The Pendulum Begins to Swing Back...

In the first quarter of 2010, the US stock market had its best start in more than a decade, extending the market rally that began in March 2009. With the exception of commodities, all asset classes in Aspiriant managed portfolios had positive returns for the quarter.

Source: Zephyr StyleAdvisor

Source: Zephyr StyleAdvisor

Despite the very positive end result, the “experience” of the first quarter included noticeable periods of discomfort as volatility spiked on mixed news: Greece’s budget/debt crisis and concern about the cost of the controversial health care legislation, followed by stronger corporate profits, improving employment figures, and the continued promise of low interest rates for an “extended period.” The volatility was especially sharp to the downside following the news of Greece’s budget crisis as the S&P 500 lost over 8% of its value in just thirteen trading days. The visceral market response to this event brought back memories of October, 2008, and reminded investors how quickly things can change.

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The Currency of the Times

A year ago almost every economy in the world was in trouble. In the developed economies, output plunged while in China and some other emerging economies, growth merely slowed sharply. The slump was synchronized and severe.

However, the opposite seems true of the recovery. China’s rebound began earliest and has been the most spectacular. The US economy began growing in the middle of 2009 and accelerated sharply in the final months of the year. News from the euro zone and Japan is rather gloomier. Germany emerged from recession before the US, but growth fell back to zero in the fourth quarter. The Japanese recovery also seems to be fading. read more

Impact of Health Care Reform

In our last Insight, we provided some thoughts on income tax rates that seem likely to prevail starting in 2011, and commented on the direction of possible surcharges Congress was considering to help pay for health care reform. Well, the health care part is a little clearer now as the Patient Protection and Affordable Care Act was signed into law on March 23, 2010. The following is a brief summary—in order of the effective date—of some of the resulting tax law changes likely to impact a majority of our clients: read more

Taking Stock: REITS

For years, real estate investment trusts (“REITS”) rewarded investors with consistent dividends (averaging 5-7%), relatively low volatility and low correlation to other asset classes. Starting in 2008, however, the experience of the REIT investor changed significantly.

From its inception in 1990 until the end of 2007, the Dow Jones All REIT index moved more than 5% in a single day only three times. Yet, in the seven months from September 2008 to March 2009, value changes of that magnitude occurred a staggering 64 times, and REIT values plummeted over 70% from their 2007 peak. But over the last year, REIT values have more than doubled, and volatility has declined, though it remains elevated relative to historical levels. In addition, the average dividend of US REITs, at approximately 4%, is still well below the long-term average. read more

Estate Tax "Repeal" in 2010: A Wolf in Sheep's Clothing?

To illustrate the bizarre nature of the current estate tax, consider a hypothetical couple, John and Mary Smith. John and Mary are in their early 80s and have amassed a $14,000,000 estate, primarily appreciated stocks, over their lifetime. They have strong charitable intent and have decided to divide their estate 50/50 between charity and their three children upon the surviving spouse’s death. After hearing about changes to the estate tax laws for years, they looked forward to the year 2010 when the estate tax would finally be repealed, possibly for good. However, now that 2010 is here, they are dismayed to learn that “estate tax repeal” for them is transitory, results in higher taxes, unnecessary legal costs, and increased uncertainty. Surely this is not the state of affairs that they, and many others, expected. read more

Strengthening Information Security

Late last year, Aspiriant began a new firm-wide information security program that has changed how we interact online with clients when sending and receiving sensitive financial information. The new system reflects a growing trend among businesses in the U.S. to develop more stringent security measures to protect customers’ financial information. It follows on the heels of recent privacy legislation in states such as Massachusetts and Nevada that holds companies to stricter standards of information security than in the past. read more

Changes to Clients' Quarterly Performance Report

We are currently investigating new approaches and formats for providing clients with meaningful performance information on their portfolios. In the meantime, we have decided to make a few minor changes to the first quarter reports, as follows: read more