We have always approached the emerging markets with a value bias, seeing exposure to the segment as growthy enough. Small cap emerging market names can provide additional downside insurance as they trade far less frequently than their larger cap peers, leading to less performance volatility driven by low conviction capital volatility. In uncertain periods we will hold small cap exposure to avoid capital whipsaws. Unfortunately, just as the low trading volumes limit selling pressure, low trading volumes also limit buying pressure. With conviction growing in the durability of emerging market outperformance, after twenty years of underperformance, we have chosen to swap our emerging markets small cap passive position for a larger cap active position that will benefit more from incoming capital flows. Our selected manager prioritizes dividend paying companies, maintaining our quality bias, while also aligning with our “prove it” financial bias at this point in the cycle. Consider the following factors supporting our Emerging Market exposure:
Note the valuation differential when comparing the Emerging Market stock market index with other world indices:
The emerging market complex trades at 13.7x forward earnings within the midpoint of its historical range, while the US trades at 22x, near the top of its historical range.
2. Consider the earnings momentum that “Re-globalization”, technological adoption, and voracious demand for materials and components have unlocked:
While analysts expect US earnings to grow 15% and 16% in 2026 and 2027 respectively, they forecast 23% and 15% earnings growth within Emerging Markets.
3. Consider money flows into Emerging Markets from January alone:
How long can these catalytic money flows persist? Lower valuations and improving earnings momentum paired with Mag-7 fatigue and institutional under allocation to the asset class could fuel relative outperformance for years.
4. Consider the last twenty years of relative underperformance and the spread available for recapture:
In this year alone, the Emerging Markets index has advanced 7% while the S&P 500 has declined 1%. Last year, the Emerging Markets index outperformed the S&P 500 by 16.5%. Relative performance ebbs and flows, but after two decades of neglect, the revival of the Emerging Markets seems well overdue and fundamentally defensible.
Large Value Rotation
Over the past week, panic attacks incited by fears of AI capex overallocation, infighting among the Mag 7, and the threat of AI agents cannibalizing the software sector created dramatic deleveraging and a flight to quality within the markets. Consider the performance divergence between the Mag-7 complex and the S&P 500 Dividend Aristocrats index over the past week alone:
It’s highly unusual to see an 8% performance spread between such large weightings over a short amount of time, but it validates our thinking. While AI deployment will benefit some technology providers, it will benefit all who utilize it. Therefore, while the tech sector becomes more capital intensive to produce AI, traditionally capital-intensive businesses will become less capital intensive through utilizing AI. Additionally, the historic capex cycle we find ourselves in building out virtual AI, and ultimately physical AI, will require all forms of financing, including massive debt issuance. Much of this bloat can hide in circular financing structures and private debt markets, making investors unsure of true creditworthiness within the marketplace. This reveals the Achilles’ heel for this fast-paced economic cycle. While we are not concerned about an imminent credit event, we are attuned to rising investor skittishness as displayed last week. This drives part of our decision to rotate out of an agnostic deep value manager into another more dividend focused manager, finding comfort in the “prove it” attributes of tangible cash distributions. We expect to see more dividend payer appetite as the debt cycle enlarges, which means more demand, and higher prices for dividend centric strategies.
When Trump won the election in November, the US dollar strengthened. In theory, the orderly deployment of a tariff agenda should increase exports (purchases of dollars) and decrease imports (sales of dollars), supporting currency strength. In recognition, we repatriated a portion of our international exposure to avoid potential currency drag.
Trump’s tariff agenda was anything but orderly, overriding the economics and inciting dollar debasement benefiting Gold, Silver, etc. With Kevin Warsh’s appointment, we have less clarity on the dollar’s direction, but we do see Europe starting to consider economic growth as national security in a disorderly political environment. Increased military spending, fiscal deficit expansion, resumption of energy production, and whispers of deregulation should lift profit margins and earnings. We already see this in rising earnings expectations across Europe:
The combination of “prove it” cash flows and additional developed world international exposure informed our search and selection of a new value focused large cap manager screening for high free cash flows and juicy dividends, worldwide.
Fortunately, the remainder of our holdings properly calibrate with our worldview, which we will reveal next Thursday. Position changes from here will likely be situational (tax trades) rather than strategic, unless our worldview changes significantly. Remember, history shows a clear inverse relationship between frequent trading and investment returns!
Have a great week!
-David
Sources: Yardeni Research
This communication and its contents are for informational and educational purposes only and should not be used as the sole basis for any investment decision. The information contained herein is based on publicly available sources believed to be reliable but is not a representation, expressed or implied, as to the accuracy, completeness, or correctness of said information. References to political figures or policies are for informational purposes only and do not represent an endorsement by Waddell & Associates. Any forward-looking statements reflect current opinions and assumptions and are subject to change without notice; actual results may differ materially. Past performance does not guarantee future results. Waddell & Associates may use artificial intelligence tools to help generate or summarize content; all outputs are reviewed by our team for accuracy and relevance.
We have always approached the emerging markets with a value bias, seeing exposure to the segment as growthy enough. Small cap emerging market names can provide additional downside insurance as they trade far less frequently than their larger cap peers, leading to less performance volatility driven by low conviction capital volatility. In uncertain periods we will hold small cap exposure to avoid capital whipsaws. Unfortunately, just as the low trading volumes limit selling pressure, low trading volumes also limit buying pressure. With conviction growing in the durability of emerging market outperformance, after twenty years of underperformance, we have chosen to swap our emerging markets small cap passive position for a larger cap active position that will benefit more from incoming capital flows. Our selected manager prioritizes dividend paying companies, maintaining our quality bias, while also aligning with our “prove it” financial bias at this point in the cycle. Consider the following factors supporting our Emerging Market exposure:
Note the valuation differential when comparing the Emerging Market stock market index with other world indices:
The emerging market complex trades at 13.7x forward earnings within the midpoint of its historical range, while the US trades at 22x, near the top of its historical range.
