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The Black Swan and Your Portfolio

Earlier in the year, we talked about the backdrop being favorable as we entered 2020. However, we noted that 2020 would be like every other year in that it would include unpredictable or surprise events. It didn’t take long for that to materialize. The Coronavirus is the black swan event for 2020.  

You hear the term “black swan” often on the news, or when the pundits talk about the financial markets, but what, exactly, do people mean when they talk about a black swan? A Black Swan Event is one that is completely unexpected and cannot be predicted. It also has significant consequences. A black swan event can have a tremendous effect, positive or negative, on societies, economies, financial markets and of course on investment portfolios.

The term Black Swan originates from the belief that all swans were white because these were the only ones ever seen or accounted for. However, around 1700, black swans were discovered in Australia. So, this unexpected, unpredictable event in (scientific) history profoundly changed zoology.

When it comes to stock markets, the main black swan effect is increased volatility. This is not just due to the actual effect, but the psychological effect of something completely unexpected happening on market sentiment. 

With these events, often market dynamics can change substantially, and, as we saw this time, very quickly. In the week ending February 28th, the Coronavirus outbreak drove stocks to their worst weekly loss since the 2008 financial crisis. The Dow lost 12%, S&P 11.5% and the NASDAQ 10%. Since then, and on a variety of headlines, both the Dow and S & P have moved even lower, into bear market territory. A bear market is a term used to describe a market that has tumbled by 20% or more from its high.

So, while these things happen and are extremely difficult to predict, there are some things you can do to mitigate risk to your portfolio. Effective asset allocation may be the best way to ensure that a portfolio can endure over the long term as black swan type events inevitably occur. Chasing returns in the top-performing areas of the market may produce great returns in the short term, but it only takes one catastrophe to wipe out a portfolio that is not diversified. A portfolio can be diversified by asset class, region and investment or product style.  

For example, we proactively rebalanced our portfolios in mid-January because of the great performance the markets saw in 2019. If people went from a 50/50 bond/equities mix to 60/40, we brought it back in line, which has helped mitigate some of the volatility we’re seeing now. Keep in mind that, in a look back over the past 20 years, (1998); every 5 day sell-off of over 10%, with the exception of the October 2008 plunge of 14.6%, led to positive returns just two weeks after the fall.  And 6 months later the average gain was about 12%.     

We consider a wide range of possible outcomes, both good and bad when helping an investor establish an asset allocation and plan. Those preparations include the possibility, even the inevitability, of a downturn. Amid the anxiety that accompanies developments surrounding the coronavirus, decades of financial science and long-term investing principles remain a strong guide.

If you have questions about your portfolio, we’re here to help. For clients, their advisor is always available to talk. For others, our advisors are also willing to discuss your portfolio, and how we may be able to help you. 

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Tax changes under the One Big Beautiful Bill Act

Posted By Lineweaver Financial Group
August 12, 2025 Category: Tax Planning

By Mark Sipos, LFG Tax Director The passage of the One Big Beautiful Bill Act has been one of the most discussed topics coming out of Washington in the past few weeks.  LFG Tax Services is diving into the new legislation, deciphering what it means for our clients, and keeping a close watch on tax planning opportunities and IRS interpretations of some of its components. Here are a few highlights we think will be of interest to you: The TCJA rate schedules for tax years beginning after December 31, 2017, are now permanently extended, as well as several key parts of the 2017 Act.  No Tax on Tips: A temporary deduction of up to $25,000 in tip income for workers in “customarily tipped” occupations. Individuals phased out for MAGI above $150,000 and Joint filers at $300,000. Expires December 31, 2028. No Tax on Overtime: Temporary above-the-line deduction of $12,500 (single) / $25,000 (joint). Deduction phases out at $150,000 of MAGI (single) / $300,000 (joint), expiring at the end of 2028. The lifetime estate tax exemption has been permanently increased to $15 million (indexed for inflation) per US person. The Act stopped short of a full repeal and would essentially extend the current generous lifetime estate tax exemption. The limit means that only the wealthiest 1% or fewer taxpayers would ever face a tax on their estate after death. The qualified business income deduction under IRC Section 199A is now made permanent at 20%. The phase-in of the limit

Harness the Superpower of Compounding While Reducing “Tax Drag”

Posted By Lineweaver Financial Group
August 12, 2025 Category: Financial Planning, Investment, Finance

By Chad Roope, CFA ®, Chief Investment Officer Compounding is the superpower of investing. Following the Rule of 70, an investment averaging 10% per year will double in just seven years. That’s the kind of growth that builds real wealth over time.  But there’s a catch. Anything that slows compounding, even slightly, can have a dramatic impact on your long-term results. One of the biggest threats to that is unnecessary taxes. In the chart below, a JP Morgan analysis shows that a modest 1% annual “tax drag” on a $1 million investment in the U.S. stock market from 2014 to 2024 would have reduced its value by $326,000. At 2%, the loss jumps to $625,000. That’s money that could have been working for you. We all must pay our fair share of taxes. However, we should be very mindful about not paying extra. At Lineweaver, we employ proven, proactive strategies to help reduce unnecessary taxes so you can keep more of your gains compounding year after year. Systematic Tax Loss Harvesting Throughout the course of the year, some investments rise while others fall. That’s diversification for you. But we can help with taxes and get the benefits of diversification at the same time. For example, if a particular company hits a rough patch and we have a loss in the stock in a taxable account, we can sell the stock and harvest the loss to help with taxes. We can then reinvest the proceeds in a different company that we either like better or

Simple ways to spot, avoid and report scams

Posted By Lineweaver Financial Group
August 12, 2025 Category: Cybersecurity, Scam, Security

At Lineweaver, your financial security is one of our highest priorities, and that means staying ahead of potential threats. We are constantly seeking credible, trusted resources to help protect our clients, and when we find information worth sharing, we make it a point to get it into your hands. That’s why we want to share this “Scam Squad Guide” developed by Cuyahoga County’s Department of Consumer Affairs. This valuable resource offers clear, practical strategies to help you recognize, avoid, and report scams before they can cause harm. By understanding how scams work and having a plan in place, you can take an important step toward safeguarding both your personal information and your financial accounts. To read the guide, follow this link: “Scam Squad Guide: Simple ways to spot, avoid and report scams” For those of you who live outside of the county, reach out to your county officials for the appropriate contact information to report a

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