The market has been hovering for the last few weeks as we await next week’s Fed meeting that releases on Wednesday. In October, core inflation subsided to between 2.4% and 3.6% annualized depending on the metric you follow. This is a huge decrease from the numbers earlier this year where we saw inflation near to 18% annualized during a few months. We will get the first reading of November’s inflation data next Tuesday which will likely play a strong role in the Fed’s decision the day after. Ideally we see a number similar to October’s number and the Fed decreases the pace of rate hikes at this meeting and signals a shorter duration of maintaining those high rates.
The markets have been a bit jittery this week as they have been this year right before a Fed announcement. PE ratios in the market continue to look good, and profits are still strong in corporate America, so really the only thing the market cares about right now are the Fed actions. Our hope is that a more accommodative Fed leads to a market rally, and we can look at decreasing our stock exposure and increasing our bond exposure. Bonds are still very attractive, with short to medium term yields ranging from about 5% to roughly 8.5%. If we get a substantial rally, then stocks won’t be as inexpensive and selling some of those to buy bonds will lock in those attractive rates.
As we close out the year, if you are interested in doing a Roth conversion or tax harvesting in non-retirement accounts, don’t hesitate to reach out to us. Hopefully a year-end market rally will make for a happy New Year. Please keep in mind that the custodians get very busy at the end of the year, and they don’t guarantee that they will fulfil conversions etc. if they are received in the last two weeks of the year. So if you want to discuss these moves, please let us know ASAP.
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