Happy New Year! As we turn the page on the calendar and start a fresh chapter in 2024, it’s natural to look both forward and back. We hope your holiday season was filled with joy and family, and now we turn our attention to some important financial matters, starting with tax season.
Tax Prep Reminder: A friendly heads-up that you will receive 1099 forms from both TD Ameritrade and Charles Schwab, likely arriving between late February and early March. Remember, March 15th or later is generally a safer timeframe to file your return, allowing time for any potential document updates. For streamlined tax preparation, Summit Tax Services and Heemer Klein & Company are available to assist individuals and businesses. Contact our tax team today at (586) 459-5340 for a consultation.
Santa Claus Delivered
As we mentioned in our two previous articles, the market typically performs well in November and December and they were thankfully both positive months that allowed us to finish the year strong (Source https://finance.yahoo.com/quote/%5egspc/history). We encourage you to look at your statements for your individual performance. We switched our research process 100% in May of 2023, and we are very happy with that decision overall. While past performance cannot predict future performance, we’re cautiously optimistic that the research will continue to help us navigate the ups and downs of the market well. Want to learn more? Schedule a review meeting with us to discuss our approach!
Student Loan Crunch: Potential Impact on Consumer Spending
Student loan payments were put on hold back in 2020 during the COVID pandemic. They restarted in October 2023, however, 40% of borrowers missed their first payment (Source: https://nypost.com/2023/12/19/business/nearly-9-million-student-loan-borrowers-defaulting-on-payments/). This means that 8.8 Million out of the 22 million borrowers are in a tough spot. Currently, we have $1.6 Trillion in outstanding student loans.
It seems that borrowers are feeling the pain from inflation and a record low in housing affordability due to high rent, as well as high-interest rates. It’s hard to imagine a scenario where this does not negatively affect consumer spending, at least in the short term, so we’ll prepare accordingly.
Election Buzz and Its Market Impact
This is the period where we get to enjoy endless mailers, phone calls, text messages, and TV Commercials from candidates vying for office. This significant rise in advertising spending is actually good for the economy believe it or not.
The Presidential Election will occur in 2024 and Congress will be up for grabs. The market is very overbought right now, so there is a decent chance that January is a negative month. In the long term, four pieces of evidence are currently making us optimistic that the next 10 months until the election have the potential to be good for stocks overall despite some potential short-term bumps in the road.
- Presidential Polishing Act: Every President that is running for reelection typically wants to get reelected, so they make moves that potentially “window dress” the economy and stock market before the election.
- Positive Indicator Shift: In late April of 2023, one of our most important longer-term indicators shifted from negative to positive. It had been negative since the first quarter of 2022, so it was negative for quite a while (Source: https://www.shermanportfolios.com/indicators).
- Multi-Term Green Lights: Our other 3 indicators, including both short-term and intermediate-term, have turned positive, so all four of our preferred indicators are currently positive. While past performance cannot predict future performance, in the past this type of indicator switch has said brighter days may lie ahead for the stock market in the longer term (Source: https://www.shermanportfolios.com/indicators).
- Trendline on the Rise: The 200-day moving average of the S&P 500 has turned and has been heading up rather than down. This is a longer-term trendline and in the past, it has had some success identifying a change in trend (Source: https://www.carsongroup.com/insights/blog/two-more-bullish-pieces-of-evidence/).
We had a different indicator a few months back declare that there is a chance we’ll have a recession within the next year (inverted Yield Curve, Source: https://www.forbes.com/sites/simonmoore/2024/02/06/the-inverted-yield-curve-continues-to-flash-a-recession-warning/?sh=1325948b15ac). We’re hoping that recent improvements in the overall economy, inflation data, and the housing market, as well as signals from the Federal Reserve that interest rates may be lowered in 2024, will provide some stability moving forward.
Financial Planning and Review Meeting
We’d love to have a review meeting with you to discuss investments, retirement income planning, college planning for kids or grandkids, tax preparation, health insurance, including Medicare supplemental and prescription drug plans, and a variety of other financial planning topics. Please get in touch with our office at (586) 226-2100 to schedule a meeting today!
If you’ve had any changes to your income, job status, marriage status, a new birth in the family, 401K options, address, risk tolerance, or any other financial changes, please contact us right away.
Sincerely,
with contributions from Robert Wink, James Wink, Zachary Bachner, and James Baldwin
Notes & Disclaimer: Stock market indices, like the S&P 500 Index, are unmanaged groups of securities considered to be representative of the stock market in general or subsets of the market, and their performance is not reflective of the performance of any specific investment. Investments cannot be made directly into an index. Historical returns data are calculated using data provided by sources deemed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, or correctness. This information is provided “AS IS” without any warranty of any kind. All historical returns data should be considered hypothetical. Past performance is no guarantee of future results.
This communication is only intended for recipients who reside in states where our agents are licensed to sell these products. Investment advisory services are offered through Summit Financial Consulting, LLC, an SEC registered investment advisor. Registration does not imply a certain level of skill or training. Summit Financial Consulting Investment Advisor Representatives do not render tax, legal, or accounting advice. Insurance products and services are offered through Summit Financial Consulting, LLC. Note: Please update Summit Financial Consulting, LLC, if your investment objectives have changed or if the personal or financial information previously provided has changed. The investment advisory disclosure document that describes Summit Financial Consulting investment advisory services account is provided to you annually. Please consult Summit Financial Consulting for a copy of this document should you need an additional copy. All guarantees are subject to the claims paying ability of the issuing insurance company. Past performance cannot predict future performance. It is not possible to invest directly in an index. The Sherman Group, LLC is not associated with Summit Financial Consulting, LLC in any way, other than a research sharing partnership. Back testing is more heavily scrutinized than any other type of investment analysis because it can be updated to take advantage of past data. The algorithms and trading signals that we receive from the Sherman Group, LLC were created using back testing with the goal of creating a sustainable research process. We have reviewed data from the entire 20 year period which was mostly back tested, and have also personally reviewed the live data for the past 5 years and feel comfortable with it, but we encourage you to meet with us and ask questions so you are fully informed on what we plan to do with your investment assets at Charles Schwab. It is important to look at fees, taxable repercussions, and trading frequency when looking at a rate of return number. There is no perfect system or research feed, and Sherman Group, LLC has had both longer term and short-term periods where they lost money. Investing involves risk, and these portfolios are no exception.