Daily Commentary

MarketMinder’s View: Do you or your spouse have an IRA? If so, check your designated beneficiaries and make sure they match your intentions. “Has there been a death, a new grandchild or other key change? Beneficiary forms that don’t reflect such events could cause major snafus. Even if nothing has changed but the account owner’s age, that could matter. It may be clear now—as it wasn’t 10 years ago—that Grandpa will be leaving a larger traditional IRA than expected. In that case, naming his grandchildren as secondary heirs could provide flexibility at his death. Or if Grandma’s tax rate is low compared with her children’s rates because they’re in peak earning years, perhaps a Roth IRA conversion could lower withdrawal taxes on the family as a whole.” These are all logical, sensible, easy enough things to see to. But many don’t, instead filling in a placeholder beneficiary when opening the account, then forgetting to update it as life changes, leaving behind IRAs with missing or incorrect beneficiaries. One anecdote here recounts a man who initially named his sister beneficiary and didn’t update it when he married and had kids, complicating things greatly for them when he passed on. Since IRAs don’t pass on through the traditional estate process, fixing this after the account owner dies can be costly, if not impossible in some circumstances. The best remedy is to get things in order now, and this article has some helpful tips. Among them: Don’t name your estate as the beneficiary, as that will probably negate the tax benefits. Do name secondary beneficiaries as well as primary to give your heirs more flexibility. If you transfer an IRA between brokerage houses, complete new beneficiary forms, as the old ones may not carry over. And fill yourself in on the specifics for 401(k)s, divorce and other special situations that may be relevant. It is a small hassle now to spare your heirs a lot of cost and hassle at a very vulnerable time.

MarketMinder’s View: Is all well that ends well? After US President Donald Trump and Chinese President Xi Jinping struck a trade deal last week, China’s tiff with Europe also appears to be winding down. When the US had earlier put a Chinese chipmaker on a national security watchlist, subjecting it to export controls, Dutch officials seized a local factory owned by that company, leading China to halt all of that chipmaker’s European exports. But the US/China deal delayed implementation of US restrictions, leading to a détente between the Netherlands and China and now, it appears, the resumption of chip exports. That is a big relief for European auto factories, which warned of chip shortages idling production lines. As always, MarketMinder doesn’t make individual security recommendations, so our interest here isn’t the effect on all the companies mentioned in the article. But the saga’s resolution should help ease uncertainty, which broad markets generally prefer.

MarketMinder’s View: Another day, another tax hike trial balloon ahead of the UK’s Budget announcement on Thanksgiving. After setting the table for broad tax hikes this week, Chancellor of the Exchequer Rachel Reeves “informed the Office for Budget Responsibility (OBR) of her plan to raise personal taxation as one of the ‘major measures’ in the fiscal statement later this month.” And now, per everyone’s favorite unnamed sources familiar with the situation, Reeves is considering raising the Basic Rate of income tax from 20% to 22% but cutting employee payroll taxes by 2 percentage points for earnings of £50,270 or less. That amount isn’t arbitrary—it is the threshold for the Higher Rate (currently 40%). So, it would seem, this is one potential way to limit the tax hike on lower-earning households while still raising revenue from higher earners and households that earn most of their income from investments, property and pensions. “It would mean almost nine million state pensioners facing a higher tax bill, including 124,000 who currently pay the additional 45p income tax rate. As the £12,570 tax-free allowance is removed for anyone with this level of income, they pay 20pc tax on the full amount of their first £50,270 and then 40pc up to £125,140. A rise of two percentage points would result in an extra bill of £2,502.80 for pensioners on the additional rate of tax. Their earnings over £125,140 would also be taxed at 47pc.” Any legislation that creates winners and losers affects sentiment, but the key for markets is whether any of this qualifies as a big negative shock. We doubt it, considering how widely expected tax hikes are. UK stocks are also far less sensitive to income tax changes, for good or ill, than people presume. We don’t deny the pain these hikes could cause for retirees, should they take effect, but markets tend to look at the bigger picture. If a broad tax hike ends the will-they-or-won’t-they, falling uncertainty could be an unheralded tailwind. Especially if that tax hike proves to be smaller than feared. For more, see this week’s commentary, “Why Britain’s Budget Bluster Shouldn’t Tax Markets.”