After the Federal Reserve hiked interest rates again (but less than last time) and all the market volatility, it’s a good time to talk about the economy.1
Inflation has been falling since summer
Inflation fell for the sixth straight month in December, bolstering evidence that it may have peaked last June at 9.1%.2
However, inflation is still very high, and its impact is being felt across the economy.
The jobs market is still very strong
The latest January jobs report was a blowout, coming in ahead of the data that Fed economists expected. The economy added over 500,000 new jobs and the unemployment rate fell to the lowest level since 1969.3
You can see in the chart above that most industries are still actively hiring, suggesting that Fed actions still haven’t slowed the desire for workers.4
The economy shrugged off recession worries in Q4
Despite all the recession doom and gloom, the economy grew 2.9% in the last three months of 2022.5
However, consumer spending weakened slightly, indicating that Americans might be trimming expenses. Since consumer spending accounts for 70% of economic growth in the U.S., it’s a potential warning sign we’re keeping tabs on.
I see a few takeaways about the current state of the economy
But, before we dive into them, we want to point out two important caveats about economic data:
Much of the initial data we see in the headlines is based on incomplete estimates that get revised later as more data is processed. These big data bureaus try to balance releasing data quickly enough to be useful and getting the complete picture.
Data is often impacted by seasonal trends that can cause spikes or “noise” in the data. That’s why we look for trends rather than single data points.
Here’s what we see:
Despite tech layoffs and gloomy headlines, many sectors seem to still be going strong, job-wise.
Interest rate hikes aren’t slowing down growth as much as the Fed hoped, though inflation is definitely showing a downward trend.
While recession fears are definitely real and based on solid concerns, it doesn’t look like the economy has hit the skids yet.
What does all this mean for future Fed interest rate moves?
That’s the trillion-dollar question, isn’t it?
We don’t have a crystal ball, but we’ll give it a shot.
It’s possible that more interest rate hikes are coming.
We think folks expecting a quick pivot away from increases are going to be disappointed.
But any future rate hikes may be smaller and slower paced as the Fed takes stock of what the data is showing and works to keep us out of a recession.
Federal Reserve chair Jerome Powell has admitted that inflation has begun to fall but he wants to see “substantially more evidence” of a declining trend before changing policy.1
With inflation still three times above the Fed’s 2% target, there’s still a long way to go before we’re out of the woods and back on the path.2
What could happen with markets?
We expect a lot of volatility ahead as markets digest every shred of information about the economy and the direction of interest rate policy.
We don’t have a crystal ball here, either, but we think it’ll be a rocky spring. So, we’re watching markets, we’re reading analyses and reports, and we’re looking for opportunities.
Do you have any questions? Would you like to talk anything over? Contact us and we’ll find a time to talk.
As you know, this holiday was originally set aside to honor George Washington’s birthday. But as Abraham Lincoln’s birthday is also around this time of year, many states began celebrating the two dates together. More recently, the day has become dedicated to all presidents.
Recently, we came across a speech about Abraham Lincoln given by a man named Phillips Brooks. But this was no ordinary address. It was, in fact, a eulogy for our sixteenth president.
Lincoln was assassinated on April 14, 1865. Most people don’t realize this was Good Friday – an important holiday for many people. It was also the start of the Easter weekend, a time when churches around the country would fill to capacity. But on that weekend, religious leaders were suddenly faced with a dilemma: How to comfort thousands of grieving, bewildered people. People mourning the sudden, unthinkable death of their president.
Phillips Brooks was one of these leaders. As the rector of one of the largest churches in Philadelphia, he wrote down his thoughts about Lincoln for a eulogy that he delivered the following weekend. The same weekend when Lincoln’s body passed through Philadelphia on its way back to Illinois.
In honor of the holiday, we thought we would share a few excerpts with you. While Presidents’ Day is not as celebrated as, say, July 4 or Memorial Day, we think Brooks’ words perfectly illustrate why it still matters. They also illustrate why we were so lucky to have a man like Abraham Lincoln as president of the United States.
The Life and Death of Abraham Lincoln by the Reverend Phillips Brooks1
While I speak to you today, the body of the President who ruled this people is lying honored and loved in our City. It is impossible for me to stand and speak of the ordinary topics which occupy the pulpit. I must speak of him today; and I therefore…invite you to study with me the character of Abraham Lincoln, the impulses of his life, and the causes of his death. I know how hard it is to do it rightly, how impossible it is to do it worthily. But I shall speak with confidence because I speak to those who love him.