2. Consider the earnings momentum that “Re-globalization”, technological adoption, and voracious demand for materials and components have unlocked:
While analysts expect US earnings to grow 15% and 16% in 2026 and 2027 respectively, they forecast 23% and 15% earnings growth within Emerging Markets.
3. Consider money flows into Emerging Markets from January alone:
How long can these catalytic money flows persist? Lower valuations and improving earnings momentum paired with Mag-7 fatigue and institutional under allocation to the asset class could fuel relative outperformance for years.
4. Consider the last twenty years of relative underperformance and the spread available for recapture:
In this year alone, the Emerging Markets index has advanced 7% while the S&P 500 has declined 1%. Last year, the Emerging Markets index outperformed the S&P 500 by 16.5%. Relative performance ebbs and flows, but after two decades of neglect, the revival of the Emerging Markets seems well overdue and fundamentally defensible.
Large Value Rotation
Over the past week, panic attacks incited by fears of AI capex overallocation, infighting among the Mag 7, and the threat of AI agents cannibalizing the software sector created dramatic deleveraging and a flight to quality within the markets. Consider the performance divergence between the Mag-7 complex and the S&P 500 Dividend Aristocrats index over the past week alone:
It’s highly unusual to see an 8% performance spread between such large weightings over a short amount of time, but it validates our thinking. While AI deployment will benefit some technology providers, it will benefit all who utilize it. Therefore, while the tech sector becomes more capital intensive to produce AI, traditionally capital-intensive businesses will become less capital intensive through utilizing AI. Additionally, the historic capex cycle we find ourselves in building out virtual AI, and ultimately physical AI, will require all forms of financing, including massive debt issuance. Much of this bloat can hide in circular financing structures and private debt markets, making investors unsure of true creditworthiness within the marketplace. This reveals the Achilles’ heel for this fast-paced economic cycle. While we are not concerned about an imminent credit event, we are attuned to rising investor skittishness as displayed last week. This drives part of our decision to rotate out of an agnostic deep value manager into another more dividend focused manager, finding comfort in the “prove it” attributes of tangible cash distributions. We expect to see more dividend payer appetite as the debt cycle enlarges, which means more demand, and higher prices for dividend centric strategies.
When Trump won the election in November, the US dollar strengthened. In theory, the orderly deployment of a tariff agenda should increase exports (purchases of dollars) and decrease imports (sales of dollars), supporting currency strength. In recognition, we repatriated a portion of our international exposure to avoid potential currency drag.
Trump’s tariff agenda was anything but orderly, overriding the economics and inciting dollar debasement benefiting Gold, Silver, etc. With Kevin Warsh’s appointment, we have less clarity on the dollar’s direction, but we do see Europe starting to consider economic growth as national security in a disorderly political environment. Increased military spending, fiscal deficit expansion, resumption of energy production, and whispers of deregulation should lift profit margins and earnings. We already see this in rising earnings expectations across Europe:
The combination of “prove it” cash flows and additional developed world international exposure informed our search and selection of a new value focused large cap manager screening for high free cash flows and juicy dividends, worldwide.
Fortunately, the remainder of our holdings properly calibrate with our worldview, which we will reveal next Thursday. Position changes from here will likely be situational (tax trades) rather than strategic, unless our worldview changes significantly. Remember, history shows a clear inverse relationship between frequent trading and investment returns!
Have a great week!
-David
Sources: Yardeni Research
This communication and its contents are for informational and educational purposes only and should not be used as the sole basis for any investment decision. The information contained herein is based on publicly available sources believed to be reliable but is not a representation, expressed or implied, as to the accuracy, completeness, or correctness of said information. References to political figures or policies are for informational purposes only and do not represent an endorsement by Waddell & Associates. Any forward-looking statements reflect current opinions and assumptions and are subject to change without notice; actual results may differ materially. Past performance does not guarantee future results. Waddell & Associates may use artificial intelligence tools to help generate or summarize content; all outputs are reviewed by our team for accuracy and relevance.
We have always approached the emerging markets with a value bias, seeing exposure to the segment as growthy enough. Small cap emerging market names can provide additional downside insurance as they trade far less frequently than their larger cap peers, leading to less performance volatility driven by low conviction capital volatility. In uncertain periods we will hold small cap exposure to avoid capital whipsaws. Unfortunately, just as the low trading volumes limit selling pressure, low trading volumes also limit buying pressure. With conviction growing in the durability of emerging market outperformance, after twenty years of underperformance, we have chosen to swap our emerging markets small cap passive position for a larger cap active position that will benefit more from incoming capital flows. Our selected manager prioritizes dividend paying companies, maintaining our quality bias, while also aligning with our “prove it” financial bias at this point in the cycle. Consider the following factors supporting our Emerging Market exposure:
Note the valuation differential when comparing the Emerging Market stock market index with other world indices:
The emerging market complex trades at 13.7x forward earnings within the midpoint of its historical range, while the US trades at 22x, near the top of its historical range.
2. Consider the earnings momentum that “Re-globalization”, technological adoption, and voracious demand for materials and components have unlocked:
While analysts expect US earnings to grow 15% and 16% in 2026 and 2027 respectively, they forecast 23% and 15% earnings growth within Emerging Markets.
3. Consider money flows into Emerging Markets from January alone:
How long can these catalytic money flows persist? Lower valuations and improving earnings momentum paired with Mag-7 fatigue and institutional under allocation to the asset class could fuel relative outperformance for years.
