You work at your job, you pay taxes, then when you retire, you get Social Security benefits tax-free, right?
Wrong. Up to 85% of the Social Security benefits you get each year could be subject to tax, depending on your household income. What’s more, 100% of your withdrawals from traditional IRAs and traditional 401(k)s will likely be considered taxable income. There are ways to keep more of your retirement income—but first, it helps to understand how retirement income is taxed. Taxes on retirement income: In retirement, different kinds of income are taxed differently:
So as you work with financial and tax professionals, consider the following 2 strategies. (Note that if your and your spouse’s combined annual retirement income is more than $100,000, you will likely need additional tax planning.) 1. Converting savings into a Roth IRA: "One strategy to reduce the taxes you pay on your Social Security income involves converting traditional 401(k) or IRA savings into a Roth IRA," says Shailendra Kumar, director at Fidelity's Financial Solutions. Not everyone can contribute to a Roth IRA or Roth 401(k) because of IRS-imposed income limits, but you still may be able to benefit from a Roth IRA's tax-free growth potential and tax-free withdrawals by converting existing money from a traditional IRA or a workplace retirement savings account into a Roth IRA. This process of converting some of your IRA or 401(k) into a Roth IRA is known as a partial Roth conversion. "You can choose to convert as much or as little as you want of your eligible traditional IRAs. This flexibility enables you to manage the tax cost of your conversion," adds Kumar. "A Roth IRA or Roth 401(k) can help you save on taxes in retirement. Not only are withdrawals potentially tax-free,2 they won't impact the taxation of your Social Security benefit. This is an important aspect of a Roth account that most people are not aware of.” Remember: The amount you convert is generally considered taxable income, so you may want to consider converting only the amount that could bring you to the top of your current federal income tax bracket. You also may want to consider basing your conversion amount on the tax liability you may incur, so you can pay your taxes with cash from a nonretirement account. Consult a tax professional for help. Tip: To learn more about Roth conversions, read Viewpoints on Fidelity.com: Answers to Roth conversion questions 2. Delaying your Social Security benefit claim: "The other strategy,” says Kumar, “involves postponing when you first take Social Security. Both approaches can help shave dollars off your tax bill in retirement every year—it just takes a little forward planning." Consider a hypothetical couple named Natalie and Juan: For every year they delay taking Social Security past their full retirement age (FRA), they get up to an 8% increase in their annual benefit. In general, many people would benefit from waiting to age 70 to take Social Security. Others may need the income sooner and may lack the resources necessary to meet expenses during the delay period, or they may not live long enough to reap the rewards of delaying their claim. Natalie and Juan’s strategy is to reduce the amount they withdraw from their taxable IRAs over time and make up the difference in income by waiting until age 70 to claim Social Security. This has a big payoff for them because by delaying claiming Social Security until age 70, the percentage of their Social Security income that gets taxed is cut from 85% to 47.2%. It gets better: While Natalie and Juan’s retirement paycheck of $70,000 remains the same, they pay approximately 41% less in taxes and withdraw smaller amounts from their respective IRAs each year. Natalie and Juan should also look for ways to mitigate their tax liability between ages 65 and 70 while they delay Social Security and supplement their income with other sources. Withdrawing solely from taxable IRAs over this time period could result in relatively higher tax bills, potentially offsetting some the tax savings they expect to get at ages 70 and beyond. Bottom line: Social Security income becomes even more valuable for retirees when they realize that it is taxed less in retirement versus other forms of retirement income. Consider how long you may live, your financial capacity to defer benefits, and the positive impact the claiming decision may have on taxes you'll pay throughout your retirement. Tip: To learn more about timing and Social Security, read Viewpoints on Fidelity.com: Should you take Social Security at 62? Planning ahead: As you develop short- and long-term retirement income strategies, remember:
Tip: As you approach retirement, think about increasing your contributions to these preretirement savings vehicles such as Roth IRAs. These accounts are federally tax-advantaged and can help reduce your combined taxable income. This approach makes it possible to help reduce the taxes you pay on your Social Security benefit because you will likely have to withdraw less from traditional taxable IRAs to fund your retirement. Do you have more questions? Please reach out to Laurie or Brien at Laurie@TraditionsWealthAdvisors.com Brien@TraditionsWealthAdvisors.com We are here to serve you. Source: Fidelity Viewpoints. https://www.fidelity.com/viewpoints/retirement/taxes-on-social-security
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During a press conference on March 20th, Jerome Powell discussed expectations for interest rates, revealing no immediate plans for cuts but acknowledging a possible reduction in the future. The Federal Reserve's projections now anticipate three interest rate cuts in 2024, driven by the desire to support a healthy job market and economy despite ongoing inflation above the 2% target. This marks a slight adjustment from December's forecast of four cuts. The Fed expects core inflation to be at 2.6% by the end of 2024, a slight increase from the previously projected 2.4%.
