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Markets Surge on War Hopes, Oil Shock Reshapes Outlook · The Financial Exchange Show

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Speaker 2: Well, we've got one quarter in the books of twenty
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Speaker 2: twenty six for this stock market year, and we ended
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Speaker 2: yesterday's quarter with a tremendous day for equities. Paul Lane,
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Speaker 2: Mark Vendetti, and Tucker Silver here with you if you're
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Speaker 2: just tuning in or did not happen to see where
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Speaker 2: markets closed yesterday. It was a tremendous day across equity markets,
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Speaker 2: where we saw the S and P five hundred closing
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Speaker 2: out up close to about three percent, come clocking in
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Speaker 2: about two point nine percent. The Nasdaq, which is a
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Speaker 2: more tech heavy sector, was up upwards of three and
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Speaker 2: a half percent, closing the day up almost close to
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Speaker 2: four percent, and we had the Dow Jones up close
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Speaker 2: to three percent as well, shading around two and a
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Speaker 2: half percent. So just a tremendous day for equities as
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Speaker 2: there was some continued optimism that perhaps the war with
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Speaker 2: Iran would come to a halt. We have that optimism
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Speaker 2: sort of percolating through markets today as we're about forty
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Speaker 2: minutes into the trading day with the S and P
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Speaker 2: five hundred up over a half percent and the Dow
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Speaker 2: Jones is up over two hundred and fifty points at
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Speaker 2: the moment, and that's what we will start is kind
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Speaker 2: of a recap from what was yesterday. Aside which was
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Speaker 2: a very good day for markets, not a particularly good
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Speaker 2: quarter for stocks in general. We had the S and
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Speaker 2: P five hundred off about five percent over the first
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Speaker 2: three months of the year. We had the NASDAC down
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Speaker 2: about seven percent, and the Dow Jones was off about
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Speaker 2: four percent as well. And this comes against a backdrop
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Speaker 2: where earnings from companies within the S and P five
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Speaker 2: hundred have actually been quite strong. We've seen six straight
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Speaker 2: quarters of double digit earnings growth for companies in the
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Speaker 2: S and P five hundred. We started this year with
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Speaker 2: a tremendous amount of optimism that perhaps we would see
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Speaker 2: two cuts from the Federal reserve easing monetary policy that
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Speaker 2: was priced in at about an eighty percent probability heading
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Speaker 2: into twenty twenty six. The chances of that, with everything
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Speaker 2: that's gone on recently between the US and Iran and
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Speaker 2: this you know, spectacular surge and energy prices, that probability
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Speaker 2: of two rate cuts this year sits at only about
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Speaker 2: a five percent chance of the moment far likely. Looking
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Speaker 2: at interest rate futures, that rates will stay the same
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Speaker 2: as we're battling, you know, gas that has surged to
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Speaker 2: over four dollars a gallon nationally. Here, Really it has
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Speaker 2: gone to a point where we are sort of looking
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Speaker 2: at this was quoted in one of the pieces of
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Speaker 2: Stay a single variable market where oil and this conflict
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Speaker 2: between the US and Iran really takes the forefront focus
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Speaker 2: for all investors out there. We have seen oil prices
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Speaker 2: surge sixty three percent since February twenty eighth, and it
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Speaker 2: continues to have a trickle down impact to many different
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Speaker 2: areas of the global apply chain for things like illuminium
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Speaker 2: and fertilizer products. There's just a lot of commodity shocks
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Speaker 2: that we've seen through the last month or so, and
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Speaker 2: a quarter that, like I said, mark was not particularly strong.
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Speaker 2: Of course, the energy sector did perform quite well, but
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Speaker 2: looking at the rest of the remaining sectors, the S
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Speaker 2: and P five hundred not a strong quarter for markets.
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Speaker 3: Yeah, going into the new year, the concern was, and
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Speaker 3: this is a little bit retrospective because.
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Speaker 4: We now know.
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Speaker 3: We now have final unemployment and growth data for the
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Speaker 3: end of twenty twenty five, but the concern was the
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Speaker 3: economy was slowly twenty twenty five was a much slower
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Speaker 3: growth year. GDP grew about two point two percent. Prior
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Speaker 3: year was two point eight or two point nine. Year
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Speaker 3: before that was two point nine or two point eight
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Speaker 3: I forget which. So growth slowed by a lot in
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Speaker 3: twenty twenty five and we had no job creation. So
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Speaker 3: the thinking was, well, the Fed's got to stimulate demand,
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Speaker 3: goose the economy, and that'll probably be good for equities,
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Speaker 3: that'll be good for earnings. And then of course we
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Speaker 3: get hit with this war in the Middle East, and
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Speaker 3: that changes everybody's calculus. It exacerbates concerns about the slowdown
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Speaker 3: in demand because we're all paying more for energy prices.
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Speaker 3: That means where you're spending less on everything else, and
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Speaker 3: it also amplifies inflation pressures. The FED went from maybe
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Speaker 3: cutting once or twice to entertaining the idea, though not
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Speaker 3: that seriously at this point, that rates may actually have
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Speaker 3: to go up if even though the FED can't control
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Speaker 3: oil prices, the FED can control inflation expectations, and it
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Speaker 3: can control how much we spend on everything else. So
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Speaker 3: it has to decide whether they want to accommodate this
5:38
Speaker 3: huge stagflationary shock. The biggest in fifty years. I'm not
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Speaker 3: sure markets have come to terms with how big this shock.
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Speaker 3: I'm not talking recession, by the way, Stagflation doesn't necessarily
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Speaker 3: and the stag is the growth part stagnation.
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Speaker 4: The inflation is the inflation part. Obviously.
