At the foundation of financial planning is establishing a budget. Knowing your income vs. expenses (how much is coming in vs. going out) is the first step in determining if changes need to be made. In order to save, invest and build wealth – getting your arms around your monthly cashflow is essential. This can be extrapolated to our federal government, and the overall spending (both mandatory and discretionary) our country does at the federal level.
Political will is something my colleague, Donovan Ingle, referenced in last week’s newsletter. It’s been elusive on both sides for longer than I can remember. Spending your way out of every problem is not a sustainable solution. Critics would say, well it hasn’t mattered in the last 15+ years, why should I care now? Ultimately, there will be a day of reckoning, just no one knows when. The Committee for a Responsible Federal Budget did an analysis of both candidates’ economic policy proposals and the impact on the federal debt – the numbers are alarming:
I wanted to compare both, although Donald Trump has been elected the 47th President of the United States, both Harris and Trump’s plans were/are to continue to spend precipitously. Ultimately, in the not-so-distant future, hard decisions will have to be made regarding entitlement programs, the size of various government agencies, tax increases, etc.
For more details on the numbers The Fiscal Impact of the Harris and Trump Campaign Plans-Mon, 10/28/2024 - 12:00 | Committee for a Responsible Federal Budget
The Ramifications:
- Reduced Public Investment.
- Fewer Economic Opportunities for Americans.
- Greater Risk of a Fiscal Crisis
- Challenges to National Security
- Imperiling the Safety Net
For more detail on each of the bullet points The Fiscal & Economic Impact of the National Debt
Changes to the Dow
The constituents of the Dow Jones Industrial Average (DJIA) will be changing today. A brief history of the DJIA:
- Established in 1896 by financial journalists Charles Dow and Edward Jones (no relation to the ubiquitous financial services firm Edward Jones)
- The original index consisted of 12 U.S. industrial companies, which at the time, well represented the U.S. economy.
- With only 30 constituents today, the DJIA represents a tiny fraction of the thousands of American companies listed on the New York Stock Exchange and Nasdaq.
- Over the decades, changes to the constituents of the index have occurred periodically. (Excluding the mergers of existing Dow companies and name changes, its occurred 52 times over 128 years.)
- Today represents the 53rd. Long-time member Intel has been removed from the index and replaced by Nvidia. An additional change is the inclusion of materials giant Sherwin-Williams, replacing Dow Inc. 2 Ways the Dow Jones Industrial Average Will Change Forever on Friday | Nasdaq
- While the DJIA is widely referenced, two of its greatest shortcomings are:
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- The index is price-weighted vs market-cap weighted. This means the larger the share price of a constituent, the greater the impact on the overall index. This will result in outsized moves by names like United Health and Goldman Sachs vs. Johnson and Johnson and Walt-Disney.
- 30 companies is not a large enough sample size to extrapolate its performance to the overall performance of the broader stock market.
Fed Meeting
During any other week, the Federal Open Market Committee (FOMC) meeting would be the center of attention for investors. However, with the election, it took a back seat. Yesterday, the Fed cut short-term rates by another 25 basis points (0.25%), in line with forecasts. This now puts the fed funds rate in the range of 4.50%-4.75%. With the Fed’s preferred measure of inflation – core PCE (Personal Consumption Expenditure) - still running above their 2% target, at levels between 2.5%-3.0%, I would not be surprised if they hold steady at their December meeting.
Another Newsletter, Another Worker’s Strike
A month ago, when I last wrote the RSWA newsletter, I had a brief section discussing the dockworker’s strike and the ultimate resolution. This Monday, Boeing machinists and the Union representing them, came to an agreement with Boeing executives, after a seven-week strike. The main points of contention were pay and retirement benefits. Machinists wanted significant increases in pay as the cost of living in the Seattle area (where most work), has skyrocketed. While not getting what they originally were requesting (a 40% wage increase) they were close - a 38% wage increase over four years. Regarding retirement benefits, the machinists were requesting Boeing to restore the defined benefit plan (traditional pension plan), that workers lost in 2014. This was an area where Boeing didn’t budge. However, machinists will see an increase in their 401(k) contributions Boeing will make on their behalf, and a $12,000 ratification bonus.
Since last week’s newsletter was jampacked with great financial and tax planning info prior to year-end:
https://www.robinsonsmithwealth.com/blog/2025-tax-updates-year-end-planning
Quick Hits:
- I wrote about this at the firm I was working at in Knoxville. I can’t stress enough the heightened level of skepticism Millennials (my generation) and Gen Zers need to have when acting on personal financial advice from AI or social media “finfluencers.” Due diligence is paramount. How to use artificial intelligence for personal finance
- Black Friday is right around the corner. Here are some interesting statistics and trends. black friday - Reports, Statistics & Marketing Trends | EMARKETER
- A restaurant I went to for dinner last month– it gets added to my “Favorite Portland Restaurants” list. About — TWELVE
- Understandably difficult with small businesses, but thought this was an insightful article 7 Reasons Employee Sabbaticals Are a Winning Idea
Quote:
“In three words I can sum up everything I’ve learned about life: it goes on.” – Robert Frost
Thank you for reading RSWA Financial Advisor Insights! We welcome feedback, and please forward this to a friend! Be well, take care, and stay safe!