Despite these inflation concerns, the Federal Reserve also plans on observing fluctuations within the labor market before starting to reduce rates. The objective is to witness cooling in the labor market to alleviate the burden of elevated rates on consumers. Currently, ten of the Fed's nineteen officials foresee the policy rate decreasing by at least three-quarters of a percentage point by year-end, implying short-term rates slightly above 4%. The economy's resilience, as evidenced by GDP growth, also factors into these considerations. On March 26, the Atlanta Fed verified their prediction of the robustness in economic growth, with a forecast of 2.1% GDP growth in the first quarter—a figure elevated by 10 basis points than the previous year and indicative of a resistant nature. The final quarter of 2023 saw a GDP growth rate of 3.1%, contributing to an annual growth of 2.5%. Complicating the economic landscape are rising oil prices and a slower-than-expected decline in housing costs, exacerbated by a nationwide housing shortage and an affordability crisis fueled by higher mortgage interest rates. These dynamics further introduce uncertainty regarding the likelihood of rate cuts within the year. While economic indicators may not strictly justify a reduction, political pressures suggest the necessity of a rate cut. Powell's navigation of these complex demands illustrates an effort to balance economic imperatives with political expectations, particularly considering the sticky inflation. The CPI update on April 10th for the month of March will be pivotal in offering insights into rate cut scenarios. Despite not providing any definite assurances during press conference, the U.S. stocks continue to see gains as the U.S. dollar weakens against other currencies. This indicates the market’s optimism about the Fed's cautious yet supportive stance towards economic growth and inflation management. Traditions Wealth Advisors
Brien L. Smith, CFP®/Kristina Badrak TWA CEO/Financial Analyst Intern February 23, 2024 Consumer Price Index Amid fluctuating economic forecasts, January 2024 Consumer Price Index (CPI) data release stands as a testament to resilience in the face of adversity. Capturing the spending patterns of urban households, which constitutes about 93% of the U.S. populace, the CPI saw a year-over-year increase of 3.1% and a month-over-month growth of 0.3% in January—figures that exceed the modest 2.9% annual inflation rate anticipated by analysts. This unexpected rise not only indicates concerning developments for markets and policymakers alike but also signals that the Federal Reserve might need to maintain higher interest rates for an extended period to counter inflationary pressures. According to the Bureau of Labor Statistics (BLS), the shelter sector emerged as the dominant driver of January's inflation, contributing 36.191% to the CPI's weight. This sector experienced its most significant price jump since April 2022, with a 6% rise on an annual basis. The shelter index is broken down into four critical components: owners' equivalent rent (OER), rent of primary residence, lodging away from home, and tenants' and household insurance. Notably, OER and rent of primary residence, with CPI weightings of 26.770% and 7.671% respectively, stress the extensive nature of housing costs. OER, an estimate of what homeowners would pay in rent for comparable living spaces, alongside rent of primary residence—the direct rent costs faced by tenants—underline the scope of housing expenses. Despite the Bureau of Labor Statistics (BLS) updating its approach in January 2023 to use one year of spending data for CPI calculations, thereby reducing the data inclusion lag from consumer purchases from 36 to 24 months, the Federal Reserve continues to prefer the Personal Consumption Expenditures (PCE) Price Index for assessing inflation. Economic Outlook The forthcoming PCE report, due on February 29th, is anticipated to have a significant impact on the Federal Reserve's monetary policy decisions. The index is highly regarded by the Fed over CPI for several reasons: it covers a wider range of household expenditures, including those paid on behalf of consumers, and more accurately reflects changes in consumer behavior and the substitution effect. Recent evaluations by Morgan Stanley indicate an expected uptick in January's core PCE to 0.29% monthly, marking a rise from the previous 0.17%, spurred by CPI increases. In a similar vein, Goldman Sachs has recalibrated its economic forecast, trimming its prediction for first-quarter growth from 2.9% to 2.3% and elevating its projection for January's core PCE inflation from 0.35% to 0.43%. The upcoming week is anticipated to shed light on these inflationary patterns in hopes of providing a more detailed understanding of the current and future fiscal environment. With the PCE prized by the Fed for inflation monitoring, the indicator will play a crucial role in guiding interest rate strategies. The notable gap between PCE and CPI, especially given the persistent rise in shelter costs affecting the CPI, stresses the complex challenges of navigating the lasting effects of the pandemic. Sources: https://www.reuters.com/markets/us/us-consumer-prices-rise-more-than-expected-january-2024-02-13/ https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm https://www.economicsuncoveredresearch.com/p/shelter-and-the-cpi-everything-you Tax season is here! Tax-related identity theft happens when criminals use your personal information to file a return in your name and claim your refund. Victims are waiting an average of almost 19 months for the IRS to process their returns and issue refunds, the National Taxpayer Advocate reported. There are also two key steps taxpayers can take to protect themselves.
