Enlightenment - A Herold & Lantern Investments Podcast
Enlightenment - A Herold & Lantern Investments Podcast
Tax Cuts, Trump IRAs, and Trade Wars: Navigating Today's Financial Landscape
July 7, 2025 | Season 7 | Episode 26
The financial landscape is shifting dramatically with President Trump's newly signed "Big Beautiful Bill" extending the 2017 tax cuts that were set to expire this December. This sweeping legislation keeps the top tax rate at 37% while expanding the estate tax exemption to a generous $15 million per person ($30 million per couple), providing substantial benefits for wealth transfer planning.
For everyday Americans, the bill introduces tax exemptions on tips (up to $1,000) and overtime pay (capped at $12,500 for individuals), though these benefits won't apply to Social Security or Medicare taxes and come with income limitations. Seniors gain a new $6,000 tax deduction, while the SALT cap jumps from $10,000 to $40,000 until 2030—a major relief for residents of high-tax states.
Perhaps most intriguing is the creation of "Trump IRAs," government-backed retirement accounts that will receive a one-time $1,000 deposit between 2025-2029. These accounts must invest in index-tracking funds composed primarily of US stocks, with employers able to contribute up to $2,500 without tax implications.
Beyond domestic policy, international trade tensions continue brewing. Treasury Secretary Yellen has warned that countries failing to negotiate trade deals by August 1st will face restored April-level tariffs. Meanwhile, financial markets have shown remarkable resilience—the S&P 500 is up 5.5% year-to-date despite significant political polarization and major economic policy shifts.
The Federal Reserve now navigates contradictory signals from June's jobs report: 147,000 nonfarm jobs added (above expectations), but with private payrolls increasing by only 74,000 and 130,000 people leaving the workforce entirely. These mixed indicators have markets anticipating a September rate cut rather than July action.
As you consider your investment strategy, note the explosion of ETFs—now exceeding 4,000 on the NYSE compared to just 2,400 listed stocks. While offering advantages over traditional mutual funds, specialized ETF products demand careful scrutiny, particularly leveraged offerings that may not perform as expected over longer holding periods. How will these tax changes and market dynamics affect your financial planning? Subscribe now for ongoing insights to keep you ahead of these transformative shifts.
** For informational and educational purposes only, not intended as investment advice. Views and opinions are subject to change without notice.
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And now introducing Mr. Keith Lanton.
Keith Lanton:Good morning. Today is July 7th, 7-7. It is the first Monday of the third quarter, also post-July 4th Hope everyone had a wonderful fourth often looked at as the heart or the beginning of the heart of the summer season or the vacation season here in the United States, but this year certainly no vacation. From news flow, from changes taking place here in the United States, to have all sorts of news that could potentially affect your portfolio, continue to be a deluge. Of course, we had, over the July 4th holiday, president Trump signing the big, beautiful bill which is now law, and we will talk a good amount about that. And then we'll talk a little bit about the history of the United States. As it is July 4th, the 250th not anniversary of the birth of the country that's next year but really the 250th anniversary of what many deem as the start of the Revolutionary War the battles in Concord and Lexington, paul Revere's ride, all taking place in 1775. Saying the right, which is being accused of favoring wealthier individuals, and then in the manifestation, especially here in New York City, of Mr Mondami, who is a self-proclaimed socialist and is seeking to impose policies here in New York City, where we have an office and where I am currently pretty closely situated, where he's looking to do things like freezing rent for individuals and setting up city-owned grocery stores, talking out against billionaires, reducing the size of the police force in New York City. So these progressive policies certainly are very opposite of some of the other policies that we're seeing from Washington. We'll talk about the history of extreme views or different views in the United States and how we've been able to overcome those challenges, including, of course, the Civil War, which was the most trying time in our nation's history.
