6 min read

On Your Mark, Get Set…

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Happy Thursday!

The clocks fell back this week, but there was little time to focus on reorienting ourselves with lots of news about inflation and the midterm elections pouring in.

The final makeup of the next US Congress is still TBD (and it may be a while until there is real clarity), but the stock market is usually happiest when Congress is gridlocked because it means no big policy surprises and maintaining the status quo. Past performances are no guarantee of future results, and we truly live in unprecedented times, but midterm elections have historically signaled the start of strong rallies. The S&P 500 has risen an average of 14.4% and has always been higher in the year following midterm elections going back to World War II, according to data cited by Barron’s. Yahoo Finance has a nifty chart that shows how the index has outperformed in the 3-month, 6-month, and 12-month periods post midterms. Keep your fingers (and arms and legs and toes) crossed!

This morning inflation numbers for October came in lower than expected at 7.7%, and the market’s initial reaction was positive. Many take this as a sign that underlying inflation has peaked and hope it means the Fed will dial back its rate hiking campaign. Yet another thing that is TBD… You can read more about interest rates and inflation here.

As you plan your Thanksgiving meals, Wells Fargo has some advice for the budget conscious — buy your turkey early, swap regular potatoes for sweet potatoes, and choose canned cranberries. Their most prominent note is that eating out is better value than usual these days, but the traditionalists may think that is a step too far!

Asking for a friend….

We know there is a lot to think about these days and it can sometimes be a bit overwhelming. To help with those nagging questions and so you have useful resources at your fingertips, here are few links to resources and past stories relevant in these turbulent times:

News you can use

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  • Tomorrow is Veterans Day, a federal holiday to honor and recognize those who have served in the US military. If you’re looking to invest in companies that do the most to support, hire and retain veterans, research is key. A few places to start: VETS Indexes Employer Awards, the G.I. Jobs Military Friendly Employers list, and other rankings from Monster and and MilitaryTimes.
  • Aiming to be on Santa’s nice list, Amazon has expanded its fleet of electric delivery vans to more than 1,000 ahead of the holiday season. The company plans to put 100,000 of the Rivian vehicles on the road by 2030. Online buyers are also thinking of their carbon footprint, with close to 30% of consumers surveyed by IBM saying they will bundle multiple orders to help reduce emissions. The push to electrify last-mile delivery has led to major deals between giants like Walmart and FedEx, and EV manufacturers like Canoo and GM’s BrightDrop.
  • The 27th annual summit of the United Nations Climate Change Conference (COP27) is heating up in Egypt. The two-week event sees country leaders make decisions that affect the future of the planet and is closely watched by investors. You can keep up with the latest headlines here. One noteworthy development is an anti-greenwashing report by UN experts that could raise the bar for corporate net zero pledges.

Your year-end investor checklist

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“Peace and joy” may be an anthem for the holiday season, but the month of December often feels anything but peaceful. So before your days start filling with holiday parties, gift shopping, cookie baking, squeezing into an airplane with zillions of other people, and going Clark Griswold on your house, it’s a good time for a little investment check-up.

We’ve rounded up these five tips that personal finance experts advise checking off your list before year-end.

1) Max out your retirement savings

If you’re in a good position cash-wise (meaning you can afford your monthly expenses, have paid down high-interest debt, and have a solid emergency fund), Q4 is a good time to make sure you’ve contributed all you can to your retirement accounts before year-end.

  • If you have an employer-sponsored plan, you can contribute up to $20,500 to a 401(k), 403(b), or federal Thrift Savings Plan. And if you’re 50 or older, you can add up to another $6,500 (ca-ching!). Experts also advise contributing enough to take full advantage of any employer matching — otherwise, you’re just leaving money on the table.
  • If you are self-employed, have a side hustle, or own a business, you’ve got more options. Your retirement plan might be a traditional or Roth IRA, a solo 401(k), SEP IRA, SIMPLE IRA, or a defined benefit plan — and the contribution limits vary for each one. NerdWallet has a great breakdown of those annual limits, as well as the benefits of each account type if you are trying to decide which is right for you. Keep in mind that if you have a solo 401(k) or IRA, you can make 2022 contributions up until April 15 of next year.

2) Fund your health

No matter your age, health savings accounts (HSAs) offer a way to save for healthcare while paying zero federal taxes on your contributions, investment earnings, or withdrawals (as long as the money is used for health-related expenses, of course). In 2022, you can contribute up to $3,650 to your HSA or $7,300 for family coverage — and that money will continue to roll over and accrue interest if you don’t spend it all. If you want to open an HSA before year-end, you might find this list of top HSA providers handy. Several of the providers on this list offer ESG and sustainable fund options to consider.

3) Give to the causes you care about

If you itemize your taxes, charitable giving can help reduce your taxable income while supporting the causes that matter to you. With Giving Tuesday right around the corner, you may already be thinking about what organizations you want to aid during the holiday season, and it’s worth considering how you can make the most of your donation. For example, Kiplinger suggests that investors consider tax implications and notes that some investors may find it makes more sense to donate stocks this year.

4) Take care of your loved ones

’Tis the season of giving, so we’d be remiss not to mention that every year, you can gift up to $16,000 to any number of people without paying a gift tax. Those gifts can help your loved ones with a variety of financial goals, whether it’s contributing to a niece’s or nephew’s college savings plan or helping a parent in their retirement years. Year-end is also a good time to fund investing accounts for your dependents, like 529 plans, custodial IRAs, and other accounts. You can find more tips on gifting stocks here.

5) Harvest your losses

This year’s market volatility has likely shifted the balance of investment allocations in your portfolio. You might find that you are over-exposed to some asset classes that are performing well, like energy or value stocks, while once high-flying tech stocks now represent a smaller portion of your portfolio after this year’s dismal performance. If that’s the case, consider a strategy known as tax-loss harvesting. You can get a more detailed primer here, but it’s basically a way to sell an investment at a loss to offset capital gains taxes on other assets — and then reinvest the funds in the assets in which you are currently under-invested. Diversification is key to protecting your returns over the long term while aligning your investments with your values.

As always, talking with your financial advisor (and/or your tax advisor or accountant) is the best way to ensure you’re taking the right steps for your unique situation. With a little planning, you can set yourself up for a strong 2023 and beyond, while taking care of the people and causes that matter most to you.

Before you go -

A 95-year-old grandmother was nominated for a Best New Artist Grammy? Yep, it’s true.

** FWIW team members own shares of Amazon, GM, Rivian, and Walmart.

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