MARKET WATCH
Inflation is the decline in purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time. It is the result of too many units of a currency, such as the dollar, chasing too few goods and services. This is a situation which we are witnessing on a daily basis as the massive stimulus utilized to sustain our economy during the pandemic continues to flow through the economy as it reopens. The question is whether the inflation we are feeling will be transitory, as the Fed expects, or persistent.
For many years, the rate of inflation in the U.S has been 2 percent or less, but as the first half of 2021 came to a close, the Consumer Price Index (CPI) reported for May increased at an annual rate of 5 percent, while the Personal Consumption Expenditures Price Index (PCE), the preferred measure of inflation used by the Federal Reserve, increased 3.9 percent. While this has prompted comparisons to the inflation of the 1970’s, the reality is we are a long way from the peak mortgage rate of 16.63 percent reached in 1981. However, it is a delicate balance the Fed must maintain to stay ahead of the curve.
At the FOMC meeting in mid-June, the Fed reiterated its policy stance stating it would continue to purchase $80 billion of Treasury Securities a month and $40 billion of Mortgage-backed Securities a month in order to support the economy. The Fed also said it would keep interest rates at 0 percent to 0.25 percent and allow inflation to run hotter than 2 percent for the foreseeable future. However, they also said they would begin to “talk about talking about tapering their bond purchases”. Their goal is to have mild inflation, approximately 2 percent, and have people’s expectations to be 2 percent. With the reports coming out of the media, you can see how quickly people’s expectations can change, if they perceive pervasive and persistent inflation.
In their statement in mid-June, the Fed also reiterated, “In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, as well as financial and international developments”. So now, we watch and wait.
In the BLS employment report released on July 2nd, total nonfarm payroll employment rose by 850,000 in June, which was higher than May and the unemployment rate remained at 5.9 percent. The June GDP report showed the economy was growing at a 6.4 percent annual rate driven by increases in personal consumption expenditures, nonresidential fixed investment, federal government spending, residential fixed investment, and state and local government spending.
Meanwhile, for most of the second quarter, the stock market indexes traded within a very narrow range and close to their all-time highs. Then, at the end of the month, the NASDAQ* and S&P 500* set new records.
The S&P 500* ended the quarter at a record 4,297.5 for a 14.42% gain year to date (YTD). The NASDAQ* set a new high on Tuesday and eased back to close the quarter at 14,503.95 for a 12.54% increase YTD. The DJIA* also turned in a stellar performance when it closed at 34,502.51 for a 12.73% YTD finish. All in all, these gains would be strong annual performances in most years.
It is in our best interest to not get manipulated into expecting inflation will be persistent, as this can become a self-fulfilling prophecy. If you don’t actually need to make a big-ticket purchase at this time, simply wait. Building materials have already begun to ease off their highs. Take it slow and watch the Fed!
OUR PRIVACY POLICY AND HAPPY 4TH OF JULY
At Jersey Benefits Group, Inc. and Jersey Benefits Advisors, we collect and use information from you on applications and other forms, as well as information about financial transactions with us and from non-affiliated third parties. This “nonpublic personal information” is obtained in connection with providing a financial product or service to you.
We do not disclose any nonpublic personal information about you without your express consent, except as permitted by law andonly to provide services to you. We may disclose the nonpublic personal information we collect to persons or companies that perform services on our behalf for your benefit.
We restrict access to your non-public personal information and only allow disclosures to persons and companies as permitted by law to assist in providing products or services to you. We also maintain physical, electronic and procedural safeguards to protect your nonpublic personal information in all instances.
I do hope you had an enjoyable and relaxing Independence Day. It is certainly nice to be back to something that feels like our normal lives! If you have any questions or concerns regarding our privacy policy, or if you’d like to discuss your accounts in more detail, please feel free to contact me. Also, have a fantastic remainder of your summer.
ADDITIONAL WAYS TO SAVE For RETIREMENT WITHOUT A WORKPLACE PLAN
Saving for retirement can be daunting, so it’s no surprise that employer-sponsored retirement plans can be a key stepping-stone into the world of investing and to a healthy retirement nest egg.
While that’s great for those with access to an employer-sponsored plan, such as 401(k), 403(b) or 457 plans, those without access to a plan at work may find themselves struggling to figure out where to begin saving for the future.