Keith Lanton:So let's begin with the bill that did pass not only the Senate, but then the House, signed by President Trump, and what those changes may mean for all of us going forward. Perhaps most significantly, the bill will extend most of the Trump 2017 tax cuts, which are set to expire December 31st. That applies for all income groups. It continues tax rates with a top rate of 37%. Keep in mind, if this was not approved, we would have rolled back at the end of this year to the tax rates before the 2017 tax cut, which would have raised rates on most taxpayers. The proposal also extends deductions for closely held businesses. You might remember there was this 20% imposition for a lot of closely held businesses, which gave them a tax break, and it's also going to expand the estate tax exemption to $15 million per person, $30 million per couple. For corporations, immediate deductions for certain research and development expenses and equipment purchases would be made permanent, and these are big changes. For big corporations that spend heavily, it significantly lowers their tax rate, so this could be viewed as a positive for business.
Keith Lanton:The bill will appropriate about $157 billion for military spending, $29 billion of that for shipbuilding, $25 billion for the Golden Dome defense project and $25 billion for munitions, perhaps to rebuild some of the arsenal, as the US has been assisting the Ukraine and, more recently, Israel. Proposal allocates $150 billion for immigration enforcement. About $46 billion of that is to build a border wall, about $45 billion for the detention of migrants and $13.5 billion is to pay state and local governments for their efforts on behalf of immigration enforcement. The bill will end certain clean energy credits, tax credits for purchasing electric vehicles. So if you're thinking about an electric vehicle and you're looking for a tax credit, keep in mind your adjusted gross income has got to be below $300,000 if you're married in order to qualify currently, but those credits are going to expire September 30th. So if that's something you're thinking about and you qualify for that credit. You may want to think about doing that fairly soon. Wind and solar projects that qualify for tax exemptions incentives really not exemptions those will only apply if they go online by December 31st of 2027. Hydrogen products projects they need to start by January 1st 2028. So these incentives phasing out more slowly than the electric vehicle credits this is something that was being advocated for by certain states, even certain Republican or Red states, who are big beneficiaries of some of these policies. It will also help officials who are up for re-election not feel the full effect of losing those incentives until after the elections.
Keith Lanton:Lots of talk about deductions for tips and overtime. We'll talk a little bit about the specifics there. But the proposal to not tax tips does go into effect thousand dollars per person and the no tax on overtime also being capped twelve thousand five hundred for individuals, twenty five thousand for married couples. Keep in mind as well that when you're thinking about the no tax on tips and when you're talking about the overtime no tax, there there are income caps, so that's something to keep in mind. Also, there are overall caps, so if you work and get lots of overtime pay, you may not have all of it become tax-free. As well as that, when you're looking at overtime specifically. Well as that, when you're looking at at overtime specifically, it is not the amount that you receive for overtime pay. So if you're earning fifty dollars an hour for a job and you work overtime and let's say overtime is one and a half times, so you're getting paid not 50, but seventy five dollars, the exemption is on the 50 to 75. The exemption is not on your normal rate of pay when it comes to overtime. Also, when it comes to overtime and it comes to no tax on tips, that is a federal exemption. What states do is up to those individual states. But also bear in mind that does not apply to Social Security tax or Medicare tax. You will still owe those for your earnings on both overtime and as well as tips. Also, the bill proposes and is now law a $6,000 per person tax deduction for seniors. This also has a phase-out provision. The maximum deduction for individuals is $75,000 per person or $150,000 for joint filers.
Keith Lanton:Bill will cut Medicaid spending. This was some of the talk here between the Senate and House going back and forth exactly what would be the requirements and rules regarding some of the Medicaid reductions and the bill is going to have a work requirement of $80, $80, 80 hours a month for adults and it provides a limit on Medicaid provider taxes and that's a maneuver that allows states to secure more federal funds. So the maximum rate that states charge hospitals would gradually decline to 3.5% from 6% in states that expanded Medicaid under the Affordable Care Act. Expanded Medicaid under the Affordable Care Act In a concession to some smaller states, especially some of the states that they were seeking the votes from, like Alaska, the final proposal creates a $50 billion fund for rural hospitals.
