October Market Recap
As we noted in last month’s blog post, volatility made a brief return in October. Several asset classes hit new record highs, while precious metals also surged before profit taking and a stronger US dollar slowed their momentum.
Earnings season is off to a strong start, with major banks reporting record results and providing strong forecasts – anecdotal evidence that the economy continues to be in good shape. Many large tech companies continue to enjoy accelerating revenue and profit growth from AI-related capital investments. The S&P 500 and the Dow have logged six consecutive positive months, while the Nasdaq extended its streak to seven!
In fixed income, bond yields spiked after the Fed signaled it may be done cutting rates for the rest of the year. The Fed’s unexpectedly hawkish stance also contributed to a pullback in gold prices.
The OBBBA Primer - Charitable Giving
The One Big Beautiful Bill Act (OBBBA) brings meaningful changes to the way taxpayers can deduct charitable donations. For many households, these updates could make giving more rewarding — both personally and financially. Here’s what’s changing and how to make the most of the new provisions.
“Renewed” Above-the-Line Deduction (2026)
Beginning in 2026, taxpayers who make cash gifts to qualified charities (excluding donor-advised funds) can claim a deduction of up to $1,000 ($2,000 for married couples filing jointly). This deduction is available to taxpayers who take the standard deduction and mirrors the temporary $300 deduction offered in 2020 (see below).
Scholarship Donation Credit (2026)
Also starting in 2026, the OBBBA introduces a new tax credit (not a deduction) of up to $1,700 ($3,400 for joint filers) for cash contributions to state-certified Scholarship Granting Organizations (SGOs). Donors must reside in the state certifying the SGO and scholarships must support K–12 students from families earning no more than 300% of the area’s median income.
Rules for Itemizers (2026 and beyond)
For taxpayers who itemize deductions, several important changes will apply:
- Non-cash gifts: Deduction values are capped at 35% of AGI for taxpayers in the top 37% bracket.
- Charitable floor: The first 0.5% of AGI given to charity isn’t deductible. For example, with a $200,000 AGI, your first $1,000 of giving won’t count toward deductions.
The following table clarifies the deduction limits applicable to different charitable entities.
Tried-and-True Strategies
Even with new rules, several longstanding charitable strategies remain powerful:
- Bunching with DAFs: Combine several years’ worth of giving into one large contribution to a donor-advised fund. You’ll get a bigger deduction now while keeping flexibility to direct grants to charities later.
- Gifting appreciated assets: Give stocks, ETFs, or mutual funds that have grown in value. You avoid capital-gains tax, preserve cash, and maximize your gift.
- Qualified Charitable Distributions (QCDs): IRA owners age 70½ or older may transfer up to $108,000 (2025 limit) directly to qualified charities. QCDs are excluded from taxable income, meaning they won’t raise your AGI or affect items like Medicare premiums or the net investment income tax.
The OBBBA reshapes how charitable giving fits into tax planning, offering new opportunities for everyday donors while tightening some rules for high-income households. With thoughtful planning, you can continue to support the causes you care about and keep your tax bill in check.
Distress Signals From Subprime Consumers
Tricolor, a subprime auto-loan lender, filed for bankruptcy in September, underscoring growing stress in the consumer credit market. Vehicle prices have soared since 2020, compounded by skyrocketing ownership and financing costs. While its primary customer is not the sole contributor to Tricolor’s failure, the delinquency rate in the subprime auto-loan is at a multiyear high, reflecting broader pressure on lower-income buyers.
Meanwhile, credit loan debt in the US and borrowers at least 90 days behind have both surged.
These developments stand in contrast to other indicators that continue to signal a resilient and expanding economy. Still, the disconnect between strong macroeconomic data and rising consumer strain suggests an eventual inflection point, when asset prices and borrowing costs may need to adjust to more sustainable levels.