We take it for granted, first of all, that there is an essential connection between Mr. Lincoln’s character and his death. It is no accident, no arbitrary decree of Providence. He lived as he did, and he died as he did, because he was what he was.
In him was vindicated the greatness of real goodness and the goodness of real greatness. The twain were one flesh. Not one of all the multitudes who stood and looked up to him for direction with such a loving and implicit trust can tell you today whether the wise judgements that he gave came most from a strong head or a sound heart. If you ask them they are puzzled. There are men as good as he, but they do bad things. There are men as intelligent as he, but they do foolish things. In him goodness and intelligence combined and made their best result of wisdom.
Mr. Lincoln’s character [was] the true result of our free life and institutions. Nowhere else could have come forth that genuine love of people, which in him no one could suspect of being either the cheap flattery of the demagogue or the abstract philanthropy of the philosopher, which made our President, while he lived, the center of a great land, and when he died so cruelly, made every humblest household thrill with a sense of personal bereavement which the death of rulers is not apt to bring. Nowhere else than out of the life of freedom could have come that personal unselfishness and generosity which made so gracious a part of this good man’s character.
How many soldiers feel yet the pressure of a strong hand that clasped theirs once as they lay sick and weak in the dreary hospital. How many ears will never lose the thrill of some kind word he spoke – he who could speak so kindly to promise a kindness that always matched his word. How often he surprised the land with a clemency which made even those who questioned his policy love him the more; seeing how the man in whom most embodied the discipline of Freedom not only could not be a slave, but could not be a tyrant. In all, it was a character such as only Freedom knows how to make.
[Now], the new American nature must supplant the old. We must grow like our President in his truth, his independence, his wide humanity. Then the character by which he died shall be in us, and by it we shall live. Then Peace shall come that knows no War, and Law that knows no Treason, and full of his spirit, a grateful land shall gather round his grave and give thanks for his Life and Death.
He stood once on the battlefield of our own State, and said of the brave men who had saved it words as noble as any countryman of ours ever spoke. Let us stand in the country he has saved, and which is to be his grave and monument, and say of Abraham Lincoln what he said of the soldiers who had died at Gettysburg: ‘That we here highly resolve that these dead shall not have died in vain; that this nation, under God, shall have a new birth of freedom, and that Government of the people, by the people, and for the people, shall not perish from the earth.’
May God make us worthy of the memory of Abraham Lincoln.
We hope you enjoyed reading these words as much as we did. We wish you a very happy Presidents’ Day!
On December 23, Congress passed the Consolidated Appropriations Act of 2023. This is what’s known as an “omnibus spending bill”. (The word omnibus means that multiple measures were packaged into a single document.) The bill authorizes $1.7 trillion in government spending on everything from disaster relief to supporting Ukraine to workplace protections for pregnant mothers.1 On December 29, President Biden signed the bill into law.1
As you can imagine, this was a massive bill. In fact, it contained over four thousand pages. That’s because, as an omnibus, it’s multiple bills combined into one. Among those many bills is one that will have a profound impact on retirement called SECURE Act 2.0.
Back in 2019, Congress passed a law known as the Setting Every Community Up for RetirementAct. This was the original SECURE Act. The law made important changes to IRAs and 401(k)s, among other things, and was designed to help more Americans save for retirement.
SECURE Act 2.0 widens the scope of several provisions from the original law. It also comes with a variety of new ones. To help you understand this law and how it may affect your finances, we’ve written this special letter. Now, as you’ve probably guessed, we’ve sent the following information to all our clients. So, while some of the information you’re about to read may not apply to you right now, it could apply to members of your family. If so, feel free to share this letter with them!
There’s a lot to unpack here, so please take a few minutes to read about these new provisions. Most are simple, and we’ve done our best to explain them all in plain English. But if you have any questions or concerns, please let us know.
Important Provisions of the SECURE Act
Before we dive in, understand that SECURE Act 2.0 is over 20,000 words long. That means there isn’t room to cover every aspect of the law, and many won’t apply to you anyway. So, what follows is a brief overview of the provisions that could affect your finances.
