Fed’s Gift – Document Retention

The Fed gave our markets an early holiday present.  Three interest rate cuts are now forecast by the Federal Reserve for 2024.  That was all the market needed to head higher, with the Dow Jones Industrial Average reaching an all-time high of 37,305 up 2.92% for the Week.

The other major US indexes followed the trend, as the Nasdaq rose 2.85%, the Russell 2000 a whopping 5.695 and the S&P 500 2.56%.

The S&P 500 now stands at 4719, needs to climb an additional 99 points to reach it’s all-time high of 4818.  The Nasdaq and Russell 2000 however still have much further to climb to reach all-time highs. Foreign stocks also moved higher by 1.65% and Emerging Markets up 1.65%.

An additional benefactor of the Fed’s dot-plot rate reduction plan is yields on US Treasuries dropped significantly.  The yield on the 10-Year US Treasury ending the week @ 3.915%.  It was only 6 weeks since the yield was trying to break 5%. New home buyers should see mortgage rates fall in-line with the decline in the 10-year.

As most of us are enjoying the rise in the markets, we must realize the market is a discounting mechanism pricing in what to expect over the next 6 to 12 months.  The current forward PE ratio for the S&P 500 is now @ 19.  Not cheap however not screamingly too high. 

The market is pricing in, corporate profits increasing by approximately 12% next year.  Part of the profit increase is because interest rates are forecast to decrease with inflation continuing to moderate. 

As I am optimistic about the markets and the economy, we cannot forget we have a couple of wars that see no end in sight, other international tensions and of course, a major election around the corner. 

Many of the early forecasts for next year are predicting modest gains in the market.  Expectations are for a rocky early part of the year with a recovery later.

On the other hand, markets historically have moved higher in between interest rate pauses and reductions, more so, than after the reductions. 

What will happen?  As always, time will let us know!

Week Ahead

A common question we receive, how long does one need to keep certain documents?

For investment statements, I suggest keeping your December 31st statements indefinitely.  Having a hard and electronic copy makes sense.  Your December 31st statements typically summarize transactions throughout the year. 

We suggest keeping tax returns for 3 years from the date you filed the returns.  7 years if you filed a claim for a loss from a worthless security or a bad debt situation.  There are circumstances that suggest keeping tax returns for longer.  This is a good conversation to have with your CPA or tax-return preparer.

I invite you to email me all your document keeping questions at paul@retirementrefined.com.  I will do the research to assist in providing accurate information.  Making sure we have proper documentation can be a huge plus when an issue arises.

Please feel free to share our Retirement Blog with friends, family and colleagues.

This is our last blog for 2023, we will have many exciting things to share in 2024!

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