Quarterly Economic Update |
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Welcome to our New Online Newsletter! |
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October opened with a powerful two-day rally, but the momentum faded. News that Britain’s prime minister had reversed her tax cut proposal helped spark the rally, but the gains were erased on renewed fears of higher interest rates and possible recession.
Market volatility accelerated when a higher-than-expected consumer inflation number sent stocks tumbling in early trading before inexplicably staging a massive reversal that saw the Dow Industrial rally 1,500 points from its intraday low.
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Stocks posted big gains in October, propelled by better-than-expected corporate reports.
The Dow Jones Industrial Average led, gaining 13.95 percent. The Standard & Poor’s 500 Index tacked on 7.99 percent, while the Nasdaq Composite added 3.90 percent.
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Gross Domestic Product: The initial estimate of third-quarter GDP growth came in at an annualized rate of 2.6 percent, exceeding economists’ consensus of a 2.3 percent estimate.
Employment: Employers added 263,000 jobs in September as the unemployment rate fell to 3.5 percent. Wage growth of 5 percent in September was below August’s gain of 5.2 percent. Labor force participation rate slipped to 62.3 percent.
Retail Sales: Consumer spending was flat in September compared to August, but spending was 8.2 percent higher than a year ago.
Industrial Production: Industrial production rose 0.4 percent in September, while capacity utilization increased to 80.3. Capacity utilization was 0.7 percent above its long-term average.
Housing: Housing starts dropped 8.1 percent in September as higher mortgage rates tempered demand for new homes.
September’s existing home sales slipped 1.5 percent month-over-month while falling 23.8 percent year-over-year. It was the eighth consecutive month that sales declined.
New home sales fell 10.9 percent while posting a 17.6 percent decline from a year ago. The median sales price rose, though it remains below the record high of July.
Consumer Price Index: Prices increased 0.4 percent in September. The year-over-year increase was 8.2 percent. Core inflation (excluding energy and food) rose 0.6 percent in September and was higher by 6.6 percent from a year ago. The annual gain in core prices was the highest in 40 years.
Durable Goods Orders: Orders for long-lasting goods rose 0.4 percent. Civilian aircraft orders led to the sixth-monthly increase in durable goods orders in the last seven months.
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Y-T-D CHANGE
DJIA
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-9.92%
NASDAQ
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-29.77%
S&P 500
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-18.76%
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October 2022
DJIA
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13.95%
NASDAQ
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3.90%
S&P 500
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7.99%
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November 8th cast your ballot!
The midterm elections are underway. In many states, ballots have been delivered and, in several cases, already returned by Americans exercising one of the most sacred of their Constitutional rights.
The results of elections almost always influence the economy, whether that be an immediate reaction from Wall Street or a long-term reaction due to policy changes. Midterm elections, in particular, can shake things up.
It’s too early to tell what major or minor changes might be coming, but some change is inevitable.
Such changes are among the many factors we consider when building your portfolio. The U.S. has major elections every two years, and it's best to be prepared for some market volatility as the election results come in.
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What Investors May Be Talking About in November 2022 |
November will be a busy month for investors.
First, the market will be digesting another Fed change to interest rates and the outcome of the midterm elections. Investors will also be getting updates on inflation and the labor market.
The Consumer Price Index is set for release on November 10th, and investors will be anxious to see if inflation is moderating. The Producer Price Index will be released on November 15th, providing insights into the cost pressures producers of goods and services face.
In addition, investors' attention is expected to be focused on monthly employment reports and the weekly initial jobless claims. Trends in the job markets and wage growth will play a role in the Fed’s future decisions about interest rates.
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The Power of the Consumer
Consumer confidence has been falling.
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A confident consumer can be a powerful ally in an economy. But when the consumer starts to have questions, we can measure consumer confidence in everything from retail sales to home buying to the personal savings rate.
In recent months, consumer confidence has been falling as inflation expectations have been rising. So, if inflation slows, does that mean the consumer will regain confidence? It’s possible, but other factors can influence consumer confidence, including perceptions of COVID-19.
When the consumer does regain confidence, we may expect it to be a powerful force driving economic growth. Many may base the 2022 U.S. economic outlooks on a rebound in consumer confidence, leading to increased spending.
-Barbara Stowell
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Managing Probate When Setting Up Your Estate
What can you do to help your heirs?