4. Consider the last twenty years of relative underperformance and the spread available for recapture:
In this year alone, the Emerging Markets index has advanced 7% while the S&P 500 has declined 1%. Last year, the Emerging Markets index outperformed the S&P 500 by 16.5%. Relative performance ebbs and flows, but after two decades of neglect, the revival of the Emerging Markets seems well overdue and fundamentally defensible.
Large Value Rotation
Over the past week, panic attacks incited by fears of AI capex overallocation, infighting among the Mag 7, and the threat of AI agents cannibalizing the software sector created dramatic deleveraging and a flight to quality within the markets. Consider the performance divergence between the Mag-7 complex and the S&P 500 Dividend Aristocrats index over the past week alone:
It’s highly unusual to see an 8% performance spread between such large weightings over a short amount of time, but it validates our thinking. While AI deployment will benefit some technology providers, it will benefit all who utilize it. Therefore, while the tech sector becomes more capital intensive to produce AI, traditionally capital-intensive businesses will become less capital intensive through utilizing AI. Additionally, the historic capex cycle we find ourselves in building out virtual AI, and ultimately physical AI, will require all forms of financing, including massive debt issuance. Much of this bloat can hide in circular financing structures and private debt markets, making investors unsure of true creditworthiness within the marketplace. This reveals the Achilles’ heel for this fast-paced economic cycle. While we are not concerned about an imminent credit event, we are attuned to rising investor skittishness as displayed last week. This drives part of our decision to rotate out of an agnostic deep value manager into another more dividend focused manager, finding comfort in the “prove it” attributes of tangible cash distributions. We expect to see more dividend payer appetite as the debt cycle enlarges, which means more demand, and higher prices for dividend centric strategies.
When Trump won the election in November, the US dollar strengthened. In theory, the orderly deployment of a tariff agenda should increase exports (purchases of dollars) and decrease imports (sales of dollars), supporting currency strength. In recognition, we repatriated a portion of our international exposure to avoid potential currency drag.
Trump’s tariff agenda was anything but orderly, overriding the economics and inciting dollar debasement benefiting Gold, Silver, etc. With Kevin Warsh’s appointment, we have less clarity on the dollar’s direction, but we do see Europe starting to consider economic growth as national security in a disorderly political environment. Increased military spending, fiscal deficit expansion, resumption of energy production, and whispers of deregulation should lift profit margins and earnings. We already see this in rising earnings expectations across Europe:
The combination of “prove it” cash flows and additional developed world international exposure informed our search and selection of a new value focused large cap manager screening for high free cash flows and juicy dividends, worldwide.
Fortunately, the remainder of our holdings properly calibrate with our worldview, which we will reveal next Thursday. Position changes from here will likely be situational (tax trades) rather than strategic, unless our worldview changes significantly. Remember, history shows a clear inverse relationship between frequent trading and investment returns!
Have a great week!
-David
Sources: Yardeni Research
This communication and its contents are for informational and educational purposes only and should not be used as the sole basis for any investment decision. The information contained herein is based on publicly available sources believed to be reliable but is not a representation, expressed or implied, as to the accuracy, completeness, or correctness of said information. References to political figures or policies are for informational purposes only and do not represent an endorsement by Waddell & Associates. Any forward-looking statements reflect current opinions and assumptions and are subject to change without notice; actual results may differ materially. Past performance does not guarantee future results. Waddell & Associates may use artificial intelligence tools to help generate or summarize content; all outputs are reviewed by our team for accuracy and relevance.
Living Abroad: What Makes Cross-Border Estate Planning Different?
Beyond timing market opportunities, the structural differences in how countries handle estates create another layer of complexity, one that catches many people off guard.
Unfortunately, international estate planning doesn’t always transfer smoothly. Different jurisdictions have fundamentally different rules about who inherits what, how assets can be owned, and what taxes apply:
Inheritance laws can override your wishes. For example, forced-heirship laws in France often dictate that property goes directly to children regardless of what your U.S. will specifies. Your intent doesn’t automatically travel with your assets.
Ownership structure shapes your options. How you hold an overseas home or bank account affects both taxes and inheritance. The structure you choose (individual ownership versus holding assets through an entity) raises different questions about coordination with your overall estate plan.
Banking regulations vary by jurisdiction. Access, reporting requirements, and estate settlement processes differ across regions, which can create friction when your family needs funds or when settling your estate.
Tax treaties are specific, not universal. Some protect you from double taxation, others don’t. It depends on the countries involved and the type of asset.
How We Approach It
When you’re moving assets across borders, we start by mapping what’s actually changing. Your 401(k) stays put—it doesn’t travel well, and it passes outside your estate with listed beneficiaries anyway. But property purchases abroad or new international bank accounts need additional planning.
Take that vacation home in France, for instance. Individual ownership means French inheritance law applies, and French law has opinions about who inherits property, regardless of what your U.S. will says. Setting up an entity to hold the property might give you more control and cleaner estate administration. But which entity? Formed where? And how does it coordinate with your existing U.S. estate plan and tax situation?
We coordinate with your network of specialists, including U.S.-based CPAs and estate attorneys, international tax professionals, and local experts in your destination countries, to answer these questions. Together, we can orchestrate how all these pieces interact to best meet your goals.
The Currency Question Most People Don’t Think to Ask
Once we’ve sorted the legal and tax structures, there’s a practical element that affects your day-to-day life abroad, and eventually, your estate settlement. If you’re living in Spain but most of your wealth is in U.S. dollars, how do you pay for healthcare or property taxes without constantly losing money to exchange rates?
Currency markets operate around the clock, constantly shifting, and the practical questions matter:
Which currencies should you hold based on where you’re spending money and where your assets are invested?
Where should you bank to minimize conversion fees and maximize accessibility?
How do you handle everyday expenses without watching exchange rates erode your purchasing power?