Keith Lanton:The Big, beautiful Bill does increase the debt Limit, or the debt ceiling, to $5 trillion, so we won't have to go through the iteration, at least for a little while. Hopefully we won't get to $5 trillion too quickly, which is an additional $5 trillion from where we currently are. Hopefully for a long time, but realistically for a couple of years. Go through the government shutdown scenario that was playing out every felt like every few months. Also, we're going to get an increase in the SALT cap exemption. We saw a lot of this. This is the state and local tax exemption that individuals in high-tax states, high-property tax states. This is the exemption that they were no longer able to take a lot of advantage of like they were before 2017. And the SALT cap goes from $10,000 to $40,000, but it does revert back to $10,000 in 2030. So, again, one of these temporary measures to win over voters and also to not draw the ire of voters in certain states in the near term, so that those states will have constituents enjoying those tax benefits for the next few years and therefore that might be helpful come election time.
Keith Lanton:States are going to have to pay more for food aid programs. This is something called the SNAP program. The measure proposes having states chip in for SNAP payments for the first time, but that again also begins in 2028. So you can see some of the more budget-offsetting portions of the proposal not proposal of the bill are being kicked in later, so the effects will be felt later. So this is one example of that. Another example starting in 2027, states will be required to pay 75% of the administration costs for SNAP. That's up from 15%. Child tax credits getting raised to $2,200 from $2,000. That starts in 2026. It will be indexed for inflation and it will be a permanent extension. This credit will be denied to households with US citizen children if their parents don't have social security numbers.
Keith Lanton:There are also extensive changes to the student loan repayment program. So if you or your student is currently receiving some loans, you want to delve into the specifics of this bill and the changes. They are quite extensive. They put caps on how much, for example, that the graduate students can borrow from programs like Parent PLUS Loans. The plan will also make some changes to Pell grants. Students from higher income families, as well as those receiving full-ride grants and scholarships, will no longer be able to participate in the Pell Grant program. And then there's also the increase in taxes on college endowments. Schools with fewer than 3,000 students would be exempt. These taxes on endowments will go from currently depending upon eligibility, but the highest rate is 1.4%. This rate will now go to 8%. There will also be a tier for 4% and 1.4% as well.
Keith Lanton:Some of the other provisions here in the bill auto loan interest. This also has an income cap, so if you're above certain income limits this wouldn't apply to you, but if you're not, you can deduct up to $10,000 of interest on new loans. This program begins in 2025, ends in 2028. And there is a provision in there that a certain percentage of the car needs to be manufactured in the United States. Also, there's a change for charity starting in 2025 and thereafter. If you are itemizing your deductions and there is a phase-out provision on this as well your deductions and there is a phase-out provision on this as well, but nevertheless, just to keep it simple here you'll be able to potentially write off $1,000 to $2,000, $1,000 per single, $2,000 for married and filing jointly folks that they could add to the standard deduction if they're taking the standard deduction and giving to charity standard deduction. If they're taking the standard deduction and giving to charity, certain provisions having to do with income and as your income goes above certain levels, you would sort of have a donut. So, let's say, the first $5,000 that you gave to charity wouldn't qualify you for this, and then you start qualifying depending on your income. That $5,000 is just a random number based on different income requirements, but as your income goes up, you need to make more contributions to charity to add to your standard deduction.
Keith Lanton:Finally, with respect to the bill, trump accounts are going to be treated like IRAs. In the House version, the Trump accounts were going to look different than IRAs, but important to note that in the Senate version there will be a creation of what are called Trump accounts and in these accounts the government between 2025 and January 1 of 2029, so it's actually from January 1 of 2025 to 2029. The government will provide a one-time $1,000 deposit and parents can also open accounts for Trump IRAs we'll call them and they can make these contributions for children, as long as they are under the age of 18, into these Trump IRAs. Now, when it comes to taking the money out, because it is going to be treated like an IRA, there will be tax. The kids will not be able to take the money out before age 18.
