Markets Continue to Advance
Perhaps surprisingly, investment markets continued their
strong performance though the first quarter of 2011.
Investors’ confidence in improving economic fundamentals
have outweighed a series of traumatic events that, in a
different climate like that of late 2008 or early 2009, could
have produced very sharp downturns.
Results, however, were not uniform. Emerging markets were
just barely positive while small cap stocks continued their “best
in class” equity performance again this quarter, outstripped
only by the uniquely strong commodities results.
And, the ride wasn’t smooth. Following a relatively flat January,
early February saw strong rallies, only to fall sharply as the
Japanese earthquake, tsunami, and nuclear reactor disasters
rocked markets around the world, but particularly in Japan
and elsewhere in Asia. But then March resumed the advance,
despite slow resolution to the perceived dangers of nuclear
radiation from Japan and the increasing violence in Libya and
other areas where regime change is in the air.
Still Room for More Good Performance
For investors looking for reasons to be optimistic, the first
quarter started off well. The US economy seemed to have
finally put the financial crisis into the past and Europe’s
sovereign-debt crisis seemed less acute. Investors responded
by moving out of money market funds and into equities.
Their primary concern was that emerging economies would
grow too quickly, pushing up commodity prices and allowing
inflation to take hold in their domestic economies.
From the CEO
This was a very strong quarter for the clients of Aspiriant.
Despite severe geopolitical unrest in North Africa and
the Middle East and an unprecedented sequence of
disasters in Japan, the world’s underlying economy
continued to gain momentum and markets accordingly
produced excellent returns for the quarter. While many
obvious threats remain and we’ve been reminded,
yet again, that we must “expect” threats that are
unexpected, we believe that our clients will continue
to be rewarded by perseverance in their long-term
investment strategies. It’s a much longer perspective
than one quarter, of course, but it’s gratifying to see
clients being rewarded for that perseverance as we
move deeper into 2011.
Real Estate...An Inflation Hedge?
Allocation to real assets can play an important role in a longterm
investment portfolio and, in particular, as a hedge against
Assets that are tangible or physical in nature encompass
a wide range of investment strategies whose values are
sensitive to inflation. Examples of real assets represented
in Aspiriant portfolios include real estate and commodities.
Commodities were added to Aspiriant portfolios several years
ago in particular to provide significant and unique protection
against inflation. Similarly, real estate has demonstrated that
it is a good, albeit partial hedge against inflation. The reasons
why are fairly simple.
Roth IRA Recharacterizations
American taxpayers in general (and our clients in particular)
have been encouraged to defer tax as long as possible. Since
Roth IRAs have the same investment risk as other vehicles,
those who chose to convert, and pay tax on, some or all of
a traditional IRA are at risk of the value declining by the time
tax on the conversion is due, owing tax on values that were
higher than now.
To avoid this potential regret, Congress created an escape
clause which is known as “recharacterization”. Taxpayers
can choose to recharacterize, basically undoing the Roth
IRA conversion, until mid-October of the year following the
conversion (the final deadline to file returns).
Making Life Better for Older Adults
As we age, there comes a time when we may need assistance
making it safely through the day. Perhaps you have a nagging
suspicion that an older adult (a spouse, your parents…)
needs that help right now. Of course, you want to avoid
being forced to confront a crisis where an older adult has
deteriorated, physically and/or mentally, to the point where
they are a danger to themselves or others. What can you do
to plan ahead?