In this week’s Steady Investor, we explore current market news that we believe investors should keep on their radar, such as:
• Service activity and job growth expands
• More Americans are turning 65 in 2024
• An update on regional banking
Service Activity and Job Growth Signal More Expansion in Q1 – As of February 7, the Atlanta Fed’s GDPNow forecasting tool shows growth of 3.4% in Q1. It’s early days, but key economic indicators for January support this assessment. The first key indicator is activity in the U.S. services sector, whose importance far outweighs activity in manufacturing. According to the Institute for Supply Management’s (ISM) services-activity index, activity rose from 50.5 in December to 53.4 in January – a substantial increase into expansionary territory and well above consensus estimates. New orders, business activity, and employment all posted readings in expansion territory, and a majority of respondents in the survey said business is steady or improving. Robust activity in the services sector tracks with gains we saw in the labor markets in January, with the Labor Department reporting jobs growth of 353,000 for the month. December’s payroll gains were also revised higher, from the previously reported 216,000 up to 333,000.1 Technology companies have garnered headlines recently as many job cuts have been announced at high-profile companies, but a closer analysis suggests that companies are recalibrating priorities towards A.I. while also cost-cutting in areas where they over-hired in the months following the pandemic. Overall, the unemployment rate held steady at 3.7% in January, and wages continue to rise faster than inflation. Wage growth notched 4.5% higher in January, while the latest headline CPI reading in December came in at 3.4%.2
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More Americans are Turning 65 in 2024 Than Ever Before – There’s a reasonably good probability that someone reading this week’s Steady Investor is turning 65 this year. That’s because more Americans than ever before are celebrating their 65th birthday in 2024, a trend that is set to continue through 2027. According to the Bipartisan Policy Center, about 4.1 million Americans will turn 65 this year, which averages to about 11,200 per day. For context, over the previous decade about 10,000 Americans turned 65 each day. One takeaway from this data is that the country should see a surge in new retirements over the next few years, but that may not necessarily be the case. According to a new report from the Pew Research Center, about 20% of Americans 65 and older had a job last year, which is nearly twice as many 65-year-old workers compared to 1990. What’s more, over 60% of 65+ year-old workers are still on the job full-time, compared to about 50% in 1987. There are several reasons for this shift, but chief among them is improved health, longevity, and a renewed sense of purpose.4
Is the Regional Banking Crisis Back for Round Two? – Jitters abounded last week in the regional banking space, with major downgrades issued for New York Community Bancorp (NYCB). Moody’s Investors Service cut NYCB’s credit rating to junk status on Tuesday, citing “financial, risk-management and governance challenges,” which followed Fitch Ratings moving the company to the lowest possible investment-grade rating. The credit rating cuts came on the heels of a disappointing Q4 2023 earnings report for the bank, which revealed a surprising loss and dividend cut. A key reason NYCB is receiving so much attention is its connection to last year’s regional banking crisis, given it was the purchaser of failed Signature Bank New York. NYCB has issued statements saying its deposits are stable, but it’s often a crisis of confidence that ultimately determines a bank’s fate. NYCB tried to quell worries by issuing a filing with securities regulators, forecasting net interest income of $2.8 billion in 2024, down from $3.1 billion in 2023. But it’s only February. While we believe the market has already priced in risk to the broader U.S. financial system, regional banks should be a continued focus for investors in 2024—especially given their exposure to commercial real estate loans.5
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• Investments—including tax loss harvesting, loss carryover, investment interest expense deductions, and many more topics.
• Healthcare and Education—from the Child Tax Credit to Health Savings Accounts to 529 plans and more.
• Retirement Planning—Traditional and Roth IRAs, catch-up contributions, Required Minimum Distributions and other essential topics.
• Charitable Giving & Estate Planning—Gifting strategies, Donor-Advised Funds, private foundations and other ways to help yourself as you help others.
If you have $500,000 or more to invest and want to learn more, click on the link below:
Disclosure