1. File EARLY! One of the best ways to avoid tax-related identity theft this season is by filing your return early. Do not let the scammers have time to come in and steal your information. File before they can! Further, protect your online filing with strong passwords and multi-factor authentication. 2. Get an identity protection pin! If you’re looking for added protection, experts suggest getting an identity protection PIN, or IP PIN, from the IRS. This six-digit number blocks others from using your Social Security number or individual taxpayer identification number to file a tax return. Once you enroll, the agency generates a new IP PIN for you each year. Previously, IP PINs were only for identity theft victims. Now, they’ve opened it to everyone. However, it is too last minute to get an IP pin before filing your 2023 return. It is best to file your 2023 return now, and get an IP PIN for next year. Want to learn more about the IP PIN and how to get one? Click here. Source: https://www.cnbc.com/2024/01/18/how-to-protect-yourself-from-tax-identity-theft-this-season.html?__source=sharebar|email&par=sharebar Please reach out to our in-house, tax-smart planning director, Laurie@TraditionsWealthAdvisors.com or call her at 979-694-9100 with more details and questions about the above article. Source: https://www.eatonvance.com/tax-smart-planning.php?item=evt-fa-46610
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Kristina Badrak/Brien L. Smith, CFP® Financial Analyst Intern/Certified Financial Planner 1/26/2024 Economy In the fourth quarter of 2024, the U.S. GDP grew by 3.3% marking a modest slowdown while demonstrating economic resilience. Core PCE, which gauges household consumption, rose 2.9% in December, slowing from November's 3.2% and falling below the 3.0% for the first time in the past three years. Conversely, the CPI, tracking urban household expenditures, unexpectedly climbed by 0.3% monthly, lifting the annual inflation rate to 3.4%. This rise in CPI was primarily fueled by escalating costs in essentials such as rent, food, gasoline, and notably, used car prices. Despite these trends, the PCE remains the Fed policymakers' preferred metric for interest rate decisions, particularly because it accounts for changes in consumer behavior. The current trajectory suggests only a 40% chance of a rate cut in March with many economists predicting one in either April or June due to existing uncertainties. On a different note, the job market remains strong keeping the unemployment rate steadily below 4%, this is mirrored in a 0.4% increase in average hourly earnings and a slight rise in labor force participation to 62.8%. In addition, unemployment claims the week of 20th have increased by 25,000 compared to last week, which recorded the lowest level of claims since September 2022. The indicators within the job market are at an adequate level of stability and are not adding stress to the economy. Considering all these factors, including robust household spending and market uncertainties, the Fed’s meeting on January 31st will hopefully provide us with some insights into the decision regarding rate cuts in the spring. Social Security The Congressional Budget Office warns that by 2033, Social Security trust funds will face insolvency, with projections indicating only 75% coverage of scheduled benefits. This is due to the aging population growing faster than the workforce, decreasing the ratio of workers to Social Security beneficiaries from 5.4 to 1 twenty years ago, to 3.8 to 1 today. According to John Mauldin, addressing the debt crisis requires focusing on Social Security and Medicare reforms or raising middle-class taxes since other reforms are insufficient. Medicare and Social Security's combined long-term unfunded obligations represent 95% of the federal government's total unfunded obligations. Over the next decade, Social Security will add nearly $3 trillion to the national debt. At the moment, one of the popular drafted proposals by legislators is to limit the income cap for those earning over $400,000, thereby closing tax loopholes. With presidential elections on the horizon, the incoming administration's stance will be crucial in shaping the future of these vital programs. Outlook of the Market According to BlackRock, stock markets typically experience a “sluggish” first half but stronger second half during presidential election years, with the third quarter often yielding a 6.2% return. In addition, during post-Federal Reserve rate cuts, cash yields usually drop quickly. Additionally, high-yield bonds and small-cap stocks tend to be critical recession predictors, typically experiencing declines ahead of an economic downturn. Within the past month, small-cap stocks, particularly the Russell 2000 Index, outperformed large caps with a 14.0% return, correlating with the 3.3% GDP growth in the 4th quarter, supporting the notion that small caps thrive when GDP slows down. Concerns about an economic