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Speaker 3: I don't think we're at the point where serious people
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Speaker 3: should be talking about recession, but we are way past
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Speaker 3: the point where this is going to push inflation.
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Speaker 2: Up, way past the point.
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Speaker 3: I'm sorry, the oil price in the oil price shock.
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Speaker 4: Pardon me, I didn't explain that.
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Speaker 3: Well, yeah, the oil price shock will.
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Speaker 4: Increase headline inflation. Oh, that question is you know how much?
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Speaker 4: That's that's for how much? And that's trivial?
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Speaker 2: How long triput?
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Speaker 4: How much? How long?
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Speaker 3: What is the FED? Maybe we'll get into it later
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Speaker 3: in the program. I don't want to get on my
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Speaker 3: FED rent too early. There's always plenty of time for me.
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Speaker 4: To do that, because you're very generous.
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Speaker 3: But I don't feel like I answered you. I feel
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Speaker 3: like it went off the rails a little bit there.
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Speaker 2: No, I think it's sets. It's at the table nicely.
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Speaker 2: We're kind of recapping what was a tumultuous first quarter
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Speaker 2: for for equity markets. It's largely due to everything post
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Speaker 2: February twenty's they're.
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Speaker 3: Trading on one phenomenon right right implications for other things,
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Speaker 3: but it's all about that.
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Speaker 2: It just seems like forever ago when we had the
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Speaker 2: Supreme Court ruling on tariffs, which was a significant issue
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Speaker 2: heading into this year, that seems like a mere footnote
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Speaker 2: at this point in time. And the concerns over the
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Speaker 2: labor market were probably the other one that I'd point
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Speaker 2: to heading into twenty twenty six as to an area
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Speaker 2: of the economy that we as investors are people who
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Speaker 2: follow this stuff and just people who follow the markets
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Speaker 2: in general, were most concerned about. Because of that point
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Speaker 2: that you made in twenty twenty five, we really had
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Speaker 2: minimal job creation and all, and that trend hasn't deviated
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Speaker 2: from that really in terms of what we've seen for
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Speaker 2: the first few months of data here from the start
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Speaker 2: of twenty I mean.
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Speaker 3: That's not look if you were in the well, inflation
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Speaker 3: still needs to come down a little bit to achieve
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Speaker 3: the FEDS two percent long term goal. Continued normalism, I'm
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Speaker 3: gonna call it normalization of the labor market, though many
7:47
Speaker 3: would disagree with that. Characterization a continued slow down less
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Speaker 3: controversial way to say it was probably welcome. That's what's necessity.
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Speaker 3: You've got to slow it down. You've got to slow
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Speaker 3: things down to reduce inflation. Now, of course, you've got
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Speaker 3: this oil price shock, and it just it's the biggest
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Speaker 3: mess I've ever seen or read about. Frankly, inflation above target,
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Speaker 3: fiscal policy totally out of control, six to seven percent
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Speaker 3: of GDP deficits. We've got no room there of God forbid.
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Speaker 3: The government does have to spend a lot of money
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Speaker 3: in a short period to fight a recession for example,
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Speaker 3: or something. Mean, they'll do it, but it's going to
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Speaker 3: have dire implications for interest rates. Things are really a
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Speaker 3: mess right now in many ways.
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Speaker 2: We did get some economic data that came out this morning.
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Speaker 2: The retail sales reports was released this morning at eight
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Speaker 2: thirty a m. We did see that consumer spending this
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Speaker 2: is for the month of February, did surpass economist expectations,
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Speaker 2: coming in at about zero point six percent. That was
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Speaker 2: above alest expectations, about a half percent increase. In terms
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Speaker 2: of the area where we saw the most spending momentum.
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Speaker 2: We saw in department stores and just retailers in general
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Speaker 2: saw a two to three percent increase on the spending front.
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Speaker 2: Also saw some increases on clothing and sports goods, hobby
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Speaker 2: and musical instrants, and bookstore sales. All of those were
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Speaker 2: up upwards of two percent or one percent in terms
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Speaker 2: of what we saw on the retail sales side of things. Again,
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Speaker 2: this is something that is something we track the retail
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Speaker 2: sales to kind of gauge the health of the consumer.
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Speaker 2: It is backwards looking to February of twenty eight. All
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Speaker 2: of the things that we're dealing with on the inflationary
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Speaker 2: front really haven't trickled through to the impact of March's
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Speaker 2: data that we'll get at a later point in time,
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Speaker 2: so it's not really moving markets much at all. Really,
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Speaker 2: the major focus continues to be everything that's going on
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Speaker 2: between the US and I ran what we're looking at
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Speaker 2: here on the energy energy market fronts, we do have
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Speaker 2: oil prices falling just shy of about one hundred dollars
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Speaker 2: a barrel and ninety nine dollars a barrel on West
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Speaker 2: Texas Intermediate Brent is down about two two points six
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Speaker 2: percent to one o one a barrel, and like I said,
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Speaker 2: overall with markets in general still that can continued enthusiasm
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Speaker 2: from what we saw was again a tremendous day yesterday. Again,
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Speaker 2: a lot of this is tied to optimism regarding the
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Speaker 2: war between US and I Ran, but no real critical
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Speaker 2: developments that you could point to to say that perhaps
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Speaker 2: there is oil you know, flowing through the straight up
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Speaker 2: Horo moves or anything like that.
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Speaker 3: It's interesting to see, uh, for all these these these
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Speaker 3: wild swings, they seem rational to me. I mean, if
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Speaker 3: if you think there's even a small chance that this
10:37
Speaker 3: that that that Washington or Tehran are telling the truth.
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Speaker 3: One side says, yeah, we're almost there, we got a deal.