That’s particularly true for millennials. About 72 percent of non-investing millennials are employed full-time, but don’t have access to an employer-sponsored plan, or are not employed full-time, according to a recent study by the FINRA Investor Education Foundation and CFA Institute. That compares to just 21 percent of millennials currently investing with retirement-only accounts.
But the lack of access to an employer-sponsored plan or to full-time employment doesn’t mean you can’t save for retirement. In fact, saving for the future can be one of the best ways to use your money, no matter your current employment status. "While employer-sponsored retirement plans are fantastic tools to help people save for retirement, there are plenty of options for those who don’t have access to one." said Gerri Walsh, President of the FINRA Foundation.
Here’s a look at your options:
Traditional or Roth IRA
Regardless of where you work, you can save through individual retirement accounts, or IRAs, which allow you to make tax-advantaged contributions to save for retirement. The two primary types of IRAs are the traditional IRA and the Roth IRA.
In a traditional IRA, if you aren’t eligible for a retirement plan at work, you can fully deduct your IRA contributions from your taxable income. The earnings on the investments in a traditional IRA account also grow tax deferred. In a Roth IRA, contributions are not deductible from your taxable income, but money in a Roth IRA account grows tax-free. That means you generally don’t pay taxes when you withdraw the money from a ROTH IRA during retirement.
Solo 401k, SIMPLE & SEP IRA
If you are self-employed, one of these options may be a desirable way to save for retirement. Solo 401(k)s allow individuals to contribute to 401(k) plans in two capacities: as the employee and as the employer. That allows most individuals to make higher contributions than they could through other self-employed retirement plans. Also, like other employer-sponsored 401(k) plans, you can choose to make it either a Roth plan or a traditional plan.
For SIMPLE IRAs, as with solo 401(k)s, you can contribute both as an employee and an employer. However, the contribution limits are lower than those of solo 401(k)s. For SEP IRAs, you can contribute up to the lesser of 25 percent of your self-employment net earnings or an annual cap.
If you’d like more information on these other options for your retirement needs, please don’t hesitate to contact me.
*The S&P 500, the DJIA, the NASDAQ and others referenced are unmanaged indices that are widely used as indicators of Market Trends. Past Performance does not guarantee future results and the performance of these indices does not reflect the fees and charges associated with investing. It is not possible to invest directly in an index.
*Dollar Cost Averaging through a systematic savings plan is an excellent way to build an account without a sizeable initial investment. Saving a portion of our pay each month is very important. Company sponsored pension plans are one method to save and should be used for retirement. Other systematic investment accounts, such as ROTH IRA’s, Traditional IRA’s, Coverdell Accounts, 529 Plans, Brokerage Accounts and Annuities can also be opened, and debited directly from checking or savings accounts. For more information, just call to set up an appointment. Referrals are always welcome.
John H. Kaighn
Company Information
John H. Kaighn offers various products and services under the trade name of Jersey Benefits Advisors.
PO Box 1406
Ocean City, NJ 08270
Phone: (609) 827-0194
Fax: (856) 637-2479
Email: kaighn@jerseybenefits.com
http://jerseybenefits.com
John H. Kaighn is an Investment Advisor Representative & Registered Representative of Royal Alliance Associates, Inc. Securities and Advisory Services are offered through Royal Alliance Associates, Inc. (RAA) Member FINRA & SIPC. RAA is separately owned and other entities and/or marketing names, products or services referenced here are independent of RAA.
10 Exchange Place
Suite 1410
Jersey City, NJ 07302
Royal Alliance Associates, Inc. is not affiliated with Jersey Benefits Advisors or Jersey Benefits Group, Inc.
Insurance Services and Third Party Administration offered through Jersey Benefits Group, Inc., a licensed Insurance Agency in the State of New Jersey.
PO Box 1406
Ocean City, NJ 08226
Phone: (609) 827-0194
Fax: (856) 637-2479
Email: kaighn@jerseybenefits.com
http://jerseybenefits.com
All opinions expressed in this newsletter are independent of Royal Alliance Associates, Inc. and solely those of John H. Kaighn and Jersey Benefits Advisors.