downturn, however, should be tempered as the government has the capacity to reduce interest rates, thereby facilitating a smoother, more controlled economic landing if necessary. Moreover, the increasing trend in index fund investments contributes to a well-diversified portfolios, effectively spreading out and mitigating risk. Sources: https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html https://www.bloomberg.com/news/articles/2024-01-18/us-jobless-claims-plunge-to-187-000-lowest-since-september-2022 https://www.atlantafed.org/cqer/research/gdpnow#:~:text=Latest%20estimate%3A%202.4%20percent%20%2D%2D,from%202.2%20 on%20January%2010 https://www.blackrock.com/us/financial-professionals/insights/student-of-the-market 1. What happens if I give a gift in 2024 when it’s $13.61 million per person and then the exemption is reduced to something like $7 million later? If I start gifting significant amounts while I'm alive, will this cause problems when the current limits sunset after 2025, or if they are changed sooner?
Under current law there will be no "clawback" of exemption previously used that would cause estate taxes on the extra gifted amount. This would still be the case even if the changes to the exemption amounts are put into effect as of an earlier date. Individuals can also give away money annually up to the current limit, which is $18,000 in 2024, to as many people as they would like before it impacts the lifetime limit. 2. For estate taxes, does it matter what types of accounts I'm leaving to heirs? What if all my money is in a retirement account, like a 401(k), or it's all in a brokerage account or some other type of account? Do I need to start reorganizing how my money is held given the changes ahead? The federal estate tax applies to the value of all assets that a decedent owns or controls at death, regardless of the type of account in which the asset is held. Another option to consider, is that only assets held in certain types of accounts can be efficiently transferred. For example, retirement accounts, such as 401(k)s or traditional IRAs, cannot be transferred to a third party during the account holder's lifetime without triggering income taxes and possibly penalties. 3. If I'm leaving real estate to my heirs and they aren't going to sell it, do any possible changes in the estate tax matter to me? Would my heirs possibly be hit with a tax bill upon inheriting and have to come up with the cash? Does the same apply for leaving rental property, a family business, or a share in a business? Any estate tax liability is generally the obligation of the decedent's estate, and not the beneficiaries who will inherit the property. The beneficiaries' plans for the assets are not relevant to the taxation of the inherited asset. The value of all real estate would be included in the decedent's gross estate and could be subject to the estate tax, depending on the aggregate size of the estate. That said, for those in states with an inheritance tax, the beneficiary is typically responsible for paying the tax due. Six states have an inheritance tax: Nebraska, Iowa, Kentucky, Maryland, Pennsylvania, and New Jersey. 4. How should I deal with life insurance and my estate? Will any of that change in 2026? The death benefit of life insurance is considered part of the decedent's gross estate. However, because an irrevocable trust is a separate and distinct entity for estate tax purposes, the value of a life insurance policy owned by the trust would not be included in the estate of the insured. 5. I haven't touched my estate plan in 10 years and I no longer have an estate attorney or anyone to consult. How often do I need to revisit my plan and can you recommend anyone to help me? How do I even get started with so much in flux with the laws? A good practice is to review your estate plan every 3 to 5 years, and potentially more frequently if certain life events intervene, such as:
by Denise Appleby, APA, CISP, CRC, CRPS, CRSP
Since the Roth IRA was introduced in 1998, the Roth-versus-traditional-IRA debate has been a hot topic, with various arguments being made for one or the other. A key selling point for those who favor Roth IRAs is that the upfront cost of paying taxes on contributions when they are made will be rewarded with tax-free earnings. But Roth IRA earnings are tax-free only if they are part of a qualified distribution. For interested parties, the question becomes, “How does one know if a Roth IRA distribution is qualified?” And if the distribution isn’t qualified, “What are the tax implications?” The following two steps can be used to help provide the answers to these questions. Step 1: Determine if the Roth IRA distribution is qualified. A Roth IRA distribution is qualified if it meets the following two requirements: 1. It occurs at least five years after the owner first funded a Roth IRA. This funding can be with a valid regular Roth IRA contribution or a qualified rollover contribution. A qualified rollover contribution is a conversion from a traditional IRA, SEP IRA, a SIMPLE IRA—providing that the SIMPLE IRA has been funded for at least two years at the time of the conversion, or a rollover of traditional (non-Roth) amounts from an employer-sponsored retirement plan. 2. The distribution is made under any of the following circumstances:
1. The rule starts with the owner’s first Roth IRA: The five-year period for a qualified Roth IRA distribution starts January 1 of the first year that the Roth IRA owner funded any Roth IRA. Example: John made a regular Roth IRA contribution in February 2023 for 2022. Making this contribution is the first time John funded a Roth IRA. John converted his traditional IRA to his Roth IRA in 2023. John’s five-year period for determining if he meets Five-Year Rule Number One is January 1, 2022. If John had made the regular Roth IRA contribution for 2023, his five-year period for determining if he meets Five-Year Rule Number One would have started on January 1, 2023. 2. It does not restart. Example: Susie converted $5,000 to her Roth IRA in 2015. This conversion is her first Roth IRA funding. She withdrew the entire amount, including earnings, in 2016. She no longer has a Roth IRA at this point. Susie started a new Roth IRA in 2023. When Susie takes a distribution from this new Roth IRA, the five-year period for a qualified distribution still starts January 1, 2015, even though the 2015 Roth IRA was fully distributed and closed. 3. A beneficiary inherits a Roth IRA owner’s five-year clock. A distribution from a beneficiary Roth IRA is qualified if it meets Five-Year Rule Number One. The five-year period is inherited from the owner. Using the example of Susie above, if she dies in 2023, the five-year period for her inherited Roth IRA starts January 1, 2015. All of an individual’s Roth IRAs (not including beneficiary Roth IRAs) are aggregated and treated as one to determine if Five-Year Rule Number One is satisfied. No further assessment is needed if a Roth IRA distribution is qualified because the distribution is tax-free; there is no federal income tax, and there is no 10% additional tax (early distribution penalty). If a Roth IRA distribution is nonqualified, then Step 2 must be taken. Step 2: Apply the ordering rules for nonqualified distributions. A Roth IRA distribution is nonqualified if it does not meet the two requirements above. The ordering rules must be used to determine what portion of a nonqualified distribution is subject to income tax and/or the 10% early distribution penalty. Under the ordering rules, distributions are taken from the following layers of sources in the order listed. 1. Layer 1 consists of regular Roth IRA contributions and rollover of basis amounts from designated Roth accounts. A designated Roth account can be a Roth 401(k), Roth 403(b), or governmental Roth 457(b) account. All an individual’s Roth IRAs (not including beneficiary Roth IRAs) are aggregated and treated as one to determine an individual’s total amount in Layer 1. Distributions from Layer 1 are tax-free. 2. Layer 2 consists of qualified rollover contributions. (See above under Step 1: Determine if the Roth IRA Distribution Is Qualified). Distributions from Layer 2 are tax-free. However, if the distribution occurs before the Roth IRA owner is at least age 59½, it is subject to a 10% early distribution penalty tax unless the distribution qualifies for an exception. One of the exceptions is Five-Year Rule Number Two. Under Five-Year Rule Number Two, the five-year period starts January 1 of the year the qualified rollover contributions are done and applies separately to each year. All of an individual’s qualified rollover contributions (not including rollovers to beneficiary Roth IRAs) are aggregated by year to determine an individual’s total amount in Layer 2. Example: 45-year-old Tara converted $75,000 from her traditional IRA to her Roth IRA in 2018, and $25,000 from her SEP IRA to her Roth IRA in 2018. This is a total of $100,000 for 2018. Tara also converted $50,000 from her traditional IRA to her Roth IRA in 2023. The $100,000 2018 conversion will be distributed before the $50,000 2023 conversion. Scenario 1: If Tara distributes the $100,000 in 2023, it will not be subject to the 10% early distribution penalty because it would have been at least five years since it was converted to her Roth IRA. Scenario 2: If Tara distributes the $100,000 and the $50,000 in 2024, only the $50,000 would be subject to the 10% early distribution penalty because it would not have been at least five years since it (the $50,000) was converted to her Roth IRA. The 10% early distribution penalty would be waived if Tara qualifies for an exception. One would only get to Layer 2 once the entire amount in Layer 1 is distributed. 