These decisions affect both your daily life and your estate’s eventual settlement. If your beneficiaries need to access funds held in multiple currencies across different countries, poor planning can mean significant losses during an already difficult time.
We help you think through which currencies to hold, where to maintain accounts, and how to structure things so your family isn’t navigating currency conversion logistics while settling your estate.
Looking Ahead: What’s Changing (and What’s Not)
The variables we’ve walked through (market conditions, international regulations, ownership structures, currency fluctuations) won’t stay static. That’s not a flaw in the planning; it’s the reality of managing wealth that crosses borders.
Markets may create new volatility and new opportunity. Countries will adjust their estate and tax laws. Digital assets will continue evolving, with governments still figuring out how crypto and other holdings move across borders and what reporting will be required.
This is why legacy protection for global wealth is an ongoing partnership, not a one-time plan. Your wealth is dynamic. The regulations governing it are dynamic. Having someone who sees how these pieces interact and when they matter to you specifically means you don’t carry that complexity yourself.
Working Together on Cross-Border Complexity
International considerations and market volatility add complexity to estate planning, but they also create opportunities. The key is having a partner who sees both and who can help you act on opportunities while avoiding pitfalls.
If this raised any new questions about your estate planning or global wealth strategies, we’re always here to talk. We can review your current structure, so you have a clearer understanding of how your financial plan is structured.
If you’re not yet working with us but want guidance on managing wealth across borders, we welcome a conversation. Reach out to learn more about the Waddell & Associates Difference, and how we serve as your Chief Strategy Officer for every aspect of your financial life.
Sources: IRS.gov
This content is for informational purposes only and should not be considered legal, tax, or investment advice. Opinions are those of the author and may change. Waddell & Associates is an SEC-registered investment adviser. Registration does not imply a certain level of skill. Past performance is not indicative of future results. Please consult your professional advisors before making financial decisions.
Living Abroad: What Makes Cross-Border Estate Planning Different?
Beyond timing market opportunities, the structural differences in how countries handle estates create another layer of complexity, one that catches many people off guard.
Unfortunately, international estate planning doesn’t always transfer smoothly. Different jurisdictions have fundamentally different rules about who inherits what, how assets can be owned, and what taxes apply:
Inheritance laws can override your wishes. For example, forced-heirship laws in France often dictate that property goes directly to children regardless of what your U.S. will specifies. Your intent doesn’t automatically travel with your assets.
Ownership structure shapes your options. How you hold an overseas home or bank account affects both taxes and inheritance. The structure you choose (individual ownership versus holding assets through an entity) raises different questions about coordination with your overall estate plan.
Banking regulations vary by jurisdiction. Access, reporting requirements, and estate settlement processes differ across regions, which can create friction when your family needs funds or when settling your estate.
Tax treaties are specific, not universal. Some protect you from double taxation, others don’t. It depends on the countries involved and the type of asset.
How We Approach It
When you’re moving assets across borders, we start by mapping what’s actually changing. Your 401(k) stays put—it doesn’t travel well, and it passes outside your estate with listed beneficiaries anyway. But property purchases abroad or new international bank accounts need additional planning.
Take that vacation home in France, for instance. Individual ownership means French inheritance law applies, and French law has opinions about who inherits property, regardless of what your U.S. will says. Setting up an entity to hold the property might give you more control and cleaner estate administration. But which entity? Formed where? And how does it coordinate with your existing U.S. estate plan and tax situation?
We coordinate with your network of specialists, including U.S.-based CPAs and estate attorneys, international tax professionals, and local experts in your destination countries, to answer these questions. Together, we can orchestrate how all these pieces interact to best meet your goals.
The Currency Question Most People Don’t Think to Ask
Once we’ve sorted the legal and tax structures, there’s a practical element that affects your day-to-day life abroad, and eventually, your estate settlement. If you’re living in Spain but most of your wealth is in U.S. dollars, how do you pay for healthcare or property taxes without constantly losing money to exchange rates?
Currency markets operate around the clock, constantly shifting, and the practical questions matter:
Which currencies should you hold based on where you’re spending money and where your assets are invested?
Where should you bank to minimize conversion fees and maximize accessibility?
How do you handle everyday expenses without watching exchange rates erode your purchasing power?
These decisions affect both your daily life and your estate’s eventual settlement. If your beneficiaries need to access funds held in multiple currencies across different countries, poor planning can mean significant losses during an already difficult time.
We help you think through which currencies to hold, where to maintain accounts, and how to structure things so your family isn’t navigating currency conversion logistics while settling your estate.
Looking Ahead: What’s Changing (and What’s Not)
The variables we’ve walked through (market conditions, international regulations, ownership structures, currency fluctuations) won’t stay static. That’s not a flaw in the planning; it’s the reality of managing wealth that crosses borders.
Markets may create new volatility and new opportunity. Countries will adjust their estate and tax laws. Digital assets will continue evolving, with governments still figuring out how crypto and other holdings move across borders and what reporting will be required.
This is why legacy protection for global wealth is an ongoing partnership, not a one-time plan. Your wealth is dynamic. The regulations governing it are dynamic. Having someone who sees how these pieces interact and when they matter to you specifically means you don’t carry that complexity yourself.
Working Together on Cross-Border Complexity
International considerations and market volatility add complexity to estate planning, but they also create opportunities. The key is having a partner who sees both and who can help you act on opportunities while avoiding pitfalls.
If this raised any new questions about your estate planning or global wealth strategies, we’re always here to talk. We can review your current structure, so you have a clearer understanding of how your financial plan is structured.
If you’re not yet working with us but want guidance on managing wealth across borders, we welcome a conversation. Reach out to learn more about the Waddell & Associates Difference, and how we serve as your Chief Strategy Officer for every aspect of your financial life.
