Private Client Group

April 16th, 2024

Inflation Nears Fed target, Services Sector Expands In March, Signs Of Housing Recovery

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In today’s Steady Investor, we examine the important factors affecting the market and what might lie ahead, including:

• March’s inflation report
• The high cost of homeownership
• The cost of missing tax season

All Eyes on March’s Inflation Report – The Labor Department released March data for the consumer price index (CPI), which sent the stock market into a volatile trading session. It was reported that prices rose 3.5% year-over-year in March, which was slightly higher than economist expectations and marked an acceleration from February’s 3.8% print. On a month-over-month basis, the Labor Department reported that prices rose 0.4%, which was 0.1% higher than the street was expecting. March’s inflation data sent markets into a flutter of shifting expectations about rate cuts in 2024, which many believe may not occur until September. Narratives in the financial media this week flagged this CPI report as troublesome, mostly because of the notion that rate cuts would be pared back and/or delayed as a result. But as we’ve written before, the fate of the bull market and economic expansion do not lie solely in the Federal Reserve’s hands. Many seem to forget that 2023’s better-than-expected economic growth—and the strong market rally that accompanied it—took place while interest rates were still moving higher. The economy has already proven it can withstand higher rates, and we also do not buy into the idea that inflation could head in the wrong direction this year. The consumer price index is known for having an outsized weighting on ‘shelter costs,’ which make up roughly a third of the index. The Fed’s preferred measure of inflation has come in below 3% and will be released later in the month. We see that gauge trending towards 2% as the year progresses.1

You Can’t Eliminate Volatility, But Here’s How You Can Deal with It

An inevitable aspect of investing is grappling with market volatility, which can feel unsettling.

By diversifying your investments and staying calm, you can navigate volatility and grow your money steadily. Today, we are offering our free volatility guide, which provides insights and tips to do just that. It answers questions like:

  1. Market downturns can and will occur, but what should you do?
  2. How can diversification help you manage volatility without compromising your returns?
  3. When volatility is too much for you to handle, how can a money manager help?
  4. Can volatility actually be an opportunity?

If you and $500,000 or more to invest and want to get answers to the questions above, click on the link below to download this guide today!

Download Zacks Volatility Guide, “Helping You Manage Market Volatility.”2

The High Cost of Homeownership – The National Association of Realtors reports that home-buying affordability is at its lowest level since 1985, when mortgage interest rates were still in the double-digits and had at one point reached 18%. Current mortgage rates are nowhere near those levels, of course, but it’s the cost of everything else that has risen dramatically in recent years—home maintenance costs, homeowner’s insurance, property taxes, and utilities. According to a home-improvement company called Thumbtack, it costs over $6,500 a year to maintain a home, up 8.3% from 2022. Homeowner insurance prices have also been surging, as more Americans find themselves living in areas where flood, fire, and other natural disasters are occurring more frequently and with higher intensity. Insurance premiums have risen by about 20% over the last three years, with average annual rates climbing past $2,300. Property taxes have also been going up. According to real-estate data firm Attom, the average property tax for a single-family home in the U.S. was $4,062 last year, up over 4% from 2022. All told these non-mortgage costs account for more than half of a homeowner’s overall annual costs, and it’s been pinching household budgets.3

Tax Day is Right Around the Corner. Missing It Could be Costly – It’s everyone’s favorite time of year: tax season. 2024 is shaping up to be different from past tax years. The IRS estimates that 19.4 million Americans will request an extension, which is nearly a record high. For context, in 2014 only 12.5 million Americans requested extensions. In some cases, extensions were granted by the IRS for people living in areas affected by natural disasters. But many Americans simply do not get their taxes done on time or may request more time because of a high tax balance owed. At the very least, Americans should request an extension if they’re not able to get their taxes in by the 15th, and it’s also wise to make some form of payment in the process. For individuals, failure to file triggers a 5% penalty for unpaid taxes each month, capped at 25% of the total.4

This week brought to the forefront a few factors that could affect your investment portfolio. However, the biggest challenge may lie in how investors choose to react to current market volatility.

It is important to remember that volatility is a normal part of the ebb and flow of the markets. The key is not to look for ways to eliminate it, but to develop a mental approach to dealing with it. Our guide, Helping You Manage Market Volatility5, provides insights and tips to do just that. It answers questions like:

  1. Market downturns can and will occur, but what should you do?
  2. How can diversification help you manage volatility without compromising your returns?
  3. When volatility is too much for you to handle, how can a money manager help?
  4. Can volatility actually be an opportunity?

If you and $500,000 or more to invest and want to get answers to the questions above, click on the link below to download this guide today!

Disclosure

1 Wall Street Journal. April 10, 2024. https://www.wsj.com/economy/inflation-march-cpi-report-interest-rate-239b7e5e

2 ZIM may amend or rescind the guide “Helping You Manage Market Volatility” for any reason and at ZIM’s discretion.

3 Wall Street Journal. April 10, 2024. https://www.wsj.com/economy/housing/housing-affordability-taxes-insurance-costs-rise-bca64df1?mod=hp_lead_pos7

4 Wall Street Journal. April 10, 2024. https://www.wsj.com/personal-finance/taxes/tax-day-2024-extensions-refunds-irs-d12ada6d?mod=hp_lista_pos3

5 ZIM may amend or rescind the guide “Helping You Manage Market Volatility” for any reason and at ZIM’s discretion.


DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.
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