Market Recap – September
Major Benchmark Returns in September 2024 & Year-To-Date
Déjà vu? September got off to a rough start as concerns about a slowing economy triggered a sell-off in growth stocks. Then, the Fed’s bigger-than-expected 50-basis point rate cut powered the Dow Jones and S&P 500 into record territory. Investors should pay attention as corporations present their Q3 report cards this October. Current valuation levels have not been sustainable historically, and even under a “soft-landing” scenario for the US economy, the stock market could see a mild pullback. At this point, downside protection is more important than fully participating in a potential market rally. Talk to us if you have any questions.
The Fed: Show and Don’t Tell
Fed Chair Jerome Powell and colleagues delivered a dovish interest rate cut, indicating that the Fed believes that the battle against inflation is over. What the Fed isn’t telling us is why the cut was larger than expected. In the Fed’s July meeting, Powell wrote off the idea of a 50-basis cut; yet by September, all but one Fed officials supported the action.1 The coming months will be critical, both in terms of economic data on which the Fed relies for further rate-cut decisions as well as the magnitude of any additional cuts.
A Gloomy Outlook from Discount Stores
Dollar General and Dollar Tree reported dismal earnings and provided troubling guidance in their most recent quarterly earnings reports. Both retreated a third in value and the message from Dollar General CEO Todd Vasos was clear:2
While middle and higher income households are seeking value as well, they don’t claim to feel the same level of pressure as low-income households, as customers have felt more pressure on their spending.
In other words, low-income households are struggling. Additionally, the strategic decision from these discount stores to focus on a particular niche has resulted in capital-rich rivals like Walmart eating into their market share.
With regard to consumer credit, Ally Financial, a bank focusing on auto loans, saw an increase in overdue payments and charge-offs during the third quarter.3 UBS reports that defaults on auto loans are at a 15-year high.4
Election and Taxes
With the outcome of the presidential election hanging in the balance, both candidates have put forward their policy agendas. Here are some key personal and investment-related tax proposal items.
Estate Planning Ideas – Best Gift to Your Loved Ones
If you have a pre-tax retirement account such as a 401(k) and/or IRA, most likely one or more of your family members are named as beneficiaries.
Consider the benefits of converting assets to a Roth IRA. Its tax-free status makes it the ideal method of bequeathing assets to your heirs. Talk to us for more details.
“Falling” Into Year-End Planning?
Autumn has officially begun, and now is a great time to evaluate your financial picture as we sprint toward the New Year! Consider the following items (this list is not exhaustive):
Tax situation – this includes income tax liabilities (federal, state and local), capital gains, contributions to retirement accounts, charitable gifts, etc.
Mandatory distributions – owners of qualified plans who are 73 or older must withdraw a minimum amount, known as required minimum distribution (RMD). Qualified charitable distributions (QCDs) can be a helpful way to offset RMD up to a limit ($105,000). Of course, like most rules, there are strict requirements that must be followed to take advantage of QCDs.
Health insurance – open enrollment for both private and Medicare plans will be upon us soon. If your situation warrants a change of coverage, it is now time to start the process.
Family gifts – if you are in a position to make this holiday season even merrier and more memorable for your family members, talk to us about the “how.” Gifts are often so much more than cash – in both meaning and value!
Footnotes:
1 https://www.federalreserve.gov/newsevents/pressreleases/monetary20240918a.htm
2 https://www.reuters.com/business/retail-consumer/dollar-general-cuts-annual-sales-forecast-weaker-discretionary-demand-2024-08-29/
3 https://www.reuters.com/business/finance/ally-financial-flags-intensifying-credit-challenges-shares-slump-2024-09-10/
4 https://cnb.cx/3XU6BQP
