Whittier -Jerry Green

Whittier Trust is pleased to announce that Dr. Jerrold D. Green has joined the wealth management company's board of directors. Dr. Green is a renowned scholar and executive with extensive experience in global business and diplomacy.

As President and Chief Executive Officer of the Pacific Council on International Policy in Los Angeles, Dr. Green brings a wealth of knowledge and expertise to the Whittier Trust board. He is also a Research Professor at the University of Southern California’s Annenberg School for Communication and Journalism.

Prior to joining the Pacific Council, Dr. Green was a Partner at Best Associates, a privately held merchant banking firm with global operations, and occupied senior management positions at the RAND Corporation, where he was awarded the RAND Medal for Excellence. He is also a member of the Council on Foreign Relations, the Lincoln Club, the Advisory Board of the Center for Public Diplomacy at the University of Southern California and the Bill Richardson Center for Diplomacy/FBI Hostage Recovery Fusion Cell Influencers Group.

Dr. Green's distinguished career includes serving for eight years as a member of the United States Secretary of the Navy Advisory Panel, where he was awarded the Department of the Navy's Distinguished Civilian Service Award. He has also served on the U.S. Department of State Advisory Committee on International Economic Policy, the Board of Directors of the California Club, and the Board of Falcon Waterfree Technologies. Dr. Green also holds a B.A. (summa cum laude) from the University of Massachusetts/Boston, as well as an M.A. and Ph.D. in Political Science from the University of Chicago.

In addition to his academic and business achievements, Dr. Green has been recognized for his contributions to public service and the international trade community. He is a Reserve Deputy Sheriff with the Los Angeles Sheriff's Department and was accorded the department's Meritorious Service Award. In 2019, he was honored by the Los Angeles Area Chamber of Commerce with its World Trade Week Stanley T. Olafson Bronze Plaque Award, which recognizes “a member of the international trade community whose outstanding dedication, efforts and achievements have advanced trade in the Southern California region.”

"We are thrilled to welcome Dr. Green to the Whittier Trust board of directors," said Whittier Trust President and CEO, David A. Dahl. "His deep expertise in international affairs, public policy and business will be invaluable as we continue to grow and provide the highest level of service to our clients."

Whittier Trust announces the retirement of Paul Cantor after 13 years of extraordinary service and commitment as Executive Vice President, Client Advisor, and Northwest Regional manager.

Nickolaus Momyer, Senior Vice President and Senior Portfolio Manager with Whittier Trust, will assume the role of Northwest Regional Manager, Senior Vice President, Senior Portfolio Manager.

“Paul’s many years of service have been a gift to us here at Whittier Trust and to our clients. He has been a valuable part of our expansion in the Portland and Seattle markets and a huge reason the Northwest Office was named a Top Five Multifamily Office by the Society of Trust and Estate Practitioners in 2021. We are saddened to see him go and to lose his presence in the office, but we’re also so grateful for what he’s done for our clients.” — David Dahl, Whittier Trust President & CEO

In his new role, Nick Momyer will take over the leadership of Whittier Trust’s Northwest Region. The Seattle and Portland Offices are two of Whittier Trust’s many growing teams and client bases, reflecting a continued effort to connect with individuals and families locally. In his continuing role as a Senior Portfolio Manager, Nick is responsible for helping establish the investment philosophy of the firm. He’s also responsible for the selection of individual securities and appropriate asset allocation ranges for client portfolios.

“Nick Momyer was the clear choice to succeed Paul as Northwest Regional Manager. Nick has a long resume full of great experience behind him, and he’s done exceptional work in focusing on our clients and enhancing the Northwest Team. Nick is deeply embedded in the northwest area through his work as a board member with The Seattle Public Library Foundation and as a member of the Investment Committee at The Mountaineers. His commitment to the local community aligns with Whittier Trust’s vision to make a meaningful and lasting difference in the communities that we do business in,” said Dahl.


Whittier Trust pros share insights about why a career path in finance can be rewarding—and challenging

Pursuing a career as a finance professional, especially in investment wealth management, can be worthwhile and fulfilling. At Whittier Trust, advisors are the heartbeat of the company, making a career path in finance an opportunity to impact the lives of their clients in a positive way. What are the important skills to cultivate and the steps required for success in this field? Two of Whittier Trust’s client advisors weigh in with some things to consider. 

For a finance professional, even in a high-tech world, human competency still matters. 

Although technology has introduced new methods to manage finances, including online banking, web-based investing platforms and digital wallets, the expertise of a wealth advisor, accountant or financial analyst cannot be substituted by any application. That personal touch and tailored approach is evident at Whittier Trust, where the company maintains a low client to advisor ratio. “The personality traits and skills needed at Whittier include insight and analysis, problem solving, interpersonal skills, confidence, knowledge of digital tools, strategic and analytical skills, adaptability, honesty and strong values, strong leadership skills, industry-specific knowledge and more,” says Whittier Trust SVP and Senior Client Advisor Lauren M. Peterson. She adds that being adaptable and agile to accommodate clients’ varying needs is another lynchpin for success. 