Keith Lanton:But many who are analyzing this are suggesting that parents who want to save for children's college costs may be better off with a 529 plan because they offer superior tax benefits. Withdrawals from 529 plans, when used for higher education, are federally and state exempt, so basically tax free. So, depending on if you're choosing between different plans, what you might choose, 529 might have more appeal, but if you could do a 529 plan and a Trump IRA, then this is certainly benefits in the Trump IRAs. Also, with the Trump IRA, employers can contribute up to $2,500 to Trump accounts belonging to an employee or the dependent of an employee and it will not count towards the employee's taxes for tax purposes, must invest in mutual funds and exchange traded funds that track an index that is composed predominantly of US stocks, and the annual fees are capped at no more than 10 basis points 0.1% of the balance of the investment in the fund. So that's just a quick summary. So there's a lot to learn, a lot to dive into. I'm sure there'll be some more analysis. Of course, these laws are thousands of pages long and we'll be learning even more over the next several days, several weeks, several months, months, and we'll be talking more about it and being able to analyze how to structure things so that you can take maximum advantage of some of the provisions that have been put in place into the tax code, so that you can keep more of your income and hopefully grow your income more efficiently and effectively and hopefully grow your income more efficiently and effectively.
Keith Lanton:All right, well, we started out talking about the fact that it is or it was and I hope everyone had a wonderful weekend here in the United States 4th of July, and we talked about how it's the nearly 250th anniversary of the country. Bristol, rhode Island, bills itself as the most patriotic town in the United States, and that's mostly by virtue of hosting the oldest continuous celebration of the 4th of July. According to Barron's, they say that dates back to 1785. They say that dates back to 1785. If you look back at the US's history and you think about the divisiveness that we're experiencing today, well, there was a lot of divisiveness.
Keith Lanton:If you go back to the founding of our country, obviously the founding of the country was called a revolution. But even post-revolution, this country took some time to gel and become a unified country. So if you go back to the 1780s, we had something called Shays' Rebellion in 1786 and 1787. It may ring a bell in your head when you think back to high school. Perhaps. When you think back to high school, perhaps and this was when disenchanted veterans fighting in the Revolutionary War came back to the United States and were experiencing economic hardship at the end of the war. Obviously, war is devastating to the economy and lots of them were suffering with significant debts and were seeing foreclosures on their properties and farms. And some of the folks that were previously in the Army had led a rebellion in 1786 and 1787 that was subsequently put down by the military. And then, a few years later, in 1794, was the Whiskey Rebellion. That was an uprising in western Pennsylvania having to do with the taxes of whiskey, and you know who led the army to put down a rebellion A bunch of free and black slaves revolting against slavery, and 55 to 65 individuals were killed and they were white and this is something that certainly led to a greater clampdown on slaves and slave laws and one of the factors leading to the Civil War and the Emancipation Movement, but a serious rebellion taking place in the 1830s to 1971, where Native Americans, in order to highlight their plight, took over Alcatraz something that isn't spoken of often but nevertheless something that took place fairly recently.
Keith Lanton:And, of course, we've had political movements, arguably most recently the Reagan Revolution. We had the Great Society under President Johnson, we had the progressive era under President Roosevelt, and now we're being buffeted by new waves of political dissent and counter-dissent, manifested perhaps by Donald Trump and the big beautiful bill on the right and the Democratic Party triumph of New York mayoral candidate Zoran Mondami on the left. Historian Nathaniel Philbrick said it was a revolution that began us and it continues. This nation, he said, will always feel like we're on the edge of a catastrophic change that will ruin us all. That may happen at some point, but it kind of goes with the territory and, though it may pale in comparison to 1775, we did this year have Liberation Day, we've had California wildfires, we've had Doge, we've had a bond route, we've had the bombing of Iran, doge, we've had a bond route, we've had the bombing of Iran, and yet the S&P 500 has climbed five and a half percent so far year to date, which is in line with historical norms. So here we are.
Keith Lanton:Perhaps we are a country that has often struggled, more often than we think, with, you know, countering viewpoints, because, you know, in pretty much post-World War II to the turn of the 21st century, we were in a period of a lot more stability here, let's call it in the United States. But just because that's the way it was in many of our lifetimes doesn't mean that's the way it always was here in the United States. And this polarization that is taking place may not be as unique as we feel. It is All right. So let's take a look at financial markets.
