EWM Weekly Capital Market Highlights for Week Ending 9/13/2019

By Financial Markets & Economy, Weekly Capital Market Updates
  • US equities were generally up for the week on hopes of easing US-China trade tensions.
  • The Yield on the 10-year US Treasury Note rose to 1.87%, a marked increase from a recent low of 1.46% on September 4 last week.
  • The US dollar declined slightly, relative to a basket of major currencies, ahead of expectations for a 25-basis-points rate cut at the September FOMC meeting.
  • Gold prices weakened on news of easing trade tensions and a fresh round of European stimulus.

Click here to download the complete weekly report: EWMWeeklyReview 9.13.19

Disclosure: Past performance is not necessarily indicative of future results.

Endowment Index™ Gains 0.94% for Week Ending 9/13/2019

By Endowment Index™
The Endowment Index™ calculated by Nasdaq OMX® (Symbol: ENDOW) closed at 1,308.54 Friday, increasing 0.94% from the previous Friday’s close of 1,296.36. The Endowment Index™ represents the investable opportunity for managers of portfolios utilizing the Endowment Investment Philosophy™ or otherwise incorporate alternative investments within a comprehensive asset allocation strategy. The Endowment Index™ measures performance for a multi-asset, globally-diversified, three-dimensional portfolio that includes Global Equity, Global Income, and Alternative Investments (like Private Equity, Hedge Funds and Real Assets). The Index uses an objective, rules-based construction methodology based upon the portfolio allocations of over 800 educational institutions managing over $615 billion in total assets. Each of the 19 sub-indexes that currently comprise the index are investable, and contained within those sub-indexes are over 34,000 underlying securities. You can obtain real-time pricing data on the Endowment Index™ under the symbol “ENDOW” through major quote providers, including Bloomberg, Google Finance and others. The Morningstar® Index ID for the Endowment Index™ is F00000TPG6. Past performance is not necessarily indicative of future results. You cannot invest directly in an index. Indexes do not contain fees.

EWM Weekly Capital Market Highlights for Week Ending 9/6/2019

By Financial Markets & Economy, Weekly Capital Market Updates
  • US equities traded broadly higher this week, with the indices up between 1% and 2%. Non-US equities also rose, with the regional indices up 1.5%-2.0%.
  • The Yield on the 10-year US Treasury Note drifted higher in the holiday-shortened week. The 3-month / 10-year Treasury curve remains inverted, with the Treasury bill yield roughly 40 basis points higher.
  • The US dollar finished weaker against a basket of currencies, reflecting both rising expectations of a Fed rate cut later this month and renewed optimism over trade talks with China.
  • Gold was down slightly on the week after rallying more than 2% through mid-day Wednesday.
  • Oil prices were up slightly from their pre-holiday close. A sharp rally on Wednesday erased Tuesday’s losses. Prices have been tightly range bound since early August.

Click here to download the complete weekly report: EWMWeeklyReview 9.9.19

Disclosure: Past performance is not necessarily indicative of future results.

Endowment Index™ Rises 1.66% for Week Ending 9/6/2019

By Endowment Index™
The Endowment Index™ calculated by Nasdaq OMX® (Symbol: ENDOW) closed at 1,296.36 Friday, increasing 1.66% from the previous Friday’s close of 1,275.17. The Endowment Index™ represents the investable opportunity for managers of portfolios utilizing the Endowment Investment Philosophy™ or otherwise incorporate alternative investments within a comprehensive asset allocation strategy. The Endowment Index™ measures performance for a multi-asset, globally-diversified, three-dimensional portfolio that includes Global Equity, Global Income, and Alternative Investments (like Private Equity, Hedge Funds and Real Assets). The Index uses an objective, rules-based construction methodology based upon the portfolio allocations of over 800 educational institutions managing over $615 billion in total assets. Each of the 19 sub-indexes that currently comprise the index are investable, and contained within those sub-indexes are over 34,000 underlying securities. You can obtain real-time pricing data on the Endowment Index™ under the symbol “ENDOW” through major quote providers, including Bloomberg, Google Finance and others. The Morningstar® Index ID for the Endowment Index™ is F00000TPG6. Past performance is not necessarily indicative of future results. You cannot invest directly in an index. Indexes do not contain fees.