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Speaker 3: The other side says, I'm sorry, we're not even talking
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Speaker 3: to these people. But if there's even a small chance
10:47
Speaker 3: that we're closed, it does make sense that markets would
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Speaker 3: rally strongly and oil would would would would slide.
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Speaker 4: It's just hard to keep up.
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Speaker 2: It is really hard to keep up. We're going to
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Speaker 2: take a quick break here on the financial exchange. When
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Speaker 2: we come back, we're you're talking a little bit more
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Speaker 2: about some of the sector performance in what was a
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Speaker 2: really rough quarter for the S and P five hundred.
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Speaker 2: That's right off this break here, on the Financial Exchange.
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12:07
Speaker 2: Here's what worked during a rough quarter for markets a
12:10
Speaker 2: PC here from the Wall Street Journal. Surprise, not much
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Speaker 2: worked at all during this quarter spoiler alert. Really only
12:18
Speaker 2: the energy sector. As many of you can imagine as
12:21
Speaker 2: you fill up at your local pump, that was the
12:23
Speaker 2: only real area that was a bright spot for equity
12:27
Speaker 2: markets in Q one of this year. We had the
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Speaker 2: energy sector upwards of thirty five percent in the first
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Speaker 2: quarter of the year. And what was interesting that I
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Speaker 2: have been continually focused on in just the sector breakdown
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Speaker 2: in general, there's eleven sectors of the S and P
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Speaker 2: five hundred, which is the benchmark that we most commonly
12:48
Speaker 2: fallen in many other investors too, in terms of how
12:50
Speaker 2: the US stock market is performing in a given year.
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Speaker 2: And one of the areas that I focus on a
12:56
Speaker 2: lot when talking with clients, Mark is that it is
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Speaker 2: important to have that diversification across different sectors, because if
13:02
Speaker 2: you study the sector performances year over year, you can
13:07
Speaker 2: fall guilty into a pattern of just saying, well, why
13:09
Speaker 2: don't I just have all my money in tech because
13:12
Speaker 2: tech has just you know, kicked but for the last
13:15
Speaker 2: just decade off and on, and you know, the last
13:18
Speaker 2: three years are no exception to that, where tech was
13:20
Speaker 2: really the focum of growth that we saw from equity markets,
13:23
Speaker 2: but year to date it's off about nine percent. One
13:26
Speaker 2: of the weaker performing sectors Consumer discretionary also an area
13:30
Speaker 2: that has shown some weakness as well. It has been staples,
13:33
Speaker 2: which would be companies like Procter and Gamble, Colgate, Palmola,
13:37
Speaker 2: for example. The staples that have fared far better. Energy
13:41
Speaker 2: markets and energy companies have fared well to and materials.
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Speaker 2: Those have been the three areas that have have hung
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Speaker 2: up pretty well from a performance perspective. But many of
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Speaker 2: the others that I mentioned though, those are fewer in number,
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Speaker 2: perhaps like the information technology and communication and services. Yeah,
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Speaker 2: that's only two of the eleven, but they are the
14:02
Speaker 2: most important two of the eleven, and financials would be
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Speaker 2: the third one. Those three from a waiting perspective, are
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Speaker 2: really significant in terms of their impact. When you're watching
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Speaker 2: the S and P on a daily basis, the tech sector,
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Speaker 2: the financials, and consumer distrectionary, you get up to close
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Speaker 2: to fifty percent of the waiting of the market in general.
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Speaker 2: So looking forward in terms of the sector rotation, it
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Speaker 2: does seem like investors are focusing in times of volatility.
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Speaker 2: There tends to be a little bit of piling into
14:32
Speaker 2: more value focused companies that tends to land into companies
14:37
Speaker 2: that might be consumer staples or utilities, et cetera. And
14:41
Speaker 2: so that really is the backdrop of where we sit
14:44
Speaker 2: from a market perspective. There has been some individual stocks
14:46
Speaker 2: that have benefited from some of these market movements. CF
14:50
Speaker 2: Industries in particular. They are a producer of nitrogen fertilizer
14:55
Speaker 2: that is a US domestic company. They use natural gas
14:59
Speaker 2: to produce that fertilizer. We've seen nack gap prices in
15:03
Speaker 2: Europe rise upwards of sixty percent, where gnat gas increases
15:08
Speaker 2: domestically here in the US have been far more moderate
15:10
Speaker 2: in comparison to that. So that has been a stock
15:13
Speaker 2: that has benefited in some other companies that are in
15:16
Speaker 2: sort of that agriculture fertilizer space that are domestic a
15:19
Speaker 2: little bit more immune to some of the overall global
15:22
Speaker 2: supply shocks. So it's been an interesting quarter Your day
15:26
Speaker 2: and sort of re emphasizing that the energy sector can
15:29
Speaker 2: be really a bus cycle, a bus sector over many years,
15:33
Speaker 2: but it's important to have that diversification.
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Speaker 3: Yeah, you brought up tech and I giggled like an idiot,
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Speaker 3: But because it's not an unreasonable thing for somebody to say, well,
15:41
Speaker 3: why not just invest in the highest growth sector, and
15:43
Speaker 3: tech is it's had the highest growth by any measure,
15:47
Speaker 3: and it's also got the highest perspective growth. That doesn't
15:50
Speaker 3: mean things are going to pan out for and that's
15:52
Speaker 3: the way investors are pricing those stocks today, and that
15:56
Speaker 3: leads to the key point that well it's priced accordingly.
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Speaker 3: So the tech sector is worth about twenty five trillion dollars.
