Resources

The Bottom Line:

• Can global market downturns ever actually help my estate plan? Yes. Volatility can create opportunities to transfer wealth at lower valuations, which may potentially save significant estate taxes.
  
• How does estate planning work if I own assets in multiple countries? Different jurisdictions have conflicting laws about inheritance, ownership structures, and taxation, which can make professional coordination across borders essential.
  
• Do I need to worry about currencies when planning my legacy on a global scale? Absolutely. Currency fluctuations can affect everything from daily expenses abroad to your estate’s eventual settlement.
  

The Full Story:

You have a vacation home on the French Riviera, a business operating across three continents, and your estate attorney just asked: “Where exactly are all your international accounts domiciled?”

This can be the reality of cross-border wealth, where success unlocks even greater financial complexities—and opportunities—in your legacy planning.

Whether you own international holdings, are planning a retirement abroad, or are already navigating wealth across multiple countries, the need for strategic coordination remains the same.

As your Chief Strategy Officer, we help identify these variables before they become problems, and structure your wealth so you’re positioned to act when opportunity windows open. If you or your wealth has gone global (or you’re planning a move that will take it there), we’re here to help ensure your legacy protection is aligned appropriately across borders as strategically as you are.

Navigating Global Market Volatility: How International Downturns Can Become Gifting Opportunities

When people see global markets drop 30-40%, many feel anxiety about their portfolio—and that’s completely normal.

But, depending on the situation, we may see an opportunity to transfer international assets to the next generation, potentially at significantly lower valuations and tax costs.

Let’s say you’re worth $100 million, with assets spread across U.S. markets, European real estate, and international holdings. You’ve determined you need about $30 million for your lifestyle and security. Suddenly, global markets drop 40%, and your portfolio sits at $60 million. You’re understandably unsettled.

But look at what just became possible: You could transfer $10 million in assets (perhaps that French property) to your children or grandchildren right now. Because your total estate is temporarily valued lower, that $10 million gift represents roughly 17% of your estate moving to the next generation. If you make that same $10 million gift at the higher valuation, it only represents 10% of your estate.

Finding Your Window of Opportunity

It’s important to note that this strategy only works if we’ve already discussed it before markets drop and if we’ve structured your international assets to allow clean transfers.

When global markets plummet, many people freeze. That’s completely human. But if we haven’t already walked through projections showing you’ll still have more than enough, coordinated with your international tax specialists, and structured your overseas holdings appropriately, the moment passes. You stay frozen until markets recover, and the opportunity closes.

This is why legacy protection for global wealth isn’t static. We need to know where your assets are, how they’re structured across jurisdictions, and what you want to accomplish—well before opportunity windows open.

The Bottom Line:

• Can global market downturns ever actually help my estate plan? Yes. Volatility can create opportunities to transfer wealth at lower valuations, which may potentially save significant estate taxes.
  
• How does estate planning work if I own assets in multiple countries? Different jurisdictions have conflicting laws about inheritance, ownership structures, and taxation, which can make professional coordination across borders essential.
  
• Do I need to worry about currencies when planning my legacy on a global scale? Absolutely. Currency fluctuations can affect everything from daily expenses abroad to your estate’s eventual settlement.
  

The Full Story:

You have a vacation home on the French Riviera, a business operating across three continents, and your estate attorney just asked: “Where exactly are all your international accounts domiciled?”

This can be the reality of cross-border wealth, where success unlocks even greater financial complexities—and opportunities—in your legacy planning.

Whether you own international holdings, are planning a retirement abroad, or are already navigating wealth across multiple countries, the need for strategic coordination remains the same.

As your Chief Strategy Officer, we help identify these variables before they become problems, and structure your wealth so you’re positioned to act when opportunity windows open. If you or your wealth has gone global (or you’re planning a move that will take it there), we’re here to help ensure your legacy protection is aligned appropriately across borders as strategically as you are.

Navigating Global Market Volatility: How International Downturns Can Become Gifting Opportunities

When people see global markets drop 30-40%, many feel anxiety about their portfolio—and that’s completely normal.

But, depending on the situation, we may see an opportunity to transfer international assets to the next generation, potentially at significantly lower valuations and tax costs.

Let’s say you’re worth $100 million, with assets spread across U.S. markets, European real estate, and international holdings. You’ve determined you need about $30 million for your lifestyle and security. Suddenly, global markets drop 40%, and your portfolio sits at $60 million. You’re understandably unsettled.

But look at what just became possible: You could transfer $10 million in assets (perhaps that French property) to your children or grandchildren right now. Because your total estate is temporarily valued lower, that $10 million gift represents roughly 17% of your estate moving to the next generation. If you make that same $10 million gift at the higher valuation, it only represents 10% of your estate.

Finding Your Window of Opportunity

It’s important to note that this strategy only works if we’ve already discussed it before markets drop and if we’ve structured your international assets to allow clean transfers.

