Second Homes, New Taxes: How Local Governments Are Rewriting the Wealth Planning Map
This summer, those with vacation homes in New York City may have received letters in the mail from the city. Those letters are the first wave of enforcement for a new pied-à-terre surcharge that took effect July 1, 2026. Here’s how it works: if a household owns a home in the city worth $5 million or more and doesn’t use it as a primary residence, the city adds an annual surcharge on top of the regular property tax bill. Condos and co-ops currently trigger the surcharge at a much lower $1 million threshold, not because the policy targets smaller units, but because the city’s valuation method for those properties runs well below true market value; a $1 million “city value” condo may really be worth $5 million on the open market. The rules run for five years before they’re set to expire.
Equity Markets Not Fearful of Fed or Yields, Yet…
Last week, the major U.S. stock indexes finished mixed. The Federal Reserve announced its first rate hike since 2023, and oil prices bounced around due to Middle East headlines. Artificial intelligence (AI)-related stocks largely ignored the warnings about the “end of humanity” and the need to “slow down” from various AI thought leaders. The Nasdaq Composite Index outperformed last week. Growth stocks outpaced value in the large-cap Russell 1000 Index universe, while the small-cap Russell 2000 Index lagged.
Economic Commentary: The Benefit of a Clear Mind and Strong Stomach
Every home realtor knows that a 7% mortgage rate is the kiss of death. Stock market savants know that a 5% 10-year Treasury yield is a tipping point. Lots of economists know that trade wars cause recessions. And now we are told, with a certain amount of qualified certitude, that AI could/will kill us. In all of this, it becomes extremely important to ask “Why?” or “How?”. The answer is frequently based on perceptions of historical reality, which should be tempered with the knowledge that history is a guide, not an oracle.
The Trouble With an All-Pre-Tax Retirement
For years, the standard retirement advice was simple: max out your traditional 401(k), take the upfront deduction, and let Uncle Sam wait to tax your Required Minimum Distributions (RMDs) in retirement. Watching your taxable income shrink on your W-2 can feel like an immediate win. But if you follow this path for decades, you may arrive at retirement with a less welcome discovery: a portfolio that is almost entirely pre-tax is not a nest egg so much as an income tax bill in waiting. On top of that, if your heirs are non-spouses, they’ll likely face the 10-year distribution rule on any pre-tax IRA they inherit, often during their own high-earning years.
Rising Rates, Resilient AI: Markets Face a Pivotal Fed Moment
The S&P 500 returned -0.8% as a jump in oil prices and two hot inflation gauges drove bond yields higher. Mid-cap stocks (-1.7%) and small-cap stocks (-2.4%) both fared worse than large caps. Within the S&P 500, energy (+2.1%) and communication services (+1.1%) were the only sectors with gains; healthcare (-3.5%) and materials (-2.7%) were the worst performing. EAFE markets returned -1.4% with losses in Europe (-1.7%) and the U.K. (-1.6%), while EM markets returned -0.2% with gains in Korea (+4.1%) offset by losses in China (-2.8%) and India (-2.8%).
Economic Commentary: A Chill in the Early Fall Air
Economic winds are blowing, not necessarily favorably. The Federal Reserve FOMC (Federal Open Market Committee) is widely expected to discuss moving to more restrictive monetary policy this week, possibly even following the European Central Bank and aising the target interest rate by 25 bps. Oil prices have returned to above $100/barrel and the average US retail price of gasoline rose 15 cents per gallon over the last seven days. Late last week, US consumer prices were reported as increasing 0.4% in August, with the 12 month annual rate of 3.4% well-exceeding the 3.1% pace of wage gains.
August Leaderboard Rattled By Inflation and AI Risks
Strong earnings, broad market participation, and resilient economic growth have supported equities, but rising Treasury yields, geopolitical risks, and elevated valuations could shape the next phase of market performance.
Labor’s Long Evolution: Productivity, Prosperity, and the Future of Work
A good chart raises as many questions as it provides answers. This one is no exception. Numerous developments across this same 1979-to-present time period have occurred that may have something to say about the picture (which, by the way, is a picture that has been painted quite consistently by other data and other researchers). The first generation IBM Personal Computer was released in August 1981. In the 1980s, it became apparent that the creation of value (production of goods and services) in technology sectors was less labor-intensive than other industries. In the 1990s, stock options moved out of the executive suite and into regular worker compensation in technology, finance, and select other industries and occupations, supplementing hourly pay and salaries. Union membership peaked in 1979 at approximately 25% of the labor force — with indirect influence on as much as an additional quarter to one-third of workers— and fell steadily over the ensuing 4 decades. US labor force growth slowed from roughly 2.5% at the start of the 1980s to near zero today, while at the same time, US corporate profitability rose more than 6% on average and the corporate profits share of GDP rose from approximately 7% to more than 13% in 2025. The productivity of American workers has consistently been credited with the dominant economic growth and relatively low inflation of the US economy compared to other developed economies in the world, and so the question looms large today: Will this pattern continue, what will it require and how does the American workforce best benefit from its critical role in economic expansion?
Opportunity Zone Deadline Approaches: Is Your Tax Plan Ready?
For taxpayers with Opportunity Zone investments under the original program, the deferral window closes on December 31. Any capital gain deferred into a Qualified Opportunity Fund must be recognized as income this year, regardless of whether the investment has been sold or produced any cash to cover the tax. That gap between when the gain is taxed and when cash is actually on hand can create a liquidity crunch, and it’s worth getting ahead of before year-end.
PPLI: The Current Hot Topic for the Ultra-Wealthy
The Wall Street Journal recently spotlighted Private Placement Life Insurance (PPLI), describing it as a “Roth IRA on steroids” for wealthy Americans seeking tax-free growth. While the headline captures the imagination, PPLI is not a loophole or an aggressive tax shelter. In the eyes of the tax code, it is a variable universal life (VUL) insurance contract designed for Qualified Purchasers and Accredited Investors. It replaces the high-commission, off-the-shelf retail product with an institutionally priced, insurance wrapper that can invest in almost any asset class but is primarily used for tax-inefficient alternative assets.
AI Momentum Meets Rate Hike Risk
Last week, stock prices were up and bond prices were down (yields up). The MSCI Emerging Markets and MSCI EAFE indices outperformed the S&P 500. The best-performing sectors in the S&P 500 were energy, utilities, and consumer staples. Across U.S. Russell style and market-cap indices, mid-cap growth performed best, but the value factor led more broadly.
As for fixed income, the 10-year Treasury yield was up to 4.69% over the week, and the 2s/10s Treasury yield spread steepened to +52 bps. High-yield bond spreads were nearly flat at 265 bps and still remain well below the 2025 high of 453 bps.
Warsh Draws a Line: Inflation Fight Back in Focus
Federal Reserve Chairman Kevin Warsh used his speech at the Jackson Hole Economic Symposium to take back a bit of control over the interest rate narrative. He successfully communicated — for the first time during his short tenure — his views on the economy and his concerns about inflation. Probably the most interesting part of the speech for bond traders was his reluctance to use the modest improvements in recent US inflation numbers as an argument for having patience with the current approximately 3.5% pace of price increases. For others, his amazingly clear statement that “monetary policy cannot easily be described as restrictive” was long-awaited insight into his thinking about monetary policy (and a reminder of the hawkish policy stances he was once widely known for.)