What Else?  The Fed!

The S&P 500 was having an ok week through last Wednesday, until Fed Chair Jerome Powell said rates will be raised by .50% at the May Federal Reserve Meeting.  This should not have come as a surprise as the .50% increase has been in the news for a few weeks. 

Why did “known” news still rock the markets last Thursday & Friday?  I believe it’s a lack of confidence in the Federal Reserve’s ability to orchestrate a “soft landing,” as they attempt to “normalize” interest rates.  Chair Powell’s decisions so far…. well, no need to state the obvious!!

The Fed is certainly behind the curve with interest rates.  Gradually increasing by .50%, .25% or .75% over the next several months will still pose the question, “where is the end?”  Will Powell keep raising rates until the actual inflation data is reported in their desired range? 

At this point, with inflation running very hot and the fact the “market” interest rates have priced in a significant number of hikes, why doesn’t Powell just raise rates by 1% and get the lift-off started?   Inflation is a problem, and this problem needs to be dealt with quickly.

How will this all turn out?  As always, time will tell!

Markets Last Week

Powell’s announcement last week pushed equities down, with the Dow dropping (1.82%), the S&P 500 (2.74%), the Nasdaq (3.83%) and the Russell 2000 (3.20%).

International equities were also down, as foreign stocks lost (1.52%) and emerging markets (3.32%).

US Bonds, as a category, are down approximately (9.5%) year to date. 

This week, we’ll hear from several well-known companies reporting earnings, including Amazon, Apple, Google, Microsoft, GE, Facebook, GM, Exxon & Bristol Meyers.  Investors will certainly be paying attention to what theses major companies report and have to say about their inflation impact going forward.

On the economic front this week, we’ll hear the first read on 1st Quarter US Gross Domestic Product (GDP), Durable Goods Orders, Personal Income/Spending and New Home Sales.  Should be interesting!!

Covid, Not the Leading Cause of Death in 2021

Last year, Covid unfortunately claimed 415,000 livesCovid however was the 3rd leading cause of death.  Not surprising, Heart-Disease was #1, with 693,000 deaths, followed by Cancer with 604,000.

IRS and Required Minimum Distributions (RMDs)

If you do not take your Required Minimum Distribution (RMD’s) by the deadline, the IRS imposes an excise tax, which amounts to 50% of the amount that was required to be withdrawn from your various retirement accounts.  It’s no wonder why we keep a separate file for each client.  Keeping a close eye can certainly help avoid any unnecessary penalties.

The IRS issued proposed regulations on February 24th that modify the rules by making it easier for some to avoid the 50% penalty.  

Once you realize you missed your RMD, you should immediately take the RMD, even though it’s late.  You will then file an IRS Form 5329 to apply for the waiver.

Assuming your mistake was truly just a mistake, you will probably get relief from the 50% penalty.

I’ll provide more information shortly as some missed RMD requirements will automatically be waived.  Waiting for further clarification. Stay tuned!!!

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Paul Levin CFP®, ChFC®, RICP®

Retirement Income Certified Professional®