THE WEEK ON WALL STREET
Stocks were under pressure last week as the Fed Chair's hawkish comments unsettled investors ahead of the holiday season.
The Dow Jones Industrial Average received the hardest hit, falling 2.25 percent. The S&P 500 Index lost 1.98 percent, while the Nasdaq Composite Index dropped 1.78 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, retreated an eye-catching 3.38 percent.
FACT OF THE WEEK
The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States.
MARKET MINUTE
No Santa Yet
Divergence marked the start of the week as megacap tech stocks rallied while the Dow Industrials fell for the eighth-straight session—its longest losing streak since 2018. Following its scheduled December meeting, the Fed announced it was cutting short-term rates by a quarter point, as widely expected. However, Fed Chair Jerome Powell also signaled fewer rate reductions next year. “From here, it’s a new phase and we’re going to be cautious about further cuts,” he said in his post-meeting news conference. The rate news surprised investors, who were anticipating more dovish comments from the Fed Chair. Markets were under pressure again early Friday as the spending bill to fund the federal government appeared to stall. But a lower-than-expected inflation update boosted the market and helped erase some of the earlier losses.
Holiday Cheer
Despite a difficult week, stocks are on track to have their second consecutive year of double-digit returns. Year to date, through Friday’s close, the S&P 500 was ahead by about 24 percent. In 2023, the S&P 500 also tacked on 24 percent for the full year.
FINANCIAL STRATEGY OF THE WEEK
Things You Can Do for Your Future as the Year Unfolds
What financial, business, or life priorities do you need to address for the coming year? Now is an excellent time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to considering an estate strategy. You have plenty of choices.
Here are a few ideas to consider:
Can you contribute more to your retirement plans this year? In 2024, the contribution limit for a Roth or traditional individual retirement account (IRA) remains at $7,000 ($8,000 for those making "catch-up" contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA. With a traditional IRA, you can contribute if you (or your spouse if filing jointly) have taxable compensation. Income limits are one factor in determining if a traditional IRA contribution is tax-deductible
Once you reach age 73, you must take the required minimum distributions from a traditional IRA. The I.R.S. taxes withdrawals as ordinary income, and if taken before age 59½, they may be subject to a 10% federal income tax penalty.
Roth 401(k)s offer their investors a tax-free and penalty-free withdrawal of earnings. Qualifying distributions must meet a five-year holding requirement and occur after age 59½. Such a withdrawal also qualifies under certain other circumstances, such as the owner's passing. Employer match is pretax and not distributed tax-free during retirement. The original Roth IRA owner is not required to take minimum annual withdrawals.
Open an HSA. A Health Savings Account (HSA) works like your workplace retirement account. There are also some HSA rules and limitations to consider. You are limited to a $4,150 contribution for 2024 if you are single; and $8,300 if you have a spouse or family. Those limits jump by a $1,000 "catch-up" limit for each person in the household over age 55.
Pay attention to asset location. Asset location is one factor to consider when creating an investment strategy. Asset location is different from asset allocation, which is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.
Vow to focus on your overall health and practice sound financial habits in 2025. If you have questions about this or anything else, please call Amanda at the office and let's set up some time to talk. We are here for you.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.