5 Questions For You To Consider NOW + Market Insights
By Dan Moskowitz, CFP® President and Chief Investment Officer
Photo by Leeloo The First
Wow, where has the year gone? We are 30 days away from the election and going through our year end checklists.
YEAR END CHECKLIST
As we approach the end of the year, I put together a checklist of items for our clients. It is far from comprehensive but hopefully a few do apply to you. Should you have any questions, do not hesitate to reach out to us.
1. Do you have any realized gains or losses from sale of a business, sale of a home, or other taxable brokerage accounts? If so, please make sure we are aware.
2. Did you fund an HSA this year?
3. Can you contribute more to your work retirement plan (401k, or 403B)?
4. If you gift to children or charities, have you done it yet?
5. If you are 73 or older, have you taken RMD’s from all retirement plan accounts?
WHAT’S GOING ON IN THE MARKET?
The stock market is at all-time highs and the economy is still strong but showing some signs of slowing.
Now that inflation is receding, the crucial variable is the job market. The economy added 254,000 jobs last month, while the unemployment rate fell from 4.2%. to 4.1%. The strong September jobs report released today, caused investors to rethink how aggressive the Fed will be in cutting rates. This report was the opposite of August’s much weaker report.
Graph source: Goldman Sachs
The bond market also has continued to rally. Clients have earned double digit returns in the last twelve months. In the bond market, we had our first rate cut (September 18th 50 basis points) in 6 years. The chart above (from Goldman Sachs) shows that after 568 trading days the yield curve is now positively sloped again. During this period investors were compensated more for taking less risk. This has only happened 17% of the time since 1976. The curve has begun to normalize, a trend we expect to continue. As such, investors will now benefit when buying longer term bonds.
We expect the recent trend of shorter-term yields falling and longer term yields rising will continue. We expect the Fed to cut rates one or two more times before year end (25 basis point cuts). Still significantly less than was thought earlier this year.
As I wrote in July, there are always things that are worth worrying about and the amount of money flowing into private credit is near the top of the list. Recently the very influential bond investor Jeffrey Gundlach espoused his views on both private credit and AI. He said private credit was getting overinvested – meaning, those reaching for it may not be getting paid for it.
As for AI, he said data center demand was getting too hot for the nation’s power grid to handle and likened the recent fervor to the dotcom bubble of 1999. “Where are we going to get all the electricity?” he asked incredulously.
Both areas seem to be frothy to us. As always having diversified portfolios of quality investments has allowed us to get through some tough times in the markets. This philosophy allows both our clients and us sleep well at night.
Dan Moskowitz
If you have any questions, please contact Dan or any of our advisors at (800) 472-8086.
Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.