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Slick TV ads often make financial planning and wealth management sound simple, but it’s usually not. Managing wealth requires knowing a lot about highly technical topics, like taxes, government regulations, and finance as well as history, psychology and how to communicate with loved ones about sensitive issues. This article highlights some of the knowledge needed to manage wealth and why it’s often so daunting without the help of an independent personal financial advisor who is familiar with your situation.
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Understanding The Federal Reserve Mandate To End Inflation
The Federal Reserve System, the nation’s central bank, has a dual mandate to pursue maximum employment and maintain price stability. These two priorities are currently treated equally, but that was not always the case. In fact, the Fed’s bias toward maximizing employment was a critical driver of the stagflation that plagued the U.S. in the late 1960s and 1970s. Recognizing the need to balance price stability and maximum employment, in 1977, Congress revised the Federal Reserve Act.
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Fed Governor Kugler Details Inflation And Economic Outlook
The 12-month inflation rate, as measured by the personal consumption expenditures (PCE) index, was 2.6% in December, down from its peak of 7.1% in June 2022, and the six-month rate for PCE inflation was even lower, at 2%, which is the target rate set by the Federal Reserve.
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Why Rates May Not Be Cut Until June
The cost of a loan to buy a home, car, college education, and achieve the American Dream is staying the same for now. As expected, Federal Reserve Chairman Jerome Powell said the central bank did not lower loan rates following the Fed’s Wednesday, Jan. 31, 2024, policy meeting.
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Practical Suggestions For Achieving Your 2024 Resolutions
New Year’s resolutions usually fail because they‘re often too hard to achieve. After six months, only 10% of people who make resolutions achieve them or remain committed to them, , according to a study by Dr. Mark Griffiths, a Chartered Psychologist and Distinguished Professor of Behavioral Addiction at the Nottingham Trent University. What can you do to make financial, medical, or other personal resolutions more likely to be achieved?
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A Sign Of Progress In Solving U.S. Economic Problems
The Federal Reserve appears to be pulling off a feat most experts did not believe it could: ending its aggressive inflation-fighting campaign of 11 interest rate hikes without tipping the U.S. economy into a recession.
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Fed Keeps Rates Unchanged; Expects Easing In 2024
To promote transparency and free markets, the Federal Reserve System began publishing the opinions of the 19 U.S. central bankers that decide interest rate policy.
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Have You Logged Into Your Social Security Account?
Have you logged in to your Social Security account? Creating an online account at SSA.gov is an important first step in understanding your retirement income situation. However, only about 60 million of the 160 million individuals in the U.S. labor force who have Social Security accounts have created a way to access the Social Security Administration’s website.
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The Great Fake Out Of 2023 Is Poised To Extend Into 2024
All year long, the economy and stock prices have fooled experts and consumers, outperforming expectations month after month.
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Test Your Financial Planning IQ
The five questions below are a challenge meant to allow you to assess your knowledge of investing, tax and financial planning. If you have been following our news stream, this quiz draws on familiar ground. The answers are below.
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Planning Briefs
Will Negative Rates Abroad Boost U.S. Stocks?
Published Wednesday, September 18, 2019 at: 7:00 AM EDT
Negative rates abroad are driving down bond yields in the U.S., which could make the stock market multiple expand. Investing always carries risk, and current financial economic conditions are unprecedented. For the first time in modern history, you have to pay the bank to hold your money in Europe! You have to pay a bond issuer to hold your money. Here's a factual analysis of factors driving what's happening and how it might affect your portfolio.
Here's the simple math formula behind the complex economics altering current financial conditions: The growth rate of a nation's working age population — its labor force — plus its growth in productivity is equal to its economic growth rate, the growth of its total domestic product.
Keeping this fundamental formula of economics in mind, this chart shows that Europe, Japan, and China face a shrinking working-age population in the decades ahead, according to World Bank data. In contrast, the U.S. is about to benefit from the echo boom generation and an expanding labor force.
Because Europe's economy has grown very slowly for the last decade, central banks across the continent have dropped lending rates below zero to stimulate growth.
Bond yields are set in a global market, and low rates in Europe are affecting U.S. investors. Why?
Since Germany is the world's No. 2 issuer of government-guaranteed bonds, negative yields on German Bunds make the higher yield on U.S. bonds relatively more attractive to investors across the globe.
With slow growth in Europe causing negative rates abroad and making U.S. Treasury Bonds relatively more attractive than the German Bund, bonds yields in the U.S were driven. That inverted the yield curve earlier in the U.S.: A 30-day Treasury Bill yielded more than a 10-year U.S. Treasury Bond.
Over the last three economic cycles, negative yield curves have occurred nine times and were followed by recessions three times within 18 months. Still the inversion of the yield curve has frightened U.S. investors into thinking a recession could be on the way, which could end the bull-market fueled expansion now in its eleventh year.
To the contrary, however, current conditions could boost stock values!
No one can predict the next move in the stock market and markets are not always rational, but the lower yields in Europe could continue for many years and make stocks more attractive. Since the labor force and productivity growth are long-term fundamentals of national economies, these conditions are unlikely to change much in the years ahead.
Consequently, U.S. investors facing the low yields on bonds, which are being imported from Europe, may find stocks a more attractive investment than fixed income. That could drive stock prices higher.
The S&P 500, as of September 6th, 2019, traded at a multiple of 16.3 times the consensus forecast by Wall Street analysts for 2020 earnings, according to data from Yardeni Research, Inc. and Thomson Reuters I/B/E/S. However, as investors come to understand the long-term fundamentals depressing yields, they could grow more willing to pay a higher multiple for U.S. stocks.
This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation. Tax laws are subject to change. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. No one can predict the future of the stock market or any investment, and past performance is never a guarantee of your future results.
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