The probate process can be expensive for some estates. Settling an estate through probate can cost you both time and money. It could take up to a year for the estate to be settled, plus attorney’s fees, appraiser’s fees, and court costs may eat up as much as 5% of a decedent’s assets. Probating an estate valued at $400,000 could cost as much as $20,000.1
Joint accounts. Married couples may hold property as a joint tenancy. Jointly titled property includes a right of survivorship and is not subject to probate.
POD & TOD accounts. Payable-on-death and transfer-on-death forms permit easy transfer of bank accounts and securities.
Gifts. For 2022 the IRS allows you to give up to $16,000 each to as many different people as you like before owing taxes. By doing so, you reduce the size of your taxable estate.
Revocable living trusts. The grantor—the person who establishes the trust—funds it while they’re alive with up to 100% of their assets and designating beneficiaries.
Make sure to designate/update retirement account beneficiaries. When you open a retirement savings account, you are asked to designate eventual beneficiaries. Consider reviewing your beneficiary designations regularly to see if they need to be updated.
-Michael Hernandez
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Should We Reconsider What “Retirement” Means?
Working past 70 may soon become common.
An executive transitions into a consulting role at age 62 and stops working altogether at 65; then, he becomes a buyer for a church network at 69. A corporate IT professional concludes her career at age 58; she serves as a city council member in her sixties, then opens an art studio at 70.
Whether by choice or chance, some may retire briefly and work again; others might rotate between leisure periods and work for as long as possible. Working full-time or part-time not only generates income. Another year on the job also may mean one less year of retirement to fund.
One factor has altered our view of retirement more than any other. That factor is the increase in longevity. When Social Security started, retirement was the quiet final years of life; by the 1960s, it was a sort of extended vacation lasting 10-15 years; today, it can be a decades-long window of opportunity.
Perhaps we should see retirement foremost as a time of change – changing what we want to do with our lives. Preparing for change may be the most responsive move we can make for the future.
-James Jones
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5 Retirement Concerns Too Often Overlooked |
Baby boomers entering their “second acts” should think about these matters.
RMDs. The Internal Revenue Service directs seniors to withdraw money from qualified retirement accounts after age 72. This class of accounts includes traditional IRAs and employer-sponsored retirement plans. These drawdowns are officially termed Required Minimum Distributions (RMDs).
Taxes. Speaking of RMDs, the income from an RMD is fully taxable and cannot be rolled over into a Roth IRA. The income is certainly a plus, but it may also send a retiree into a higher income tax bracket for the year.
Health care costs. Those who retire in reasonably good health may not be inclined to think about health care crises, but they could occur sooner rather than later – and they could be costly. A report by Health View Services found that even with additional insurance coverages such as Medicare Part D, Medigap, and dental insurance, a healthy 65-year-old couple can expect to pay almost $208,000 out-of-pocket for their healthcare expenses.
Eldercare needs. Those who live longer or face health complications will probably need some long-term care. One month’s stay in a private room in a nursing home costs an average of $9,000 nationally, so it’s important to consider these when preparing for retirement. Long-term care insurance is expensive, though, and can be difficult to obtain.
Rising consumer prices. Historically, healthcare costs inflation has risen between 1.5-2 times the Consumer Price Index. For a 65-year-old couple, this equates to an additional projected $85,917 in lifetime retirement healthcare costs. Retirees would be wise to invest in a way that gives them the potential to keep up with increasing consumer costs.
As part of your preparation for retirement, give these matters some thought. Enjoy the here and now, but recognize the potential for these factors to impact your financial future.
-Shawn Hochuli
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T I P O F T H E Q U A R T E R
-MICHAEL JORDAN
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The limits are increasing on retirement accounts...here's what you need to know!
The Internal Revenue Service has released new limits for the coming year. After months of high inflation and financial uncertainty, some of these cost-of-living-based adjustments have reached near-record levels.
- IRA limits increase from $6,000 to $6,500 ($7,500 if over 50)
- 401(k) limits increase from $20,500 to $22,500 ($30k if over 50)
- HSA limits increase from $3,650 to $3,850
Other Changes. In addition to changes in contributions limits, the IRS also announced several other changes for 2023, including an increase to the annual exclusion for gifts to $17,000 per person and an increase to the estate tax exclusion threshold
Keep in mind that this update is for informational purposes only, so consult with your tax professional before making any changes in anticipation of the new 2023 levels. You can also contact your trusted financial professional, and they can provide you with information about the pending changes.
-Nicholas Lupo
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