Finding the best careers in finance: a well-rounded skill set primes advisors up for success. 

Cultivating that mix of hard and soft skills is one of the many keys to success for a financial professional. They must be able to evaluate the risks and opportunities of any financial decision and create a detailed plan to accomplish their goals. This includes staying current on industry and economic news, growing relationships with other professionals in the industry and knowing how to execute the agreed upon course of action. 

Finally—and importantly—they must communicate effectively while considering emotional factors that could be in play for a client, Peterson notes. “This career path as a financial professional would not be good for someone who is not numbers savvy, disciplined, able to think strategically and lacks interpersonal skills,” she says.

A client-first approach makes a difference. 

At Whittier Trust, no client request is too big or too small to garner attention from an advisor. “Whittier Trust encourages all employees to exhibit the entrepreneurial spirit that allows us to wear more than one hat within our role for serving clients,” explains Associate Client Advisor Thomas Porter. “That means finding innovative solutions for our clients while carefully considering all factors of a decision in a timely manner. It means being able to clearly communicate to clients or your colleagues, while also being an effective listener who can address and understand what is being communicated.” 

The industry continues to grow, making a career path in finance a bright one. 

Even in an uncertain economy, some industries are on the rise. According to predictions by the U.S. Bureau of Labor Statistics, opportunities in business and finance are expected to increase by 7% from 2021 to 2031, slightly surpassing the average anticipated growth rate for all occupations in the United States. Some of the best careers in finance made the U.S. News and World Report “100 Best Jobs” list in 2023. A financial manager, actuary, accountant and financial analyst all made the list. 

It’s good news, both for the clients who rely on savvy finance professionals and for those strategic thinkers who would choose this career path. “Working in finance becomes rewarding when you realize the impact you can have on others,” Porter says. “Using my background, I can help others make otherwise difficult decisions about their lives to minimize stress allowing for more time doing the things they enjoy with the people they love.”

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Concerned about a downturn? Here’s what to do to prepare for a recession 

Internet searches for “2023 recession prediction” are on the rise, indicating people are concerned about the state of the economy and, more specifically, their portfolios. Even with the current volatility—from high inflation to international geopolitical issues leading to a bear market—it’s not all doom and gloom. At Whittier Trust, advisors and financial professionals make it their priority to protect and grow clients’ wealth, through strategic planning and open communication, no matter the economic climate. Here, Whittier Trust Chief Investment Officer Sandip A. Bhagat shares answers to some top-of-mind questions on how to prepare for a possible recession. 

How would you describe the Q1 2023 economic climate? Is there any indication that 2023 recession predictions may be valid?

The calls for a possible recession in 2023 have become almost universal by now. The skeptics point out that growth is already slowing, and the housing market is falling under the weight of higher interest rates. The yield curve has now been inverted for several months where long-term rates are lower than short-term rates, a historic predictor of an impending recession.

Against this gloomy backdrop of economic forecasts, a couple of metrics stand out in sharp contrast. The U.S. job market is strong: more than 500,000 new jobs were added in January 2023, job openings exceed 11 million and the unemployment rate is at a 50-year low at 3.4%. The U.S. consumer has also been resilient on the heels of the strong job market. Consumer spending in 2022, net of inflation, was in line with levels seen in a normal economy. The current strength of the U.S. economy appears to be at odds with a sharp and imminent recession and any 2023 recession prediction. 

What would a possible recession mean for key industries and investment portfolios? 

Recessions generally lead to lower corporate profits. Slowing revenue growth and lower profit margins both exert downward pressure on earnings. Stocks typically decline in the period leading up to and through a portion of the recession. Economically sensitive sectors such as consumer discretionary and financial services typically bear the brunt of the damage.

In the past, bonds have offered welcome relief in terms of diversifying an investment portfolio, as bonds tend to rally as stocks sell off. Unfortunately, bonds have been unable to deliver this benefit in the current cycle for one simple reason: Inflation has been the root cause for a rise in interest rates and any related economic slowdown. Bond portfolios generally perform poorly when inflation and interest rates go higher.

A recession in this backdrop poses even greater challenges to an investment portfolio in the absence of diversification from bonds. Investors discovered few places to hide in 2022 as the prospects of a recession emerged, and 2023 recession predictions gained prominence.

How might advisors recommend clients adjust their portfolios to hedge against a 2023 recession prediction and further economic downturn?

Stock prices generally decline heading into and during the first half of a recession, when investors may be able to buffer portfolio losses through a greater allocation to cash, defensive economic sectors such as consumer staples and healthcare and diversified alternative investments which are less correlated to stocks.

We urge caution in seeking expensive recession hedges at this point. Any possible recession may be short and shallow. The worst damage to the stock market may, therefore, be behind us. There may be meaningful opportunity costs associated with turning ultra-defensive at this point. We instead recommend staying the course with a well-diversified portfolio.

Is it all negative? How can clients capitalize on this sort of economic climate or a possible recession?