3. Layer 3 consists of earnings accrued in the Roth IRA and the earnings portion of a nonqualified distribution from a designated Roth account. All of an individual’s Roth IRAs (not including beneficiary Roth IRAs) are aggregated and treated as one for purposes of determining an individual’s total amount in Layer 3. One would only get to Layer 3 once the entire amount in Layer 2 is distributed. The road to tax-free Roth IRA distributions. The goal of saving in a Roth IRA is to get tax-free distributions—including no 10% early distribution penalty. If one cannot wait until one is eligible for a qualified distribution, the next best strategy is to ensure withdrawals consist only of amounts from Layer 1 as those amounts would be tax-free and penalty-free. For Layer 2, one could wait five years to avoid the 10% early distribution penalty on distributions if one is under age 59½ and does not qualify for an exception. For earnings, the only way to avoid income tax is to ensure the distribution is qualified. However, the 10% early distribution penalty can be avoided if one qualifies for an exception. To find out if your Roth IRA distribution is taxable, please reach out to Brien or Laurie, Brien@TraditionsWealthAdvisors.com Laurie@TraditionsWealthAdvisors.com or 979-694-9100. As you can see, there are definite advantages to both approaches. Starter homes are more likely to be cheaper and allow you to start building equity sooner, but you may outgrow them. A forever home will probably be much more in terms of your monthly payment, but you’ll have a space with more of what you want and a lasting place to build a life for yourself. Check with your financial professional first before making this large purchase and feel free to ask questions to Brien@TraditionsWealthAdvisors.com
Source: https://www.rate.com/resources/starter-home-vs-forever-home?utm_source=RAC&utm_medium=Email&utm_campaign=gri-november-2023-topical-rps&utm_content=november-monthly-topical-rp-gri&utm_term=ForeverHomeCTA&loid=17379&adtrk=|Email|RAC|gri-november-2023-topical-rps|november-monthly-topical-rp-gri|ForeverHomeCTA| Overall the economic reports last week were positive for equities, even though bond yields rose after their very steep decline over the last two months. Data was trending soft recently—not recession level but indicating soft activity. That tone reversed last week.
Then the labor market report last Friday confirmed underlying health. The new jobs number came in pretty much with expectations, except the unemployment rate which dropped from 3.9% to 3.7%. This drop of unemployment is why bond yields jumped over 10 basis points (bps). Year-over-year wage growth was 4% but given how strong the productivity numbers have come in, this is not inflationary. In fact, unit labor costs are negative this year, so I do not regard data on the labor front as inflationary. I also like that the labor participation rate ticked up one tenth—this brings in further slack and lowers wage pressures. The household jobs report was also very strong, reversing some of the losses in the previous month. Of course, that report is much more volatile because of the smaller sample size. We also received really good numbers from the University of Michigan Consumer Sentiment surveys. One-year inflation expectations dropped from 4.3% to 3.1%—one of the biggest one-month drops in this survey I have ever seen. The five-year inflation expectations dropped from 3.1 to 2.8%. So, a cautionary tale: don't put any credence in the one-year-ahead forecast of the FOMC(Federal Open Market Committee). Jerome Powell (Chair of the Federal Reserve) will want to keep optionality of raising rates, particularly if there is a hot inflation report. But the data—commodity prices, oil prices and everything else—do not look inflationary. The primary risk to equities in the first half of 2024 is a Fed that remains too stubborn to see the downward inflation path. If Powell is overly stubborn, we could see up to a 10% correction in the first half of the year, but I expect 2024 to close fairly strong once the Fed finally gets it. The technicals of the market currently look quite strong, and I see December continuing these positive trends. I see the 10-year Treasury not going much below 4% and Fed funds rate down to 3.5% by year end. Given what I see for earnings, I think the equity market is poised to perform well, and while I expect the productivity trends from advances in technology to support real economic growth, there could be a broadening participation in equity markets beyond the Magnificent 7 tech stocks. ----------------------------------------------------------------------------------------------------------------------------------- The above article is commentary from Professor Jeremy Siegel a world-renowned expert on the economy and financial markets. Siegel is the winner of dozens of awards for his research, writing, and teaching. He served for 15 years as head of economics training at JP Morgan and is currently the academic director of the U.S. Securities Industry Institute. |
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