Most market indices held on to positive returns despite a turbulent second half of July. Investors rotated away from the mega-cap tech stocks known as the "Magnificent 7" into value and small cap stocks. The stock market volatility in the second half helped drive bond yield lower pushing up bond fund returns.
The top 10 stocks in the S&P 500 have grown so large that they now represent 35% of the total index because of this concentration investors in the popular index will sink or swim largely based on the performance of those companies. For the first half of 2024 investors benefitted because the top 3 stocks Nvidia, Alphabet and Microsoft collectively were up 49% which accounted for 49% of the index's return. The index as a whole was up 14.5%.
Net Unrealized Appreciation (NUA) is a valuable tax strategy that can offer the benefit of lower taxes and portfolo diversification for investors holding appreciated employer stock within their retirement plans. By understanding how NUA works and considering its potential impact on your overall financial plan, you can make informed decisions to optimize your tax efficiency and achieve your long-term financial goals.
While there still may be pain to be felt in the economy we can be thankful for equity markets in 2023.