We remain more constructive in our economic and market outlook than most industry observers. We point to the massive post-Covid monetary and fiscal stimulus that continues to support the economy and consumer and company balance sheets. The U.S. job market and consumer are remarkably resilient, and corporate earnings have, so far, held up better than in prior slowdowns. Either extreme of taking excessive risk or shunning it entirely may result in a costly mistake. We recommend holding a prudently diversified portfolio of stocks, bonds, cash and alternative investments.

Many are wondering what to do to prepare for a recession. What is your advice in the face of a 2023 recession prediction?  

The inherent strength of the U.S. economy in this cycle may preclude a deep and protracted recession. A lot of the market damage from high inflation and the unfolding economic slowdown may have already taken place in 2022. As a result, we recommend staying the course with a well-diversified portfolio instead of making significant defensive changes.

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Wealth management is a crucial aspect of financial planning for high-net-worth families and individuals, and having the right advisor or consultant can make all the difference. Meet Brian Bissell, a top-performing athlete in the sailing world who now provides expert wealth management services as a senior vice president and client advisor for the Whittier Trust Company. Brian Bissell was recently honored by his alma mater, Georgetown University, as an inductee into the Georgetown Athletics Hall of Fame. 

Brian's background in sailing and his success on the national and world stages set the course for his future career in wealth management. He grew up in Newport Beach, California, surrounded by the sailing community, and developed a love for the sport at a young age. He excelled in sailing throughout high school and was heavily recruited by top universities.

Brain ultimately chose Georgetown University for their commitment to the sailing program and the challenge of elevating his performance. In his four years at Georgetown, Brian was a two-time All-America skipper honoree, and named team MVP as a senior. The Georgetown sailing team received its first-ever No. 1 national ranking in the spring of his junior year, and won the team racing national championship in 2001 and placed third in 2002. Brian went on to sail professionally in multiple national competitions in the six years following graduation. 

After graduating from Georgetown's McDonough School of Business with a degree in Marketing, Brian went on to work as a business development manager for the North Sails Group and continued to sail professionally in national and world competitions. He won several national and world championships in J24 and Mumm 30 class races, and was a silver medalist in match racing and team racing national championships.

In 2013, Brian earned an MBA from the University of Southern California and began his career in wealth management with the Whittier Trust Company. As a senior vice president and client advisor, he provides expert private wealth management services to high-net-worth families and individuals. Brian's experience in sailing and his competitive nature have served him well in his new career. He is dedicated to helping his clients achieve their financial goals and providing them with the best possible service.

Outside of work, Brian continues to pursue his passion for sailing and other outdoor activities like surfing, skiing, and mountain biking. He is also a devoted family man and enjoys spending time with his wife and two young children. And of course, he still follows the Hoyas and USC football teams closely.

Brian's dedication to excellence and success as an athlete have translated seamlessly into his career as a wealth management advisor. His expertise and commitment to his clients make him a valuable asset to the Whittier Trust Company and the high-net-worth families and individuals he serves.

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The Gift That Keeps on Giving

A 529 Plan is a savings account for college and, in some cases, K-12 education, depending upon the state plan that is selected. With the cost of college and private schools soaring, creating a 529 Plan for kids to ease that financial burden is a wonderful way to assist family members and friends. 

“For our clients, gifting to 529 Plans serves as a great estate planning tool and offers some unique benefits,” says Alec Gard, client advisor at Whittier Trust. He outlines how below.

The Major Benefits of 529 Plans to Investors

The funds in these savings plans grow tax deferred, similarly to that of IRA’s and 401(k) plans. Yet unlike IRAs and 401Ks, 529 plans have unique funding options, the most advantageous of which is the ‘5-year election’ (often called “superfunding”), which allows you to contribute five years’ worth of the current annual exclusion by prorating the amount contributed over 5 years. The annual exclusion is the amount of money one person may transfer to another as a gift without such gift counting against the lifetime exemption from federal gift and estate tax. The annual exclusion amount for 2023 is $17,000 per individual. 

“For example, in 2023, you could fund a new 529 Plan with $85,000, which is $17,000 times five years of annual exclusion. If you and your spouse both elect to give, then you each can contribute up to $85,000 to that same 529 Plan, thus potentially superfunding it with $170,000 in the first year of being opened,” Gard says.

The funds contributed to the 529 Plan, along with any future growth, will now be out of your estate. If you’re able to superfund vs. gifting one year of annual exclusion, you can put more tax-deferred money to work faster. “You can quickly see the benefits, especially if you have a large family and are inclined to help,” says Gard.

Another option available for individuals is contributing the maximum funding amount allowable for the selected 529 Plan. For example, some state plans allow for a maximum funding amount of $550,000. This means that a husband and wife could elect to give $275,000 each in the first year of funding. This strategy is also very effective; however, it will utilize a portion of each spouse’s lifetime exemption. This is the amount of money each person in the U.S. can exclude from estate and gift taxes. In 2023, the lifetime exemption amount per person is $12.92 million. Each spouse receives the same amount of exemption for a total of $25.84 million. It is important to note that the lifetime exemption amount per individual is scheduled to sunset at the end of 2025. When this happens, the lifetime exemption amount per individual would drop to $5,000,000 (indexed for inflation). There have been no current legislation proposals to keep the current lifetime exemption amounts past 2025, so it appears the plan laid out in the 2017 Tax Cuts and Jobs Act may take effect.

