Broker Check

Monday Money Report

| June 27, 2022

The market bounced back last week, snapping several weeks of a downward trend. Investors reacted positively to what would normally be bad news.  Several data points released point to a slowing of the economy.  A slowing economy would mean the Fed does not need to raise rates as quickly, and we may achieve that soft landing they are hoping for.

Specifically, the University of Michigan’s index of consumer sentiment dropped to its lowest ever-recorded level.[1]  And the university has lowered its inflation expectations for the next 5-10 years to 3.1%. In addition, the Purchasing Managers Index, which measures activity in manufacturing and services, fell to a five-month low on Thursday. These point to a slowing of growth, which is good when the economy is overheated.

At the same time, your investments are probably still down for the year.  Remember that you have not lost anything yet. You still own the same number of shares you owned before. There are three very good things you can do right now. First, if you have a taxable account, this is a great time to evaluate your holdings and make changes with less of a tax hit.  Second, you can take advantage of the down market to harvest tax losses in that account, offsetting gains and up to $3,000 of ordinary income.

Third, you can move 20% more shares from your traditional retirement accounts into your Roth accounts for the same tax bill. When you convert part of your traditional retirement to a Roth account, you will pay taxes on the amount you convert.  Right now, the market is down about 20%.  So to move the equivalent number of shares will cost 20% less in taxes.  Reach out to your tax professional or other advisor to see if this makes sense for you.

I’ve been asked by a number of folks if they will lose everything, if their investments will completely disappear.  If you have a diversified portfolio, you probably own shares of several hundred, if not several thousand, different companies. For you to lose everything, all of those companies would have to completely go under and stop doing business.  I’m not going to say that can’t ever happen, but it is pretty unlikely. 

Your action item this week is to fill up your gas tank on Thursday.  Back in 2013, the Maryland Legislature passed a law increasing the gas tax by inflation every July 1st. The great thing for our elected officials is that none of them are on record this session voting to increase our taxes. The bad thing for us is that inflation is high, so our state gas tax is increasing by 18%, from 36.1 to 42.7 cents per gallon. Expect gas to go up about 7 cents a gallon on Friday.

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Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. 

The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.

[1] “Dow Gains About 700 Points”, Wall Street Journal by Anna Hirtenstein and Alexander Osipovich, 6/24/22