Are you ready? Then take a deep breath as we go over…
Changes to RMDs2
One of the most notable changes from the original SECURE Act was raising the age at which retirees need to take required minimum distributions or RMDs. SECURE Act 2.0 raises the age again. Beginning on January 1 of this year, retirees may now wait until age 73 (up from age 72). This is important because it gives retirees an additional year to benefit from the tax advantages that come with IRAs before making mandatory withdrawals. (Note that anyone who turned 72 last year will still need to continue taking RMDs as previously scheduled.)
Per the new law, the RMD age will increase to 75 beginning in 2033.
Another noteworthy change is the penalty applied to those who fail to take their RMD, or don’t withdraw enough. Previously, the penalty was 50% of what the retiree should have withdrawn. Beginning this year, that penalty has now been reduced to 25%. And if the mistake is corrected within the proper “Correction Window”, it will be reduced further to a mere 10%.
The Correction Window
The Correction Window is usually defined as beginning January 1st of the year following the year of the missed RMD and ending when a Notice of Deficiency is mailed to the taxpayer or penalty is assessed by the IRS.
Finally, the law eliminates the need to take RMDs for Roth IRAs that are inside qualified employer plans. What does that mean in English? It means that if a retiree owns a Roth IRA through their old employer, they need never make mandatory withdrawals during their lifetime. This change begins in 2024.
Note, of course, that regular Roth IRAs that are not part of an employer plan were never subject to RMDs to begin with, so this change does not apply.)
Changes to Catch-Up Contributions2
Under current law, employees aged fifty or older can make extra “catch-up” contributions of up to $7,500 per year to their 401(k) or 403(b). Beginning in 2025, individuals aged 60 through 63 will be able to contribute up to $10,000 annually. Furthermore, that amount will be indexed to inflation, meaning it will go up as inflation does.
For people who are 50 or older – but not between the ages of 60-63 – the catch-up limit will remain $7,500 per year.
People aged 50 and older who own IRAs can also make catch-up contributions, albeit at a smaller amount. Currently, the catch-up contribution limit for IRAs is $1,000 per year. In 2024, that number will be indexed to inflation, too. Again, that means the limit could increase each year as cost-of-living expenses rise.
Changes for Businesses2
Beginning in 2025, the law requires businesses to automatically enroll employees in any new 401(k) or 403(b). Furthermore, unless the employee opts out or elects to contribute a different amount, they would automatically contribute 3% of their pay.
Another change: Starting in 2024, employers can help workers with their student loan payments! Because it can be so difficult to both save for retirement and pay off college debt at the same time, employers can “match” an employee’s loan payment with an equal contribution to their retirement account. This is a great option for younger investors, so if this provision applies to you or a loved one, make sure to inquire whether your employer plans to take advantage of it! And business owners around the country will be looking to use this provision to compete and retain top talent.
Other Provisions to Note2
Here’s an interesting provision: Starting in 2024, individuals may transfer money from a 529 plan into a Roth IRA. This could be useful if you own a 529 plan that has more funds than you or your loved one needs to pay for an education. Think of it as a way to add more flexibility to your long-term finances.
It’s important to note, however, that this provision comes with a lot of terms and conditions. For example, the Roth IRA must be in the same name as the beneficiary of the 529 plan. Furthermore, no transfers can be made until the 529 plan has been maintained for at least fifteen years. There are also very specific limits on how much money can be rolled over. So, if you ever intend to make use of this provision, my advice is to talk to me first so my team can help you through the process.
Let’s move on to another interesting provision. As financial advisors, we’ve long recommended that all investors have a Rainy-Day Fund. But sometimes, even this isn’t enough to handle unexpected expenses, like a health crisis or loss of income. Under SECURE Act 2.0, it’s now easier to make use of your retirement savings in an emergency. Previously, there was a 10% penalty for withdrawing money from a retirement account prior to reaching age 59½. (This was to prevent people from using their retirement savings for something other than retirement.) However, there are some exceptions, such as when you need the money to pay for certain medical expenses. The new law has expanded the list of exceptions. Here are some examples where the 10% penalty no longer applies:
Recovering from a natural disaster, like an earthquake or hurricane
Dealing with a terminal illness
Being the victim of domestic abuse
The law also allows for emergency withdrawals for any taxpayer who needs to meet “unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses.”2 Now, what the law does not do is specify what situations qualify as an emergency. Instead, the law states that “the administrator of an…eligible retirement plan may rely on an employee’s written certification that the employee satisfies the conditions of the preceding sentence in determining whether any distribution is an emergency personal expense distribution.”2
We know – that sentence is Washington legalese at its finest. Basically, this means people just need to be reasonable at determining for themselves what qualifies as an emergency. For example, if a loved one has been injured in an accident? That’s an emergency. Desperately want to buy the newest PlayStation before it goes out of stock? Not an emergency.