He adds, “Using lifetime exemption is not necessarily a bad thing, especially at these high levels, but if you intend to preserve your exemption for larger future gifts, the ‘5-year election’ may be the better option.” 

How Beneficiaries Benefit from 529 Plans

The first major benefit is that it’s the most flexible savings plan for college, unlike other savings plans that have more restrictions around funding and use. When money is taken out of a 529 Plan to be used for qualified education expenses, such as college tuition, fees, books, equipment and room and board (if enrolled in college at least half-time), the funds are not subject to federal or state taxes. If a 529 Plan allows for K-12 education (not all do), the beneficiary can also withdraw up to $10,000 annually for qualifying expenses.

Each 529 Plan can only have one beneficiary. However, multiple 529 Plans can be opened by different individuals for the same person. For instance, a grandparent and a parent could have opened separate 529 Plans for their grandchild/child over time. It is worth noting that the plans are viewed as combined for funding and use purposes.

“If an individual does not utilize the funds in their 529 Plan, the funds may remain invested and can be used in several other ways,” Gard says. 

As the plan owner, you could elect to change the beneficiary to yourself and use the plan for your own education expenses. Alternatively, the plan owner could name a different beneficiary within his or her family (once the plan is established, it cannot be gifted to anyone outside of the family). 

For instance, if a 529 Plan was opened by a mother to benefit her son, but the son decides not to attend college or goes to college but does not use the full balance of the 529 plan, the mother, as the owner, could name her grandchild as the new beneficiary. There may be generation-skipping tax implications with this change, so it is always best to consult your tax professional for advice.

Common Misconceptions About the Savings Plans

A common misconception is that 529 Plans can only be set up for family members. However, you can contribute funds to a 529 Plan for the benefit of anyone with a valid Social Security Number. 

“This can be another great opportunity if you are feeling generous toward non-family members. You do not have to open the 529 Plan yourself but can coordinate with the person or parents of the person that you would like to benefit and either contribute to the newly established 529 Plan or one that has already been opened,” says Gard.

The Potential Downside to This Financial Investment Strategy

There is a chance that a 529 Plan is created for someone who neither uses it for education (perhaps they don’t go to college) nor has a child who can use it. If funds are withdrawn by the owner and are classified as “non-qualified withdrawals,” the earnings will be assessed state and federal taxes, as well as an additional 10% penalty. 


It is important to note that rules, maximum contribution limits, investment options as well as fees vary per 529 Plan offered by the state. Most states offer a 529 plan, but to determine the best plan for you and your family, please consult with your financial advisor and tax professional.

1. Major Benefits to Investors


2. How Beneficiaries Benefit


3. Common Misconceptions
About the Savings Plans


4. The Potential Downside to This Financial Investment



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Your family’s real estate portfolio is too important to risk choosing the wrong trustee

Real estate portfolios come in all shapes and sizes. Whether you have a mountain house for family getaways or a variety of income-generating commercial real estate, it’s essential to choose the right trustee to ensure that your real estate investments are effectively managed.

“Real estate is one of the largest asset classes in the world, and high net worth families have been created through the passing down of real estate,” said Timothy McCarthy, managing director of Whittier Trust Company. “It’s too important to leave such a vital part of your family’s portfolio to chance. We always advise our clients to have a business succession plan in place.”

Often, people wait until a life-disrupting event occurs—such as illness or death—to put a plan in place. A rush to choose a course can make it challenging for a trustee to get up to speed or to know the background needed to deftly manage the asset for beneficiaries. That’s why it’s prudent to thoughtfully consider the best plan and to understand the responsibilities a trustee will uphold. Here are five things to keep in mind when appointing a trustee, so you’ll choose the right one for your estate and your goals.

1. Do they have the capacity to navigate tricky interpersonal relationships?

Even in the closest families, having so many personalities in the mix is bound to create some disagreements. Imagine this scenario: the patriarch and matriarch of a tight-knit family buys a vacation home, planning to leave it in their estate for future generations to enjoy. Seems simple enough, right? The once-straightforward arrangement could become more complicated a generation down the line when you may have 10 or 15 people, including grandchildren and children’s spouses, who all have a different vision of how they want to maintain the property. 

“This is just one of the situations that highlights the importance of engaging a professional trustee,” McCarthy explains. “Such a person can act to arbitrate and ensure the property continues to be used in line with your wishes and can mitigate unnecessary strife within the family.”

2. Are they equipped to do what’s best for the future of the property portfolio?

Some people may be reluctant to consider hiring a professional trustee—or a trustee outside the family—because they worry that their family may lose control of the property. Instead, having an impartial, professional trustee helps ensure that decisions surrounding the property will be in the best interest of all beneficiaries. 

“Sometimes one of the beneficiaries may want to pursue a particular course of action, but the other beneficiaries don’t agree. In such instances the trustee will work to understand the business plan to assess how each seemingly small decision will impact the property,”  says McCarthy. The right trustee can add guardrails as heirs consider how each property in a portfolio will evolve over time.

