Investments: War in the Middle East
Two weeks ago, the United States and Israel began a bombing campaign against Iran, starting a conflict that has since broadened to encompass much of the Middle East. Since the conflict began, the S&P 500 is down around 1.5%, while the energy sector, benefiting from higher oil prices, has risen around 1.5%. One of the major developments of the war so far has been the rapid increase in oil prices, as crude oil has jumped over 40% since the first strikes occurred. With highs of around $115/barrel, the price of crude oil has seesawed back and forth as new developments have unfolded, currently sitting around $95/barrel. President Trump, along with the International Energy Agency, have taken extensive measures to curb the rapid increase in oil prices. One such measure was the IEA coordinating the largest oil stock release in history, issuing 400 million barrels last Wednesday. However, prices continue to increase as Iran has closed the Strait of Hormuz and has started targeting, whether through drone strikes or planted mines, vessels that pass through the strait. High energy prices for a prolonged period of time will undoubtedly send shockwaves throughout the global economy, primarily through higher inflation. However, due to the U.S.’s emergence as a net exporter of petroleum, the disruption of oil prices will most likely serve as a temporary supply shock instead of a permanent setback. For investors, now is not the time to change your asset allocation or try and trade around the conflict. As seen already throughout the war, the market is very volatile, and any news could cause the market to swing violently in either direction. Since no one truly knows how long this conflict will last, it is best to take a long-term investing approach grounded in discipline, patience, and avoiding trying to time the market.
Planning: QCDs
Qualified Charitable Distributions, or QCDs, are a great way for those who are charitably inclined to give in a tax-efficient manner. For individuals age 70 ½ and older, a QCD allows you to distribute up to $100,000 per year directly from an IRA to a qualified charity. Once required minimum distributions, or RMDs, begin at age 73, a QCD can then be used to satisfy the RMD requirement for a given year. By doing so, the donor can exclude up to $100,000 of the RMD amount from taxable income. Implementing a QCD is an easy way to help reduce the impact of taxes on Social Security benefits and limit exposure to other income-based thresholds, such as the ACA Premium Credit phaseout. For those who already intend to give, qualified charitable distributions allow for continued flexibility and help align charitable goals with thoughtful tax planning.