Sources: IRS.gov
This content is for informational purposes only and should not be considered legal, tax, or investment advice. Opinions are those of the author and may change. Waddell & Associates is an SEC-registered investment adviser. Registration does not imply a certain level of skill. Past performance is not indicative of future results. Please consult your professional advisors before making financial decisions.
Living Abroad: What Makes Cross-Border Estate Planning Different?
Beyond timing market opportunities, the structural differences in how countries handle estates create another layer of complexity, one that catches many people off guard.
Unfortunately, international estate planning doesn’t always transfer smoothly. Different jurisdictions have fundamentally different rules about who inherits what, how assets can be owned, and what taxes apply:
Inheritance laws can override your wishes. For example, forced-heirship laws in France often dictate that property goes directly to children regardless of what your U.S. will specifies. Your intent doesn’t automatically travel with your assets.
Ownership structure shapes your options. How you hold an overseas home or bank account affects both taxes and inheritance. The structure you choose (individual ownership versus holding assets through an entity) raises different questions about coordination with your overall estate plan.
Banking regulations vary by jurisdiction. Access, reporting requirements, and estate settlement processes differ across regions, which can create friction when your family needs funds or when settling your estate.
Tax treaties are specific, not universal. Some protect you from double taxation, others don’t. It depends on the countries involved and the type of asset.
How We Approach It
When you’re moving assets across borders, we start by mapping what’s actually changing. Your 401(k) stays put—it doesn’t travel well, and it passes outside your estate with listed beneficiaries anyway. But property purchases abroad or new international bank accounts need additional planning.
Take that vacation home in France, for instance. Individual ownership means French inheritance law applies, and French law has opinions about who inherits property, regardless of what your U.S. will says. Setting up an entity to hold the property might give you more control and cleaner estate administration. But which entity? Formed where? And how does it coordinate with your existing U.S. estate plan and tax situation?
We coordinate with your network of specialists, including U.S.-based CPAs and estate attorneys, international tax professionals, and local experts in your destination countries, to answer these questions. Together, we can orchestrate how all these pieces interact to best meet your goals.
The Currency Question Most People Don’t Think to Ask
Once we’ve sorted the legal and tax structures, there’s a practical element that affects your day-to-day life abroad, and eventually, your estate settlement. If you’re living in Spain but most of your wealth is in U.S. dollars, how do you pay for healthcare or property taxes without constantly losing money to exchange rates?
Currency markets operate around the clock, constantly shifting, and the practical questions matter:
Which currencies should you hold based on where you’re spending money and where your assets are invested?
Where should you bank to minimize conversion fees and maximize accessibility?
How do you handle everyday expenses without watching exchange rates erode your purchasing power?
These decisions affect both your daily life and your estate’s eventual settlement. If your beneficiaries need to access funds held in multiple currencies across different countries, poor planning can mean significant losses during an already difficult time.
We help you think through which currencies to hold, where to maintain accounts, and how to structure things so your family isn’t navigating currency conversion logistics while settling your estate.
Looking Ahead: What’s Changing (and What’s Not)
The variables we’ve walked through (market conditions, international regulations, ownership structures, currency fluctuations) won’t stay static. That’s not a flaw in the planning; it’s the reality of managing wealth that crosses borders.
Markets may create new volatility and new opportunity. Countries will adjust their estate and tax laws. Digital assets will continue evolving, with governments still figuring out how crypto and other holdings move across borders and what reporting will be required.
This is why legacy protection for global wealth is an ongoing partnership, not a one-time plan. Your wealth is dynamic. The regulations governing it are dynamic. Having someone who sees how these pieces interact and when they matter to you specifically means you don’t carry that complexity yourself.
Working Together on Cross-Border Complexity
International considerations and market volatility add complexity to estate planning, but they also create opportunities. The key is having a partner who sees both and who can help you act on opportunities while avoiding pitfalls.
If this raised any new questions about your estate planning or global wealth strategies, we’re always here to talk. We can review your current structure, so you have a clearer understanding of how your financial plan is structured.
If you’re not yet working with us but want guidance on managing wealth across borders, we welcome a conversation. Reach out to learn more about the Waddell & Associates Difference, and how we serve as your Chief Strategy Officer for every aspect of your financial life.
Sources: IRS.gov
This content is for informational purposes only and should not be considered legal, tax, or investment advice. Opinions are those of the author and may change. Waddell & Associates is an SEC-registered investment adviser. Registration does not imply a certain level of skill. Past performance is not indicative of future results. Please consult your professional advisors before making financial decisions.
But the stock market isn’t your “scoreboard.” Your real benchmark for success is the probability that your financial plan “works” across different scenarios.
Every financial plan we build already contemplates market declines. For example, if you have about a third of your total net worth invested in stocks, and the market suddenly drops 10%, your overall wealth likely dips just 3%. That’s not comfortable, but it’s also not catastrophic. And frankly, it’s exactly what a well-built plan was designed to handle. This is why we keep coming back to your plan—not to be repetitive, but because it’s the one thing you can control.
Managing Risk in 2026: Three Levers We Can Pull (and When We Pull Them)
As we head into 2026, it’s natural to feel a mix of optimism and unease. The markets have delivered another remarkable run, one that feels both exciting and worthy of thoughtful attention.
At Waddell & Associates, our portfolio allocation strategy for 2026 is designed around discipline, not prediction. We don’t chase trends or react to headlines. Instead, we rely on a clear framework with three built-in levers we can pull when conditions warrant. Each one helps protect your long-term plan while keeping you meaningfully invested.
Lever One: Rebalancing
In a strong market (like the one we’ve seen through 2025), stocks often outpace everything else, which means your portfolio can quietly become riskier than intended. You might start the year with 60% in stocks but end up with 70% just because equities have climbed so much. That extra 10% may not sound like much, but it can significantly increase volatility when the market turns. That’s when we turn to Lever One: rebalancing.