3. Do they have the time and bandwidth to fulfill the trustee duties?

Managing real estate investments is a big responsibility. It requires ongoing maintenance and connections to professionals, including property managers, real estate attorneys and bookkeepers. Does your trustee have the capacity to oversee all such details?

“Some of our clients have spent their whole lives growing their property portfolio. Once they have multiple residential or commercial properties, the process may be instinctual for them. If they know their team and their tenants, it may only take a few hours a week to oversee,” says McCarthy.

But what is turnkey for a long-time owner may not be so simple for a new trustee, even if the trustee is familiar with the business. In these cases, it may be a good idea to consider a professional trustee, who has the expertise and ability to devote the time and attention to your portfolio needs.

4. Does your chosen trustee have a robust network of the necessary professionals readily available?

For those who work in the professional trustee world, it’s not uncommon to see estate property transfers that trigger property tax reassessments. In some high-cost areas, McCarthy and the Whittier Trust team have seen property tax bills balloon from a few thousand dollars to tens of thousands of dollars or higher. “These dramatic property tax increases can have a significant impact on a client’s bottom line,” he says, adding that the right planning and resources can help mitigate such consequences.  

For example, a savvy corporate trustee can guide your beneficiaries through tax law, connect them to relevant real estate and tax attorneys and shape estate planning before an event occurs. A professional trustee is adept at saving your heirs time and money by tapping into the necessary resources to manage and maintain properties. Forethought and planning pay dividends in the long run.

5. Do you have a contingency plan in place if your chosen trustee becomes unable to oversee your real estate holdings?

Choosing a trustee to manage your valuable real estate holdings will impact your estate and your family, likely for generations to come. The magnitude of such a choice illustrates the importance of deciding on the right person or firm and allowing them the time to gain a thorough understanding of your holdings, your family and your wishes long before they are needed. This also offers a chance for your beneficiaries to meet the trustee and understand how they will be overseeing the portfolio.

“We work with all kinds of different families, but there’s a common denominator:  transparency regarding trustee choices and wishes leads to greater unity and harmony down through the generations,” says McCarthy.

When structuring the trustee relationship, it’s smart to engage an estate planning lawyer to ensure that your family retains flexibility over the trustee in some way. For instance, a remove-and-replace clause can allow your heirs to make a change to the trustees if the relationship is no longer working. Regardless, having a professional trustee in place can minimize disruption and lay the groundwork for a smooth transition. 

1. Choosing the Right Trustee


2. Trustee Bandwidth & Connections


3. Contingency Plan



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Whittier Trust - Sharon Perlin

Whittier Trust hires Sharon Perlin as Senior Vice President and Client Advisor with their Seattle and Portland offices.

Sharon brings to her new role five years as a Senior Fiduciary Advisor for Wells Fargo Private Bank, and one year as a Trust officer for Bank of America Private Wealth Management. Prior to wealth management, Sharon practiced law as a trust and estate attorney. Before her time in Seattle, Sharon worked for the Foreign Service, training foreign service and military personnel serving in US embassies in the Middle East.

As a client advisor in the Seattle and Portland offices, Sharon will work closely with clients to understand their priorities, goals and philosophies. With an eye on tax mitigation, she will also help individuals and families steward their wealth and navigate their personal circumstances and complex familial relationship dynamics.

“Sharon is a natural fit for Whittier Trust. Her efforts to approach wealth management holistically and nurture the human element align with Whittier Trust’s mission to put the client first.  We’re excited to have someone with her background and experience on the team. She’s going to do a stellar job.” – Nick Momyer, Senior Vice President, Senior Portfolio Manager, Northwest Regional Manager.

Sharon earned her degree at the University of Pennsylvania before graduating with a law degree from the University of Washington School of Law. She loves reading good novels as well as camping and hiking with her husband and three children.

It May Be Better Than You Think

By Tom Frank, Executive Vice President, Northern California Regional Manager, Whittier Trust

It’s early 2023 and we’ve just come out of one of the toughest markets for financial assets in recent years. The broad U.S. stock market as measured by the S&P 500 Index was down about 18%, while the bond market as measured by the Bloomberg US Aggregate Index down over 12% (a historic record). It’s likely that even a balanced portfolio of stocks and bonds ended the year 15% to 20% lower than it started! But it might not be all bad news for strategic investors.

There was a focus by the mainstream press at year-end concerning “tax loss harvesting” or selling assets at a loss to lock in an income tax advantage. Specifically, when an asset is sold for less than the investor paid, a capital loss is incurred. Under most circumstances, these losses can be used in future years to offset capital gains. It is a great technique to use in taxable accounts. Investors should be mindful of the wash sale rules which prohibit booking the loss if the identical security is purchased within 30 days of the sale. For investors wishing to maintain market exposure during the 30-day period, it is possible to buy an exchange traded fund (ETF) or index fund that mimics the stock market. Keep in mind that IRAs and other retirement accounts do not benefit from this strategy since investments inside the account are tax-deferred.

