Important week for the Markets
How much higher will the market climb?
Markets have moved higher on the back of a slowly improving inflationary environment. Most believe the Federal Reserve is close to being done raising rates. Corporate profits are expected to bottom this year, then head north.
If this plays out, great news for sure!
Many investors are starting to believe a soft landing is now in the cards. Those on the opposite side, point to the fact that “leading indicators” which have pointed downward for months, along with the inverted yield curve will in fact push our economy into a recession, at some point.
I do believe the inflation fight is not over. The Fed has suggested, even after they are done raising rates, they intend to keep rates higher for longer. Prior to inflation getting out of hand, the Fed said they would let inflation run hotter for longer, which is what happened. Thank you for that one!! Hopefully, the Fed can navigate our future rate path more responsibly.
It certainly appears that rates will be higher for the next ten years, compared to the 10 years pre-Covid. Typically, higher rates lead to a slower growing economy, which is not necessarily negative. As always, time will tell!!
The Week Ahead
After a week that witnessed most indexes, except the Nasdaq moving higher, we have plenty to chew on.
The Fed will announce their rate decision Wednesday. Most expect a .25% rate increase. That is baked into pricing already. Speculation will be about what will the Fed do when it meets in September. As always, what the Fed says at its press conference will be highly scrutinized.
We’ll hear the 1st of 3 readings on our 2nd quarter US Gross Domestic Product (GDP). The technical definition of a recession is when the economy contacts in back-to-back quarters. No one expects a negative number for the 2nd quarter.
Corporate profit reports start to ramp up for the 2nd quarter. Last week we had 89 companies report with 75% beating expectations, which is normal. This week will hear from a plethora of companies including Microsoft, Alphabet, Visa, GE, McDonalds, AT&T, Exxon and more.
Corporate America so far has dealt with higher costs well, as they have been able to pass those costs on to us. Going forward, seeing how the persistent higher rate environment will impact their bottom lines will be telling. Higher borrowing costs for companies and consumers impacts us all.
Inherited IRA Update
On July 14th, the IRS issued notice 2023-54 clarifying required minimum distribution rules for Inherited (beneficiary) IRAs.
If a non-spouse inherited an IRA prior to 2020, you would continue to be able to take an RMD based on your life expectancy and keep doing so for your lifetime. You are never required to distribute the entire account.
For non-spouse beneficiaries who inherit and IRA in 2020 or later the rules are different depending on the age when the decedent passed away.
If the decedent passed PRIOR to their RMD age, the non-spouse beneficiary can leave the funds in the beneficiary IRA until the end of the 10th year after the decedent passed. By the end of the 10th year, the account needs to be 100% liquidated.
If the decedent passed AFTER their RMD age, the non-spouse beneficiary must begin taking an RMD based on their life expectancy, beginning the year after death. By the end of the 10th year, the account must be depleted.
Last week, the IRS suggested that even if the decedent passed after their RMD age, for 2023, you do NOT need to take an RMD for this year. If you already have done so, no provision has been made to reverse the distribution.
If you have questions on how the Beneficiary RMD rules apply to your specific situation, feel free to give us a call.