Rebalancing is a quiet form of risk management that we do at set intervals and whenever markets move significantly enough to shift allocations beyond tolerance bands. It forces us to “sell high” on what’s overextended and “buy low” where opportunity remains. As we head into 2026, that means we’ll likely be trimming gains from equities and redeploying into underweighted areas like bonds or alternatives.
What is Rebalancing?
Rebalancing is the process of realigning your portfolio back to its intended mix of assets (stocks, bonds, and other investments). When one part of the portfolio grows faster than others, we trim it back and reinvest in areas that have lagged.
Lever Two: Shifting Within Your Stock Portfolio
Sometimes the right move isn’t to reduce your overall stock exposure but to adjust where that exposure lives. Within equities, we can move between sectors, regions, or company sizes to position the portfolio for the environment ahead.
After a long bull market, certain areas (like the so-called “Magnificent Seven” tech giants) can become crowded and expensive. At the same time, other parts of the market may offer better balance and long-term opportunity. That’s why we’re staying bullish but cautious by leaning more toward value and quality.*
By shifting within equities, we’re not trying to time the market; we’re simply helping to ensure your portfolio isn’t overexposed to sectors that have already had an extraordinary run.
Heading into 2026, we’re paying close attention to earnings trends, interest rate paths, and valuation spreads between sectors. If we see signs that leadership is broadening or that defensive characteristics are being rewarded, we can gradually adjust further toward more insulated parts of the market.
Lever Three: The “Red Button” Hedge
The best time to prepare for market stress is before it happens. By having a clearly defined hedge strategy in place, we can move decisively if conditions warrant, without scrambling or reacting emotionally.
Our “red button” hedge is a pre-defined, evidence-based allocation designed to protect client portfolios only if forward indicators signal a genuine recessionary threat. Our portfolios are designed to reduce equity exposure by up to 40% if conditions warrant.**
We only consider the red button when key recession indicators align, as only recessionary markets provide enough durable downside risk to justify hedging. It’s not about what we feel the market might do; it’s about what the data says. Heading into the new year, that readiness is what allows you to stay invested through uncertainty with confidence.
What This Means as We Head Into 2026
In a historic bull market, it’s natural to want to actively manage what’s working. But the truth is, thoughtful portfolio management isn’t about reacting to every move the market makes. It’s about knowing which moves matter, and when to make them.
Our three levers—rebalancing, shifting within equities, and the red button—exist so you can stay focused on what actually matters: the probability your plan succeeds. As we move into 2026, that remains our true scoreboard.
If your balance sheet includes company stock, rental properties, or private business interests, you might be wondering if this framework applies to you. Short answer: it absolutely does, we just look at the whole picture first.
Complex portfolios often look diversified but can be heavily correlated in downturns. By coordinating across all accounts (personal, business, and trust), we manage to your plan’s overall probability of success.
Our three levers still apply here:
Rebalancing keeps your total exposure in check, not just your portfolio weights.
Shifting within equities helps offset risks tied to your industry or business.
The “red button” hedge protects both personal and business liquidity if recession risk rises.
Our 2026 approach starts by viewing your whole balance sheet as one ecosystem, so we can manage risk across all parts of your wealth, not just your market holdings.
If your company stock or private business already carries growth risk, for instance, we might balance that with more stable, liquid assets. If real estate is a major holding, we might dial back cyclical or income-sensitive investments. The goal is to ensure no single area dominates your financial future.
Starting 2026 With Clarity
Successful portfolio allocation isn’t about reacting to what’s loudest. It’s about staying aligned to what’s lasting. The markets will shift, leadership will rotate, and volatility will return. Through it all, the constant is your plan and the discipline behind it.
The truth is, no two clients enter 2026 from the same place. Some of you are thinking about succession planning. Others are watching interest rates or considering a business exit. Whatever’s on your radar, we’d love to hear about it.
If anything in this conversation raised new questions about your portfolio or you’re anticipating any upcoming life changes in the new year, let’s connect. Even small updates can shift how your plan or allocation should evolve heading into 2026.
And if you’re not yet working with our team and are looking for a wealth partner who blends data-driven discipline with deeply personal planning, we invite you to learn more about the W&A difference. Our approach helps clients face markets like this one with clarity, confidence, and a plan built to last.
*These observations are for illustrative purposes and not intended as specific sector or security recommendations.
**The “red button” hedge is not a guarantee against loss, but a disciplined framework that may be activated if economic data signals elevated risk.
This content is for informational and educational purposes only and should not be construed as investment, legal, or tax advice. Waddell & Associates, Inc. is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.
The strategies and examples discussed are illustrative only and may not be appropriate for every individual. All investments and planning decisions involve risk, including the possible loss of principal.
Please consult your financial advisor, attorney, or tax professional before making any decisions related to retirement, estate, or healthcare planning.
But the stock market isn’t your “scoreboard.” Your real benchmark for success is the probability that your financial plan “works” across different scenarios.
Every financial plan we build already contemplates market declines. For example, if you have about a third of your total net worth invested in stocks, and the market suddenly drops 10%, your overall wealth likely dips just 3%. That’s not comfortable, but it’s also not catastrophic. And frankly, it’s exactly what a well-built plan was designed to handle. This is why we keep coming back to your plan—not to be repetitive, but because it’s the one thing you can control.
Managing Risk in 2026: Three Levers We Can Pull (and When We Pull Them)
As we head into 2026, it’s natural to feel a mix of optimism and unease. The markets have delivered another remarkable run, one that feels both exciting and worthy of thoughtful attention.
