Dear Clients and Friends,
If it be now, 'tis not to come. If it be not to come, it will be now. If it be not now, yet it will come - the readiness is all.
There are many linguistic gems in Shakespeare’s play Hamlet, the most famous being the soliloquy in which the central character ponders the existential question, “To be, or not to be?” Indeed, Hamlet is rich with other famous expressions that have since woven their way into modern vocabulary, such as “cruel to be kind,” “method in the madness,” and “neither a borrower nor a lender be.” [1] Our chosen quote may not be as renowned as those previously mentioned, but it comes at a key moment in the play’s fifth act, and we think it has applicability to our outlook for 2025
The gist of our chosen quote is inevitability, and we want to focus your attention on the last part of the phrase, “the readiness is all.” Of course, we are all familiar with the saying about the few things in life that are certain, namely death and taxes. These may be inevitable, but you and your heirs may still benefit from careful planning for both. Without intending to come across as grim (Hamlet was a tragedy, after all,) we think the start of the new year is the perfect time to take a fresh look at your estate and financial plan, especially as key estate and gift tax provisions of the 2017 Tax Cut and Jobs Act (TCJA) are set to expire at the end of this year. Though we anticipate the incoming Administration and Congress may take action to extend those provisions, your Evermay Wealth Advisor, along with your attorney, can help you review your evolving personal situation and be better prepared for potential changes in the law.
With this in mind, Evermay is excited to announce our new relationship with a third-party trusts and estates attorney, who will serve as counsel to Evermay, enabling us to better assist in estate plan evaluation services for clients with complex wealth transfer and philanthropic goals. And while not everyone has complicated trusts or even a will, actions as simple as reviewing and updating your retirement plan beneficiaries can go a long way toward ensuring your future wishes are carried out.
Recall that the TCJA also lowered the corporate tax rate to 21% from the prior 35% rate and does not expire at the end of the year. There was a great amount of pre-election debate over whether an incoming president might attempt to change the tax rate paid by corporations. The stock market responded favorably to Trump’s election victory, rallying at least in part on the possibility that the corporate tax rate will remain at the current level or even be reduced, thereby increasing after-tax corporate profits and company valuations.
The S&P 500 stock index finished the year up 25% in 2024,[2] continuing its upward trajectory despite facing brief periods of higher volatility during the year. This performance underscored the resilience of the U.S. economy, especially compared to other parts of the world, and the strength of US corporate earnings. Key sectors such as technology and communications also benefited from an affinity for all things “AI” (artificial intelligence) and resultant capital flows into this developing theme. Though we do have concerns about overall stock market valuation, we are pleased to note that several of the largest companies that comprise our equity holdings, whether held directly or via mutual or exchange-traded funds, have also been among the biggest beneficiaries of AI-related investment interest.
At least part of the US equity market’s strength can be attributed to changes in the bond market, as the Federal Reserve began lowering its target for the short-term Federal Funds interest rate, largely in response to reduced inflation worries. While bonds began 2024 with a steeply inverted US Treasury yield curve, the eventual return to a more normal interest rate environment (in which longer-term interest rates are higher than shorter-term rates) may warrant a fresh look at our bond holdings in the new year. Our clients’ portfolios have benefitted from our short-term US Treasury bond emphasis, as shorter-term bonds outperformed the longer-term aggregate bond index during the calendar year,[3] but the evolving rate environment may create opportunities to lock in higher rates for client accounts without taking undue risk. Such portfolio changes may not be inevitable, but we plan to be ready.
With best wishes for the new year,
Mitch Schlesinger
Chief Investment Strategist
[1] https://www.bellshakespeare.com.au/hamlet-fast-facts
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Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Evermay Wealth Management, LLC (“Evermay"), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Evermay. No amount of prior experience or success should not be construed that a certain level of results or satisfaction if Evermay is engaged, or continues to be engaged, to provide investment advisory services. Evermay is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the Evermay’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.evermaywealth.com.
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