Shifting the "Great Resignation"
Action item: It is time to consider contributing to your individual retirement account either Roth IRA or Traditional IRA. The rules have not changed but the income limits have moved marginally higher. Link to the IRS website: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits
Tax filing time is also approaching so be aware of gathering your documents and requesting any missing documents that you need to file. The IRS is overwhelmed with demands, questions and earlier year returns so if you are expecting a refund, then plan to file sooner rather than later. Other than contributing to individual retirement plans most tax considerations and actions are determined based on a calendar year.
Is it time to declare that the great resignation is over? April 1st is comically touted as April Fool's Day, but on this day, there is no joke about this: workers are returning to work. With inflation increasing, savings decreasing, and just plain boredom, the great resignation that began at the beginning of the Covid-19 pandemic persisted through helicopter fiscal policy as well as loose monetary policy and is now reversing due to an environment of monetary and fiscal tightening. Women with children are returning to the workforce at one of the fastest rates. While the pandemic is waning, one in three Americans worry about contracting Covid especially in light of any and all new variants, down from 50% late in 2021. At the same time, inflation is causing rising costs and converging with the lower savings rates, meaning an uptick in a return to jobs. This trend began in September 2021 and continues to increase.
We watch the US Treasury Yield curve to determine how much the bond market is discounting in the economy. In particular, we watch for changes in the shape of the yield curve. Professional investors view the difference between the 2-year Treasury yield vs. the 10-year Treasury yield. At the moment there is no inversion in this favored spread although the difference is the 10-year yield is 4/100th (0.04) more than the 2-year. Close to inversion (>0.00) but not there yet. However, the 3-year Treasury yield is higher than the 30-year yield. There are many reasons for inversion. Inversions have predicted at least 50% of recessions. More importantly, aside from a recession it is more accurate in predicting a slowing down of the economy. The soft landing that is the goal of the Federal Reserve is problematic. An article from Politico illuminates the success of the Fed at engineering a soft landing. It failed 8 out of 9 times.
Biden tax proposal
In his budget proposal for the next fiscal year, President Biden is proposing a very narrow tax increase for the very wealthy. Incidentally, California has by far, the most billionaires in the US, which is good for us in this state, and I hope you are one. The downside is, if any legislation is passed, these are the new proposed tax recommendations that are suggested to be implemented.
- Households with a net worth of $100M+ might very well be paying a minimum of 20% tax; a tax that would include income and assets.
- Also included is raising in the corporate tax rate from 21% to 28%.
- The top individual tax rate would rise to 39.6%.
There are other smaller proposals but together the proposal would generate over $1T in funds to reduce the budget deficit. Much of this sounds familiar and an executive budget proposal is merely a proposal and any thoughts this might result in legislation is remote.
And now for lifestyle relief, TV to watch while you eat dinner. Aren’t we trained that watching TV during a family dinner is distracting and limits family conversation? The Atlantic has a column with recommended viewing during family dinner. Some of the recommended shows are Moon Knight on Disney+, CODA on Apple TV winner of best picture at the Oscars, and also on Apple TV WeCrashed a story about the company WeWork. Enjoy the dinner conversation.
This website is informational only and does not constitute investment advice or a solicitation. Investments and investment strategies recommended in this blog may not be suitable for all investors. SAS Financial Advisors, LLC and its members may hold positions in the securities mentioned within this newsletter.