Endowment Index™ Gains 1.55% for Week Ending 8/30/2019

By Endowment Index™
The Endowment Index™ calculated by Nasdaq OMX® (Symbol: ENDOW) closed at 1,275.17 Friday, increasing 1.55% from the previous Friday’s close of 1,255.68. The Endowment Index™ represents the investable opportunity for managers of portfolios utilizing the Endowment Investment Philosophy™ or otherwise incorporate alternative investments within a comprehensive asset allocation strategy. The Endowment Index™ measures performance for a multi-asset, globally-diversified, three-dimensional portfolio that includes Global Equity, Global Income, and Alternative Investments (like Private Equity, Hedge Funds and Real Assets). The Index uses an objective, rules-based construction methodology based upon the portfolio allocations of over 800 educational institutions managing over $615 billion in total assets. Each of the 19 sub-indexes that currently comprise the index are investable, and contained within those sub-indexes are over 34,000 underlying securities. You can obtain real-time pricing data on the Endowment Index™ under the symbol “ENDOW” through major quote providers, including Bloomberg, Google Finance and others. The Morningstar® Index ID for the Endowment Index™ is F00000TPG6. Past performance is not necessarily indicative of future results. You cannot invest directly in an index. Indexes do not contain fees.

EWM Weekly Capital Market Highlights for Week Ending 8/23/2019

By Financial Markets & Economy, Weekly Capital Market Updates
  • US equities seesawed most of the week on worries about a potential recession in the US as well as an escalation of the trade war with China. The S&P 500 Index lost more than 2.5% on Friday after President Trump ordered US companies to “find an alternative to China,” which followed China’s announcement that it would impose new tariffs on $75 billion of US goods. International equities followed a similar pattern, with both developed and emerging markets erasing earlier gains.
  • Treasury yields increased across the board, with the yield on the 2-year note increasing more than that of the 10-year note. During the week, the yield curve inverted three times.
  • The Markit Flash Manufacturing PMI dropped to 49.9 this month, falling below 50 for the first time in about ten years. The index also was lower than the 50.3 reading forecast by economists in a WSJ survey.
  • The Conference Board Leading Economic Index (LEI) ticked up 0.50% from the previous month to 112.2 in July, which signals that the economy will continue to expand in the second half, albeit at a slower pace.
  • The University of Michigan’s preliminary August survey showed that consumer sentiment fell to 92.1 in August from the 98.4 level reached in July. The reading, which was well below the market consensus of 97.2, was the lowest since January, and reflects growing concerns of an economic downturn and stock market volatility.

Click here to download the complete weekly report: EWMWeeklyReview 8.26.19

Disclosure: Past performance is not necessarily indicative of future results.

Endowment Index™ Declines 0.33% for Week Ending 8/23/2019

By Endowment Index™
The Endowment Index™ calculated by Nasdaq OMX® (Symbol: ENDOW) closed at 1,255.68 Friday, declining 0.33% from the previous Friday’s close of 1,259.85. The Endowment Index™ represents the investable opportunity for managers of portfolios utilizing the Endowment Investment Philosophy™ or otherwise incorporate alternative investments within a comprehensive asset allocation strategy. The Endowment Index™ measures performance for a multi-asset, globally-diversified, three-dimensional portfolio that includes Global Equity, Global Income, and Alternative Investments (like Private Equity, Hedge Funds and Real Assets). The Index uses an objective, rules-based construction methodology based upon the portfolio allocations of over 800 educational institutions managing over $615 billion in total assets. Each of the 19 sub-indexes that currently comprise the index are investable, and contained within those sub-indexes are over 34,000 underlying securities. You can obtain real-time pricing data on the Endowment Index™ under the symbol “ENDOW” through major quote providers, including Bloomberg, Google Finance and others. The Morningstar® Index ID for the Endowment Index™ is F00000TPG6. Past performance is not necessarily indicative of future results. You cannot invest directly in an index. Indexes do not contain fees.

