Client Newsletter 1Q25
Dear Ambassador Family,
Happy New Year! As we welcome 2025, we are excited to share some incredible news. Our firm has officially acquired Rodman & Associates, LLC, a highly respected CPA firm in Spokane, WA. This partnership allows us to expand the range of services we offer, bringing even greater value to you through integrated financial planning and tax expertise. We are thrilled about this opportunity to serve you even better in the year(s) ahead!
In addition, we are in the process of rebranding to better reflect our combined vision and expanded services. In the coming months, you will notice updates to our logo, colors, and overall brand identity across printed materials like this newsletter, as well as online through our website and client portal. We’re excited for you to experience this fresh new chapter with us!
2025 Market Outlook: A Year of Volatile Opportunity?
As we look ahead to 2025, we can’t help but reflect on the unique market dynamics of 2024. While many streams typically contribute to overall market returns, this past year, one (or perhaps two) streams dominated. The so-called Magnificent 7 tech companies delivered incredible gains of over 48%, while the remaining 493 companies in the S&P 500 posted a more modest 15%. Smaller stocks, unfortunately, saw even less exciting returns.
Today, these seven companies make up less than 2% of the S&P 500 index by name but hold a staggering $1 of every $3 invested in it—a testament to their outsized influence. Gold also had a strong year, climbing more than 20%, though it plateaued following the November elections as the Fed hinted at pausing rate cuts. In contrast, many global markets struggled, with Europe, China, and emerging markets facing headwinds. Even fixed income saw only modest gains, and energy trended lower.
Looking ahead, could 2025 bring a shift in these trends? As always, there are reasons to be optimistic (the Bulls) and areas to remain cautious (the Bears). Here’s a snapshot of both sides:
Reasons for Optimism (Bulls)
- AI Investments Continue: Big tech’s spending on AI shows no signs of slowing. The question remains to what extent a broader range of companies actually adopt AI for profitable growth.
- New Leadership in DC: A fresh administration promises deregulation, lower inflation, and reduced interest rates. Will these changes create meaningful growth despite political challenges?
- Potential for Peace: Cooling geopolitical tensions in regions like Ukraine and the Middle East might foster global growth, though pressures in areas such as China and Taiwan remain.
Points of Caution (Bears)
- Valuation Concerns: At over 21 times earnings, the S&P 500 is priced at the higher end of its historical range. Future returns might depend more on earnings growth rather than simply higher prices for the same amount of earnings.
- Consumer Pressures: High inflation and interest rates put a strain on many consumers. Cracks are appearing in housing, credit, and auto loans. Risk of a weaker labor market might amplify these challenges.
- Lingering High Rates: Despite the Fed’s pause on cuts, mortgage rates remain elevated. Government borrowing continues to fuel inflationary pressures.
While we approach 2025 with caution, we also see opportunities within this complex environment. Your portfolios remain prudently diversified. They balance traditional investments such as short-duration US Treasury fixed income and US large cap equities with themes such as robotics and India. Additionally, alternative strategies, including equity long-short, commodities, and merger arbitrage, potentially account for a range of possible market scenarios.
As the 2025 tax season nears, the IRS offers key reminders to make filing easier and protect your information:
- Set Up an IRS Online Account: View recent returns, manage payments, and sign forms electronically.
- Get an Identity Protection PIN (IP PIN): This prevents others from filing taxes under your name. Starting in 2025, returns with the same dependents can be processed if an IP PIN is included.
- Estimated Tax Payments: If you have non-wage income, ensure you make any required payments by January 15, 2025.
- Form 1099-K: If you earned over $5,000 through payment apps, you’ll receive a Form 1099-K. Remember to report all income, even without the form.
- Digital Assets: Report any cryptocurrency transactions and keep accurate records of purchases, sales, or exchanges.
Stay Safe: How to Spot Smishing Scams
We want to pass onto you another heads up for protecting your personal data. While we have heard nothing from our clients, Schwab has informed us that hackers are using another scam to target people.
The newest scam attempting to steal client data is called “smishing.” Hackers send clients text messages from international numbers claiming that a large disbursement has been made from their Schwab account. The message asks you to click on a link to verify or cancel the transaction.
Just to be clear: neither we nor Schwab will ever contact you by text related to your money. We would only give you a personal phone call to confirm your identity and permission on any disbursement.
Here’s how you can spot these phishing attempts:
Red Flags:
- International numbers: The texts come from foreign phone numbers.
- Large transactions: They claim an ACH was debited, often in the thousands of dollars.
- Suspicious links: The link leads to a fake Schwab website with a misspelled URL.
- Urgency: The message asks you to reply “Y” and click the link to cancel.
What to Do:
- Don’t click any links: Always go directly to the Schwab website to check your account.
- Report it: Forward the text to phishing@schwab.com and delete the message.
- Add extra security: Enable two-factor authentication and a verbal password on your Schwab account.
Stay alert and don’t fall for smishing scams—Schwab will never send account updates via text from international numbers!
Several important changes to retirement accounts took effect in 2025, including higher contribution limits due to inflation. The 401(k), 403(b), and 457(b) deferral limit increased from $23,000 to $23,500. The SEP contribution limit now allows contributions up to 25% of pay, with a maximum of $70,000 on earnings up to $350,000.
The SECURE Act’s 10-year rule now requires most non-spouse beneficiaries to take annual required minimum distributions (RMDs) from inherited accounts starting in 2025. New automatic enrollment rules also apply to 401(k) and 403(b) plans, requiring eligible employees to contribute unless they opt out. Part-time employees with at least 500 hours worked over two consecutive years must be allowed to participate in these plans.
Catch-up contributions have also increased. For workers aged 60-63, the “super catch-up” limit is now $11,250 for 401(k), 403(b), and 457(b) plans, and $5,250 for SIMPLE IRAs.
Don’t Overlook Beneficiaries
Life brings change—marriage, divorce, the birth of children, or the passing of a loved one. Keeping your beneficiary forms current ensures your assets go where you intend.
It’s important to remember that beneficiary designations often override the instructions in your will. If these forms are outdated, it can create conflicts and complications. By maintaining accurate beneficiary designations, you can help reduce legal disputes and delays, ensuring assets transfer smoothly without the expense and complexity of probate.
Additionally, specific accounts like IRAs, 401(k)s, and other retirement plans may have tax implications when passed to beneficiaries. Without proper planning, they can create unintended tax burdens. Reviewing and updating these forms regularly can help protect your legacy and provide peace of mind.
Sincerely,
Petr Burunov, CFP®
President / Wealth Strategist