Keith Lanton:This morning we had Treasury Secretary Besant say in an interview that countries that do not make trade deals by August 1st will see tariffs go back to April levels, with several big announcements, he said, on trade deals expected over the next few days. That commentary led to a little bit of a rebound in futures and we're off the worst levels of the morning. We were positive and now we're slightly negative. We're down 18 on the Dow, 16 on the S&P and 92 on the NASDAQ. 10-year treasury is up to a 436. Speaking of trade deals, the EU is reportedly near a deal with the US that seeks to maintain a 10% tariff rate. Also having to do with trade, reuters is reporting that the United States will allow GE Aerospace to resume shipments of jet engines to China's Comac. That's their answer to Boeing, china trying to launch their own domestic aircraft manufacturing business. Despite news of lifted restrictions on chip design exports to China last week, the Trump administration is reportedly looking to curb the shipment of AI chips to Malaysia and Thailand over fears that these countries are passing along their chips to China. That's, according to Bloomberg.
Keith Lanton:Some overseas markets Asian markets down modestly. Japan's down six tenths of one percent. China unchanged. In European markets we are seeing some modest strength the DAX, the strongest market, up seven-tenths of one percent, the FTSE up one-tenth of one percent and France is up two-tenths of one percent. Crude oil on some news about the production changes. It's only down seven cents. There was some talk about increasing production. Then there was some talk perhaps that wouldn't go forward. Natural gas leading commodities lower it's down 11 cents. Gold is down $33 an ounce, so seeing some weakness in commodities this morning.
Keith Lanton:President Trump also out this morning. There is a meeting taking place I believe it's in Brazil of the BRICS, which is the countries Brazil, russia, india, china. These countries talking trade. They came out with some commentary that were critical of US tariff policy and President Trump says that these countries, if they align themselves with anti-American policies, will be charged with an additional 10% tariff. Commentary from President Trump this morning.
Keith Lanton:Moving on, if you're looking at the bond market I mentioned the 10-year Treasury up modestly this morning. I mentioned the 10-year Treasury up modestly this morning Treasuries are outperforming all other fixed-income markets in the United States so far this year, and that's despite the sell-off that we experienced on Friday when we got a stronger-than-expected jobs report. We'll talk a little bit about that. Since Trump's Liberation Day sent markets into a tailspin in April, markets have rebounded super strongly. S&p is up 4% over 25% from their lows, nasdaq up over 28%. This bullishness is giving some market participants pause. Some are concerned, what happens if and when tariffs really take hold and if we start to see a push up in prices for already cash strapped consumers? What will that mean for US equity markets? Of course, the answer is we'll see.
Keith Lanton:What do we have going on this week? Well, today we have President Trump meeting with Prime Minister Netanyahu of Israel and there is talk that perhaps there will be an agreement for Israel to agree with Hamas. They're meeting in the same hotel, on different floors, to strike an agreement possibly to have a 60-day ceasefire, with some conditions about extending that ceasefire Beyond that. Hostage for prisoner exchange is also a possibility. President Trump expressing great desire to end the war in Gaza. So he will be working hard, I am sure, to try and bring that about. Tomorrow we get the National Federation of Independent Business releasing its Small Business Optimism Index for June. That's expected to come in about 97.9, one point less than last month. Wednesday, that was originally the deadline for the White House's 90-day reciprocal tariff pause. That's now been extended to August 1st.
Keith Lanton:So far, the United States has announced trade deals with the United Kingdom and has come out with a framework of a deal for Vietnam, as well as a truce, so to speak with China so to set up time for more discussions. But you may remember, if you go back 90 days ago, some in the Trump administration were suggesting that you could see 90 deals in 90 days, arguably. You've got one deal, which was with the UK, one with Vietnam that hasn't had all the details worked out, and then you've had some negotiation with China. So some are getting concerned that it's challenging to get these deals done and make sense given the complexity, but nevertheless, some getting concerned that you might start to see an imposition of tariffs and what that would mean for financial markets if deals can't be struck relatively quickly.
