Tax-Saving Opportunities Are Silver Lining in Bear Market
The silver lining for market downturns is that they create greater opportunities for tax loss harvesting and improving after-tax returns.
~ Curt Overway, CFA®
Co-Head, Natixis Investment Managers Solutions
The third quarter proved to be another challenging one for the market but continued to provide ample opportunity for tax loss harvesting. The Inflation Reduction Act was signed into law, but the changes to the tax code should not have much impact on most investment portfolios.
With the market extending its decline, the percentage of stocks in the S&P 500® posting negative returns for the year increased slightly, to 85%. As always, however, some stocks bucked the trend, and even with the overall index down over 24% year to date, 75 index stocks generated positive returns for the period.
S&P 500® Losers vs. Winners – Historical Perspective
Source: Thomson Reuters, Standard & Poor’s, Natixis Investment Managers Solutions
Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.
Although the S&P 500® was down for a third consecutive quarter, the dispersion of returns improved somewhat, with higher highs – and higher lows – in Q3 2022 compared to the first two quarters of the year.
Quarterly Dispersion of Return for S&P 500® Stocks (October 1, 2020 – September 30, 2022)
Source: Thomson Reuters, Standard & Poor’s, Natixis Investment Managers Solutions
Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.
To learn more, please read the full Tax Management Update Q3 2022.
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Tax Management Update Q3 2022
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Tax-Efficient Investing in Separately Managed Accounts (SMAs)
Direct Indexing SMAs can help address key issues facing tax-sensitive investors. All accounts are actively managed to optimize tax loss harvesting while providing beta exposure to an index. Our tax-managed SMAs include:
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What Is Tax Loss Harvesting?
A portfolio can harvest its losses for tax purposes by selling investments when their current value is less than the price originally paid for the security. These losses can be used to offset other capital gains on an investor’s tax return. If there are excess losses, they can be used to offset up to $3,000 in ordinary income – or be banked for use in future years.
A tax liability is the total amount of tax debt owed by an individual, corporation or other entity to a taxing authority.
Capital gain is a rise in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price.
CFA® and Chartered Financial Analyst® are registered trademarks owned by the CFA Institute.
S&P 500® Index is a widely recognized measure of US stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. It also measures the performance of the large-cap segment of the US equities market.
The views and opinions expressed may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary.
Indexes are not investments, do not incur fees and expenses and are not professionally managed. It is not possible to invest directly in an index.
Investing involves risk, including risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.
This document may contain references to copyrights, indexes and trademarks that may not be registered in all jurisdictions. Third-party registrations are the property of their respective owners and are not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively “Natixis”). Such third-party owners do not sponsor, endorse or participate in the provision of any Natixis services, funds or other financial products.
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5 Trends in Model Investment Portfolios – Year-End 2022