Hopefully, you will never have to make use of this provision. But it’s nice to know that it’s there in case you ever do!
The final provision we want to address in this letter involves qualified charitable distributions or QCDs. A QCD is a direct transfer of funds from your IRA to a qualified charity. They are a popular tool for retirees who want to contribute to a worthy cause because QCDs also double as RMDs in most situations.
Under SECURE Act 2.0, people age 70½ and older may use a QCD to gift up to $50,000 to a beneficiary. This is a one-time deal, and several conditions must be met. So, again, if you want to take advantage of this provision, talk to me and my team first so we can help you navigate the rules and restrictions.
Lastly, the law also links the maximum annual QCD amount to inflation rather than capping it at $100,000 like before.
Conclusion
As you can see, SECURE Act 2.0 is loaded with provisions for those saving for retirement. So, again, if you have any questions or concerns, please don’t hesitate to contact us!
Of course, our team will continue pouring over these changes. If there is anything else we feel you need to know, we’ll reach out to you, or go over them with you during our next review.
In the meantime, remember that we’re here to help you work toward your financial goals. Please let us know if there’s ever anything we can do – in 2023 and beyond.
Finances get tight, especially now as prices seem to continue to go up.
Increased costs out of pocket mean less money to invest in saving for your goals.
So, how do you handle saving for long-term goals, let alone short-term goals, plus maintaining retirement savings without going broke?
Follow these simple steps:
Start with a budget. Make sure you are covering the cost of living, i.e. mortgage/rent, food, utilities, and any other essentials such as transportation.
Next, you have to make sure you set money aside for emergency funds, rainy day funds, and of course, retirement.
Once you have those bases covered, you need to prioritize your goals: First by long-term, midterm, and short-term. Then by importance. Saving for college may outweigh that cross-country European adventure.
With priorities set and savings goals determined, you need to figure out how to divide up the money you have left over. The key here is to make sure the things that are necessities are funded consistently, without exception. Decide what amount of money you can afford each paycheck and have it automatically put into a high-yield savings account.
Speaking with a financial professional can help you work through the math of longer-term, higher-ticket items. They can help you budget and map out a plan that works for you and your family.
If you need help, please reach out, we love being able to assist people with reaching their financial dreams.
Every year millions of people set new year’s resolutions. However, very few can stick to their resolutions long-term. A study done by the University of Scranton found that 23% of people quit their resolution after 1 week. Only 19% stick to their resolution for at least 2 years.
As advisors, we want to help you succeed, not just financially, but with everything in life. So here are some tips for sticking to your resolutions.
Know Your “Why”. Many people set a goal but their why is “just because”. If you don’t know why you are doing something, and that why is not a driving force, you are less likely to do it. An example of a resolution with a good why is: I want to lose weight and be in shape so that I can play with my kids/grandkids without being out of breath quickly. Your kids/grandkids are now motivating factors in your goal, and you are more likely to do it for them.
Setup Accountability. In our experience, you are more likely to succeed at anything if someone, or something, is there to hold your feet to the fire. Partner with a family member or friend that can help nudge and push you to your goal.
Plan, Plan, Plan. We can all agree that one of the biggest reasons for not reaching a goal is that we don’t plan how to get the goal. We want to lose weight, but don’t have a diet and exercise plan. We want to go on a big vacation, but don’t plan how to save up for it. Take the time to plan out the details of how to reach your goal.
We wish you all a Happy New Year and may we all be in the 19% to accomplish our resolutions.
Have you ever gotten a present you didn’t really want but knew that you kinda sorta needed? (For example, socks.) Just before Christmas, that’s exactly what the Federal Reserve decided to give the country. Except the present wasn’t socks, but another interest rate hike meant to combat inflation.
