In this week’s Steady Investor, we explore current market news that we believe investors should keep on their radar, such as:
• The index that investors should watch most closely
• Is the U.S. heading for another Government shutdown?
• Japanese equities return to all-time highs
• How to navigate tax season
The Federal Reserve’s Preferred Inflation Gauge Rises 2.4% in January – The consumer price index (CPI) measure of inflation tends to get the most fanfare in financial media. But it’s not the inflation gauge that the Federal Reserve watches most closely. Back in 2000, in the Fed’s semi-annual policy report to Congress, they formally made the PCE price index the preferred inflation gauge, which we would argue is the index that investors should also watch most closely. On Thursday, the Bureau of Economic Analysis released the PCE price index for January, showing a 2.4% year-over-year increase. For those keeping score, this puts annual inflation much closer to the Fed’s 2% target, and also strengthens the case for rate cuts later this year. On a month-over-month basis, inflation rose by 0.3% from December to January, which was in-line with expectations. Digging into the numbers a bit more closely, food prices were seen rising 0.5% and services prices rose 3.9%, while prices for goods fell by 0.5% and energy prices decreased by 1.4%. The PCE price index’s 2.4% annual increase is distant from CPI’s 3.1% print in January, and is the main reason for the discrepancy is housing costs. As we’ve written before, shelter costs for homeowners and renters makes up about 34% of the CPI measure, while they only account for about 15% of the PCE price index. The good news here is that shelter costs’ contribution to inflation is widely expected to moderate as the year progresses, which should be great news for CPI and good news for PCE.1
Navigate Tax Season with Our Free Tax Reference Guide
Whether you are handling your returns independently or with a tax professional, uncertainties about rules, deductions, limits, and credits arise.
To help you navigate through this tax season, we are offering our free 2024 Tax Reference Guide, which is an easy-to-use, accurate reference for the most common tax questions.
This guide includes:
• Key dates for the 2024 tax season
• Tax rate brackets, other tax rates, and deduction information
• Complete IRA and pension limits
• Tax information for Education, Social Security, Health Savings Accounts, Retirement Plans, Charitable Gifts, Estates and more
If you have $500,000 or more to invest and want to learn more, click on the link below to get your free copy:
Download the 2024 Tax Reference Guide2
Is the U.S. Heading for Another Government Shutdown? Another year, another story about a possible government shutdown. With every iteration of headlines warning about the lack of a budget deal to keep the U.S. government open, investors get jittery about the potential impact on equity markets. But we’ve seen this movie too many times to know that budget deals eventually get done, and while the market may experience some short-term sentiment-driven volatility, political wrangling over spending has slim-to-no chance of actually impacting economic fundamentals. In this edition of ‘will the government shut down or not,’ top congressional leaders have already struck a partial budget deal with an agreement for six funding bills, one for each represented agency. Most of those agencies will see funding extended through March 8, and the remaining agencies will have funding extended to March 22. This gives Congress a few weeks to arrive at a larger scale budget deal, which may ultimately result in shutdown fears emerging once again towards the end of March. We think investors can largely write-off worries then, too.3
Japanese Equities Finally Return to All-Time Highs – The Japanese economy was something of a darling on the world stage in the 1980s, with its Nikkei stock market reaching an all-time high in 1989. But then its real estate bubble burst, and the country experienced three decades of middling economic growth and deflation. 34 years later, Japan’s stock market has finally recaptured its all-time high. Decades of ultra-easy monetary policy had previously done little to spur inflation, but signs are emerging that a weaker yen has been boosting Japan’s export-driven economy, with solid performance in 2023. Japanese companies have also been making moves to attract foreign investors, via share buybacks and increased dividends. To be fair, the economic outlook is not rosy for Japan, and higher bond yields and eventual rate hikes from the Bank of Japan could tighten financial conditions. But the Nikkei’s recent surge is worth noting, and it also underscores a pattern we’ve seen recently across global developed equity markets.4
This time of year, many investors also have questions surrounding taxes. So today, we are offering readers our free 2024 Tax Reference Guide5, which is an easy-to-use, accurate reference for the most common tax questions. This guide covers:
• Key dates for the 2024 tax season
• Tax rate brackets, other tax rates, and deduction information
• Complete IRA and pension limits
• Tax information for Education, Social Security, Health Savings Accounts, Retirement Plans, Charitable Gifts, Estates and more
If you have $500,000 or more to invest and want to learn more, click on the link below to get your free copy:
Disclosure