For individuals and families with significant wealth, there is another benefit to lower valuations across asset classes. It may be a good time to transfer assets to younger generations, particularly if you think the assets will increase in value again once economic fortunes shift. Tax loss harvesting focuses solely on income taxes, but what about the gift, estate and generation-skipping transfer taxes? With the lifetime gift and estate tax exclusion amount set at $12.92 million per person, admittedly this is not an issue that all families will face. However, for those who find themselves always looking for ways to lessen the tax burden of estate taxes upon death, a lousy year in the market may be an excellent opportunity. The current large lifetime exemption amount is scheduled to sunset at the end of 2025 back to something in the $6 to $7 million range. The IRS has announced that there will not be a “clawback” of gifts made in excess of that amount during this period when the amount is higher.

Let’s take the example of an asset that is worth 20% less today than it was in January 2021, yet it is expected to grow again when conditions improve. By gifting that asset to a younger generation family member today, less of the donor’s lifetime exemption is used and any appreciation on the gift escapes gift tax. If the younger family member is too young to handle a gift right now (say it’s a grandchild), the gift may be made to an irrevocable trust. That way it can be preserved for future use. One caveat to lifetime gifting is that the donee inherits the donor’s income tax basis in the asset. So, if grandpa gives shares of Amazon and his basis is $60 per share, little Johnny (or his trust) will hold the stock with a cost basis of $60 per share. Contrast this to a gift upon death which results in a “step up” in basis to the date-of-death value. Since the top income tax bracket for individuals in high income tax states is often above the transfer tax rate of 40%, an analysis of the two types of taxes should be conducted prior to making a substantial gift. A lot will depend on the prospects for the asset’s appreciation.

Of course, stocks and bonds aren’t the only asset classes that suffered in 2022; real estate and private business entities may also have taken a hit. A critical component of gifting a non-marketable asset is obtaining a qualified appraisal and attaching it to the gift tax return. The IRS has specific rules about what goes into and who may perform a qualified appraisal. Many gift and estate tax audits are essentially battles over valuation, so it is a good idea to be prudent. Specialty assets like fine art involve an additional layer of complexity and must be handled by experienced appraisers of similar objects.

A good estate planning attorney and an accountant can advise donors on the best way to structure a gift of depreciated property. There are many techniques, each with its own pluses and minuses. The right choice will involve an analysis of the donor’s tax situation and family situation as well as knowledge of prior gifts. This is not a DIY exercise—seeking expert advice is critical to success.

By gifting that asset to a younger generation family member today, less of the donor’s lifetime exemption is used and any appreciation on the gift escapes gift tax.

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Focus on Recession ... or Recovery?

The market turmoil of 2022 couldn’t have been in sharper contrast to the benign conditions of low inflation, easy money and high growth seen in 2021. Persistently high inflation in recent months has led to tighter monetary policy and slower growth.

The Fed has raised rates by more than 400 basis points and reduced its balance sheet by almost $400 billion ... with more to come on both fronts. Inflationary pressures have come from both pent-up demand and supply side shocks. The war in Ukraine has lasted longer than most expected and China’s zero-Covid policy further disrupted supply chain logistics.

These factors conspired to push back the peak in inflation and created a hostile environment for risk assets. Investors were left with no place to hide ... even bonds did not provide a safe haven in 2022.

Very rarely do both stocks and bonds deliver negative returns in a single year. Over the last almost 100 years, this has only happened twice and 2022 was by far the worst outcome in this regard. Stocks were down almost -20% and bonds were down around -10%.

All of this brings us to an interesting juncture in this bear market. The calls for a recession in 2023 have become virtually universal in recent weeks. The arguments in favor of that view appear well-justified. Growth is clearly slowing, the housing market is falling under the weight of rising rates, the entire yield curve is now inverted, the Fed is far removed from rate cuts and the global economy is in even more dire straits.

These macroeconomic views in turn support the characterization that the current stock market rebound is just another bear market rally. The consensus believes that this rally will only flatter to deceive and stocks are then inevitably headed to new lows. The skeptics further observe that stocks have never bottomed before the onset of a recession and worry specifically about three potentially negative outcomes.

  • Services inflation may yet prove to be uncomfortably sticky.
  • The Fed may have virtually no flexibility in its policy path forward.
  • Earnings, and stock valuations as a result, may continue to slide lower.

We address these concerns specifically in developing our more contrarian and constructive outlook for 2023.

Trends in Components of Inflation

Inflation was clearly the headline story in 2022. But as headline inflation peaks, investors are now switching their focus to economic growth as well.

While the Fed’s preferred inflation gauge is based on Personal Consumption Expenditures, we use the more comprehensive Consumer Price Index (CPI) for ease of discussion here.

Headline CPI inflation peaked at 9.1% in June and has since declined to 6.5% in December. However, core CPI inflation, which excludes the volatile food and energy components, seems to be uncomfortably stuck at an elevated level. Core CPI inflation was 5.7% in December and has been largely unchanged in a narrow band around 6% for several months.

Investors now worry that core inflation will remain stubborn, sticky and elevated for quite a while.

Let’s decompose inflation into its goods and services components and study their underlying trends. Much like the overall U.S. economy, inflation is also more dominated by services than it is by goods.