When global markets plummet, many people freeze. That’s completely human. But if we haven’t already walked through projections showing you’ll still have more than enough, coordinated with your international tax specialists, and structured your overseas holdings appropriately, the moment passes. You stay frozen until markets recover, and the opportunity closes.

This is why legacy protection for global wealth isn’t static. We need to know where your assets are, how they’re structured across jurisdictions, and what you want to accomplish—well before opportunity windows open.

Major stock indexes pulled back modestly this week when bipartisan stimulus talks failed to materialize into any action or forward progress. Even with inaction in Washington, coronavirus trends continuing to worsen, and renewed activity restrictions, capital markets have performed resiliently, driven by the brighter outlook of vaccine rollouts. That outlook has been supporting growth in certain sectors and regions… 

Full Story:

Global equity markets have staged a remarkable recovery from their March lows; however, the recovery has been regionally disproportionate. The U.S. and emerging Asian (China, South Korea, India, Taiwan, etc.) equity markets have fully recovered their COVID-19 losses and stand in solidly positive territory. In contrast, other regions have not fared as well. Although regions and their dominant countries have specific issues and trends, differences in the economic sector composition between regional equity markets may likely explain the divergence in year-to-date performance.  

The U.S. and Emerging Markets (EM) Asia equity markets are heavily tilted towards sectors that performed well during the COVID pandemic, including the social distancing compatible sectors – technology and communication services. On the other hand, developed international and other EM regional equity markets tend to tilt towards economically cyclical sectors like financials, industrials, materials, energy, and consumer discretionary.  With the possible exception of consumer discretionary, these cyclical sectors felt the full brunt of the pandemic shutdowns and coinciding recession. 

As of the end of October, differences in sector performance were at extremes, with technology up 33% and banks down 40%. As a result, the U.S. and EM Asia indexes were up 3% and 12%, respectively, while Europe, Japan, and EM excluding Asia were still negative year-to-date. Overall, the U.S. was outperforming international markets by 10%. 

During November, we started to receive positive news about vaccine trials starting with the Pfizer efficacy levels and followed by similar results from Moderna and AstraZeneca. The positive vaccine data and resulting uptick in forward economic growth expectations (along with moving past the election) bolstered global stocks performance to one of the best calendar months on record.  

And it wasn’t just the absolute performance that was noteworthy; we started to see some level of sector rotation that should be commensurate with an economic reopening in 2021. As a result, the cyclical sectors and cyclical-heavy regions performed the best during November. European equity markets had their best monthly performance ever, while Japanese equities hit their highest level since 1991. The U.S. dollar also weakened by over 2%, which provided a tailwind to returns for U.S. based global investors. Meanwhile, the defensive sector-heavy regions like the U.S. and EM Asia did well but lagged in relative returns. Overall, the U.S. underperformed international markets by 3% in November. 

Overall, the fourth quarter has been a robust period for global stocks, as the MSCI All Country World Index posted gains of near 12% through December 10th. Emerging market stocks led the way, posting a 16% gain compared to 13% for developed international stocks and 9% for U.S. stocks, as you can see in the chart below. This EM outperformance is an interesting story that may have legs in 2021. 

China is the bully on the block (RIP Tiny “Deebo” Lister) in the Emerging Markets Index. It makes up slightly more than 40% of the MSCI EM Index and has six of the top ten stocks. After introducing COVID-19 to the world one year ago, China currently stands as the only major economy that will grow in 2020 (1.9% projected real GDP growth per the IMF), and its stock market has returned approximately 25% year-to-date. However, the fourth quarter outperformance by EM stocks was concentrated elsewhere. In fact, Chinese stocks (measured by the MSCI China Index) lagged their EM and developed international peers with gains of 8%. We can theorize that Asia has less to gain from a vaccine, as the virus is largely under control in much of the region. And, again, China’s economy is already growing after fully recovering from the pandemic. 

The largest EM performance contributors were regions outside of Asia – Latin America, Eastern Europe, Africa, and the Middle East. Latin America, led by Brazil, has posted a 30% gain in the fourth quarter (as measured by the MSCI Brazil Index). Much like in the U.S., equities have performed resiliently despite the backdrop of Brazil (and the broader Latin America region) experiencing rising COVID cases and securing a much smaller amount of vaccine doses relative to its population compared to Europe or the U.S. 

Looking back to the first chart, we see that Latin American equity markets are composed of 68% economically cyclical sectors. Sector rotation and fourth quarter outperformance is supported by rising prospects for a global recovery in travel and transportation in 2021 and lifting commodity-sensitive EM stock markets in Latin America, Eastern Europe, Africa, and the Middle East regions.

According to Wall Street analysts’ 2021 consensus estimates, the recovery in global demand may drive earnings of emerging markets companies to exceed those of both the U.S. and developed international markets next year. Significantly lower valuations also increase the longer-term potential for EM outperformance. With lower valuations, stronger earnings expectations, and the potential for a weaker U.S. dollar, EM equities fourth quarter outperformance may signal things to come in 2021. 

Have a great Sunday! 