16:08
Speaker 3: That's nearly as much as the economy. GDP is about
16:12
Speaker 3: thirty Remember the old Buffett rule. When the stock market
16:15
Speaker 3: gets as big as or bigger than the economy, things
16:18
Speaker 3: might be investors might be getting ahead of themselves. Now
16:21
Speaker 3: Peck is as big as all. So and when I
16:24
Speaker 3: say as big, I'm talking about market capitalization market cap
16:30
Speaker 3: of the S and P five hundred. This cannot I'm
16:34
Speaker 3: pulling data from morning Star here, it can't be right.
16:37
Speaker 3: I want to say something like seventy trillion. This has
16:40
Speaker 3: it at one hundred and fifteen trillion. Maybe I just
16:44
Speaker 3: haven't checked in a while. But to your point, tech
16:46
Speaker 3: is far and away the biggest sector. It's also the
16:48
Speaker 3: most richly priced. So if those expectations, all these technologies
16:54
Speaker 3: could pan out, AI could be revolutionary and life changing,
16:58
Speaker 3: disruptive and a good and a bad way, et cetera.
17:00
Speaker 4: But a lot of that is could already be priced in,
17:03
Speaker 4: so to speak.
17:04
Speaker 3: So you want to look for undervalued ideally, I'll just
17:10
Speaker 3: say investments. And one way to do that without having
17:12
Speaker 3: a thing too much about it is just to buy
17:14
Speaker 3: an index fund that is comprised of all the eleven
17:17
Speaker 3: sectors that you well, you didn't talk about everyone, but
17:19
Speaker 3: you talk about many of them.
17:21
Speaker 2: The other areas that have performed well year to date.
17:24
Speaker 2: Of course, the defense sector has seen a tremendous ride
17:28
Speaker 2: over the course of the last twelve months or so,
17:30
Speaker 2: a sixty percent increase for companies that fall under that umbrella.
17:34
Speaker 2: The defense sector. A lot of the domestic ones you
17:36
Speaker 2: can think of off the top of your head, the North
17:38
Speaker 2: of Gunman's, the Lockey, Martins, et cetera. Those stocks have
17:41
Speaker 2: seen their valuations increase.
17:44
Speaker 3: I assume the theme there, the story there is, well,
17:51
Speaker 3: we're gonna be spending more on defense.
17:52
Speaker 4: The rest of the world will too.
17:55
Speaker 3: There may be more conflicts or something, and defense, the
17:58
Speaker 3: defense industry will benefit. How does that jibe with the
18:02
Speaker 3: idea of expecting high growth from If there will be
18:06
Speaker 3: more conflict and we need to spend more on guns
18:09
Speaker 3: and therefore there's less to spend on butter, you can't
18:13
Speaker 3: have a high growth world that is at the same
18:17
Speaker 3: time spending a lot more on defense. The high growth
18:20
Speaker 3: world of the last several decades was a result of
18:24
Speaker 3: American military dominance enforcing sort of rules of the game
18:29
Speaker 3: on everybody imposing and enforcing I think for the better,
18:33
Speaker 3: but honest people could disagree. Rules of the game. That's
18:37
Speaker 3: all breaking down. Free trade is broken down, NATO's about
18:40
Speaker 3: to fall apart. What does that mean for growth, Well,
18:45
Speaker 3: it means more conflict probably and higher spending on defense.
18:49
Speaker 3: You can't have both that and higher and the same
18:52
Speaker 3: growth rates that we were able to achieve in a
18:54
Speaker 3: more orderly world.
18:56
Speaker 2: When you mean the supply chains sort of being there's
18:59
Speaker 2: that trade, trade, the flows of goods and people becoming
19:05
Speaker 2: more constricted, all of that.
19:08
Speaker 3: You may like it, by the way, you may say
19:10
Speaker 3: I am America first, I don't care. We've got a
19:12
Speaker 3: vast country where about where we're more than adequately endowed
19:18
Speaker 3: with natural resources. We don't need others to play with.
19:22
Speaker 3: We're coming up against the break. Maybe something we can
19:24
Speaker 3: talk about later.
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Speaker 2: We're going to take a quick break here on the
19:26
Speaker 2: finished Exchange. When we come back, we'll have a full
19:28
Speaker 2: market update with Wall Street Watch and the weekly segment
19:31
Speaker 2: with Todd Lusky from Christian Dolan asked Todd right after
19:34
Speaker 2: this break.
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Speaker 1: Street Watch treking the stocks, the data, and the headlines
19:58
Speaker 1: driving markets so far today. Right here on the Financial
20:01
Speaker 1: Exchange Radio network.
20:04
Speaker 5: Markets are extending there games from yesterday's strong relief rally
20:08
Speaker 5: driven by optimism. The conflict in Iran is nearing a conclusion.
20:11
Speaker 5: This morning, President Trump posted the US will consider a
20:15
Speaker 5: ceasefire when the Strait of Hormuz is open. Wall Street's
20:18
Speaker 5: also sifting through some fresh fresh economic data points this morning,
20:22
Speaker 5: including slightly better than expected retail sales for the month
20:26
Speaker 5: of February. Right now, the Dow is up two thirds
20:28
Speaker 5: of a percent, SMP five hundred by a similar measure,
20:32
Speaker 5: Nasdaq up over one percent, Hire Rust two thousand and
20:35
Speaker 5: up about one percent, ten Your Treasure reeled flat at
20:38
Speaker 5: four point three one seven percent, and Oil pulling back
20:41
Speaker 5: nearly three percent, trading around ninety eight dollars a barrel.
