This article originally appeared in the Knoxville News Sentinel’s business column on November 18, 2018.
As this year is drawing to an end, here are a few random thoughts related to the markets.
October was one of the worst months for stocks that we’ve seen in years, but there is likely a bright future ahead. Since 1950, the S&P 500 Index has risen by an average of 10.7 percent from its October low through year-end, according to data compiled by Bloomberg. Through the date I drafted this article, the S&P had rallied 4.3 percent from the October low that was reached on Oct. 29.
Enter midterm election results. Historically, U.S. stocks as measured by the S&P 500 have typically performed well in the year after midterm elections regardless of the party in control. Interestingly, U.S. stocks have thrived under political gridlock with a Republican president and split Congress, averaging 12 percent annual return.
When we have a Democratic president and split Congress the annual return averages 16 percent, according to S&P FactSet. Those averages have been compiled from 1928 through 2017.
Obviously, October was a rough month for equities, but it is important to remember that pullbacks are part of investing. Fortunately, the overall economic backdrop remains solid and earnings are coming in strong.
As always, proper diversification and having cash needed for expenses in reserves make it somewhat easier to tolerate the market’s volatility.
It’s time to think about year-end planning. If you’re over age 70½, you can make a qualified charitable distribution from an IRA account to approved 501(c)(3) charities of your choice. The maximum donation cannot exceed $100,000 per year.
For many people, the new standard deduction will be larger than the itemized deductions.
You can’t be worse off using all or a portion of your required minimum distribution as a direct charitable rollover, and you might very well be better off.
Don’t wait until the last minute. Go ahead and contact your IRA provider if you’d like to make a qualified charitable distribution before the end of the year. And remember, individuals must be age 70½ before the qualified charitable distribution is made.
Have a Happy Thanksgiving, and let’s all take a moment to count our many blessings.