2023 | September 25

The Market

Stocks Decline Again

The S&P 500 and the NASDAQ posted weekly declines of around 3% to 4%, retreating for the third week in a row. The setbacks were driven by steep declines on Wednesday afternoon and on Thursday in the wake of the latest U.S. Federal Reserve meeting.

Although the Fed kept its benchmark interest rate unchanged—as expected—it signaled that it’s likely to keep that rate high further into 2024 than it had previously forecast. Projections released at the end of the Fed’s meeting showed that 12 of 19 officials favor raising rates one more time this year. 

Yields of U.S. government bonds retreated somewhat on Friday after spiking on Thursday to the highest levels in more than a decade. The 2-year U.S. Treasury bond yield climbed as high as 5.20% in intraday trading, the 10-year yield hit 4.49%, and the 30-year yield jumped to 4.59%.

An index that tracks investors’ expectations of short-term U.S. equity market volatility surged nearly 25% for the week, reversing a recent decline that had sent the index to the lowest level since late 2019. With the latest week’s climb to a level of about 17.2 the CBOE Volatility Index (VIX) nevertheless remained below its year-end 2022 level of 21.7.

Japan’s central bank kept the nation’s main interest-rate targets unchanged, with the bank’s governor, Kazuo Ueda, citing deflationary risks if it tightens monetary policy too soon. Friday’s decision came as Ueda said he planned to keep a benchmark short-term interest rate in negative territory for now—the same level that it’s been since 2016.

With the United Kingdom’s steep inflation rate easing, the Bank of England kept its benchmark interest rate unchanged after raising it for the previous 14 meetings. The bank had been hiking rates consistently since December 2021 in a bid to rein in inflation, but it opted on Thursday to keep its rate unchanged after inflation slipped to an annual 6.7% rate in August.

The value of Japan’s yen has sharply weakened relative to the U.S. dollar this year as Japan sticks by its accommodative monetary policies and the United States maintains higher interest rates. As of Friday, the yen had fallen about 12% year to date as the gap between Japanese and U.S. rates widened to the highest level in 22 years.

A report scheduled to be released on Friday will show whether a recent interruption in inflation’s longer-term decline extended into August, as measured by the U.S. Federal Reserve’s preferred gauge for tracking prices. The most recent report showed that the Personal Consumption Expenditures Price Index rose at a 3.3% annual rate in July, up from 3.0% in June—a reversal of the downward trend in the prior months. 

Source: John Hancock Investment Management

AJA Open House

The Rules Will Change in 2026

Since 2001, workers who are age 50 or older have been able to make catch-up contributions to their workplace retirement plans. As the name implies, the idea was to help people who are behind on saving for retirement catch-up by saving more. For example, if older plan participants reach the annual contribution limit of $22,500, then they can choose to contribute an additional $7,500 in catch-up contributions.

However, Secure 2.0 changed the rules for higher-income earners, reported Paul Mullholland in PlanSponsor.

Plan participants who earn $145,000 or more each year will no longer be able to make catch-up contributions to traditional plan accounts. Instead, higher-income earners in 401(k) and similar types of retirement plans must direct any catch-up contributions to Roth plan accounts.

As a reminder, contributions to traditional plan accounts are typically made with pre-tax dollars so they may help reduce the amount of taxes owed today. In addition, any earnings in traditional plan accounts grow tax deferred. Taxes are owed when a distribution is taken.

In contrast, contributions to Roth plan accounts are made with after-tax dollars. While there is no immediate tax benefit, the contributions and any earnings grow tax-free. Distributions are tax-free, too, after the account has been open for five years and the owner has reached age 59½.

The change was originally slated for 2024. However, many workplace retirement plans don’t have designated Roth accounts, which presents a problem for higher-income earners who want to save more. To give plan sponsors and administrators time to adjust to the new rules, the change will now take place in 2026.

Secure 2.0 also included an opportunity for older retirement plan participants to supercharge their savings efforts. In 2025, participants who are between the ages of 60 and 63 can make bigger catch-up contributions – either $10,000 or 50 percent more than the regular catch-up contribution amount for the year.

If you have any questions about retirement plan contributions or how to generate enough income to live comfortably in retirement, please get in touch.

Phone: (615) 709-8709

Fax: (615) 505-3306

eMoney

Charles Schwab

Advyzon

Past performance does not guarantee future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product (including those recommended or undertaken by AJ Advisors, LLC), or any non-investment related content, made reference to directly or indirectly in this communication will be profitable, equal any indicated historical performance level(s), be suitable for your portfolio or individual circumstances, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. You should not assume that any discussion or information contained in this communication serves as the receipt of, or as a substitute for, personalized investment advice. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to their individual situation, they are encouraged to consult with the professional adviser of their choosing. AJ Advisors, LLC is neither a law firm nor a certified public accounting firm and no portion of the content herein should be construed as legal or accounting advice. If you are an AJ Advisors, LLC client, please remember to contact the firm, in writing, if there are any changes in your financial situation or investment objectives or if you wish to impose, add, or modify any reasonable restrictions on our investment advisory services. Until so notified, AJ Advisors, LLC will continue to rely on the most recent information provided. A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available upon request.