EWM Weekly Capital Market Highlights for Week Ending 8/16/2019

By Financial Markets & Economy, Weekly Capital Market Updates
  • Emerging markets hit a rough patch. Argentina showed it was not immune to political risks, as its stock market plummeted 48% after poll results, sending a shockwave across financial markets. The Argentinian peso also felt the heat after it closed more than 7% weaker against the dollar. China’s economy showed signs of struggle after growth in industrial output and retail sales data slowed.
  • European stock markets extended their losing streak. The decline was led by Britain’s FTSE 100, which dropped to a six-month low. Further gloom  prevailed in the markets as Germany’s economy shrank in the second quarter, driven by a decline in exports, signaling recession.
  • Within commodities, gold rallied, while oil continued to tumble. This activity echoed prevailing market sentiment.
  • Shares of General Electric tanked. The stock plummeted 11% after a private financial investigator accused the firm of indulging in accounting fraud at a magnitude higher than that of the Enron scandal.
  • Inflation accelerated in the US. The Consumer Price Index rose a seasonally adjusted 0.30% last month from June, which was driven by the Energy, Health Care, and Real Estate sectors and the transportation industry.

Click here to download the complete weekly report: EWMWeeklyReview 8.19.19

Disclosure: Past performance is not necessarily indicative of future results.

Endowment Index™ Declines 0.44% for Week Ending 8/16/2019

By Endowment Index™
The Endowment Index™ calculated by Nasdaq OMX® (Symbol: ENDOW) closed at 1,259.85 Friday, declining 0.44% from the previous Friday’s close of 1,265.43. The Endowment Index™ represents the investable opportunity for managers of portfolios utilizing the Endowment Investment Philosophy™ or otherwise incorporate alternative investments within a comprehensive asset allocation strategy. The Endowment Index™ measures performance for a multi-asset, globally-diversified, three-dimensional portfolio that includes Global Equity, Global Income, and Alternative Investments (like Private Equity, Hedge Funds and Real Assets). The Index uses an objective, rules-based construction methodology based upon the portfolio allocations of over 800 educational institutions managing over $615 billion in total assets. Each of the 19 sub-indexes that currently comprise the index are investable, and contained within those sub-indexes are over 34,000 underlying securities. You can obtain real-time pricing data on the Endowment Index™ under the symbol “ENDOW” through major quote providers, including Bloomberg, Google Finance and others. The Morningstar® Index ID for the Endowment Index™ is F00000TPG6. Past performance is not necessarily indicative of future results. You cannot invest directly in an index. Indexes do not contain fees.

Do You Have an Exit Strategy for your Rental Properties?

By Estate Planning, Retirement, Tax Planning, Wealth Management

Owning rental properties is one of the most common investments that Americans make along with their 401k or other retirement accounts. The primary reason why real estate is so popular is because it is easy to understand from an investment standpoint. There are four primary wealth builders associated with real estate; the rental income, price appreciation, loan pay down (equity) and the tax benefits. Additionally, the ability to use leverage (borrow money to purchase a property) makes real estate investing accessible to many people and not just the rich. All of the reasons listed above are why many Americans end up nearing retirement with a few rental properties or in some cases, a substantial real estate portfolio, without a clear exit strategy.

Let’s go over an example to explain how an investor’s real estate investing career may unfold. The investor bought six rental properties over the past few decades for $75,000 each. The properties are fully depreciated and entirely paid off. Throughout the years, the properties have all appreciated and are currently worth $200,000 each. The investor is interested in selling and finding a more “passive” investment vehicle until he realizes the tax ramifications associated with selling the properties. One option for the investor is to hire a property manager. The investor could achieve his desire for a more passive involvement and would not have to pay the taxes that would be due with a sale, however, the headaches of owning real estate do not go away when one hires a property manager. The owner is still responsible for the repairs and expenses and all of their associated costs. Remember, these properties have been owned for decades, they are older and have seen their maintenance costs tick up as they continue to age. Major potential repairs such as fixing a roof or replacing major appliances can seriously threaten an investor’s “stress-free” retirement.

