THIS IS FOR ALL THE TECHNICIANS
We are the first to admit that it’s a bit on the geek side of investing, but we want to share an interesting data point that could signal a soft landing. On July 27, 2023, the S&P 500 closed at short-term overbought levels for the 42nd straight day.
This current streak that started around Memorial Day is the longest since September 2020 (45 days) and the 24th streak of 40 or more trading days in the last 70 years. So what? In the 24 prior periods since 1953 when the S&P 500 closed at short-term overbought levels for 40 days in a row, its median performance over the next six and twelve months was +5.5% and +11.3%, respectively, with positive returns 83% of the time. (Source: Bespoke)
VENMO, ZELLE & CASH APP – WHAT TO KNOW BEFORE SIGNING UP
In today’s world, we have multiple ways to send, receive, or transfer money from one person to another. Within this financial landscape, the meteoric rise of peer-to-peer payment apps over the past decade stands out, propelled by their blend of convenience, speed, and seamless social integration. As people rely less on traditional cash, these apps have competed ferociously for market share in a growing industry.
These apps have made it easier to split bills, reimburse friends, or pay for a service. Money is sent instantly from one user to another and can then be transferred directly to a linked bank account. Regular transactions are generally fee-free, only adding to their appeal.
Nevertheless, just like most online industries, there are reasonable concerns about cybersecurity. Cybercriminals have shifted a lot of their focus toward hacking people’s accounts or scamming users into sharing their login information. An estimated $10 billion has been lost to scams over the years. Unlike credit card companies, there is hardly any buyer or seller protection, so users are on the hook for the lost amounts.
As with any financial tool, it’s important to weigh the pros and cons before deciding whether you should use one of these apps. If you decide to use one, we suggest creating a complex password and taking advantage of the double authentication process.
Top Peer-to-Peer Payment Apps: Pros and Cons – NerdWallet
Credit Card, PayPal or Cash App? How You Pay Matters – WSJ
Peer-to-peer payment apps and scams are growing – Marketplace
U.S. LOSES TOP CREDIT RATING
On August 1st, Fitch Ratings downgraded the U.S. government’s credit rating one notch from AAA to AA+ citing “erosion of governance” as the main reason. The full commentary can be found here (link). Fitch argues that overspending and an inability of Congress to act swiftly in raising the debt ceiling limit will continue to cause fiscal deterioration over the next three years and assigned a “Stable Outlook” for the U.S. While this has caused downward pressure on stocks in the weeks since we do not expect a material impact on markets or the economy moving forward. The U.S. remains the world’s largest economy, reserve currency, and most robust capital markets.
For context, the first (and only other) U.S. credit downgrade from a major rating agency occurred back in August 2011. Standard & Poor’s (S&P) took the U.S.’s credit rating down one notch to AA+ following another debt ceiling impasse. The immediate impact was a flight to safety in the form of U.S. Treasuries (rather counterintuitive to the credit downgrade). The S&P 500 went on to gain another 6% through year-end, ending up 2% for 2011. S&P has maintained its AA+ rating on U.S. credit since 2011 while Moody’s, the third top rating agency, still has the U.S. at its highest credit rating.
OH, HOW SEVEN STOCKS CAN DISTORT THE MARKET
While it is nice to see the market up so much this year, seven stocks have been responsible for most of the returns just as they were the ones to drag the market down so much last year. This reversal can best be demonstrated by looking at the return of the S&P 500 on a market cap vs. equal-weighted basis. As of July 31st, the S&P 500 market-weighted index is up 20.1% compared to the equal-weighted index which is up just 10.8%. Since the start of 2022, however, the S&P 500 is down 4.2% compared to a decline of 4.7% for the equal-weighted index. (Source: S&P)
NAVIGATING THE STUDENT LOAN REPAYMENT JOURNEY
In a few short months, 46 million Americans will recommence repaying the collective $1.6 trillion student loan debt owed. In 2020 during the height of the Covid-19 pandemic, student loan payments were suspended, and the suspension has been extended by President Joe Biden. Starting October 2023, student loan payments will resume.i
The resumption of payments brings a great wave of uncertainty and apprehension for many who had been counting on President Biden’s student loan forgiveness proposal, despite its recent rejection by the Supreme Court. The renewal of student loan payment undoubtedly strikes Gen Zers. On track to be the most well-educated generation yet with 57% of 18 to 21 year olds enrolled in a two or four year university according to Pew Research, Gen Zers are grappling with student loan debt.ii
Fortunately, the pause of student loan debt paved the way for taking a close look at student loan assistance and repayment strategies. The Education Department has rolled out a new repayment plan, the Saving on Valuable Education (SAVE) with some borrowers qualifying for a $0 monthly payment. Similar to the existing Income Driven Repayment (IDR) plans, the SAVE Plan’s repayment formula strategy will increase the considerations for the borrower such as income level as well as eliminating negative amortization where the loan balance continues to grow because the payments made are less than the accruing interest. Borrowers can apply to enroll in the SAVE Plan through the Federal Student Aid website.iii
i “Opinion | the Student Loan ‘Payment Shock.’” The Wall Street Journal, 21 July 2023, www.wsj.com/articles/student-loan-payments-transunion-report-student-debt-biden-administration-c9923d
ii Parker, Kim. “On the Cusp of Adulthood and Facing an Uncertain Future: What We Know about Gen Z so Far.” Pew Research Center’s Social & Demographic Trends Project, 14 May 2020
iii Minsky, Adam S. “9 Key Facts about Biden’s New Student Loan Payment Plan, and How to Apply.” Forbes, 14 July 2023, www.forbes.com/sites/adamminsky/2023/07/11/9-key-facts-about-bidens-new-student-loan-payment-plan-and-howto-apply/?sh=3c47e2f24900
SOCIAL SECURITY AND YOU
One of the most difficult retirement decisions is when and how to start taking Social Security. Although the Full Retirement Age (FRA) is currently age 67, one can start as early as age 62 but the benefit is reduced dramatically. You can delay taking Social Security until age 70 and for each year above FRA, the benefit increases by 8%.
According to a recent survey conducted by Schroders, 40% plan on taking their benefits between the ages of 62 and 65. Only 10% plan to wait until age 70. They cited two major reasons people gave for taking benefits early: 1) Social Security will run out of money; and 2) needing additional income despite receiving lower payments over their lifetimes. If you are closing in on retirement, we can help you make the choice that best suits your financial needs.
BEST AND WORST PLACES TO RETIRE
As people retire, most retirees stay in place because they like where they live, family and friends are close, and they cannot afford to move. But others cannot wait to leave and head to greener pastures. Where should they go? Where should they avoid? Bankrate.com has ranked all 50 states based on affordability, overall well-being, the cost and quality of health care, weather, and crime. Here is the bottom five: 5) Massachusetts; 4) Washington; 3) California; 2) New York; and 1) Alaska.
Now for the top five: 5) Mississippi; 4) Missouri; 3) West Virginia; 2) Delaware;
and 1) Iowa. In case you are wondering… Florida was 8th best.
PROVISE RECOGNIZED AGAIN!
Earlier this year, ProVise was recognized as one of the Best Places to Work in Financial Services by Investment News. Now Florida Trend magazine has selected ProVise as a Best Place to Work in Florida. ProVise was one of 33 companies selected across Florida in the 15-49 employee category. Our clients know how hard all members of the ProVise team work on their behalf and we are very proud of this recognition and the light it shines on our culture.
We Hope You Continue to Stay Safe and Well
Proudly and successfully serving our clients for over 37 years. As always, we encourage you to call or email us if you would like to discuss anything.
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