20:45
Speaker 5: Nike plunging fourteen percent after the athletic apparel and sneaker
20:49
Speaker 5: maker warned of sales declines ahead, saying its turnaround efforts
20:53
Speaker 5: will continue to affect results this year. Bloomberg reported that
20:57
Speaker 5: CEO Elliot Hill turned to staff to air his frustration
21:01
Speaker 5: yesterday at an all hands meeting. Meanwhile, shares an home
21:05
Speaker 5: furnishing company, our Age, sinking twenty two percent after its
21:09
Speaker 5: full year revenue growth range miss Street forecast. Our Age
21:12
Speaker 5: said it was hurt by tariffs and bad weather Elsewhere.
21:15
Speaker 5: David Buster said that restaurant and entertainment company said the
21:19
Speaker 5: restaurant excuse me. David Buster has said it expects an
21:23
Speaker 5: increase in same store sales revenue and EBITA this year,
21:27
Speaker 5: sending shares rallying eleven or fifteen percent. In Intel agreed
21:32
Speaker 5: to pay about fourteen billion dollars to buy half a
21:35
Speaker 5: plant in Ireland that had previously sold to Apollo Global Management.
21:40
Speaker 5: That stock is climbing by eight percent. On that news,
21:44
Speaker 5: I'm Tucker Silva and that is Wall Street Watch.
21:48
Speaker 1: This is asked Todd on the Financial Exchange Radio Network.
21:52
Speaker 1: If you have an existing estate plan or in the
21:54
Speaker 1: market for one, Tom Letskey is here to answer your
21:57
Speaker 1: questions and help you plan for a later life. Ask
21:59
Speaker 1: Tom is presented by Cushing and Dolan, serving Massachusetts and
22:03
Speaker 1: New England for more than thirty five years, helping families
22:06
Speaker 1: with a state and tax planning Medicaid planning and probate law.
22:09
Speaker 1: Visit Cushingdolan dot com. Now here's Todd Lutsky.
22:16
Speaker 2: It is Wednesday, which means we are joined by Todd
22:18
Speaker 2: Lusky from Cushion Dolan to answer any of your questions
22:22
Speaker 2: in the estate planning realm. If you have questions on gifting,
22:25
Speaker 2: estate taxes or trust, give our studio line of call
22:29
Speaker 2: it eight eight eight two zero five two two sixty three. Again,
22:33
Speaker 2: any of your questions in the estate planning realm for
22:35
Speaker 2: Todd Lutsky, give our studio line of call it eight
22:37
Speaker 2: eight eight to zero five two to six'. Three, todd
22:42
Speaker 2: thanks so much for joining.
22:43
Speaker 6: Us punctual as, usual always a. Pleasure are you making
22:46
Speaker 6: fun of?
22:47
Speaker 7: Me?
22:47
Speaker 6: No let me let me get my microphone set. Up
22:50
Speaker 6: you THINK i wasn't?
22:51
Speaker 2: Ready you're always ready to, Go, todd And. UH a
22:55
Speaker 2: question THAT i have for, You i'll be the first
22:58
Speaker 2: first person here to. Ask thank. YOU a question is
23:01
Speaker 2: on leaving assets to. Children in, Particular SOMETIMES i bump
23:05
Speaker 2: into with clients concerns about what their children would do
23:10
Speaker 2: upon receiving a significant. Inheritance there's concerns that perhaps they
23:15
Speaker 2: might spend it. Foolishly there could be some other concerns
23:18
Speaker 2: about addiction and drugs and things of that. Nature what
23:22
Speaker 2: are some of the provisions that you can put in
23:24
Speaker 2: to some of your estate planning work that can help
23:27
Speaker 2: buffer against concerns that a parents may have on their
23:30
Speaker 2: children inheriting assets from.
23:32
Speaker 6: Them so a couple of. Things you, know when you
23:36
Speaker 6: talk about leaving assets to, Children as you, said there's
23:41
Speaker 6: so many different problems you could have with a, child
23:44
Speaker 6: and all of those things could could impact the way
23:48
Speaker 6: in which you leave assets to. Children so maybe we
23:51
Speaker 6: just run through a couple of examples might be the
23:54
Speaker 6: best way to. GO i, MEAN i think the first
23:57
Speaker 6: thing people don't think about is how many people people
24:00
Speaker 6: actually have a special needs. Child it's. AMAZING i can't tell.
24:04
Speaker 6: YOU i talk about. IT i ask families all the
24:06
Speaker 6: time just to make sure and when they have special needs,
24:10
Speaker 6: children they oftentimes think that they need to disinherit that
24:14
Speaker 6: child just because they're special needs and they might be
24:19
Speaker 6: getting governmental. Benefits and if they're getting governmental, benefits then
24:23
Speaker 6: they're going to lose their governmental benefits if you leave them.
24:25
Speaker 6: Assets we got disinherit, them, right horrible, idea. Folks you
24:29
Speaker 6: do not need to do that in, fact inside your.
24:32
Speaker 6: Trust and this applies to whether you have a revocable
24:35
Speaker 6: trust and irrevocable. TRUST i don't care if it's a
24:38
Speaker 6: lifetime giving trust and irrevocable life insurance. Trust remember when
24:43
Speaker 6: we talk about how to leave assets to, children the
24:46
Speaker 6: type of trust you have when you start it is.
24:48
Speaker 6: Irrelevant it is when you. Die all trusts are created created,
24:54
Speaker 6: equal so you can do anything you want after you.
24:56
Speaker 6: Pass so in this, case inside your, trust you might
25:00
Speaker 6: break it down into three. Buckets if you have three,
25:02
Speaker 6: kids if one happens to be special, needs you're just
25:06
Speaker 6: simply going to have special language and that share so
25:09
Speaker 6: that child doesn't own. It if that child doesn't own,
25:12
Speaker 6: it meaning they can enjoy, It i'll explain the. Language
25:17
Speaker 6: but if they don't own, it, well then they don't
25:19
Speaker 6: lose their governmental benefits and they can continue to get.
