Last week, the yield curve “uninverted.” This historically has signaled an incoming recession.

The unemployment rate moved up last week to 4.3%, the highest since 2021. The rise in unemployment likely portends a slow down, albeit off an incredible high. This, along with other global events such as the movement in the Japanese Yen vs the US Dollar likely led to a drop in the markets over the past few days. The combination of a slowing (global) economy and lower inflation will spur Chairman Powell to lower interest rates. Either way, the US is still the strongest economy in the world. History shows that through economic downturns, wars, and other geopolitical events, the US economy continues to grow, driving the stock market higher.

The economy is resilient. If it falters and recession sets in before the election, the American people might take President Biden for a one-way walk. If Trump is elected, he’s all but signaled he wants lower interest rates and plans to take Fed Chairman Powell for a one-way walk. One thing always worth remembering, the stock market's long-term trend is one-way, UP!

This is an overview of safe investments for this frothy market. We start with a super cool product that’s part of the “Innovator ETF” family of investments. We also touch on Treasuries, CD’s and covered calls, all tools in our arsenal for safety.

Gifting money is one of the more confusing topics. Many people want to gift money to loved ones (family, friends, others) as a way to show they care, to provide needed funds, or simply to give away some of their assets while they are still alive. Most people assume that someone (either they or the recipient) will be taxed when gifts are given in this way. In reality, at the current exemption levels, that’s rarely the case.

My favorite delicacy is a cream filled long john. Pastry at the beginning, creamy white middle, and pastry at the end. The best part is the creamy middle. Delicious sugary white goodness….. We’ve been writing about Roth IRA’s and when to convert from a traditional IRA. In our view, the best time for the conversion is often, well, in the middle.

In the 18 months since that storm, it’s been widely reported that insurance costs have gone through the roof (pun intended) across the country. I renewed my Cincinnati homeowner’s policy in April. Last year’s premium was $1,267. This year’s premium came in at $1,656 for a 31% increase!!! To get to the bottom of what’s behind the insurance inflation, I turned to a friend of mine, Jean Mabry, who works for Risk Source, an independent insurance company in Cincinnati. Make sure you stick around for some ideas on what you can do to minimize your insurance costs.

Many of us have exercised stock options as part of compensation. This is true from P&G to GE and many other companies. I think most of us assume that we have to pay taxes on these options. And while it’s true that paying Federal and State taxes is a given, it’s not always the case for municipalities.

The financial literature is full of articles about Roth IRA’s. Most of the articles revolve around whether to convert a traditional IRA to a Roth IRA. This article attempts to start a conversation about a unique way you and your adult children might execute a Roth conversion, especially if you expect your IRA to be part of the legacy you leave behind for those children.

I’m currently in the work force and have a 401(k) at work. Should I contribute to the traditional 401(k) or a Roth 401(k)? As with so many financial planning questions, the answer is: It depends. 

We just finished tax preparation and filing. We now move into tax planning for the rest of the calendar year. The concept of a Roth retirement account continues to grow in popularity with the introduction of the Roth 401k and plethora of articles about Roth IRA’s in general. Whether to contribute to a Roth is easily one of the most confusing questions facing our clients.

We continue to watch the economy closely. My opinion based on all the data is that we are still in that “goldilocks” phase - not too hot, and not too cold. But with each move up in the market, and as the indicators add up to show a slowing economy, it may not be long before we finish the tornado drill and have to “duck and cover” for real. Until then, we can continue to play the game Twister, reaching and contorting to find the highest growth parts of the market.

With interest rates stable to dropping, the dollar weakening and inflation on the wane, we like the market. But we also are looking for bond funds to replace the Treasuries. If the Fed cuts interest rates later in 2024, we will want to be in bond funds. And we may lighten up our stock positions in anticipation of a slowdown. After all, if the market gets too hot, we don’t want to ask, will it make me sweat?

Why convert investments from a traditional IRA to a Roth IRA? In a sentence: if you pay taxes now, you will never pay taxes again. You don’t pay taxes on the principle when you remove it, nor do you pay on the earnings generated by the investments…….

We continue to look for ways to invest in baskets of stocks and bonds that provide us a great ride without all the ups and downs. We don’t want to get whipped around and end up lightheaded when we’re back in the station. Otherwise, we might all tire of the PA announcer saying “welcome back riders” and just go to “Kiddie Land”.

I like to “double down” so to speak. And by double down I mean that I utilize my savings to get an additional return. I’m talking about carrying a higher deductible on my car and home insurance.

With the direction of interest rates unclear, we continue to lean on relatively safer options wherever feasible. Treasuries continue to pay 5+%. And some banks offer short-term CD’s over 5% as well. The Schwab platform gives us access to multiple banks so we are even able to split an account between banks with a couple clicks, easily providing the necessary FDIC insurance on larger accounts. The market is often full of uncertainty as lower inflation, stabilized corporate earnings estimates and the prospect of an AI productivity boom are offset by more debt ceiling negotiations, higher interest rates and a contentious presidential election. It’s easy to see why a lot of us are wondering Watt Up?

Like a doctor’s harsh diagnosis, last week the Fitch Ratings company downgraded US debt to AA+ from AAA. Fitch’s explanation of the rating downgrade is this: “The downgrade reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to AA and AAA rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions”.

But most of the story is “AI”. Artificial Intelligence is the buzzword of the year. Microsoft introduced their natural language search tool, Nvidia has chips that power the revolution and just about every technology company is talking about how AI is going to change the world. Here’s a chart that will blow you away - the chart below shows 3 S&P sectors all delivering 30+% this year with no other sector above 10%. Two of the 3 sectors - Technology Select, Communication Services - are all about technology and the AI revolution. The third of the 3 standout performers is “Consumer Discretionary”. The top two holdings in this sector are Tesla and Amazon, both of which are as much about technology as anything else they do.

Unfortunately, the US government isn’t headed toward “cash on the barrel” any time soon. Enter: the debt ceiling. The debt ceiling is the maximum amount of money the federal government is allowed to borrow to pay its bills. The government reached its current ceiling of $31.4 trillion in January. Once the debt ceiling is hit, the Treasury has to find other ways to fulfill its financial obligations including but not limited to paying interest on the debt, paying Federal employees, operating Federal Parks, and funding Social Security and Medicare benefits.