What Is The New Fed Chair Going To Do…And When
As expected, the U.S. Senate confirmed Kevin Warsh, but by the closest vote since Janet Yellen was appointed by President Biden for Fed Chair. Mostly along party lines, the vote to confirm was 54-45. Some believe that Warsh will push to lower interest rates and perhaps be influenced by President Trump’s wishes, which could potentially lead to the Fed losing its independence. It would be surprising to see this play out at the June meeting. Warsh has proposed reducing the Fed’s balance sheet, which would likely raise rates on longer-term bonds while at the same time lowering short-term interest rates. He believes that this would be a neutral move that would create a more normalized yield curve.
The Fed has a dual mandate of full employment and control of inflation. The job market, while not robust, seems to be in a relatively good place. However, inflation was still running higher than the Fed’s 2% target before the war with Iran began and most recently surged over 3%. Warsh was a hawk on inflation when he was at the Fed previously. We believe that interest rates should, at a minimum, stay the same, but they may need to rise, rather than being cut. We do not see a cut coming at the June meeting, but maybe later this year if the war is halted sooner rather than later and the price of oil comes down.
Daniel Mannix, CFA® Announced Principal at ProVise
We are pleased to announce that Senior Portfolio Manager, Daniel Mannix, CFA® has become a Principal at ProVise Management Group. Since joining the firm in 2020, Daniel has supported ProVise’s investment management efforts and currently chairs the firm’s Investment Committee. Daniel brings nearly 20 years of experience across various financial markets. At ProVise, Daniel’s diverse background informs his investment decision making, lending a unique perspective to the investment department. His approach is keenly focused on aligning client portfolios with their personal, long-term financial goals. In the community, Daniel currently serves on the Merrill Lynch Wealth Management Center’s Advisory Board at the University of South Florida as well as on the Elder Board for Real Church. Please join us in congratulating Daniel on this accomplishment.
Social Security Setting For A Big Increase
While the Social Security Administration will not announce its cost-of-living increase until October, expect to see a big increase. That is the good news, but the bad news is that inflation is running hot. The Senior Citizens League is anticipating a 3.9% increase which would increase the “average” recipient’s benefit by about $81 per month. That is up from 2.8% this year.
The Charity Parity Act
Bipartisanship is rarely found in Congress, but the proposed Charity Parity Act may be an exception to the rule. This bill would correct an issue that we have always viewed as non-sensical. Why can’t you make a charitable contribution out of your 401(k) and other workforce retirement plans like you can from an IRA? The bill has solid support from both sides of the isle. If the bill passes, it will allow these retirement plans to make contributions to qualified charities up to $111,000 each year (adjusted for inflation) just like one can do from an IRA currently. We will keep you updated as the bill progresses.
The Great Wealth Transfer Might Not Be Happening Just Yet
While many of us have heard about the “Great Wealth Transfer,” it may not be as large or as immediate as it’s often portrayed. Enormous figures, such as $110 trillion, are frequently cited as the amount expected to change hands, but this shift in wealth will not occur all at once.
For those unfamiliar, the Great Wealth Transfer refers to the ongoing process in which wealthy baby boomers pass away and transfer their assets to their children and grandchildren. However, several factors could slow or reshape this transition. People are living longer than ever, and many affluent individuals are spending significant amounts of their wealth to extend both the length and quality of their lives. This includes investing in luxury retirement communities, healthcare advancements, and extensive travel experiences.
Currently, baby boomers hold a disproportionate share of generational wealth, estimated at around $90 trillion. At the same time, the wealthiest individuals are increasingly focused on longevity, directing billions of dollars toward research and innovations aimed at extending human life. For example, a UBS survey of 87 billionaire clients found that many expect to live longer than they did just a decade ago.
SpaceX (Symbol: APCX) IPO — Biggest Ever?
Up to this point, the 2019 IPO of Saudi Aramco was the biggest coming in at a paltry $26 billion (sic). It pales in comparison to SpaceX which is trying to raise a minimum of $86 billion. Of course, this will make the richest man in the world even richer, maybe even reaching a net worth of over $1 trillion. This IPO is already the most hyped and anticipated IPO ever.
Its Falcon 9 rockets lead this technology heavy company for their ability to be reused rather than just falling into the ocean and lost forever. Musk wants to provide the internet to the world and the Starlink series of satellites is well on its way to making this a reality. Then there is Twitter, oh we are sorry X, no, we mean xAI, which collapsed into SpaceX.
Based on early estimates, the valuation of SpaceX following the IPO could exceed $1.5 trillion. That would make Musk a trillionaire. Forget about all those mere billionaires. We will provide you with more thoughts and information as the IPO unfolds this June. Oddly, the shares will be listed on both the Nasdaq Stock Market and Nasdaq Texas Exchange.
Are Insurers Ready for Hurricane Season?
It’s no secret that insurance companies love collecting premiums from their customers, but the risk they undertake often goes unheard. As natural disasters have become increasingly costly for insurers, the $500 billion reinsurance market plays a crucial role in the insurance industry. Reinsurance contracts are essentially insurance policies underwritten for insurance companies, helping transfer some level of risk associated with major catastrophes such as hurricanes or earthquakes, rather than absorbing the full cost.
A single catastrophic event, such as Hurricane Ian in 2022, can leave insurance companies facing billions of dollars of claims on damaged cars, homes, and businesses. In many cases, insurance companies are able to absorb the losses from most natural disasters. However, reinsurance is designed to protect against high-severity events, like Hurricane Ian, which result in excessive losses.
It’s not every day that a catastrophic hurricane hits Florida, but when one does, the reinsurance market can help ensure that customers still receive their payouts, while also keeping insurance companies in business. Ultimately, reinsurance is a crucial tool for managing catastrophic risk within insurance companies.
Up Your Assets™ Podcast
Episode 32 – How Smart Investors Navigate Market Uncertainty
When markets soar or plunge, it’s natural to want to time your moves perfectly. But what if the real secret to lasting wealth isn’t timing, but discipline? In this episode, Ray Ferrara, CFP® and Kara Murphy, CFA®, CIO of Kestra Investment Management, dispel some common misconceptions around market timing, strategies, and the hype surrounding AI and crypto—helping you navigate today’s volatile landscape with confidence.
No FOMO here…learn about Rays’ affinity for a YO-YO, and how the up and down of the stock performance / emerging technologies may reshape markets and what it could mean for future investments. This is essential listening for anyone serious about building wealth and avoiding costly mistakes during uncertain times.
Acknowledgements and Important Disclosures
From the Up Your Assets website
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