25:22
Speaker 6: That but we can enhance their life by having a,
25:26
Speaker 6: child such as a, sibling serve as trustee when you're,
25:31
Speaker 6: gone to make distributions out of that bucket for that child's,
25:36
Speaker 6: benefit and don't usually need to tie it to any,
25:40
Speaker 6: standard simply say in the trustees soul. Discretion that way
25:45
Speaker 6: you can help this child have a better life without
25:48
Speaker 6: losing governmental. Benefits so easy to, do.
25:51
Speaker 2: A lot of great information. There really really appreciate that
25:55
Speaker 2: we're gonna go to the phones. Here we've got dated
25:59
Speaker 2: from the cape you're on With Todd.
26:00
Speaker 7: Leutskey, Hi, Todd good to talk to. You todd than.
26:07
Speaker 8: My.
26:08
Speaker 7: Mother as a irrevocable medicaid, Trust i'm the trustee and
26:12
Speaker 7: my siblings are. Beneficiaries my mother asked me to give
26:15
Speaker 7: some money from the trust to one of my. Brothers
26:17
Speaker 7: is that considered a gift to resent because he's a.
26:20
Speaker 7: Beneficiary it's not a gift as far as IRUs is.
26:22
Speaker 6: Concerned so so money in This if it's an irrevocable
26:27
Speaker 6: medicaid trust like the ones THAT i, Prepare, AGAIN i
26:30
Speaker 6: haven't read this, trust SO i don't. Know but but
26:33
Speaker 6: if it's one That cushing And dolan, prepares we would
26:37
Speaker 6: have language in. There Again, again the beneficiaries don't own
26:40
Speaker 6: the property, yet they don't own the. Money they don't
26:42
Speaker 6: own any of the assets in the. Trust the trust owns.
26:44
Speaker 6: It so that's very. Important and since it's a grand tour,
26:47
Speaker 6: trust or at least ours, are it's still technically taxed
26:50
Speaker 6: for income and perhaps give tax purposes on your mom's. Return,
26:55
Speaker 6: okay so if a, trance if you distribute money, out
26:58
Speaker 6: let's say we took one hundred dollar, Dollars i'm assuming
27:01
Speaker 6: it's more than Nineteen if it's less than nineteen thousand,
27:04
Speaker 6: dollars then there's no gift, tax no, filing no requirements
27:07
Speaker 6: to do. Anything but if it's if we decide this
27:10
Speaker 6: child needs like fifty, grand and you take fifty grand
27:14
Speaker 6: and distribute it out of the trust to the. Child,
27:16
Speaker 6: again assuming there's a paragraph in the, document And i'm
27:18
Speaker 6: sure there should be that allows discretionary distributions to be
27:22
Speaker 6: paid out to the donors'. Children so here we distribute
27:26
Speaker 6: out fifty grand to the. Child technically it's a gift
27:29
Speaker 6: from mom to the. Child and then we go. Forward
27:33
Speaker 6: but the child doesn't have to file. Anything the child
27:34
Speaker 6: doesn't pay any gift tax. Returns it's the giver that
27:38
Speaker 6: has to. File so technically your mom would file a
27:41
Speaker 6: seven h nine gift tax. RETURN i, know no good
27:43
Speaker 6: deed goes, unpunished, Right so the giver files and the
27:48
Speaker 6: giver would not have to pay any tax in this,
27:51
Speaker 6: case because your, mom, me, you everybody has the ability
27:54
Speaker 6: to gift fifteen million dollars once in a lifetime without
27:58
Speaker 6: paying a gift. Tax so hopefully that that answers the.
28:01
Speaker 2: Question we're talking here With Todd lutsky From Cushian. Dolan
28:04
Speaker 2: if you have any questions in the estate planning realm
28:06
Speaker 2: on gifting, taxes trust give our studio line to call
28:09
Speaker 2: it eight eight eight two zero five two to two sixty. Three,
28:13
Speaker 2: again that's studio line for any of your questions For
28:15
Speaker 2: Todd lutsky Of Chushian. Dolan eight eight eight to zero
28:18
Speaker 2: five two to two six. Three we're going to take
28:20
Speaker 2: a quick break, here but when we come, back your
28:22
Speaker 2: questions With todd right after this.
28:24
Speaker 1: Break Ask todd With Todd lutsky Every wednesday at ten
28:28
Speaker 1: thirty only here on The Financial Exchange Radio. Network you're
28:34
Speaker 1: listening To Ask todd With Todd lutsky on The Financial
28:38
Speaker 1: Exchange Radio.
28:39
Speaker 2: Network we are back here With Todd lutsky From Cushian.
28:52
Speaker 2: Dolan if you have any questions For Todd lutsky in
28:56
Speaker 2: the estate planning realm regarding trusts or, gifting give our
28:59
Speaker 2: student you'll want to call it eight eight eight two
29:01
Speaker 2: zero five two two sixty. Three anything, again questions that
29:05
Speaker 2: you have in the estate planning realm eight eight eight
29:08
Speaker 2: two zero five two to two sixty. Three we're gonna
29:10
Speaker 2: hit the phones right. Now we've Got kevin In. Needham,
29:13
Speaker 2: kevin you're on With Todd. Lutsky.
29:17
Speaker 8: Yes. Hello first of, all thank you for having the.
29:19
Speaker 8: SHOW i love.
29:20
Speaker 6: It thank.
