All in all, 2019 was a pretty strong year for the economy.
Job growth was brisk, with both inflation and interest rates low. Economic growth was decent as recessionary fears have abated. Consumers remain confident, highlighted by solid holiday sales.
But this doesn’t mean everyone is prospering. Here are some money and finance trends to watch for in the coming year:
Continuing debt overhang
Now 10 years into the economic recovery, plenty of Americans are only treading water. Pay raises have been spotty, and many people continue to live paycheck to paycheck. Too many households still lack emergency funds, let alone long-term investments.
Some 82% of people who participated in a survey released this month by Fidelity Investments said they’re in a similar or better financial position compared to last year. Yet in the same poll, respondents revealed continuing anxiety about making ends meet and keeping debts under control.
Dealing with unexpected expenses was the top concern among respondents heading into the new year. Another was keeping a lid on debts. The top three New Year’s resolutions cited by respondents are to save more, pay down debt and spend less.
Many individuals still aren’t prepared to meet unforeseen money pressures.
“A large portion of the people I talk to in a given year find that their financial troubles come in steps that cause significant hardship: medical debt, a job loss, a major car repair, a family emergency,” said Jonathan Walker, executive director of the debt-focused Elevate Center for the New Middle Class in Fort Worth, Texas.
Yet many people just keep adding debt until the hurdles eventually become too high, with unexpected challenges finally pushing them over the edge, he said.
Retirement help coming
Plenty of Americans are unprepared for retirement. Reasons include not saving enough, making premature withdrawals and not having access to 401(k) plans through work.
That could start to change now that the SECURE Act, with broad bipartisan support, was passed by the House of Representatives and the Senate this month as part of a federal spending bill.
Among other things, the legislation would expand access to retirement-savings programs for part-time workers and people employed by small businesses, by providing employer incentives and making it easier for small businesses to band together to create 401(k) plans and benefit from economies of scale.
In addition, it would make annuities available in workplace 401(k) plans, providing investors with a way to lock in guaranteed income for life.
The legislation also would tweak Individual Retirement Accounts. Seniors with traditional IRAs who don’t need to spend their money immediately could delay required minimum distributions until age 72, up from 70½ currently. Also, older workers could continue to sock away money into IRAs. Currently, contributions must stop after age 70½.
The IRA changes reflect “the reality that people are living longer today,” said Paul Schott Stevens, president and CEO of the Investment Company Institute.
Good investment results still likely
It might be hard for the stock market to repeat a year like 2019, with the Dow Jones Industrial Average and other barometers up more than 25% through mid-December. But solid economic growth, low interest rates and other factors create a backdrop where the market’s positive momentum could persist.
“The remarkable longevity of the (economic) expansion and a continuation of low inflation and unemployment are all significant positives,” said J.P. Morgan’s markets insight team in a December forecast.
A possible slowdown ahead in economic growth, and rising wages, could put pressure on corporate profits, which could hamper stock prices, the forecast added. So could the threat of higher taxes, more trade tensions and a bloated federal budget deficit expected to top $1 trillion in the current fiscal year.
But while J.P. Morgan sees risks rising, it still expects the stock market to “grind higher” in 2020.
Incidentally, years when presidential elections are held tend to be favorable for stocks, and 2020 falls into that category. The broad market as represented by the Standard & Poor’s 500 has advanced in 19 of the past 23 presidential-election years, dating to the 1920s.
The country might be sharply divided when it comes to politics, but elections also tend to bring a lot of excitement and even optimism.
Rhetoric but little action on taxes
It’s unlikely that we’ll see passage of a major federal tax bill in the coming year — not with a deeply divided Congress in an election year. But Americans will be hearing a lot more about tax proposals as the campaign swings into high gear.
Most proposed changes are coming from Democratic presidential contenders. These include calls to raise tax rates for the highest-earning Americans, expand the earned income tax credit, boost the amount of personal income subject to Social Security taxes (from a current cap at $132,900) and jack up tax rates on dividends and capital gains.
Most radical are the proposals to tax the wealthiest Americans on their net worth, as advanced by Democratic presidential candidates Bernie Sanders, Elizabeth Warren and others.
To help people keep track of these ideas, the Tax Foundation has compiled a tax-plan summary for the leading presidential contenders here or at taxfoundation.org.
Could these proposals become law after the election? it would be a stretch for the most extreme changes, but you never know.
Most respondents in a December survey by the Pew Research Center said they felt today’s economy has mainly benefited the wealthy. A majority of respondents cited poor people, those lacking college degrees, the elderly, young adults and the middle class as groups now being hurt.
Broader help from employers
Workers — especially those at larger corporations — probably can look forward to more benefits and perks in the coming year beyond just paychecks, vacation/sick days, health insurance and perhaps a 401(k) savings plan.
Financial and health wellness programs continue to gain appeal, said Fidelity Investments in a recent review of workplace benefits. These include programs to help with mental and substance abuse as well as deal with student loans, budgeting and other financial pressures.
In part, these efforts address productivity and absenteeism: If companies can help their employees deal with personal problems, they could develop into more reliable and productive workers.
Fidelity also sees a trend toward greater social responsibility in the workplace including more company subsidies for charitable giving and volunteering, with more flexible work schedules and work spaces.
As for older workers, Fidelity expects to see more companies assist their employees and recent retirees in making retirement-plan withdrawals.
Until now, the focus has been in helping workers accumulate savings in 401(k)-type programs. Now, more employers apparently feel responsible for helping them pull out assets in a smart, efficient manner.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