Suddenly, socks don’t seem so bad, do they?
The markets reacted predictably, with the Dow dropping over 750 points the following day.1 So, in this message, we want to ensure you know what’s currently going on during the last few weeks of this year and what’s potentially on the table for next. We also want to assure you that our team has expected this. That way, armed with both understanding and assurance, you can focus on enjoying the holidays and spending time with your family.
In short, all the things that matter.
Understanding the Fed’s Most Recent Move
On December 14, the Federal Reserve announced their seventh and final interest rate hike of 2022, bringing the Federal Funds Rate to a range of 4.25% to 4.50%.1
Now, what’s interesting about this move isn’t that it happened. Everyone knew another rate increase was coming. What’s interesting is the number the Fed chose: 0.50%.1
It’s easy to forget, but interest rates were barely above zero less than twelve months ago. Back then, the Fed was still trying to stimulate the post-COVID economy by keeping rates low and buying billions of dollars in bonds every month. Unfortunately, while this was going on, inflation was starting to ramp up, too.
Think of it like hitting the accelerator on your car…right before you hit that patch of ice.
The Fed began reversing course in March, but it wasn’t until June that they began hiking rates in earnest. What followed was the fastest rise in interest rates since the 1980s, all designed to slow the economy and bring prices down. Over the next several months, the Fed raised rates by 0.75% at a time.2 That may not sound like much on its own, but the full scope becomes clear when you realize that rates have gone from 0% to over 4% in just nine months.
The Fed’s latest increase, however, was only 0.50%, which we haven’t seen since back in May. It’s the first sign the Fed may now be moving to slow the pace of rate hikes – although there are no plans to end the hikes anytime soon. (More on this in a minute.)
Interest Rate Changes in 20222
Date
Rate Change
Federal Funds Rate
3/17/22
+0.25%
0.25% to 0.50%
5/2/22
+0.50%
0.75% to 1.00%
6/16/22
+0.75%
1.5% to 1.75%
7/27/22
+0.75%
2.25% to 2.5%
9/21/22
+0.75%
3% to 3.25%
11/2/22
+0.75%
3.75% to 4%
12/14/22
+0.50%
4.25% to 4.50%
So, why is the Fed exploring a slower pace of increases? To answer that, imagine heating a mug of hot cocoa. You put the mug in the microwave for about a minute, only to find your drink is nowhere near warm enough. So, what do you do? One approach would be to heat it for another minute – there’s no chance your cocoa won’t be hot after that. But there is a chance your drink will end up curdling…or maybe even exploding all over the inside of your microwave!
Instead, you’d probably continue heating your cocoa in ten-second bursts, checking the temperature after each increment. It’s a bit more work, but it ensures your cocoa ends up exactly how you want it to be.
That’s what the Fed is doing now by dialing back the pace of their rate hikes. They’re giving themselves a chance to see what effect each “ten-second burst” has on both prices and the overall economy. The reason they feel comfortable with doing that now is that the rate of inflation is slowing, too.
According to the latest data, inflation slid from 7.7% to 7.1% in November.3 That’s a positive sign – especially as it’s a sharper decrease than economists expected. And it’s why the Fed feels a bit more comfortable with hiking interest rates at a slower pace.
So, does that mean all these interest rate spikes are working? The answer is yes – to an extent.
You see, when the Fed raises rates, what they’re trying to do is decrease economic activity. By making it costlier to borrow money, the Fed wants to decrease how much consumers spend money. It seems counterintuitive – after all, we’re used to the idea of economic growth being a good thing! As spending goes down, companies have no choice but to lower their prices to attract new business. Lower prices equal lower inflation.
The issue right now is that while prices are starting to go down, they are not going down evenly. Furthermore, not all these decreases can be directly tied to interest rates. For example, there’s an obvious link between interest rates and home prices. So, it should come as no surprise that the housing market has been falling for months. Auto loans are pricier too, which is why used-car prices are starting to fall.
But other areas of the economy aren’t quite so tied to interest rates. For example, two of the major sources of inflation this year have been food and fuel. Both have started to level off, but this is largely due to post-pandemic supply chains finally getting sorted out and the world adjusting to geopolitical issues like the war in Ukraine. As far as inflation is concerned, the effect is the same – but the cause isn’t always tied to interest rates.