Keith Lanton:Wednesday the Federal Open Market Committee releases the minutes for its mid-June monetary policy meeting, at which they left rates unchanged. Central Bank has been on hold since December and looks to take the summer off, as we got a jobs report on Friday which was relatively solid, but there was pockets of weakness and we may talk a little bit about that. On Thursday of this week we get the initial jobless claims coming out for the week and those numbers getting more attention now that the concern is having to do with the job market. So let's talk about the job market. We got a job report on Friday the Bureau of Labor Statistics this is from Barron's article A report of 147,000 nonfarm jobs were added in June.
Keith Lanton:That was well above consensus of 106,000. Revisions didn't mar the report either. The two preceding months saw an increase of 16,000 jobs. So looking backwards, the changes that were made did not take away from the job gains that were reported in June. But if you're digging a little bit deeper, the beach should have an asterisk next to it. Private businesses increased their payrolls by only 74,000 in June, short of 100,000 forecast. Less than half of all industries added jobs.
Keith Lanton:The big boost in jobs came from state and local education jobs, which jumped by 63,000. Which jumped by 63,000. But that number was after a seasonal adjustment which presumed that many teachers would be off by the time that the BLALS survey took place. And in fact on June 12th, much to the dismay of many, you know, fourth, fifth and sixth graders, those students were still in school. So the assumption was that these teachers wouldn't be working based on the data. And a big chunk of these teachers were working. So the numbers arguably looked better than they would have if this number had been looked at last year, where in June 12th a lot more teachers would have been out of work because the school year was over, so that also contributing to a more bullish or more jobs being created than necessarily was the case.
Keith Lanton:Other factors also weighing on concerns that perhaps the numbers weren't as good as first blush Average work week dipped by one-tenth of one hour. First blush Average work week dipped by one-tenth of one hour. Aggregate hours slipped by three-tenths of one percent. So people working less hours, average hourly earnings rose a small than expected two-tenths of one percent. And if you were to look at the decline in hours worked and were to include that with the average weekly earnings, well, what that means is because the average hours worked declined and the average weekly earnings only went up modestly, the actual personal income slipped by one-tenth of 1%. And then, if you're looking at the unemployment rate, that also deserves its own asterisk. According to Barron's, in the latest month the headline jobless rate, which is derived from a separate survey of households, ticked down one-tenth of a percent to 4.1 percent. The workforce, however, contracted by 130,000 people, lowering the labor force participation rate to 62.3 percent, which is below the average of 63 percent.
Keith Lanton:We've seen post-pandemic Immigration certainly having an impact on the employment numbers or perhaps, better said, the lack of immigration. Since March, the foreign-born civilian force has declined by 1.1 million people, and that has offset much of the 1.8 million increase in the native-born labor force over that span. So, based on historical measures, we are seeing labor force contracting at a significant rate, perhaps because of the fact that we are seeing less foreign workers in the workforce. So what does this create for the Federal Reserve? Well, it creates a picture of lots of, I guess mud would be the workforce. So what does this create for the Federal Reserve? Well, it creates a picture of, you know, lots of, I guess mud would be the word.
Keith Lanton:We have data that suggests that demographics and policies have slowed US labor supply, and we have future tariffs, perhaps curbing demand for goods and services. And we have one big question out there, and that is where are the tariffs? We know that the government is raising about $30 billion a month at least they did the last time they reported tariff revenue, so that comes down to $400 billion. We're seeing this not currently show up in the inflation data. So that then begs the question, as we approach earnings season, of this $400 billion, who is paying this? Is it the, as President Trump says? Is it the companies that are producing these goods overseas. We'll find out. Is it American companies that are absorbing some of this shock? And we will find out when we get earnings, which are crucially important, obviously, to keep the market momentum going. So this is one factor also the Fed will be taking a look at. They'll be looking for some clarity on what's taking place with tariffs and who is absorbing the cost of these tariffs with tariffs, and who is absorbing the cost of these tariffs. And if you're looking at what the Federal Reserve might do, well, the market is now expecting a September rate cut, looking at odds there of about 80%. But if you're looking at a July rate cut, well, the probability there is fading fast, despite some commentary from Fed Governors Waller and Bowman recently that they may be open to a Fed rate cut come July. But with the most recent employment data, it's not looking like, at least at the moment, that you may get a consensus to raise rates. Mark is certainly not expecting one at this moment.
