Much has transpired since our last blog!
- The Fed lowered rates by .50%.
- Economic Activity has remained resiliently positive.
- Retail Sales increased in September by .4%.
- Market interest rates have moved higher.
- Corporate earnings for the 3rd quarter are looking fine, however more to report.
- Housing sales are near their slowest annualized pace since approximately 2010.
- The Phillies were knocked out of the playoffs.
- Medicare open enrollment runs from October 15th through December 7th.
- The 2 wars continue to percolate.
- Of course, our Presidential election
The Election and the Fed
The Presidential election has both candidates promising to spend more taxpayer’s dollars. Hey, the easiest money to spend, someone else’s! Increased government spending in the short-term increases economic activity and can uplift corporate profitability.
Combine our massive government spending along with recent productivity gains for Corporate America, it’s no wonder the markets continue to attempt to push toward new highs.
Reviewing the current level of economic activity and the sheer size of the younger generations, it’s hard to believe inflation will remain in the 2% range over the intermediate term period. Treasury yields may be reflecting greater economic activity and possibly a higher rate of inflation. The 10-year US Treasury has been bouncing around 4.25% after dropping below 4% for a short period of time. Thoughts of increasing levels of government spending may also be contributing to rates moving higher.
The next Fed meeting on November 6th and 7th will be interesting. After the Fed lowered rates by .50% in September, it was suggested additional rate cuts will continue. Since the last rate cut announcement, economic activity has remained positive, job growth increased, and higher inflation chatter is starting to circulate.
Will the Fed continue to cut, or will they pause to see if the economic strength continues?
Between now and Election Day/Fed Announcement the news media will be in their glory!
Taxes
The election result will likely determine our income tax policy going forward. As we have discussed, the current tax policy is set to expire/sunset at the end of 2025.
If either party wins a trifecta (Presidency, the House and Senate), you should expect tax changes. If we have a divided government, drastic changes may be avoided.
In either case, 2025 may provide an opportunity to visit doing a Roth Conversion or distributing additional funds from your IRA. This could potentially reduce your future Required Minimum Distribution (RMD) requirements down the road.
A good way to get started is to take a look at 2025 tax rates. For your convenience, click here to see “preliminary” 2025 tax brackets and other tax related information. It’s never too early to strategize about your tax situation.
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As always, thank you for reading!
