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Social Security Webinar
February 22nd 12:00pm-1:00 pm CT | Via Zoom
Have questions about Social Security? Andrew and John will be hosting an engaging webinar with investment management company, Nuveen, to answer all your questions. Click here to register!
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Stocks Up Again
The major stock indexes slipped on Wednesday following a U.S. Federal Reserve meeting but regained their footing to post gains on Thursday and Friday. The S&P 500, the Dow, and the NASDAQ all climbed more than 1% overall; for the S&P 500, it was the 13th positive result out of the past 14 weeks.
The S&P 500 posted its third monthly gain in a row in January, rising a cumulative 15.5% over that stretch. Last month, the index climbed 1.6% overall and eclipsed its record closing level six times, breezing past the 4,800-point mark on January 19 and then 4,900 ten days later.
Small-cap stocks were an outlier in the week’s mostly positive results across the U.S. stock market, as a small-cap benchmark fell 0.8% for the week. The latest result left small caps further behind their large-cap peers on a year-to-date basis; small caps also lagged overall in 2023.
The bond market went on a rough ride late in the week as the yield of the 10-year U.S. Treasury bond fell as low as 3.82% on Thursday before climbing back above the 4.00% threshold the next day. Friday’s surge to a closing yield of 4.03% followed a stronger-than-expected monthly jobs report, which helped fuel expectations of a further delay in potential interest-rate cuts.
High interest rates again appeared to do little to hold back the U.S. labor market, as January’s jobs gain of 353,000 was roughly double the number that most economists had been expecting. In addition, gains from the previous two months were revised upward by a total of 126,000 jobs and the unemployment rate stayed unchanged at 3.7%.
The U.S. Federal Reserve kept interest rates unchanged at the highest level in more than two decades and Chair Jerome Powell said that the prospect of a rate cut as soon as March is “probably not the most likely case.” He indicated that a cut appears likely at some point in 2024 but added that the Fed first wants greater confidence that inflationary pressures will continue to ease.
The Eurozone’s economy ended 2023 on a flat note, posting a 0.0% fourth-quarter GDP growth figure after contracting slightly in the previous quarter. The last time the continent recorded significant growth was in the third quarter of 2022, when the annual growth rate was 0.5%.
The price of oil fell more than 7% for the week, reversing most of its year-to-date gain. U.S. crude was trading at around $72 per barrel on Friday, down from a recent peak of more than $90 in September.
Source: John Hancock Investment Management
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Tax Filing Deadline Extended for Davidson & Other TN Counties | |
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From IRS.gov:
Following the disaster declaration issued by the Federal Emergency Management Agency (FEMA), individuals and households that reside or have a business in Cheatham, Davidson, Dickson, Gibson, Montgomery, Robertson, Stewart and Sumner and Weakley counties qualify for tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Dec. 9, 2023, and before June 17, 2024, are granted additional time to file.
As a result, affected individuals and businesses will have until June 17, 2024, to file returns and pay any taxes that were originally due during this period.
The June 17, 2024, deadline applies to individual income tax returns and payments normally due on April 15, 2024. For affected taxpayers, 2023 contributions to IRAs and health savings accounts are extended to June 17, 2024.
The tax relief also applies to quarterly estimated tax payments, normally due on Jan. 16 and April 15, 2024. Penalties on payroll and excise tax deposits due on or after Dec. 9, 2023, and before Dec. 26, 2023, will be abated as long as the tax deposits are made by Dec. 26, 2023.
For full details, see this link.
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Last year, the U.S. economy produced about $27.9 trillion worth of goods and services. At the end of 2023, the U.S. national debt was about $33.2 trillion.
So, America’s debt is currently bigger than its economy.
The U.S. national debt has accumulated over decades. Each year the government spends more than it receives, the debt grows. When the government spends less than receives, the debt shrinks. Over the last 50 or so years, the government has taken in more than it spent only five times. The last time was 2001.
The debt generally falls into two categories:
Debt held by the public amounted to about $26.9 trillion in 2023. It includes U.S. Treasury securities that have been sold to investors. Economists generally consider this to be “the most meaningful measure of debt, because it reflects the amount that the Treasury has borrowed from outside lenders through financial markets to support government activities,” reported the Peter G. Peterson Foundation.
Debt the government owes itself, which amounted to about $7.1 trillion in 2023. This is the money the U.S. government owes to itself. For example, when Social Security, Medicare, and other national government programs take in more than they need. The extra is invested in U.S. Treasuries that are held in the program’s trust funds.
We’re not alone. The level of government debt has grown around the world. The Institute of International Finance forecasts that global debt would total $310 trillion for 2023, reported Sam Meredith of CNBC.
1. How do we finance the debt?
The U.S. government finances its debt by selling securities such as Treasury bills, notes, bonds. When the debt grows or interest rates rise, the cost of interest increases. As a result, less money may be available for programs that support economic growth, education, Social Security, and other programs.
Higher debt can lead to slower economic growth. “A study by the World Bank found that countries whose debt-to-GDP ratios exceed 77% for prolonged periods experience significant slowdowns in economic growth,” reported Will Kenton of Investopedia. Since the U.S. economy and the U.S. stock market tend to be highly correlated, market returns might slow, too.
Some economists point out that higher rates can stimulate economic growth because they put more money in the hands of consumers, and consumers tend to be the driving force behind the U.S. economy. “…People who are holding government bonds, paying higher rates of interest, are getting a huge windfall in the form of interest income and that income can be spent just like any other form of income,” explained a source cited by Charlotte Morabito of CNBC.
2. How much is too much?
Economists are uncertain how much debt is too much debt for developed nations to hold. Last year, though, researchers at Penn Wharton of the University of Pennsylvania suggested that 200% of gross domestic product (GDP) would be the limit for the United States. In 2023, U.S. debt-to-GDP ratio was 123%.
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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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