The reason that matters is that in other areas, higher rates are not having the effect you might expect. For example, take the labor market. Oftentimes, when rates go up, businesses cut back on hiring or delay giving raises to their employees. So far, neither is happening. Unemployment is still near a 50-year low. Wages continue to grow at an unusually fast rate. Hiring is beginning to slow, but nowhere near what the Fed likely expected.
The result is that consumer spending continues to motor along. With most Americans having jobs and extra savings, families continue to spend. That’s the main reason we haven’t entered a recession yet. But it’s also one of the reasons that prices – although cooling! – continue to run stubbornly hot.
It also means that, while the Fed may be slowing the pace of their rate hikes, there are no plans to stop anytime soon.
Looking Ahead
On December 14, the Fed also unveiled their projections for 2023. That’s important, because these projections reveal the Fed’s intentions for the coming year, allowing us to plan ahead.
Due to all the factors, we’ve just gone over, the Fed projects they will continue to raise rates throughout the New Year. Most Fed officials predict rates will rise to 5.1% by the end of 2023 (up from 4.25% now), but that’s just the median.4 Five officials thought 5.25% was more likely, and two went as high as 5.6%. That’s significantly higher than what the Fed predicted just a few months ago when they projected rates rising to around 4.6% for 2023.
The last time interest rates were over 5% was all the way back in 2006.2 As you can imagine, this would have a profound effect on the economy, and the Fed knows it. In fact, the Fed forecasts that unemployment will rise to 4.6% next year – up from 3.7% right now – and remain near that level through 2024.4 As a result, they also project a meager 0.5% in economic growth for 2023.4 That’s not technically a recession, but it will probably still feel like one.
Now, it’s important to remember that this is a forecast. Anyone who watches the weather knows how often forecasts change. Inflation could cool faster than anticipated, nixing the need for such high interest rates. Alternatively, inflation could continue being stubborn. Or, the Fed might raise rates exactly how they predict, only to find the economy remaining surprisingly resilient.
What it means for the markets – and for us
In 2022, there has been a spike in market volatility before and after every hike. Don’t be surprised if that continues in 2023. At the same time, investors have been playing a game of chicken with the Fed all year long, seeming to bet that the central bank won’t keep raising interest rates as high as they say, or for as long as they say. This balancing act of inflation slowly cooling off, and the economy only gradually slowing down, may be the best thing that could happen to the markets. Either way, however, we need to be mentally, emotionally, and financially prepared for more volatility in 2023.
The good news is that we already are! While dealing with volatility is never fun, it’s important to remember that our investment strategy already accounts for this. We expect there to be times when we need to hit “Pause” on our journey and have factored those times into our plans accordingly. The most important thing now is that we keep focusing on our mug of cocoa – tasting, and testing as we go, looking for opportunities when we can, and holding course when we need to.
Our advice is to focus on the season. Our team will take care of the rest! So, from all of us here at Minich MacGregor Wealth Management, we wish you Happy Holidays! Please let us know if there is ever anything we can do for you. May your cocoa always be the right temperature, and your gifts never be socks.
On a scale of 1 to 10, how hopeful are you feeling about 2023?
We’ve seen A TON of headlines talking about recessions, layoffs, and market fears over the past few weeks. And what we should be doing to stave off the worst.
It’s prudent to plan ahead and reef the sails before the storm strikes.
But are we going overboard? Are we being TOO negative?
It’s a normal human reaction to try to foresee and prepare for the worst.
But we think that can sometimes lead us to act as though the worst-case scenario is a foregone conclusion.
What if we’re not making enough room for good things to happen?
While the risk of a recession next year is real, it’s not a given — it’s a prediction.
The Wall Street Journal survey of economists puts the risk of a recession within 12 months at 63%.1
On the other hand, Goldman Sachs puts the probability of a 2023 recession at just 35%.2
No one knows what will happen for certain but it doesn’t look like a recession is just around the corner.
Recent layoffs are getting big headlines, but they aren’t widespread.3
In fact, there’s still a chance that we could avoid a recession or experience only a mild downturn.
Especially if inflation has truly peaked. (Fingers crossed!)
