It’s Episode 132 and economic data is really good, and from our perspective, it’s good news. We’re going to tell you why we like the economy right now. We’re going to talk about the market action. The market’s been selling off as we’re getting to the dog days of summer here.
On The Tipping Point, we will talk about your financial planning for the fall. Summer’s coming to an end. Things are getting real. Are you financially fit to get ready for the rest of the year?
Summer sell-off
The market has been up 28% since October, but now we have some selling, and the bears are predicting a big problem with inflation, interest rates, and a recession next year. However, their insights have been wrong all year, so why should they be trusted now?
”.. every dip in history is viewed as an opportunity except for the next one.. which is only seen as risk.
Bob Payne
”Of course the bears are out in droves saying we're finally here.. everything's gonna fall off a cliff.
Ryan Payne
The economy is booming
The reason rates are going up is not due to anticipating the Fed will continue to raise rates, but because the economy is booming and growing. GDP is predicted to be 5.8% for the third quarter. Economic data shows better-than-expected housing starts and industrial production. The labor market continues to be very strong with a high demand for good people. While wages are still going up but they’re moderating.
”Wall Street's mantra is good news is bad news... good news is always good news.
Ryan Payne
”.. a client of mine said it's just so hard to get people because the labor market is so strong.
Chris Payne
The Fed may have pulled off the soft-landing
- What’s happening now is a 10-year yields are going up and the 2-year is staying pretty steady.
- We’re going to get a flattening of the yield curve by intermediate rates, going up to normal rates. If you look at history.
- The 10-year treasury is at its highest since 2007, but the average rate during the 2000s was 4.75%. The economy grew during this time, so higher longer-term rates may indicate the economy is doing well.
- Earnings have been rising for four consecutive quarters and analysts are increasing their estimates for double-digit growth in the next year.
- Deflation is happening, with shelter costs decreasing and rents moderating. Consumer inflation outlook has also improved.
”If you’re sitting there waiting for the trough in earnings.. you missed it.
Bob Payne
The rally is broadening out with plenty of places to put your money
Energy and industrial stocks have been performing well since June, while tech stocks have seen a recent downturn, with energy outperforming tech year over year.
”Tech has gotten hit in the last couple of weeks. But look at energy stocks. They've been rocking since June.
Ryan Payne
The Tipping Point
Fall Financial Planning Tips
Payne Points
The end of summer brings the change of seasons and the need to get back to reality. The same applies to financial planning. We are going to go over tips for preparing for the fall and getting your financial life in order.
It’s a great time to rebalance your portfolio.
As we’ve talked about the rally starting to broaden out, time to broaden out your exposure as well. It’s a really good time to do that.
It’s a great time to start thinking about those end-of-year taxes
If you’re in a low tax bracket this year, it could be a good time to convert IRAs to Roth for tax-free contributions, catch up on 401k contributions, or set up a retirement account if self-employed.
”If you're concerned about capital gains.. you're able to donate appreciated stock.
Chris Payne
”A great time to look at tax swaps
Bob Payne
It’s a great time to make sure your wills and estate plans are all up to date.
Check your estate plan and living wills every couple of years. Verify beneficiary forms and trustees for minor children. If you haven’t updated your will, it’s important to do so.
”Let's face is, there's a 50% divorce rate.. we've seen some horror stories
Bob Payne
”I've noticed a lot of people haven't updated their wills in 5 or 10 years.. it's something you want to look into.
Chris Payne
”There's a lot of proactive planning for gifting right now if your estate is starting to balloon..
Ryan Payne
Hidden Facts of Finance
The net interest paid by the government has continued to rise rapidly, along with interest rates since early last year. The outlay rose to a record $627 billion over the 12 months through July. Just before the pandemic, it was only $377.5 billion.
Apple is the most profitable company in America, reaching almost $100 billion in profits in 2022. It outpaces the profit leaders in both the energy and financial sectors combined. Furthermore, at the end of 2022, its net profit margin stood at nearly 25%.
The total returns of 10,000 invested in the S&P 500 between January 1, 2003, through December of this past year would have been $64,844. You would have averaged an annualized return of 9.8% a year. If an investor had simply missed the best ten trading days over that time frame, he would have lost 50% of the return by the end of last year. That investor would have only had $29,000 versus that $64,000.