After much thought and debate with his wife, (who by the way I forgot to mention wants nothing to do with the rentals and prefers to be able to travel extensively throughout retirement; often being gone for weeks or months at a time), he decides to sell the rentals and face the significant tax liability. His decision to sell only lasts a few days until he realizes the second major problem of selling the rentals, which is the loss of the income stream during retirement. The income can be replaced with a new investment but the amount in the new investment will be considerably lower after the taxes are paid from the initial sale. Since the amount invested will be lower, the new income stream will likely be lower too.

Afraid of the drawbacks listed above, our investor and many owners of investment real estate simply deal with the headaches of being a landlord and continue to hold the rentals throughout retirement in conflicting views with their spouse. However, there is another option that will allow an investor to sell their rental properties, defer the capital gains (potentially forever) and maintain their current stream of monthly income without the headaches of being a landlord. That option is a DST 1031 exchange into a real estate fund.

A 1031 exchange is a method to exchange an investment property for another “like-kind” investment property and avoid the tax implications from the initial sale. A Delaware Statutory Trust (DST) is a legally recognized trust for conducting business and can be used in a 1031 exchange. The replacement property now becomes an interest in a professionally managed real estate fund.

The benefits of a DST 1031 exchange can be substantial with the primary benefit being the ability to defer capital gains and depreciation recapture. The taxes are deferred until the real estate fund liquidates and distributes the proceeds of the sale. Once the fund is liquidated, the investor has the option to invest the proceeds received into another DST 1031 exchange in order to defer the taxes again. The investor can continue to defer, defer, defer until the original owner passes away. The heirs will receive a step up in cost basis, effectively eliminating the taxes owed from the original sale of the investment real estate. This deferment of taxes is a powerful wealth building strategy that can accelerate the growth of a family’s wealth.

The second benefit of a DST 1031 exchange is the elimination of property management responsibility. As with other passive investments, the investor will not have to make decisions regarding the investment management. Dealing with tenants will be over and the only work required will be the monthly walk to the mailbox to pick up the check.

Diversification is the third benefit achieved. The investor is able to diversify from a concentrated property in one location into a more diversified fund with several properties in different geographical locations. Examples of some property types available include multi-family apartments, NNN retail, self-storage, assisted living facilities, office buildings and medical offices. Often these newer commercial buildings are unattainable to the individual investor but a real estate fund pools the assets of many investors and can access these newer commercial property types.

The final benefit associated with a DST 1031 exchange is the use of the 20% qualified business income (QBI) deduction. This deduction, which was passed with the 2017 Tax Cuts and Jobs Act, allows eligible taxpayers to deduct up to 20% of their qualified business income. Individual owners may not qualify for the 20% QBI since they’re not in the business of owning and managing real estate but since the real estate fund is in the business of managing real estate, the fund qualifies for the 20% reduction.

In conclusion, the DST 1031 exchange provides an investor with a great exit strategy for their real estate portfolio. The headaches of being a landlord are eliminated, the tax liability from selling the properties is deferred (or in some cases eliminated through a step up in cost basis), and the investor benefits from the 20% QBI deduction and continues to receive monthly income from a real estate investment fund.

To learn more, please visit our 1031 exchange webpage at www.EndowmentWM.Com/1031-exchange or contact us by phone at 920-785-6010.

Have Questions? Need an expert opinion?

If you have more questions I’m happy to help you! We make getting answers super easy, without having to talk to some high-pressure sales person. Just use the secure contact form to ask a question, or email me directly at Sam@EndowmentWM.com, and I’ll get back to you via email within 48 hours to help point you in the right direction. I also offer a free wealth discovery meeting where we can discuss your personal situation and make sure you’re on the right path. Remember, it’s free to contact us and we are fiduciary advisors putting your personal needs first and foremost.

Best of Success,

Samuel Moore