Welcome to the October edition of FAQs and RAQs!
This month, we address client questions—some Frequently Asked, and others Rarely Asked.
FAQ: How will the Presidential Election affect the stock market?
This may be the most frequently asked question of all!
Let’s approach it from this angle: Yes, the next President has the ability to influence the stock market. But it’s just as likely, in our opinion, that the stock market will influence the next president.
U.S. investors can learn a lot in this regard from the U.K. leadership election two years ago.
Liz Truss became Prime Minister and announced an aggressive economic agenda. Markets saw her plan as reckless, causing U.K. stocks, bonds, and the Pound to crash. In response, Truss’s approval rating fell to just 9%, and she resigned just 45 days after taking office.
After that, the country shifted political course, and U.K. markets rebounded.
What’s the takeaway?
Markets ultimately call the shots, exerting enormous influence over a president to avoid enacting policies that would harm the economy and markets. So, don’t stress if your candidate doesn’t win. Markets should keep the next president in check.
RAQ: I've heard I should “bunch” my charitable donations into single calendar years to take advantage of the high standard deduction, but I don’t like my favorite charities going without donations for a year. What should I do?
Yes, it can make sense to itemize if all of your deductions exceed the standard deduction. But that can be difficult to achieve since the standard deduction has increased in recent years. This is where “bunching” comes in. By concentrating charitable donations into a single tax year, you can potentially exceed that standard deduction and benefit from itemizing. However, that can leave your favorite charities waiting for funds during non-donation years.
This is where a Donor Advised Fund (DAF) can help. With a DAF, you can contribute a large amount in one year, qualify for your deduction, and then distribute your donations from the DAF to charities over several years. It gives you the flexibility to take advantage of tax benefits now, while ensuring that your favorite causes receive a steady stream support.
But that explanation only scratches the surface of DAFs. Give us a call to discuss!
Have a question? Drop us a line at carlsongroup@rwbaird.com. We’d love to hear from you!
Baird does not provide tax advice. All investments carry a level of risk, including loss of principal. PAST PERFORMANCE DOES NOT PREDICT FUTURE RESULTS.