Stocks POP… But Will it Last??

Stocks moved higher last week, providing a small amount of year-to-date relief.  US major stock indexes all traded higher, over 5%.  Foreign stocks and emerging market stocks also finished higher.

Was last week simply an oversold bounce?  Will we add to the gains?  If you’re sitting on cash “ear-marked” for equities, adding funds will most likely prove beneficial in time. I’m looking forward to when inflation has been brought under control.  How long will that take?  No specific answers here yet.

This week we’ll hear the final read on our 1st Quarter Gross Domestic Product (GDP).  Each quarter we hear an advance reading, a second reading, and then a final.  Most believe the final number will be a (1.4%).  On July 28th we’ll hear the advance reading for our 2nd Quarter GDP.  Two quarters of negative growth in a row, technically places us in a recession. I’m not going to bet that the current quarter will be negative, as we’ll find out together.  I do believe unless the Federal Reserve can tame inflation sooner than later, we will find ourselves in a recession in the not-too-distant future.

It’s amazing to me how high the Fed has let inflation run before taking any action.  Then starting with a .25% move and finally getting up to a .75% move also doesn’t make sense.  Is Powell waiting for the data to get worse and worse before taking more decisive action?  As I mentioned prior, I believe rates should have been raised by 1% initially and then continue to stay aggressive.  We certainly know rates can be lowered if necessary. 

Also, this week, we’ll hear the Personal Consumption Expenditures (PCE) number for May.  This is the inflation reading the Fed pays close attention too, apparently!  In April, the number registered 6.3% with the “core” rate at 4.9%.  “Expert” expectations are for a core reading of 4.7%, down slightly.

I’m not sure who makes my head spin more – the Fed, or our Government as a whole?  How many of our government officials that make up the House of Representative and the Senate, actually go to work each day, placing our interests in front of their own personal agenda and/or the agenda of their party?

Guessing you cannot honestly answer that question!

SECURE ACT 2.0 (RMD Changes, again?)

The 2nd version of the Secure Act is now on the voting block.  Secure Act 2.0 most likely will be passed and placed into law. Here a few of the highlights that do provide additional planning opportunities:

  • Required Minimum Distribution (RMD’s) – For those who turn age 72 between 2022 and 2027, your first year of RMD requirement will move to age 73.  For those who turn age 72 between 2028 and 2039, your first year will be age 74.  For those who turn age 72 in 2040 and beyond, the age will be 75 (not law, but looking likely).
  • Retirement Plan Catch-Up Provisions:  Currently most people over age 50 can contribute additional funds to a 401K, IRA or a Simple IRA.  These limits, by law, are increased only by legislative action and not inflation.  The last time it was increased was back in 2006.  The new law will index catchup’s to inflation.  The downside is, it will apply to taxpayers ages 62, 63 and 64.  Why?  Another head-turner.  I’m sure I’ll provide clarification in due time.
  • SEP-IRA and Simple IRAs: Currently these plans do not offer a Roth option.  Secure Act 2.0 will add Roth options to both plans, which is very much overdue.
  • Catch-Up Contributions according to 2.0 will all be required to be added to Roth accounts.
  • These is more!  I’ll wait to include all nitty-gritty, if and when it is actually passed and signed into law.

This law can certainly provide more opportunity to consider Roth conversions.  Especially now, with the markets down, the time may never be better.  To have a conversation and analysis to discuss your options, please feel free to reach out our office! 856-354-3200 x 205

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