There are likely to be stormy waters ahead, especially for employees affected by layoffs, but as we enter the final weeks of the year, I want to highlight some signs of hope:
Hopeful sign #1: The latest data shows that the U.S. economy grew nearly 2.9% in the third quarter.4
Hopeful sign #2: Economists think the economy will grow again in the fourth quarter as well.
Hopeful sign #3: The Fed might slow down the pace of interest rate hikes soon.5
It’s true, we’re still in challenging conditions as we approach 2023.
More volatility is very likely in store for us.
But let’s make room for optimism and positivity.
Good things are in store as well.
Before we go, we wanted to highlight a few more bits of good news from 2022:
We learned that U.S. child poverty plummeted 80% between 1993 and 2021.6
Scientists discovered a way to help identify babies at risk for sudden infant death syndrome.7
Voters elected the first Gen Z member of Congress.8
A record number of sea turtles laid nests on the Georgia coast.9
What other wonderful things happened this year? What good news do you have to share with us?
Earlier this year, we started a series of posts called “Questions You Were Afraid to Ask.” We look at a common question that many investors have but feel uncomfortable asking. Because when it comes to investing, the only bad question is the one left unasked!
So far, we’ve covered a variety of topics, including:
How the Dow Jones, S&P 500, and NASDAQ indices work and which companies they include.
How the values of these indices are calculated.
How stocks work, and how they differ from bonds.
How investment funds work, including the differences between passive and active funds.
The pros and cons of mutual funds, exchange-traded funds, and hedge funds.
As you can see, when it comes to investing, there’s a lot to know, a lot to consider, and a lot to choose from. And while choice is always a good thing, many investors often come to us with their heads spinning because they’re not sure where to start, what to do, or which option to choose. They all come with some variation of the same question. The question we’re going to answer right now.
Questions You Were Afraid to Ask #6: How do I know which investment options are right for me?
When it comes to this question, we have good news and bad news.
The bad news is that there is no one-size-fits-all answer.
The good news is that there is no one-size-fits-all answer.
Yes, you read that right.
To illustrate what we mean, think about your clothing for a moment. Do you buy one-size-fits-all attire? Of course not – and there’s a reason for that. “One-size-fits-all” wouldn’t look very good. It wouldn’t feel very good. And it simply wouldn’t work for every person and every lifestyle.
In life, we have a variety of different clothes we can choose from. We make those choices based on several factors. Climate: pants or shorts. Employment: jeans or slacks. Occasion: a day at the beach or a day at a wedding. Personality: colorful vs dark, brazen vs muted. Figure: from extra-small to extra-large. You choose your clothes – and your style– based on what’s right for you. Based on your wants, your needs, your nature. Investing, believe it or not, is much the same. There is no one-size-fits-all. No single “best” option. Only the best for you, based on your wants, your needs, your nature.
This might seem like a no-brainer, but it’s critical all the same. That’s because, as an investor, you will often hear the media say otherwise. You will hear people claim that the Dow is more important than the S&P (or vice versa). That stocks are better than bonds, or bonds are safer than stocks. That passive is better than active (or vice versa), or that ETFs are always better than mutual funds (or vice versa).
As we’ve seen, the truth just isn’t that simple.
In these posts, we’ve answered six questions many investors are afraid to ask. Now, we have six more for you to consider. Six questions you must not be afraid to ask. Questions only you can answer.
Those questions are as follows: Who, What, When, Where, Why, and How.
Who am I? Are you cautious by nature or a risk-taker? Are you a family-oriented person, or more of a lone wolf? An adventurer or a caretaker? Someone with a few simple wants, or big, bold dreams? Or – as many people tend to be – are you a mixture of all these things?
What kind of lifestyle do I want? Simple or extravagant? Always trying new things, or staying in your comfort zone? One focused on work and personal accomplishment, or one focused on family and community? Or again – and I can’t stress this too much – a mixture of these things, depending on what stage you’re at in life?
When will I most need money? Do you need it soon because you’re buying a new home or starting a new business? Or do you need it later when you’re about to retire?
Where do I see myself in ten years? Or twenty? Life is all about change and growth. That means you need to ensure you’re investing for long-term growth to reach your long-term goals.
Why do I need to invest? To help send your kids to college? To retire? To see the world? To give to charitable causes? To feel like you always have a safety net?
