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11.24.2023 by Gerrit Petersons

Technology Stocks Continue to Lead

Technology sector stocks have led the market in 2023, fueled by spending on AI related hardware and software. By some measures, this has pushed the technology sector to all time highs and the sector may be at some of its more expensive periods of time in history: Technology Stocks vs. S&P 500 | Business Insider 

While the headline and charts may look ominous, relative to past peaks, the stock market is driven by corporate profits and earnings.  Some technology stocks are delivering on that.  Nvidia, a chip maker at the forefront of open AI hardware, reported earnings on November 21st and tripling revenue from a year earlier.  Juxtaposed with operating expenses up just 13% over the same period, the stock is up 241% in 2023.  Some market observers consider Nvidia, and similar companies, to be the proverbial Levis or picks and shovels for the AI gold rush.  Nvidia 2023 | CNBC NVIDIA Financial Results | NVIDIA Newsroom 

Even with technology stocks leading the market, investors may feel they are not participating at the same rate and that makes sense looking at the below chart.  The S&P 500 has not hit an all-time high in over 470 trading days, the seventh-longest stretch since 1950.  Intuitively, that makes sense for 2023 since the technology sector is driving a lot of the returns, while other sectors have not kept up. S&P All Time Highs | Seeking Alpha 

FAI 12.22.23

U.S. and China Summit: President Joe Biden and President Xi Jinping met last week in San Francisco, the first meeting in a year for the two leaders.  China entered the meeting under growing domestic pressures as China’s economic growth has been slowing, with low foreign direct investment.  Exiting the meeting, an agreement was made for China to go after Chinese companies producing fentanyl, with the U.S. reducing some sanctions on China.  Xi met with U.S. business leaders as well, pledging a friendlier business environment in China.  Although agreements were reached, the business support from China was only verbal.  Biden and Xi's Meeting | CNBC Biden China Meeting | Reuters 

Higher for Longer Remains:  While the Federal Reserve has paused interest rate hikes recently, they are continuing to say that inflation needs to come down before they will even consider reducing rates.  Higher for longer has been the consistent theme and the Federal Reserve is more concerned with getting inflation lower than the prospect of lower economic growth.  The Federal Reserve is also very hesitant to declare victory on inflation to avoid another jump in inflation. Fed Wants More Evidence | WSJ 

Financial Planning/Investment Strategy Corner:  

The MERITs of Automatic Retirement Enrollment: U.S. policy began incentivizing companies to automatically enroll employees in retirement plans in 2006 through the Pension Protection Act, which led to an increase in employee participation in some plans from 38% to 96%. Some observers who pushed for automatic enrollments are pointing out that the policy may have an outsized impact on lower-income employees as they will accept the automatic contribution, while it may be a detriment to their budgets.  Targeting a lower automatic contribution may be more helpful.  Lower-Income Employees Remain at 401(k) Defaults | Yale Insights   

Some states have also attempted to boost retirement savings and starting in 2024, employees in Maine who do not have access to a retirement plan through their employer will be automatically enrolled in a ROTH IRA, contributing 5% of their wages to a state-sponsored retirement plan.  The Maine Retirement Investment Trust (MERIT) program will require all employers with five or more employees, who do not offer access to a retirement plan, to register covered employees with MERIT. Full-time, part-time, and seasonal employees all count toward an employer’s number of employees.   While the program does not cost employers anything, they will need to register employees through the MERIT portal or face penalties.  Employers who offer retirement plans may have to register their exemption with MERIT as well.  For eligible employees, since the vehicle is effectively an IRA, they should be aware of IRS limits if they are already contributing to an IRA or if they make any withdrawals from their MERIT account, as there may be taxes and penalties.  Although the program initially defaults to a ROTH IRA contribution, employees can opt out or adjust their account to a traditional IRA, receiving a tax deduction.  Participating employees’ contributions will automatically increase by 1% annually until contributions reach 10%.  Any clients or their working children impacted (employees are eligible at 18 years old) will want to be aware of the implications here.  Contact your RSWA advisor if you have any questions.  Maine’s Mandatory Retirement Savings Program| Home | MERIT (  

Quick Hits:  

Quote: “I tell him what I think."- Rosalynn Carter 

And other quotes from the late Rosalynn Carter: Rosalynn Carter's life memorialized in 10 of her own quotes | Axios 

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