By Joe Smalley, Accredited Investment Fiduciary®


As I sit here in front of the fireplace in the glow of my tree listening to Christmas choral music while I write this, I especially feel the spirit of the season.  I love choral music.  I don’t know how many people know this, but I’ve been singing in choirs for pretty much my entire life.  It started in elementary school when my violin teacher politely told my mother that I wasn’t cut out for a strings instrument and that I might consider switching to choir.  That lead me to singing in musicals, high school honors choirs, a music scholarship to college, performing throughout Europe, and signing for church choirs in three different denominations.  It is amazing how one person’s suggestion forty years ago had such an immense influence on my life. 

That is the theme for today’s newsletter:  we each have an enormous impact on others.  Sometimes we know it, but most of the time, we have no idea.  That violin teacher probably does not remember me at all, let alone what she said that changed my path. Interwoven in this season’s commentary will be how we can change people’s lives – and sometimes even our own.

Now, on to some topical commentary.  The good news is that we all survived the election.  The bad news is that the country is still very much divided.  I suspect it would have been divided no matter the outcome, but we certainly can feel it now.  There seems to be a growing disparity between and among our fellow countrymen.  As discussed in our spring commentary, some of the root causes can be traced back to the financial crises.  It was not surprising that outside candidates were so popular.  Both Mr. Trump and Senator Sanders had the pulse of the country.  But it is hardly a phenomenon specific to the United States.  This summer Brexit showed that there are people who feel marginalized and gravitate to a more populist message.  The referendum in Italy two weeks ago confirmed that the wave is growing throughout Europe.  

What I find most interesting, however, is not the outcome of our presidential election, but that it took so many people by surprise, and Wall Street especially.  Baked into every stock market and economic forecast prior to the election was the assumption that Secretary Clinton was going to win.  Clearly that did not occur.  Monday morning quarterbacks are saying that the writing was on the wall all along (see above).  So now analysts and economists around the globe are changing their views and their outlooks.  The narrative is mostly that with a Trump administration, regulations will be cut, and growth will accelerate.  Instead of GDP growth at 1-2% annually, it could be in the 2-3% range.  Bulls argue that translates to higher stock prices.  Bears will point out that the market is long in the tooth and that we are due for a correction.  The challenge, of course, is that both could be true.  As with most things in life, it is all about timing

Have you ever heard of a Santa Claus rally?  Historically, stocks rally at the end of the year and going into the new year.  The thinking is that retailers are finally printing profits and that consumer spending will boost the economy.  This year is no different.  Consumer confidence is up.  Headwinds in commodity prices are fading.  And stocks are indeed up.  If you would like to review your portfolio in light of the election, the Santa Claus rally, or for any other reason, give us a call to schedule up a time to get together.

Getting back to the theme of this season’s commentary, our impact on others.  Like you, I have my favorite local charities.  Each year, Smalley Investments chooses charities to support in the name of our clients.  For Thanksgiving we provided resources to supply the St. Luke Soup Kitchen, which does a wonderful job providing hot meals to folks in Lansing who need them.  For Christmas, we are making a donation to Refugee Development Center, an organization that helps educate, orient, and support refugees in our area to become self-sufficient members of society. 

Americans are enormously generous.  Last year, Americans gave more than $373 million to charitable organizations.  By far, the vast majority comes from individuals and families.  Cash donations are the preferred method of giving, but not necessarily the most tax-advantageous. 

With the bull market now in its 7th year, perhaps you have some highly appreciated stocks or other assets.  By donating shares of a stock or mutual fund, you get the tax deduction for the current market value, and you pay no capital gains tax.  If the charity is a 501(c)3, they can sell the shares and also pay no capital gains tax.  It really is a win/win situation. 

Another tax-efficient strategy to donate to a charity or house of worship is to use your Required Minimum Distribution from your Individual Retirement Account.  Congress has (finally) permanently put in place a law that allows people to donate their RMD without increasing their adjusted gross income.  Another win/win.

Giving to others, of course, has benefits beyond tax deductions.  Research has shown that philanthropy satisfies a deep human need to help others.  I do believe that it is human nature to want to be generous.  At least, that is my hope. 

If, as you think about your tax situation and charitable intentions, you find that you’d like to do more, we can help you determine if it might be best for you to set up a donor-advised fund, a named fund at the Capital Region Community Foundation, or even your own private foundation

Whether you give of your time, your talents, your money, or your assets, you have a dramatic effect on those whose lives you touch.  Thanks for being the type of person who impacts those around you, whether you know it or not. 

Charles Dickens, the author of one of my favorite tales of the holidays, A Christmas Carol, sums it up best:

So may the New Year be a happy one to you, and happy to many more whose happiness depends on you!
Charles Dickens

Charles Dickens

Happiest of holidays and Merry Christmas,


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