in similar investments to maintain the asset allocations we’ve developed with you. (The “wash sale” rule disallows the loss if you buy back into the same investment you sold within 30 days of the sale.) Depending on the amount of the sale proceeds, it might also make sense to re-invest over time, which we often refer to as “dollar cost averaging.”

Please feel free to contact Park Piedmont Advisors to discuss whether tax loss harvesting makes sense for you.

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Contact 20-year Piedmont resident Nick Levinson to learn more:

Founded in 2003 as an alternative to the Wall Street advisory model, Park Piedmont Advisors (PPA) is an independent, multigenerational family-owned firm, dedicated to client-centered relationships. Decades of experience inform our straightforward approach to investment and financial advising; we help our clients protect, build, and share their wealth in a low-cost, tax-efficient manner.

As a fiduciary, we provide thoughtful advice to individuals, families, and the retirement plans of small businesses and non-profit organizations (including 401(k), 403(b), and defined benefit plans). And through our advisory process, we help clients gain insight into the ways financial decision-making can express and transmit their core values.

Park Piedmont Advisors 

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