It turns out that goods inflation has actually declined rapidly in recent months. Supply chain pressures have eased significantly, gasoline prices have fallen sharply and the price of almost all commodities from wheat to lumber has declined dramatically. Unfortunately, since goods are a smaller component of inflation, they have played a smaller role in bringing inflation down.

Services inflation is made up mainly of two components – rents and wages. Both are notorious for being sticky. We look at each of them separately.

The dark blue line in Figure 1 shows CPI shelter inflation, which has been rising steadily for several months and now stands at 7.5%.

       Source: Federal Reserve, Zillow, Apartment List

At first glance, this increase in shelter inflation contradicts the growing weakness in the housing market. But the counter-trend is actually not much of a surprise at all.

Rents are typically negotiated over a 12-month lease. It, therefore, takes 12 months for the entire stock of leases to get re-priced. Even as rents on new leases begin to come down, older leases at previously higher rents slow down the measured decline in rents. This lagged measurement effect does not capture real-time fundamentals because of the delayed discovery of new rent prices.

The good news in Figure 1 is that rents on new leases are indeed coming down. We can see that clearly in the two downward parabolas. Both these lines show rents for new listings and offer a more timely indicator of rent inflation. Rent growth on new leases is declining rapidly. The Dallas Fed projects that rent inflation will likely peak in the second quarter, which means that rent relief is in sight.

Let’s see if wage inflation is also likely to abate by using average hourly earnings as our proxy for wages. The year-over-year change in average hourly earnings was 4.7% in December. This is clearly too high to achieve the Fed’s target of 2% inflation overall.

But again, recent data brings some good news. Wage inflation peaked over a year ago and has since been declining. At its peak, wage inflation was above 6%. In contrast, the annualized pace of wage gains in the fourth quarter of 2022 was less than 4%.

We believe wage inflation will continue to trend lower as the job market begins to cool off. But how far can wage inflation decline? Can it go back to pre-pandemic levels?

Unfortunately, we believe the answer is No, not quite. We believe two reasons may drive a secular uptick in wages – one related to demographics and the other to the pandemic.

As we know, the labor force participation rate is the proportion of the working-age population that is either working or actively looking for work. It represents the available resources for the production of goods and services. An aging population has been a major driver of labor shortages in recent years. As the baby boomers age, the labor force participation rate has been declining for the last 20 years.

We show this demographic trend in Figure 2.

Source: Haver, Jeffries Economics

The labor force participation rate is shown as the dark green line and its trendline is in light green.

The steadily declining labor force participation rate trendline will continue to constrain labor resources. As a result, even as wage inflation comes down, it is unlikely to subside to pre-pandemic levels.

And beyond demographics, there is another factor at play here related to the pandemic.

It turns out that we have more than 2 million fewer workers today than we did prior to Covid. Interestingly, the largest cohort of these missing workers, almost 1 million of them, is in the age group of 65 and above. We can only surmise that these workers embraced full retirement over the vagaries of a Covid-ravaged workplace. They are unlikely to re-enter the labor force.

This pandemic effect is incrementally additive to the broad demographic trend. Absent any major policy reform on immigration, we believe that both wages and overall inflation will eventually settle in at a slightly higher level in the next cycle.

Inflation averaged about 3% between the 1970s and the Global Financial Crisis (GFC). We believe that the abnormally low 2% post-GFC inflation was enabled by a long deleveraging cycle and is unrealistic in this post-covid recovery.

We believe inflation will be less sticky than feared and will continue to decline in coming months. However, we feel it will eventually settle in above the Fed’s target of 2% ... somewhere in the 2.5% to 3% range. We also believe that this slightly higher range of inflation will still be benign to stock and bond valuations.

Flexibility of The Fed

The U.S. job market was remarkably strong in 2022 and, as a result, the U.S. consumer was remarkably resilient. However, cracks are beginning to emerge in both the labor market and the overall economy. Layoffs and job losses are mounting, retail sales are falling and economic activity as measured by the Purchasing Managers Index and Leading Economic Indicators is beginning to drop off materially.

The growing evidence of a slowing economy and cooling inflation gives the Fed more flexibility on policy.

As of mid-January, the Fed expects 3 more rate hikes of 25 bps each for a terminal Fed funds rate of 5.1%. It then expects to hold rates steady for the rest of the year. The market, on the other hand, expects only 2 more rate hikes, not 3.

And more importantly, it expects 2 rate cuts in November and December.

Should the Fed pause and pivot sooner than they anticipate? The market believes they should ... and so do we.

To the extent that this upcoming recession will be induced by Fed tightening, we believe that the Fed will also have the flexibility to mitigate it before it becomes entrenched.

2023 will offer up a set of binary outcomes. In one scenario, growth slows all the way into a recession. In this setting, inflation comes down and the Fed no longer needs to be restrictive because the inflation war has been won. If inflation instead doesn’t subside, it will likely be on the heels of a fairly strong economy in which case a recession becomes moot.

We, therefore, believe that any potential recession will be short and shallow.