How will I pay for retirement? This is key. Because, regardless of your other goals, there’s probably going to come a time when you want to stop working. But you can’t just pick a day to not show up at work. Retirement creates a massive lifestyle change, one that will be quite upsetting to your finances if you don’t prepare for it.
It’s these questions that should determine the right investment options for you. The types of assets you invest in. How much risk you take on. Whether your portfolio is simple or complex. Active versus passive. You get the idea.
So, here’s our suggestion: Take some time to think about these questions. Then, communicate your answers with a professional you trust. Together the two of you can create an investment plan that’s as specific to you as the clothes you wear. A plan designed to get you where you want to be. We hope you’ve enjoyed learning a bit more about how investing works. We hope we’ve been able to answer some questions you may have pondered over the years. Most of all, we hope you can use this information as a springboard to ask more questions down the road. After all…
When it comes to investing, the only bad question is the one left unasked!
A lot of turkeys and trimmings are eaten to celebrate Thanksgiving, with sports and shopping galore. But what is Thanksgiving all about?
Originally, this day was rooted in want. It fostered an attitude of genuine gratitude for life’s simpler blessings of adequate food, clothing, and shelter. The day also involved sharing those blessings with others less fortunate. Thanksgiving was more than a day.
From these humble beginnings, Thanksgiving has evolved into a frenetic free-for-all whose genesis starts months before the turkeys and pumpkins are carved. We hear and feel the marketing blitz leading up to Halloween—then three more weeks of marketing. There is a short pause—we hear about “Turkey Day.”
We also survive the all-day barrage of ads pounding us into submission, preparing for the assault. That night, memories of Thanksgiving are slowly obliterated as armies of shoppers mobilize, braving the elements, armed with credit cards, coupons, and attitude.
The next morning before dawn, Black Friday officially kicks off the Christmas shopping season. Cartoonists and commentators have astutely suggested that Thanksgiving has become little more than a blip in the holiday season beginning with Halloween and lasting through New Year’s. Is this what Thanksgiving is all about: human beings reduced to the average dollar amount spent? No—a thousand times, No!!
Thanksgiving is more than the Pilgrims; more than an American autumn festival; more than an annual paid holiday from work, more than sports and shopping and feasting; it is far more than a holiday narrowly framed by a specific country. Rather, Thanksgiving is a mindset and a way of life!
Regardless of culture or season, as fellow citizens of planet Earth, we can all make the world a little better by embracing and living the principle of Thanksgiving. Thanksgiving is good for all of us!
This year, as you enjoy a fine meal with family or friends, we hope you have a wonderful holiday. Hug your family; value your friends; enjoy fine food; and cheer on your favorite team.
But remember, it is not Turkey Day. Please pause to be grateful for the abundance we all enjoy in this great land and practice Thanksgiving!
Thanksgiving is more than a day. It is a noble way of life we can aspire to.
“The greatest asset of a company is its people.” – Jorge Paulo Lemann
We truly believe it is our people that set us apart from other financial firms. Since the start of Minich MacGregor Wealth Management in 2009, we have worked hard to develop into the team we are today. We take great pride in the ways we help our clients plan for the various stages of life. Over the past 13 years our client base has expanded largely in part because of people like you that have introduced us to friends, colleagues, and family members.
To keep up with our growth and success, we decided it was time to add more talent to our team. We are excited to introduce our newest team member, Andrew Pallas. He joined our firm on October 31, 2022.
Andrew has been working in the financial industry since 2013. He started his career in western NY with a financial planning firm and in 2016, he decided to return home to the Capital District area. For the past five years, he has been a financial planner at CAP COM Federal Credit Union. Andrew has always had the intention of earning his CERTIFIED FINANCIAL PLANNER TM certification and is actively working on attaining this very prestigious designation. Lucky for us, his search for a career change occurred at the same time we decided it was time to add to our team of professionals. The rest, they say, is history.
Andrew has experience with social security, Medicare, and tax planning. He takes a holistic approach with clients that includes strategies for wealth accumulation, tax-efficient investing, and charitable giving and assists with estate and retirement income planning.
Andrew resides in downtown Saratoga Springs. Outside the office, when he is not preparing for his CERTIFIED FINANCIAL PLANNER TM certification, he enjoys playing basketball, coaching youth basketball and hiking. He is also a volunteer at Therapeutic Horses of Saratoga.
