Government Spending & Job Cuts
The Trump administration is attempting to slash as much government spending as arms can reach.
On one hand, our government is already $800+ billion in the red, just 4 months into the United States fiscal year, which runs from November 1, 2024, through October 31, 2025. The prior fiscal year ended October 2024; the red was $1.8 trillion. Certainly, with the debt challenge, taking a comprehensive dive into the fiscal workings of our government makes sense, however I am not certain as to the proper methodology.
Consumer Spending & Sentiment
Last week, February’s Consumer Sentiment reading fell to 64.7, down from 71.1 in January and 74 in December. Wisdom reminds us of when consumers are feeling positive, more money is spent, flowing through the economy. When consumers are concerned, many tighten the belts of their purse-strings. Eventually, spending trends can impact corporate profitability and stock prices.
Consumer Sentiment may be trending downward because of the large amount of political uncertainty and its eventual impact. Will the Fed cutting government jobs and spending reduce economic activity? Will the tariffs increase inflation? Consumer feelings regarding the border, Ukraine/Russia, cost of food/housing, Presidential executive orders, and our fiscal situation are continually being influenced by the media pushing left or right, playing into their preferred bias.
At the end of the day, will the actions being taken by the Trump administration turn out positive, making us Economically stronger or not so? The answer simply has too many inputs to conclude at this point.
Markets/Economy
Most major stock indexes retreated last week; with the Dow dropping (2.63%), the S&P 500 (1.54%), the Nasdaq (2.49%) and the Russell 2000 (3.62%). Over the pond, Foreign stocks fell (.52%) however Emerging Markets gained .95%.
Rates on US Treasuries fell last week with the 10-Year US Treasury ending the week with a yield of 4.431%. Will treasury yields move higher, move lower or stay range bound? The results of the Trump administrations initiatives will provide influence, at least in the shorter-term period.
This week, we will hear quarterly profit reports from Nvidia, Salesforce, Home Depot and TSX. Their forward guidance will certainly be worth paying attention.
On the economic data front, we will hear housing and manufacturing data. On Friday, the Fed’s favorite inflation reading, the PCE, Personal Consumption Expenditures Price Index will be released.
We have been expecting heightened volatility in the stock and bond markets in 2025. The first 2 months have not changed that thesis.
Is Medicare Changing?
A topic of major importance to millions of Americans, will Medicare change?
It is no secret medical costs in the United States are sky high. When one enters a hospital, the bill for the hospital, supplies, surgical procedures, etc. are incredibly eye popping. Do we blame insurance companies, the hospitals, doctors, the pharmaceutical companies, the system? It is easy to place blame however hard to conclude with any real accuracy.
Currently, when enrolling in Medicare, you enroll into original Medicare by default, signing up for Parts A and B in most situations. You then make a choice of continuing with Original Medicare or enrolling into a Medicare Advantage program.
If you elect to stay with original Medicare, most will purchase a Part D prescription drug plan and a Medicare Supplement.
If you desire to enroll in a Medicare Advantage Plan, after enrolling in Parts A and B as original, you then choose and enroll in the Advantage Plan of your choice, based on plan selections in your area.
A Medicare Advantage Plan is administered by the insurance carrier you select. You will typically have a limited network of physicians and hospitals, which can be adjusted by the insurance company.
Original Medicare with a Part D drug plan and a comprehensive supplement can offer access to all Doctors and hospitals that accept Medicare, which mostly all do.
Why do many Medicare beneficiaries choose Medicare Advantage? It’s the allure of cheaper insurance premiums; additional perks such as limited dental vision and some plans even have limited gym memberships. Many are not aware how Advantage plans are funded.
The Medicare Advantage insurance company receives a flat fee from the government for each Medicare beneficiary it insures. The insurance company selects the network of doctors, hospitals and coverage limits and restrictions. These selections are based on the projected costs and profitability of the plan. If profits shrink, you may see your network of doctors reduced as well as other benefits.
Making the correct Medicare choice is an important part of the retirement planning process. For years we have taken pride in assisting our clients make an informed choice for their situation and to be aware of the potential increased premium levels for higher income beneficiaries.
Keep in mind your income in 2025 will impact your Medicare premiums in 2027. Clients, please forward your 2024 tax returns when complete, so we can forecast your 2025 situation, especially if you will be taking Required Minimum Distributions. If you are underneath the age of required minimum distributions, considerations for a Roth conversion may be appropriate.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
