Stock Market Commentary November 2024
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Open Enrollment Update
If you have health insurance, either individually, for your business, or through Medicare, now is a great time to shop around and make sure you have the best benefits for the price. Call Summit Health today at (248) 779-1000 to receive some updated quotes. Remember the deadline is December 7, so call early to get an appointment to discuss it.
Social Security Cost of Living Adjustment (COLA)
On October 10, 2024, the Social Security Administration) announced the 2025 Cost of Living Adjustment (COLA). Starting January 1, 2025, over 72.5 million Americans will receive a 2.5% increase in their Social Security benefits.
Why the Recent Fed Rate Cut Matters
Last month, we discussed how the Federal Reserve unexpectedly dropped the Fed rate to 0.5% rather than the traditional 0.25%.
The Fed Rate is what commercial banks use for overnight loans to each other, and it typically affects most interest rate-sensitive instruments. Most mortgages are based upon the US Government 10-year bond.
Unfortunately, the market is potentially showing some nervousness that inflation is not under control, and this has caused interest rates to increase from 3.68% on September 18 up to 4.27% on October 28 rather than decrease as the Fed intended.
Source: Yahoo Finance
Inflation Concerns Amid Rising Interest Rates
When spending increases, it has the potential to increase inflation.
For the past 18 months, we have mentioned in our market commentaries that we believed the stock market would have a good run leading up to the election because most incumbent Presidents will attempt to window-dress the economy, in our opinion, which may include extra government spending.
Government Spending and Its Influence on Inflation
One reason investors may be worried about inflation, which is causing an increase in interest rates rather than a decrease, is recent government spending. This is a chart of year-to-date spending as of September 30, and the national debt is getting worse by the day, unfortunately:
Source: FiscalData
Long-Term Impact of Excessive Government Spending
When Donald Trump was President, the numbers were bad as well. During Covid in 2020, President Trump created over a $3 Trillion deficit, and in 2019, before Covid, he had a $1 Trillion deficit. Trump has said that if he is elected, he will appoint Elon Musk to root out and stop wasteful government spending, but that may or may not be a big help.
In our opinion, if the politicians on both sides of the aisle continue the reckless, unchecked spending spree, it could dampen the economy for decades and continue to spike inflation.
Here is a chart of recent government spending by year:
Source: BPC
The election polling numbers are currently showing a 50/50 toss-up in many key swing states. Whoever is our next president will hopefully cut spending so our interest rates and US Government debt interest expense will drop.
Financial Planning and Review Meeting
If we haven’t spoken in a while, or you’ve had any changes to your beneficiaries, income, job status, marriage status, a new birth in the family, 401K options, address, risk tolerance, or any other financial changes, please contact us right away at (586) 226-2100 to schedule a review meeting.
Sincerely,
with contributions from Robert Wink, James Wink, Zachary Bachner, James Baldwin, and Daniel Ladzinski
Sources:
- * [https://faq.ssa.gov/en-us/Topic/article/KA-01951#:~:text=How%20much%20is%20the%20increase,%2Dliving%20adjustment%20(COLA)](https://faq.ssa.gov/en-us/Topic/article/KA-01951#:~:text=How%20much%20is%20the%20increase,%2Dliving%20adjustment%20\(COLA\))
- https://finance.yahoo.com/quote/%5ETN
- https://www.investopedia.com/ask/answers/111314/what-causes-inflation-and-does-anyone-gain-it.asp#:~:text=Expansionary%20Fiscal%20and%20Monetary%20Policy&text=The%20government%20could%20also%20stimulate,too%20can%20loose%20monetary%20policy
- https://fiscaldata.treasury.gov/americas-finance-guide/national-deficit/
- https://bipartisanpolicy.org/report/deficit-tracker/
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Ken Wink
Kenneth “Ken” Wink is the Co-Founder and Chief Compliance Officer of Summit Financial Consulting, LLC. With over 22 years of experience in the financial services industry, he is deeply knowledgeable and passionate about explaining complex financial concepts in understandable terms. Ken’s passion for simplifying complex financial concepts began early. While still in high school, he honed his skills by assisting classmates with their tax returns. This led him to pursue a B.A. in Finance at Michigan State University, graduating with honors. He further bolstered his qualifications by obtaining numerous financial licenses, including Series 6, 7, 63, and 65, along with Life, Health, and Accident licenses. Ken believes that everyone deserves to make informed financial decisions without feeling overwhelmed or intimidated. That’s why he writes articles that break down complex concepts into understandable terms, empowering you to navigate your financial future with confidence.