29:20
Speaker 8: You So i'm trying to find out if there's a
29:24
Speaker 8: way to gift stock that's highly, Appreciated say like if
29:28
Speaker 8: you Bought apple fifteen years ago and now it's mostly,
29:32
Speaker 8: profit but you don't want to have to take the
29:34
Speaker 8: profit to give them money. Away is there a way
29:36
Speaker 8: to do, that said you wanted to give it to
29:38
Speaker 8: a grandchild or.
29:40
Speaker 6: Well there there, is But i'm not sure you're you're saving.
29:43
Speaker 6: Anything and that's that's the. Problem. Right, so, one you
29:46
Speaker 6: are allowed to make a gift of anything you, want
29:51
Speaker 6: including highly appreciated. Stock you don't have to sell. It
29:55
Speaker 6: so you can gift the shares in kind to your.
29:58
Speaker 6: GRANDCHILD i mean you might have to set up some
30:00
Speaker 6: kind of an. ACCOUNT i don't think your grandchild unless
30:02
Speaker 6: they're old, enough can can have an. Account but let's
30:05
Speaker 6: say they're over. Eighteen you can set up an account
30:08
Speaker 6: or he can or she, can and you just transfer
30:11
Speaker 6: the stock over. There so let's just, say for, example
30:13
Speaker 6: that you have you, know five, HUNDRED i don't know
30:16
Speaker 6: whould we use a number just to make an. Example
30:19
Speaker 6: so let's say you've got a million dollars of apple.
30:23
Speaker 6: Stock but let's say you bought it long time, ago
30:26
Speaker 6: and let's say you only paid one hundred thousand dollars for,
30:28
Speaker 6: It so your gain built into that stock is nine hundred.
30:32
Speaker 6: Thousand that's kind of what you're driving at. Right you
30:34
Speaker 6: got this built in, gain so they call it built in.
30:38
Speaker 6: Gain and if you gift this, away you are making
30:41
Speaker 6: a taxable. Gift forget the nineteen thousand dollars present interest exclusion.
30:46
Speaker 6: Amount i'm just going to ignore that for. Now you're
30:48
Speaker 6: making a taxable. Gift you are because you're the. Giver
30:52
Speaker 6: you're making a taxable gift of one million. Dollars and
30:57
Speaker 6: the recipient doesn't have to have any income tax that,
31:00
Speaker 6: gift and the recipient doesn't have to pay a gift,
31:02
Speaker 6: tax but the giver. Does so now you get to
31:06
Speaker 6: file a gift tax return A form seven oh, nine
31:09
Speaker 6: and you get to file it and Say i've made
31:11
Speaker 6: a million dollar taxable. Gift, however there's a deduction line
31:16
Speaker 6: on the seven oh nine gift tax, return and that
31:19
Speaker 6: deduction line, SAYS i get to use up one million
31:22
Speaker 6: dollars of my fifteen million dollars once in a lifetime
31:26
Speaker 6: gift tax exclusion that everybody. Has, okay so one million
31:32
Speaker 6: minus my one million dollar, exemption you pay zero. Tax
31:37
Speaker 6: but now you only have the ability to shelter fourteen
31:39
Speaker 6: million dollars of other assets from federal estate tax. Purposes
31:44
Speaker 6: NOW i don't know, you and you're probably, saying, well that's,
31:46
Speaker 6: great that's not a problem for. Me you're not going
31:47
Speaker 6: to be an, issue and you're probably, Right but what
31:51
Speaker 6: have you really. Accomplished you've now given your grandchild a
31:55
Speaker 6: nine hundred thousand dollars built in, Gain so when your
32:00
Speaker 6: grandchild sells, it that capital gain is still going to
32:04
Speaker 6: be taxed at twenty eight point eight percent federal, state
32:09
Speaker 6: plus if you're in mash you get the bonus of
32:11
Speaker 6: that four percent millionaire's tax on top of. That so
32:15
Speaker 6: So i'm not sure we really saved. Anything so depending
32:18
Speaker 6: on your, estate you might want to just do an
32:20
Speaker 6: estate plan where we can also pay no estate tax
32:23
Speaker 6: when you. Die at the death tax level and allow
32:27
Speaker 6: your grandchild to inherit it when you. Die if that's the,
32:31
Speaker 6: case we save on the estate tax. Front we don't
32:33
Speaker 6: pay any federal or state death tax depending on the
32:36
Speaker 6: size of your. Estate and when your grandchild gets, it
32:39
Speaker 6: let's say then it's worth a million five that, child
32:44
Speaker 6: that grandchild's basis will be a million. Five now the
32:49
Speaker 6: grandchild can liquidate the apple stock and pay zero capital gains.
32:54
Speaker 6: Tax so you're saving you, know a nine hundred thousand
32:57
Speaker 6: dollars if you hit that at thirty, percent, right that's
33:00
Speaker 6: two hundred and seventy thousand dollars in capital gains.
33:03
Speaker 4: Tax.
33:03
Speaker 6: Right so just saying there's a lot to be done,
33:08
Speaker 6: there SO i would not just jump at the idea
33:10
Speaker 6: of making a, gift is my is my, point do
33:13
Speaker 6: some planning, anyways. Folks hope that. Helps but you, know
33:17
Speaker 6: some of the things we think, about and this is
33:18
Speaker 6: a great question From kevin because it's how do you
33:20
Speaker 6: leave your assets to your? Family which is exactly what
33:22
Speaker 6: the new guide is this, month, folks how do you
33:25
Speaker 6: leave your assets to your? Family not so much worried,
33:28
Speaker 6: about you, know the estate tax and the, probate BUT
33:31
Speaker 6: i care about the family behind the estate. Plan what
33:34
Speaker 6: IF i wanted to go to a grandchild Like kevin.
