From the desk of Anthony Sandomierski, CPA/PFS, CFP®, MS (Taxation)
August 8, 2023
I wanted to reach out and provide everyone a quick update on where markets are and where
we see things. Feel free to contact Jason Gordon or myself with any questions.
Stock Market Update
The S&P 500 is currently trading around the 4,400-4,600 range. It started the year around
3,800 and previously peaked in 2021 around 4,800. Lately the market has mainly been driven
by growth/technology stock performance.
What could drive the market higher? In our view, you really need to see companies’ projected
earnings take a nice jump for the market to make a significant increase. If this doesn’t
happen, a big increase wouldn’t be justified and is likely overvalued and we would act
accordingly. The market would LOVE interest rates to go down (as this makes equities more
valuable) but it’s hard to see a case right now for interest rate decreases. A large rate
decrease in rates would likely be caused by a major economic event (i.e., high
unemployment) OR a non-economic event (i.e., pandemic, terrorist attack, dot com bubble).
What could drive the market lower? A few things. Higher inflation, high unemployment,
missed earnings expectations, or as always, a non-economic event. The fed so far seems to
have pulled off a “soft landing”, where they were able to raise rates to tame inflation without
causing a recession, which is good news. The market has largely priced this info in and if we
see more positive news on this front the market shouldn’t react much too it.
Inflation/Interest Rates Update
Something we’ve been following very closely is inflation data. The Consumer Price Index
(CPI) and Core Inflation numbers have been steadily falling which is good news. It looks like
the fed could pause rate increases which the market has seen favorably and this is really
priced in right now in our view. There isn’t a very strong case right now for rates to come way
down from where they are because inflation is not under the fed’s preferred 2% number AND
the labor market is quite strong despite higher rates. You would need to see unemployment
go way up from the 3.5% range to see rates come further down from where they are. The fed
funds rate (short term rate) is currently at 5.5% and was at 0% two years ago. This is a steep
increase in a short amount of time. The 10-year treasury (currently 4%) and 30 year treasury
(currently 4.18%) have SLOWLY increased with rates going up. The market is betting that
rates won’t stay this high long-term.
Fixed Income Update / Cash
Higher rates hurt borrowers but really benefit savers. Money market accounts and CDs are
paying attractive rates now BUT keep in mind that interest is fully taxable for federal and state
purposes. This makes sense for a short-term need BUT NOT a long-term one. Municipal
Bond and bond funds are paying pretty attractive rates. Muni bond interest being tax-free.
Are rates historically high right now? No! Not really. It’s actually pretty normal. The fed
funds rate went well over 10% in the 1980s due to persistent inflation. Do we see rates
getting that high? No based on current info because inflation is taming down.
Clients unsure what to do with cash are encouraged to call Jason Gordon or myself to
Right now we are pretty “neutral” on portfolios. We’d be looking for asset classes that
overreact to bad news to add to. Over the past 18 months we’ve been taking advantage of
some tax sensitive moves in portfolios and adding to areas that looked cheap and
undervalued. Right now most asset classes are right about where they should be valuation
wise. We’re taking a close look at the “growth” stock area to see if this jumps any higher from
where it is. That area is starting to look a little overvalued but other than that most other asset
classes are right about where they should be.
Wealth Management Issues
We’re always trying to stay on top of the latest tax change news and it’s been pretty quiet
lately on that front.
Inherited Retirement Accounts – The one significant topic is new rules for inherited retirement
accounts inherited AFTER 2019. The IRS has sent out incomplete info on if beneficiaries
have to take Required Minimum Distributions (RMDs) in 2023 and as of now has announced
that NO RMDs have to be taken for 2023 for inherited IRAs that were inherited after 2019.
We are waiting for more guidance for 2024 and will reach out to each client impacted when
we find out more info.
Beneficiary Designations – We encourage all clients to check their beneficiary designations on
accounts with us to make sure they fit their wishes. We also encourage contingent
beneficiaries be setup where applicable. Please reach out to our office if any changes need to
Retirement Planning – Clients who are close to retirement that haven’t been in in a while are
encouraged to setup review meeting/call for some updated goal setting.
Securities offered through Avantax Investment ServicesSM, Member FINRA, SIPC. Investment advisory services offered through Avantax Advisory ServicesSM.
Insurance services offered through an Avantax affiliate insurance agency.
If anyone feels like they need a review of their financial plan or want a general update of their
situation don’t hesitate to reach out to myself or Jason.
We are also accepting new wealth management clients and referrals are always greatly
appreciated. It’s how we’ve built our ENTIRE practice.
Anthony Sandomierski, CPA/PFS, CFP®, MS (Taxation)
Direct: (732) 681-1384