Given the events in the Middle East – specifically over the last week, the continued tariff uncertainty and no clear picture on what the final version of the tax bill will look like, it’s amazing to think the S&P 500 is within 1% of its all-time highs, with the NASDAQ reaching new heights this week. The word I’ve used before (relating to the U.S. consumer), can also be used to describe the U.S. stock market - resilient. This is not to say we can’t experience another significant decline in the latter part of the year, but the bounce we have seen off the April 9th lows has been remarkable. It can’t be stated enough – it is about time in the market, not timing the market.
Inflation Remains Subdued…For Now
Usually, a good indication of coming inflation first shows up in the Producer Price Index (PPI), with many components of this index mapping over to the Federal Reserve’s preferred inflation measure of the Personal Consumption Expenditures (PCE) Price Index. However, there has been an interesting decoupling between the PPI vs. PCE over the last several months. The chart below shows that PPI and PCE usually share a strong positive correlation, with only brief periods of time of divergence. If we see them converge in the back half of the year, it could make it difficult for the Fed to cut rates even once in 2025.
A divergence worth watching
Tax Bill Update
Congress has a self-imposed deadline of July 4th to get the “Big Beautiful Bill” to the President’s desk. This seems unlikely given the lack of cohesion amongst Republicans, and the contentious topic of the state and local tax deduction (SALT) cap causing continued heated debate. It will be interesting to see where the SALT cap ends up – with the Senate wanting the limit to remain at $10,000 vs. the House’s proposed $40,000 cap.
Financial Planning Corner
Last Friday, the Social Security Board of Trustees released its annual report on the financial status of the Social Security Trust Funds (for the next 75 years) – the Old Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds. While the DI Trust Fund is not forecast to be depleted over the 75-year projection period, the same can’t be said for the OASI Trust Fund. The report projects that by 2033, the OASI Trust Fund will be depleted – meaning roughly 77% of your earned retirement benefit would be payable at that time. Again, this does not mean that 0% of benefits will be paid out, but the benefits you earned based on your earnings history will be reduced (for those of us who are younger). However, the release reiterates the importance for Congress to act sooner rather than later – through some combination of increasing the SS taxable wage base (the amount of income subject to SS tax), payroll tax, delaying full retirement age etc. Press Release | Press Office | SSA.
Living Life to the Fullest
My dad celebrated his 67th birthday on Wednesday – and this one meant a little more. Several months ago, he was diagnosed with prostate cancer– and while he was fortunate enough that his urologist caught it early – it was a harsh reminder of how fragile life can be. While our job as financial advisors is to guide you along your financial journey, steering you on a path that maximizes the chances of achieving your life goals, you do only have one life – live it. For me, it is a balancing act between living for today and saving for tomorrow – trying not to go too far in either direction. While this balancing act looks different for everyone, “permission to spend” is a conversation we have been having more and more frequently with clients who are currently retired. It is not an easy shift in mindset to go from decades of accumulation (saving) to distribution (spending). Our job as your advisor is to show you what is possible, and hopefully through our planning software, client communication/transparency - we make that clear. 😊
Quick Hits:
- The heat dome this week has got me thinking: 10 tips to keep you and your house cool this summer
- I can’t believe the 4th of July is a week away - 47 Best Fourth of July Recipes & Ideas | Food Network
- My favorite fruit is in season – the benefits of watermelon: The wonders of watermelon - Mayo Clinic Health System
- Another book recommendation – I’m halfway through this one and the candidness of media billionaire executive Barry Diller is refreshing - Who Knew | Book by Barry Diller | Official Publisher Page | Simon & Schuster
Quote: “The single most important ingredient in the recipe for success is transparency because transparency builds trust.” – Denise Morrison
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