At Waddell & Associates, our portfolio allocation strategy for 2026 is designed around discipline, not prediction. We don’t chase trends or react to headlines. Instead, we rely on a clear framework with three built-in levers we can pull when conditions warrant. Each one helps protect your long-term plan while keeping you meaningfully invested.
Lever One: Rebalancing
In a strong market (like the one we’ve seen through 2025), stocks often outpace everything else, which means your portfolio can quietly become riskier than intended. You might start the year with 60% in stocks but end up with 70% just because equities have climbed so much. That extra 10% may not sound like much, but it can significantly increase volatility when the market turns. That’s when we turn to Lever One: rebalancing.
Rebalancing is a quiet form of risk management that we do at set intervals and whenever markets move significantly enough to shift allocations beyond tolerance bands. It forces us to “sell high” on what’s overextended and “buy low” where opportunity remains. As we head into 2026, that means we’ll likely be trimming gains from equities and redeploying into underweighted areas like bonds or alternatives.
What is Rebalancing?
Rebalancing is the process of realigning your portfolio back to its intended mix of assets (stocks, bonds, and other investments). When one part of the portfolio grows faster than others, we trim it back and reinvest in areas that have lagged.
Lever Two: Shifting Within Your Stock Portfolio
Sometimes the right move isn’t to reduce your overall stock exposure but to adjust where that exposure lives. Within equities, we can move between sectors, regions, or company sizes to position the portfolio for the environment ahead.
After a long bull market, certain areas (like the so-called “Magnificent Seven” tech giants) can become crowded and expensive. At the same time, other parts of the market may offer better balance and long-term opportunity. That’s why we’re staying bullish but cautious by leaning more toward value and quality.*
By shifting within equities, we’re not trying to time the market; we’re simply helping to ensure your portfolio isn’t overexposed to sectors that have already had an extraordinary run.
Heading into 2026, we’re paying close attention to earnings trends, interest rate paths, and valuation spreads between sectors. If we see signs that leadership is broadening or that defensive characteristics are being rewarded, we can gradually adjust further toward more insulated parts of the market.
Lever Three: The “Red Button” Hedge
The best time to prepare for market stress is before it happens. By having a clearly defined hedge strategy in place, we can move decisively if conditions warrant, without scrambling or reacting emotionally.
Our “red button” hedge is a pre-defined, evidence-based allocation designed to protect client portfolios only if forward indicators signal a genuine recessionary threat. Our portfolios are designed to reduce equity exposure by up to 40% if conditions warrant.**
We only consider the red button when key recession indicators align, as only recessionary markets provide enough durable downside risk to justify hedging. It’s not about what we feel the market might do; it’s about what the data says. Heading into the new year, that readiness is what allows you to stay invested through uncertainty with confidence.
What This Means as We Head Into 2026
In a historic bull market, it’s natural to want to actively manage what’s working. But the truth is, thoughtful portfolio management isn’t about reacting to every move the market makes. It’s about knowing which moves matter, and when to make them.
Our three levers—rebalancing, shifting within equities, and the red button—exist so you can stay focused on what actually matters: the probability your plan succeeds. As we move into 2026, that remains our true scoreboard.
If your balance sheet includes company stock, rental properties, or private business interests, you might be wondering if this framework applies to you. Short answer: it absolutely does, we just look at the whole picture first.
Complex portfolios often look diversified but can be heavily correlated in downturns. By coordinating across all accounts (personal, business, and trust), we manage to your plan’s overall probability of success.
Our three levers still apply here:
Rebalancing keeps your total exposure in check, not just your portfolio weights.
Shifting within equities helps offset risks tied to your industry or business.
The “red button” hedge protects both personal and business liquidity if recession risk rises.
Our 2026 approach starts by viewing your whole balance sheet as one ecosystem, so we can manage risk across all parts of your wealth, not just your market holdings.
If your company stock or private business already carries growth risk, for instance, we might balance that with more stable, liquid assets. If real estate is a major holding, we might dial back cyclical or income-sensitive investments. The goal is to ensure no single area dominates your financial future.
Starting 2026 With Clarity
Successful portfolio allocation isn’t about reacting to what’s loudest. It’s about staying aligned to what’s lasting. The markets will shift, leadership will rotate, and volatility will return. Through it all, the constant is your plan and the discipline behind it.
The truth is, no two clients enter 2026 from the same place. Some of you are thinking about succession planning. Others are watching interest rates or considering a business exit. Whatever’s on your radar, we’d love to hear about it.
If anything in this conversation raised new questions about your portfolio or you’re anticipating any upcoming life changes in the new year, let’s connect. Even small updates can shift how your plan or allocation should evolve heading into 2026.
And if you’re not yet working with our team and are looking for a wealth partner who blends data-driven discipline with deeply personal planning, we invite you to learn more about the W&A difference. Our approach helps clients face markets like this one with clarity, confidence, and a plan built to last.
*These observations are for illustrative purposes and not intended as specific sector or security recommendations.
**The “red button” hedge is not a guarantee against loss, but a disciplined framework that may be activated if economic data signals elevated risk.
This content is for informational and educational purposes only and should not be construed as investment, legal, or tax advice. Waddell & Associates, Inc. is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.
The strategies and examples discussed are illustrative only and may not be appropriate for every individual. All investments and planning decisions involve risk, including the possible loss of principal.
Please consult your financial advisor, attorney, or tax professional before making any decisions related to retirement, estate, or healthcare planning.
But the stock market isn’t your “scoreboard.” Your real benchmark for success is the probability that your financial plan “works” across different scenarios.
Every financial plan we build already contemplates market declines. For example, if you have about a third of your total net worth invested in stocks, and the market suddenly drops 10%, your overall wealth likely dips just 3%. That’s not comfortable, but it’s also not catastrophic. And frankly, it’s exactly what a well-built plan was designed to handle. This is why we keep coming back to your plan—not to be repetitive, but because it’s the one thing you can control.