33:36
Speaker 6: Does what IF i want to do generation skipping planning
33:39
Speaker 6: WHERE i can have children and grandchildren enjoy the, assets
33:42
Speaker 6: but not have a tax that every. Generation what IF
33:45
Speaker 6: i want to protect assets from future, creditors. Divorces what
33:49
Speaker 6: IF i have a child who's got spendthrift, problems Or
33:52
Speaker 6: i've got a special needs child AND i want to
33:54
Speaker 6: care for that. Child there's so many ways to think about.
33:57
Speaker 6: It in the last, Kick or what if you've got
33:58
Speaker 6: a second? Marriage oh my, goodness we really got to
34:01
Speaker 6: figure out how to leave?
34:02
Speaker 4: Assets.
34:03
Speaker 6: Folks get the guide how do you leave assets to your?
34:06
Speaker 6: Beneficiaries brand new for the Month packed with information eight
34:10
Speaker 6: six six eight four eight five six nine nine Or
34:14
Speaker 6: Legal Exchange show Dot com again eight six six eight
34:18
Speaker 6: four eight five six nine nine Or Legal Exchange show
34:21
Speaker 6: Dot com.
34:23
Speaker 2: Tud what are some of the pros and? CONS i
34:26
Speaker 2: think Oftentimes i'll talk with clients and they may have
34:29
Speaker 2: been added on as a co owner on a bank
34:32
Speaker 2: account for an elderly, parent and there are some some
34:36
Speaker 2: pros to that from an ease of use, PERSPECTIVE i would,
34:38
Speaker 2: imagine what are some pros and cons to that, approach
34:40
Speaker 2: because there also can be some negative effects that can
34:43
Speaker 2: come from adding a kid on as a co owner on.
34:46
Speaker 6: Assets so let's say a joint bank account, maybe or
34:48
Speaker 6: a joint and brokerage, account, right something like. That and
34:51
Speaker 6: AGAIN i, THINK i think that's. Critical and again this
34:53
Speaker 6: guide actually has that in there. Too it talks about
34:56
Speaker 6: the easy way. Out and this is what this, Is.
34:58
Speaker 6: Paul the easy way out, is, oh joint account or
35:01
Speaker 6: or maybe even add a designated beneficiary on the. Account
35:04
Speaker 6: so if you put a designated beneficiary on an account
35:07
Speaker 6: to a, child or a joint account to one, child, why,
35:11
Speaker 6: oh because they're, local because they're you, know. Convenient it's
35:15
Speaker 6: it's convenient to help out paying a, bill accessing an,
35:18
Speaker 6: account et. Cetera, uh you do, that and if you,
35:22
Speaker 6: die it goes to that person and avoids. Probate but
35:27
Speaker 6: If i've got three other, KIDS i accidentally disinherited all
35:32
Speaker 6: those other, kids why BECAUSE i listed one child as
35:36
Speaker 6: the designated. Beneficiary SO i think you need to be
35:39
Speaker 6: mindful of of that now to fix that if you
35:42
Speaker 6: if you still want to HAVE i guess you have
35:46
Speaker 6: that with a joint with a designated, Beneficiary but you
35:49
Speaker 6: have the same problem with a joint. Account, now with
35:52
Speaker 6: a joint, account you might run around and put again
35:54
Speaker 6: one child on as a joint. Owner when that person
35:57
Speaker 6: when you, die the surviving joint owner automnate gets the. Asset,
36:01
Speaker 6: yeah it avoids, probate doesn't do much from an estate
36:04
Speaker 6: planning standpoint at, all and again you run the risk
36:06
Speaker 6: of disinheriting other. Children if that's what you're. Doing at
36:12
Speaker 6: least make sure in your will that there's language that
36:15
Speaker 6: says you, Know i'm going to disregard the joint ownership
36:20
Speaker 6: and have it go to probate, anyway so that the
36:23
Speaker 6: will would grab it and pour it over into your.
36:25
Speaker 6: Trust so you'd have a poor overwill connection there to,
36:28
Speaker 6: Say Now i've prevented the accidental disinheritance of my. Children
36:33
Speaker 6: but at least during life there was the convenience of
36:36
Speaker 6: accessing the account and paying a. Bill SO i think
36:38
Speaker 6: it's very important to learn how better to leave your
36:43
Speaker 6: assets to your children or your family then a joint
36:47
Speaker 6: bank account or a designated. BENEFICIARY i don't want either of,
36:52
Speaker 6: THOSE i. Think get the guide and learn how there
36:55
Speaker 6: are so many better ways through trusts to leave.
36:58
Speaker 2: Assets, yeah you think it's, easy but it's not the
37:01
Speaker 2: best way always from that, standpoint from that, Approach, todd
37:04
Speaker 2: thanks so much for joining us this. Week really appreciate.
37:06
Speaker 6: It always. Pleasure thank.
37:07
Speaker 1: You this has been Asked todd on The Financial Exchange radio.
37:11
Speaker 1: Network Ask todd With. Todd lutsky has been presented By
37:14
Speaker 1: cushing And, dolan Serving massachusetts And New england for more
37:17
Speaker 1: than thirty, years helping families with the state and tax,
37:19
Speaker 1: Planning medicaid, planning and probate. Law call eight hundred and
37:22
Speaker 1: three nine three four thousand and one or Visit cushingdolan dot.
37:26
Speaker 1: Com the views expressed in this segment are solely those
37:28
Speaker 1: Of cushing And. Dolan Armstrong advisory does not provide any
37:31
Speaker 1: legal or tax. Advice please consult with your illegal or
37:33
Speaker 1: tax advisor on such. Matters cushing And armstrong do not
37:35
Speaker 1: endorse each other and are not. Affiliated