Keith Lanton:Finally, before I conclude, talk a little bit about the headline article in Barron's and it talks about ETFs and the growth of exchange-traded funds. There are now more than 4,000 exchange-traded funds listed on the New York Stock Exchange and there are 2,400 stocks. Etf sponsors launched 700 ETFs last year. If you're curious, 33 of those track cryptocurrencies, 130 are buffered ETFs having to do with giving up upside to limit downside, and there are dozens of ETFs that magnify bets on things like the S&P 500 or stocks like NVIDIA and Palantir. Now some of the growth from ETFs has come out of traditional mutual funds, which had $1.2 trillion in outflows in the past two years, and that's because mutual funds do not enjoy the tax efficiencies, as well as some other advantages, like daily trading during market hours, that ETFs enjoy. We're also seeing a trend where active stock ETFs before ETFs were largely passive, mimicking indexes. Well, active stock ETFs are now up to $1 trillion, and we're also seeing lots of new active ETFs being launched, both in the fixed income space as well as in the equity space.
Keith Lanton:Now, of course, when it comes to active ETFs, you do have to do your homework. Consider the rise and fall of Woods Kathy Woods, that is, her ARK Innovation Fund. That fund, which is an active ETF, soared 150% in 2020. So what happened? Lots of individuals ran into that fund up 150%. Assets peaked at the end of 2020 at $28 billion. But that one happened in 2021 and 2022. Well, the funds declined 75% or lost 75% of its value and the ARK Innovation Fund has underperformed the NASDAQ now cumulatively, including the period where it was up 150%, by more than 100 percentage points over the past five years. Nasdaq's up 108% over the last five years and the ARK Innovation Fund is down 2%. So you have to be careful about jumping onto bandwagons and being mindful of the risks. Finally, you also need to be super careful about leveraged ETFs.
Keith Lanton:These are exchange-traded funds that are designed to magnify bullish and bearish bets. So let's take an example here of the bullish bets three-time bullish bet on the NASDAQ 100. This manifests itself in the Ultra Pro QQQ, which is designed to triple the NASDAQ 100 index's daily return, rising 3% on a day when the NASDAQ is up 1%. The ultra-short QQQ aims to deliver the reverse rising 3% when the index falls 100%. So just year-to-date. Forget about long-term Year-to-date. How has this worked? Well, again, the sponsors of these products will tell you this is meant to be a daily product, which means it's not meant to be held for more than a day or two. So the NASDAQ 100 up 8.4% year to date.
Keith Lanton:The three times long ETF. So three times long ETF. That is up 5.5%. So you can see the math isn't working too good. It's up 8.4. If you think you're going to be up three times that, well then you're thinking to yourself that you're going to be up about 25%, yet you're up 5.5% year to date, and that's because of the way these are designed and structured and not meant to be held long term. And if you're thinking about the short, how did the three-time short do? Well, the three-time short is down 35.5%, a little closer to in line what you'd expect. You would expect it to be down about 25%, but it's down 35. So you can see that these indexes are not doing what you might think they would do not necessarily what they're advertised as, but what you might think they would do if you were to hold these instead of to treat them as short-term strategies.
Keith Lanton:That's everything I've got.
Alan Eppers:Thank you for listening to Mr Keith Lanton. This podcast is available on most platforms, including Apple Podcasts, Spotify and Pandora. For more information, please visit our website at www. heraldlantern. com.
Sophie Cohhen:Opinions expressed herein are subject to change and not necessarily the opinion of the firm. Past performance is no guarantee of future results. The information presented herein is for informational purposes only and is not intended to provide personal investment advice. It is important that you consider your tolerance for risk and investment goals when making investment decisions. Investing in securities does involve risk and the potential of losing money. The material does not constitute research, investment advice or trade recommendations.