The Ascend Letter

Planning Corner: Tax Planning Is Planning

It is officially spooky season. Crazy how fast the year has gone by. My wife and I already put up Halloween decorations and are getting the Christmas decorations ready. In our house, Halloween stays up until October 31st. November 1st, the whole house turns jolly hues of red and green, and smells of pine.

As the end of the year approaches, I always feel the need to remind people that tax planning is just that. Planning. Planning means thinking about it, and taking action, prior to any deadlines or taxable events.

Most CPAs are serial filers. They intake the data, spit out a return, then say see you next year. That is not a problem for a lot of people. But it would surprise you how many people would benefit from tax strategy conversations throughout the year.

These are the types of things that surprise people with a tax bill next April. It is better to be prepared for that bill than to have to come up with the money last minute. A financial plan is the best way to map your situation and be ready for whatever life throws at you.

The Macro

Everything is upside down in this market.

Wednesday's inflation report is a good example. Core PCE, the Fed's preferred gauge with food and energy stripped out, came in below expectations for August. It is still running at 3.0%. July was revised down 0.3%, to that same 3.0%. Headline readings are the ones moving higher, and they are moving higher mainly on energy. Gasoline jumped in August. So the Fed thinks it is smart to hike into a supply shock? "Transitory" became a swear word in Powell's term as chair. But it might be a fitting word in this case.

Add on that high-yield corporate bonds are falling hard. That market usually leads equity selloffs. Yet, the S&P 500 is flat.

Under the surface though, it does not look flat. Only about 24% of S&P 500 stocks are trading above their 50 day moving average, down from 68% a little over a month ago. About 40% are above their 200 day moving average, down from about 70% a month ago. The index is being held up by a shrinking group of names and they are mainly tech. Shocker.

Everything is telling me we should get a pullback. Part of me starts to think we might not. Maybe a small 4–5% dip? AI spending is through the roof, and I think it might just blow past any expectation of a meaningful selloff. Could this be the start of the euphoria at the end stage of a bull cycle?