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Stocks Down Slightly
Although the Dow managed to post a small weekly gain, the S&P 500 and the NASDAQ fell for the third week in a row. With one week left in 2022, the S&P 500 was down 18% year to date on a total return basis and on track for its worst year since 2008.
Prices of government bonds fell sharply, sending their yields higher, after Japan’s central bank on Monday widened its target range for yields of Japanese 10-year bonds. In the United States, the yield of the 10-year U.S. Treasury bond climbed to 3.75% on Friday, up from 3.48% a week earlier.
The price of U.S. crude oil rose to nearly $80 per barrel on Friday, up around 7% for the week, in part due to expectations that Russia could cut its oil output. Meanwhile, U.S. refiners shut down capacity late in the week as a winter storm made it unsafe to operate plants.
Although its rate lags that of most of the world’s major economies, Japan’s inflation is rising at the fastest pace in more than four decades, as the government reported an annual rate of 3.7% on Friday. The news came four days after Japan’s central bank lifted its cap on a key interest rate from its previous near-zero level.
The U.S. Federal Reserve’s preferred gauge for tracking inflation showed a further cooling of price hikes. The government reported on Friday that its Personal Consumption Expenditures Price Index rose at an annual 5.5% rate in November, down from a 6.1% in October. Excluding food and energy prices, prices rose at a 4.7% annual rate versus 5.0% in October.
U.S. companies continued to buy back shares at a slower pace for the third quarter in a row. In this year’s third quarter, share repurchases by companies in the S&P 500 totaled $210.8 billion, down 4% from the second quarter, according to S&P Dow Jones Indices. Relative to the third quarter of 2021, buybacks were down 10%.
Looking ahead to 2023, many Wall Street analysts have a positive view of three equity sectors: energy, communication services, and information technology. Those were the sectors that had the highest percentages of “buy” ratings from analysts, as of December 19, according to FactSet. Those with the lowest percentages of buy ratings: consumer staples, financials, and materials.
The final week of 2022 will be a light one in terms of economic reports. However, a report on home prices will be released on Tuesday, followed by pending home sales on Wednesday and weekly data on unemployment claims on Thursday. In the following week, watch for the government’s monthly employment report to come out on Friday, January 6.
Source: John Hancock Investment Management
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Retirement Account Changes | |
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As part of the Secure Act 2.0, Congress passed a series of laws heading into 2023 that stand to overhaul many parts of the retirement system. Included are dozens of retirement policy changes that go into effect over the next decade, but many kicked in immediately.
Some of the changes include:
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Required Minimum Distributions. The new legislation raises the age taxpayers generally have to start taking required minimum distributions, known as RMDs, from their retirement accounts to 73 from 72, starting in 2023. That means if you turned 72 in 2022, you have until April 1, 2023, to take your first RMD, the one for 2022, and you’ll have to take another for 2023 by Dec. 31, 2023. If you turn 72 in 2023, your first RMD will be for 2024, the year you turn 73, due on April 1, 2025.
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Missed RMD Penalty Relief. Congress is reducing the 50% penalty for missed RMDs to 25% of the amount that should have been withdrawn. The penalty drops to 10% if it is corrected in a timely manner.
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New Exceptions to the 10% Early Withdrawal Penalty. Typically there’s a 10% penalty if you withdraw money from 401(k)s or other pretax retirement accounts before age 59 ½. The new legislation enhances several existing exceptions, including covering certain private-sector firefighters and public safety officers. It also adds new categories, allowing individuals who are terminally ill to make limited penalty-free withdrawals. A catchall exception, allowing anyone with a personal or family emergency to withdraw up to $1,000 a year penalty-free, kicks in for 2024. A penalty exception for those affected by federally declared disasters is retroactive to Jan. 26, 2021. There are also exceptions for victims of domestic abuse and payment of long-term-care premiums.
For more changes and a full article by the Wall Street Journal, click here.
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Optimism and Hope for the New Year | |
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As 2022 ended, many people shared what they anticipated in the new year. From a World Cup record to peak China, here are a few of the stories that caught our attention:
The beautiful game. “…the U.S. Women’s National Team will look to defend their 2019 [World Cup soccer] title at the tournament cohosted by Australia and New Zealand. The four-time World Cup champs…could become the first team in either the women’s or men’s game to win three successive World Cups,” reported Lisa Antonucci of NBC Sports.
The Great American Solar Eclipse. On October 14, “…the Moon will again pass directly between Earth and the Sun – but this time it will not quite completely cover the solar disk, instead turning it into a thin ‘ring of fire.’ This annular (Latin for ring-shaped) eclipse will be visible within a roughly 125-mile-wide path from Oregon to Texas and on into Mexico and northern South America,” reported the American Astronomical Society.
Healthcare advances. “According to reports, science seems on the threshold of unlocking the mysteries that could lead to cures or game-changing treatments for diabetes, Parkinson’s, HIV, many types of cancers and heart conditions, and more. When it comes to modern medicine, there’s reason to hope that 2023 will be the Year of Miracles,” wrote Gary Abernathy for the Washington Post.
A change in China’s influence. “Some time in April China’s population will be overtaken by India’s, at around 1.43 [billion]. With China’s population in decline, and its economy facing headwinds, expect much discussion of whether China has peaked,” wrote Tom Standage of The Economist.
Strength in optimism. “… conventional wisdom is likely to be wrong. That’s what makes me so hopeful and so eager for the future: the widespread doom and gloom. What good is pessimism? I used to think hope was a product of external facts, but the school of life has convinced me otherwise. Hope is a choice, strengthened through practice; not a reflection of light, but light itself,” wrote David Von Drehle for the Washington Post.
What are you looking forward to in 2023?
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AJ Advisors
www.ajadvice.com
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Phone: (615) 709-8709
Fax: (615) 505-3306
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John Stauffer, CFP®
Partner
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Andrew Quinn, CFP®
Partner
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Emily Triano
Operations Associate
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