We assign a low probability to the two scenarios that work against our view – high inflation in the midst of a recession or a Fed mistake wherein they remain restrictive for several months into a recession.

Earnings and Stock Valuations

Earnings estimates for 2023 have been declining steadily in the last few months. Despite this downtrend, earnings in 2023 are still projected to grow modestly. Investors worry that these earnings projections are unrealistically high.

Many fear that earnings may fall by levels that have historically been seen during prior recessions. In the four recessionary years of this century (2001, 2008, 2009 and 2020), earnings fell by an average of -15%. A similar decline in 2023 could push stocks to significant new lows.

We offer two counter perspectives.

We agree with the view that earnings are at risk and are more likely to decline from here. But we don’t expect any impending recession to be similar to the GFC or the Covid recessions in terms of its impact on earnings. We believe the upcoming “earnings recession” will also be short and shallow.

Our second observation should further allay concerns about negative earnings growth in general. Conventional wisdom suggests that price generally follows earnings. If earnings go up, price goes up; if earnings go down, price goes down.

But, counter to intuition and popular belief, it is actually possible for stocks to go up when earnings go down! Indeed, they do so more often than not.

We show this interesting anomaly in Figure 3.

          Source: Bloomberg, Evercore ISI Research

We show S&P 500 returns on the y-axis and earnings growth on the x-axis.

There have been 13 instances in the last 50 years when earnings have declined in a calendar year. Stocks were down in only 3 of those 13 years. These limited instances, which include 2008 and 2001, can be seen in the bottom left quadrant of negative earnings, negative returns.

However, in defiance of convention and heuristics, stocks actually go up about 70% of the time when earnings are down. We see that in the top left quadrant of negative earnings, positive returns.

On further reflection, this stock market outcome is not all that surprising. We know that the core function of the stock market is to anticipate and discount future events. It is always looking ahead and often by almost a year.

At pivot points in the economy when a recession might transition to a recovery, stocks can become disconnected from the current reality of weakness and get connected to a new future reality of strength.

We demonstrate this discounting mechanism both visually and empirically in Figure 4.

Source: Bloomberg, Evercore ISI Research

Figure 4 plots three S&P 500 variables – prices, price-to-earnings multiples and aggregate earnings. It traces the trajectory for Price (P), Price/Earnings (PE) and Earnings (E) during recessionary bear markets.

Time t = 0 coincides with the low point of the bear market seen during a recession. P, PE and E are all indexed to 100 at t = 0. All data points to the left of t = 0 are prior to the market bottom. All observations to the right of t = 0 are after the market has bottomed out.

In this framework, the trajectory for P is hardly surprising. Prices decline before they hit bottom and then rise thereafter. This V-shape trajectory for P is merely a truism. Stock valuations or PE follow a similar trajectory. The trough in P and PE is marked by a red circle.

Now here is the interesting observation from Figure 4. The solid black line traces the trajectory for Earnings (E) during a recession. As expected, earnings decline as the recession unfolds. E eventually bottoms out as marked by the red oval, but it does so well after P and PE have bottomed out.

So here is the answer to the seemingly confounding earnings conundrum. The trough in prices and P/E multiples leads the trough in earnings. Stock prices anticipate the eventual low point of earnings well before it happens.

How far in advance do stocks bottom out before earnings do? The readings on the x-axis suggest that this lead time can be around a year or so.

If the earnings recession of 2023 ends up being short and shallow as we expect, it is conceivable that the October 2022 low in S&P 500 price and P/E multiple was in anticipation of trough earnings in 2023.

If that were the case, then we could be in the zone between the red circle and red oval in Figure 4 where stock prices and valuations go up even as earnings go down.

We assign a lower probability to a deep economic or earnings recession than the consensus. We believe the market may well have priced any remaining economic or earnings weakness for 2023 through its discounting mechanism.


Bear markets, especially ones that are accompanied by a recession, can be long, painful and a true litmus test of patience and endurance. So here is our economic and market outlook for 2023 and beyond to help investors navigate the second year of this difficult bear market. We believe:

  • Services inflation will be less sticky than feared and gradually abate
    • Rent inflation will decline in the coming months as lagged effects roll over
    • Wage inflation will subside but not all the way down to its pre-Covid levels
  • Overall inflation will likely normalize at 2.5% – 3.0% in 18 to 24 months
  • A slowing economy and cooling inflation will give the Fed more flexibility than it anticipates
  • Greater Fed flexibility will prevent any potential recession from becoming deep and protracted
  • The earnings recession will also be short and shallow, in line with a potential economic recession
  • Stock prices and price/earnings multiples may have bottomed ahead of the trough in earnings
  • Stocks may be impervious to further declines in earnings
  • Stocks and bonds will deliver a decent equity risk premium and term premium
  • Bonds will provide better diversification than they have in the past

In the midst of high uncertainty, we remain vigilant but also cautiously optimistic. We continue to emphasize portfolio diversification, risk management and high quality investments.

Services inflation may be less sticky than feared and gradually abate.


A slowing economy and cooling inflation may give the Fed more flexibility than it anticipates.


Stock prices and price/earnings multiples generally bottom well ahead of the trough in earnings.

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