Managing Risk in 2026: Three Levers We Can Pull (and When We Pull Them)
As we head into 2026, it’s natural to feel a mix of optimism and unease. The markets have delivered another remarkable run, one that feels both exciting and worthy of thoughtful attention.
At Waddell & Associates, our portfolio allocation strategy for 2026 is designed around discipline, not prediction. We don’t chase trends or react to headlines. Instead, we rely on a clear framework with three built-in levers we can pull when conditions warrant. Each one helps protect your long-term plan while keeping you meaningfully invested.
Lever One: Rebalancing
In a strong market (like the one we’ve seen through 2025), stocks often outpace everything else, which means your portfolio can quietly become riskier than intended. You might start the year with 60% in stocks but end up with 70% just because equities have climbed so much. That extra 10% may not sound like much, but it can significantly increase volatility when the market turns. That’s when we turn to Lever One: rebalancing.
Rebalancing is a quiet form of risk management that we do at set intervals and whenever markets move significantly enough to shift allocations beyond tolerance bands. It forces us to “sell high” on what’s overextended and “buy low” where opportunity remains. As we head into 2026, that means we’ll likely be trimming gains from equities and redeploying into underweighted areas like bonds or alternatives.
What is Rebalancing?
Rebalancing is the process of realigning your portfolio back to its intended mix of assets (stocks, bonds, and other investments). When one part of the portfolio grows faster than others, we trim it back and reinvest in areas that have lagged.
Lever Two: Shifting Within Your Stock Portfolio
Sometimes the right move isn’t to reduce your overall stock exposure but to adjust where that exposure lives. Within equities, we can move between sectors, regions, or company sizes to position the portfolio for the environment ahead.
After a long bull market, certain areas (like the so-called “Magnificent Seven” tech giants) can become crowded and expensive. At the same time, other parts of the market may offer better balance and long-term opportunity. That’s why we’re staying bullish but cautious by leaning more toward value and quality.*
By shifting within equities, we’re not trying to time the market; we’re simply helping to ensure your portfolio isn’t overexposed to sectors that have already had an extraordinary run.
Heading into 2026, we’re paying close attention to earnings trends, interest rate paths, and valuation spreads between sectors. If we see signs that leadership is broadening or that defensive characteristics are being rewarded, we can gradually adjust further toward more insulated parts of the market.
Lever Three: The “Red Button” Hedge
The best time to prepare for market stress is before it happens. By having a clearly defined hedge strategy in place, we can move decisively if conditions warrant, without scrambling or reacting emotionally.
Our “red button” hedge is a pre-defined, evidence-based allocation designed to protect client portfolios only if forward indicators signal a genuine recessionary threat. Our portfolios are designed to reduce equity exposure by up to 40% if conditions warrant.**
We only consider the red button when key recession indicators align, as only recessionary markets provide enough durable downside risk to justify hedging. It’s not about what we feel the market might do; it’s about what the data says. Heading into the new year, that readiness is what allows you to stay invested through uncertainty with confidence.
What This Means as We Head Into 2026
In a historic bull market, it’s natural to want to actively manage what’s working. But the truth is, thoughtful portfolio management isn’t about reacting to every move the market makes. It’s about knowing which moves matter, and when to make them.
Our three levers—rebalancing, shifting within equities, and the red button—exist so you can stay focused on what actually matters: the probability your plan succeeds. As we move into 2026, that remains our true scoreboard.
If your balance sheet includes company stock, rental properties, or private business interests, you might be wondering if this framework applies to you. Short answer: it absolutely does, we just look at the whole picture first.
Complex portfolios often look diversified but can be heavily correlated in downturns. By coordinating across all accounts (personal, business, and trust), we manage to your plan’s overall probability of success.
Our three levers still apply here:
Rebalancing keeps your total exposure in check, not just your portfolio weights.
Shifting within equities helps offset risks tied to your industry or business.
The “red button” hedge protects both personal and business liquidity if recession risk rises.
Our 2026 approach starts by viewing your whole balance sheet as one ecosystem, so we can manage risk across all parts of your wealth, not just your market holdings.
If your company stock or private business already carries growth risk, for instance, we might balance that with more stable, liquid assets. If real estate is a major holding, we might dial back cyclical or income-sensitive investments. The goal is to ensure no single area dominates your financial future.
Starting 2026 With Clarity
Successful portfolio allocation isn’t about reacting to what’s loudest. It’s about staying aligned to what’s lasting. The markets will shift, leadership will rotate, and volatility will return. Through it all, the constant is your plan and the discipline behind it.
The truth is, no two clients enter 2026 from the same place. Some of you are thinking about succession planning. Others are watching interest rates or considering a business exit. Whatever’s on your radar, we’d love to hear about it.
If anything in this conversation raised new questions about your portfolio or you’re anticipating any upcoming life changes in the new year, let’s connect. Even small updates can shift how your plan or allocation should evolve heading into 2026.
And if you’re not yet working with our team and are looking for a wealth partner who blends data-driven discipline with deeply personal planning, we invite you to learn more about the W&A difference. Our approach helps clients face markets like this one with clarity, confidence, and a plan built to last.
*These observations are for illustrative purposes and not intended as specific sector or security recommendations.
**The “red button” hedge is not a guarantee against loss, but a disciplined framework that may be activated if economic data signals elevated risk.
This content is for informational and educational purposes only and should not be construed as investment, legal, or tax advice. Waddell & Associates, Inc. is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.
The strategies and examples discussed are illustrative only and may not be appropriate for every individual. All investments and planning decisions involve risk, including the possible loss of principal.
Please consult your financial advisor, attorney, or tax professional before making any decisions related to retirement, estate, or healthcare planning.
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