Last week was a mixed bag, as publicly-traded companies continued to report earnings. As of August 1, two-thirds of the S&P 500 has released earnings, and 82% of those companies have outperformed expectations.[1] This is well above the five-year average, and shows that publicly traded companies have done well through the first half of the year. At the same time, inflation is trending slightly higher, and the labor market is slowing down, with only 73,000 jobs created in July and unemployment ticking up to 4.2%. The market is expecting the Federal Reserve Bank to cut rates come September, as trade deals and tariffs continue to roil markets.
The latest tax bill also created a new type of investment account. For all children born between 2025 and 2028 and that have a Social Security number, the federal government will deposit $1,000 into an investment account for the child.[2] Parents, friends, and family, as well as employers, can contribute a total of $5,000 additional dollars to the account. In addition, state and local governments, and nonprofit organizations can contribute any amount to the accounts. Those contributions do not count towards the $5,000 limit.
Once the child turns 18, the account is treated as a regular IRA, with some limited exceptions for tax-free withdrawals for higher education, first-time home purchases, and other items. For many families, the tax advantages of 529 accounts and Roth IRAs are better than the Trump accounts. Depending on your tax bracket and the eventual use of the money, a Uniform Trust for Minors Account, or UTMA, may even be preferred.
These accounts may provide huge benefits for lower-income families, especially if governments and non-profits fund them to assist with college or vocational training for children in their local communities. It may also prove to be a recruiting advantage for companies that provide the maximum $2,500 for each employee’s child born during their employment.
The accounts will be administered through private companies and overseen by the Treasury Department. They are expected to be available in July 2026.
Your action item this week is to review your estate plan and legal documents. If you don’t have one, this is a great time to reach out to an estate attorney, or find an online option that works for your family.
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CovingtonAlsina is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.