Timothy W. Ellis, Jr., CPA/PFS, CFP® 

Senior Investment Strategist, Wealth Strategist 

Sources: JPMorgan, Charles Schwab, Morningstar 

Major stock indexes pulled back modestly this week when bipartisan stimulus talks failed to materialize into any action or forward progress. Even with inaction in Washington, coronavirus trends continuing to worsen, and renewed activity restrictions, capital markets have performed resiliently, driven by the brighter outlook of vaccine rollouts. That outlook has been supporting growth in certain sectors and regions… 

Full Story:

Global equity markets have staged a remarkable recovery from their March lows; however, the recovery has been regionally disproportionate. The U.S. and emerging Asian (China, South Korea, India, Taiwan, etc.) equity markets have fully recovered their COVID-19 losses and stand in solidly positive territory. In contrast, other regions have not fared as well. Although regions and their dominant countries have specific issues and trends, differences in the economic sector composition between regional equity markets may likely explain the divergence in year-to-date performance.  

The U.S. and Emerging Markets (EM) Asia equity markets are heavily tilted towards sectors that performed well during the COVID pandemic, including the social distancing compatible sectors – technology and communication services. On the other hand, developed international and other EM regional equity markets tend to tilt towards economically cyclical sectors like financials, industrials, materials, energy, and consumer discretionary.  With the possible exception of consumer discretionary, these cyclical sectors felt the full brunt of the pandemic shutdowns and coinciding recession. 

As of the end of October, differences in sector performance were at extremes, with technology up 33% and banks down 40%. As a result, the U.S. and EM Asia indexes were up 3% and 12%, respectively, while Europe, Japan, and EM excluding Asia were still negative year-to-date. Overall, the U.S. was outperforming international markets by 10%. 

During November, we started to receive positive news about vaccine trials starting with the Pfizer efficacy levels and followed by similar results from Moderna and AstraZeneca. The positive vaccine data and resulting uptick in forward economic growth expectations (along with moving past the election) bolstered global stocks performance to one of the best calendar months on record.  

And it wasn’t just the absolute performance that was noteworthy; we started to see some level of sector rotation that should be commensurate with an economic reopening in 2021. As a result, the cyclical sectors and cyclical-heavy regions performed the best during November. European equity markets had their best monthly performance ever, while Japanese equities hit their highest level since 1991. The U.S. dollar also weakened by over 2%, which provided a tailwind to returns for U.S. based global investors. Meanwhile, the defensive sector-heavy regions like the U.S. and EM Asia did well but lagged in relative returns. Overall, the U.S. underperformed international markets by 3% in November. 

Overall, the fourth quarter has been a robust period for global stocks, as the MSCI All Country World Index posted gains of near 12% through December 10th. Emerging market stocks led the way, posting a 16% gain compared to 13% for developed international stocks and 9% for U.S. stocks, as you can see in the chart below. This EM outperformance is an interesting story that may have legs in 2021. 

China is the bully on the block (RIP Tiny “Deebo” Lister) in the Emerging Markets Index. It makes up slightly more than 40% of the MSCI EM Index and has six of the top ten stocks. After introducing COVID-19 to the world one year ago, China currently stands as the only major economy that will grow in 2020 (1.9% projected real GDP growth per the IMF), and its stock market has returned approximately 25% year-to-date. However, the fourth quarter outperformance by EM stocks was concentrated elsewhere. In fact, Chinese stocks (measured by the MSCI China Index) lagged their EM and developed international peers with gains of 8%. We can theorize that Asia has less to gain from a vaccine, as the virus is largely under control in much of the region. And, again, China’s economy is already growing after fully recovering from the pandemic. 

The largest EM performance contributors were regions outside of Asia – Latin America, Eastern Europe, Africa, and the Middle East. Latin America, led by Brazil, has posted a 30% gain in the fourth quarter (as measured by the MSCI Brazil Index). Much like in the U.S., equities have performed resiliently despite the backdrop of Brazil (and the broader Latin America region) experiencing rising COVID cases and securing a much smaller amount of vaccine doses relative to its population compared to Europe or the U.S. 

Looking back to the first chart, we see that Latin American equity markets are composed of 68% economically cyclical sectors. Sector rotation and fourth quarter outperformance is supported by rising prospects for a global recovery in travel and transportation in 2021 and lifting commodity-sensitive EM stock markets in Latin America, Eastern Europe, Africa, and the Middle East regions.

According to Wall Street analysts’ 2021 consensus estimates, the recovery in global demand may drive earnings of emerging markets companies to exceed those of both the U.S. and developed international markets next year. Significantly lower valuations also increase the longer-term potential for EM outperformance. With lower valuations, stronger earnings expectations, and the potential for a weaker U.S. dollar, EM equities fourth quarter outperformance may signal things to come in 2021. 

Have a great Sunday! 

Timothy W. Ellis, Jr., CPA/PFS, CFP® 

Senior Investment Strategist, Wealth Strategist 

Sources: JPMorgan, Charles Schwab, Morningstar