What’s Next for the Equity Markets?

The S&P 500, as of Friday, is trading over 4300.

Many forecasters have suggested the S&P 500 Index will finish the year lower than 4300.

Who is right, and who is wrong? As always, time flushes out all predictions, however let us peek at the issues….

Market Positives!

On the positive side, corporate profits are holding up better than anticipated. The consumer is still spending. We continue to create jobs. The Fed should be close to concluding hiking rates?

Have the markets already priced the positives into the 4300? Perhaps.

Market Concerns!

On the pessimistic side, many believe the economy will in fact, slow! Why?

Interest rate increases typically impact the economy with a lag, perhaps 6 months or more.  The recent banking issue may influence the government to increase the amount of capital that small & mid-size banks need to keep in reserves, which could limit lending to individuals and businesses. The Fed unfortunately has proven unreliable in making timely decisions…. the war in Ukraine… tensions with China, and the “near-shoring” movement….

Since 2009, the Fed and Congress continually stimulated the economy, which has greatly assisted with economic growth. In doing so, we are now approaching 32-Trillion Dollars in DEBT.

My thought, we will not have the same flexibility to stimulate the economy when future shocks happen, as they will. The interest on the debt is rising quickly and will need to be dealt with.

Important Economic Data Week

Will the Fed raise or hold rates? By Wednesday, we will know 3 numbers: CPI on Tuesday, PPI on Wednesday, and the Fed announcement also on Wednesday.

Additionally important this week is Thursday’s report on retail sales, indicating if consumer spending is starting to abate.

The CPI (Consumer Price Index) Core for April (which was reported in May), came in at 5.5%. Stripping out food and energy, the CPI registered 4.9%. Expectations for Tuesday are for a Core reading of 5.2%, without food & energy, 4.5%.

The Consumer inflation number has certainly come down, however is still far away from the Fed’s target of 2%.

Let us keep in mind, the CPI is a “lagging” indicator.

The PPI (Producer Price Index) for April (which was reported in May), was 3.2% on the Core and 2.3% without food & energy. Consensus for Wednesday is Core at 2.5% and 1.5% without food & energy.

The PPI is a “leading” indicator, as prices need to come down for producers, prior to being passed to consumers. How long does this take???? Great question!!

Charitable Contributions

For a “normal” cash charitable contribution to be tax-deductible, your itemized deduction (which includes your charitable contribution) must be greater than your standard deduction.

For 2023, the standard deduction is 27,700 for those filing Married Jointly. Single filers have a standard deduction of 13,850. If you are over age 65, you receive an additional 1,500 per person. Single and over 65, receives an additional 1,850.

The are several techniques available to maximize income tax benefits for your charitable desires, including Qualified Charitable Contributions for those over 70 ½, Donor Advised Funds, Charitable Remainder Trusts, and more.

Now is a good time to start thinking about and projecting your 2023 charitable contributions.  Please reach out to us as we can model your 2023 tax projection incorporating various charitable methods of contributing.

To schedule this valuable discussion, click here! We would love to speak with you!

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