Windsor Wealth Management LLC

Investment service in Topsfield, Massachusetts

Windsor Insights

Stock Market Seasonality & the September Effect

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We’re anticipating a bumpy September, aka the September effect.

Certainly, the past doesn’t dictate the future. However, data collected since 1928 show the market often dips in September.

S&P 500 Monthly Returns from 1928 through 2023
(See the full set of charts here.)

The Truth About Stock Market Seasonality

In reality, slower stock market activity in late summer through September is likely due to financial professionals taking vacations.

Less people working means less trading. This can also cause bigger market swings, since there are less trades to neutralize stock fluctuations.

Apathy likely plays a role too.

Some people simply don’t work as hard in the summer.

Also, when vacations are over, many financial professionals start rebalancing portfolios.

This often includes selling underperforming stocks, which can create downward pressure on the markets.

Santa Claus Rally

The chart also highlights a common Q4 occurrence: the Santa Claus Rally, when the market tends to swing upward.

Remember, consumer spending makes up two-thirds of the economy. The markets tend to increase at year-end in anticipation of holiday spending. (Roughly 19% of annual retail sales happen in November and December.)

Also, another common December occurrence you don’t often hear about is: window dressing.

Essentially, financial firms buy well-known and well-performing stocks to make their financial statements look better. There are legal measures to curb these activities, but it still happens. Either way, the activity adds to the December upswing.

Embrace Volatility

We view volatility as an opportunity.

While it’s not always the case, periods of volatility can be a great time to purchase stocks at attractive prices.

Of course, volatility is just one factor to consider when choosing investments.

Other considerations include market performance year-to-date, the political environment, the situation in the Middle East, the economy overall, interest rate changes and more. (Remember, it’s our job to worry about all these factors for you, so you can focus on enjoying yourself.)

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Q2 Stock Market Results, Job Creation Cooling, Rate Cut Likely

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It’s hard to believe it’s already August.

Where does the time go?!

We hope you’re enjoying a healthy and relaxing summer.

Acadia National Park
Acadia National Park
Photo by Peregrine Photography

Today, we’re discussing:

– Last quarter’s stock market results.

– Factors driving market movements.

– Noticeable slowdown in new jobs.

– Reasons for the early August market correction.

– Potential September interest rate cut.

– Changes we’re making to your portfolio.

Q2 Stock Market Results

The market performed well last quarter.

From January through June, it saw an overall increase of about 15%, with Q2 contributing 4.25% of this growth.

The Magnificent 7 (Apple, Microsoft, Amazon, Nvidia (computer component manufacturer), Tesla, Alphabet (Google) and Meta (Facebook/Instagram/Threads) continue to drive the market’s growth.

However, in the past several days the tech giants are down roughly 20% compared to the overall market.

Why?

Because they’re overvalued.

The other 493 stocks in the S&P 500 are generally performing well. While they haven’t seen the 100%+ gains like the Magnificent 7, their steady performance is a positive sign, reinforcing the benefits of diversification.

Recent Development

A new trend we’re seeing is the sell-off of tech stocks.

Investors are rebalancing by taking profits from these stocks and shifting their investments to more stable, dividend-producing stocks.

Berkshire Hathaway Sold 50% of Its Apple Shares

Speaking of selling tech stocks, Warren Buffett, chairman and CEO of Berkshire Hathaway, supported the sale of roughly 50% of the firm’s Apple stake since the start of the year. Keep in mind, the firm still owns about 400 million shares of Apple stock!

What’s driving the tech selling?

A few things are likely: economic caution, profit taking and maneuvers spurred by the recent jobs report.

July 2024 Jobs Report

According to the Bureau of Labor Statistics (BLS), the U.S. economy added 114,000 jobs in July, a noticeable slowdown from June’s 206,000 jobs.

The unemployment rate also rose to 4.3% in July from 4.1% in June.

Unemployment Rates at a Glance (Last 20 Years)

Job Creation Is Cooling Unemployment Trends
Explore more unemployment factors here, including unemployment by age and education.

Another Interesting Fact From the BLS Jobs Report:

The number of people employed part time for economic reasons rose by 346,000 to 4.6 million in July.

These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

Suffice it to say, the labor market is cooling some. Also, much of the recent job creation is government and health care jobs.

Early August Stock Market Activity

August started with a market correction.

Interestingly, 94% of years have a decline of 5% or worse (see chart). Said differently, the U.S. stock market experiences a correction almost every year.

By definition, a market drop of 10% is considered a correction, while a drop of 20% signals a bear market, the latter occurring about every four years.

Even with the correction, we’re still up about 13% on the year.

Remember, the stock market dislikes uncertainty—the jobs report, upcoming elections, recession rumors and geopolitical turmoil (Iran-Israel tensions) often cause market movements in every direction.

Will the Fed Cut Interest Rates This September?

It’s likely they will, as well as in November and December. Given the recent jobs report and signs of economic slowing, there’s increasing pressure on the Fed to cut rates.

Keep in mind, the Fed’s focus is managing inflation and maintaining full employment. In general, they’re not supposed to care about the stock market.

Your Portfolio

We’re focused on balancing portfolios.

Recently, portfolios have become overweighted in tech stocks due to the sector’s rapid growth over the past few months.

It’s time to take some profits.

After extensive financial modeling, we’re also pulling out of the Vanguard Health Index (VHT). While it’s been one of our favorite investments, it’s now causing health care to be overweighted in portfolios as other funds have added more health care stocks to their mix.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Maintaining Retirement Lifestyles: Compound Interest’s Role

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Compound interest is vital both during your working years and in retirement.

Many people concentrate on saving during their working years, however, it’s as important for your money to continue growing during retirement.

This growth helps ensure you maintain your lifestyle for the next 30+ years, including keeping up with inflation and taxes.

The below chart reflects the power of compound interest. Specifically, growth of $100K over 30 years using different interest rates.

In general, holding too many cash-equivalent investments or trying to time the market by moving all your money into cash can cause you to miss out on the compound interest your portfolio needs to outpace inflation.

Compound Interest Chart
This hypothetical example assumes an initial $100,000 contribution, with no additional deposits, and compound interest from 1% to 10%. It does not suggest nor recommend that an individual allocate 100% to equities. The ending values do not reflect taxes, fees, inflation or withdrawals. View the full 30-year compounding chart.

What happens if you try to time the market?

Studies show that missing the stock market’s 10 best days over a 30-year period can lower an investor’s average annual total return by 2.72%.

Missing the best 30 days lowers an investor’s return by 6.14%!

(Source: Bloomberg and Wells Fargo Investment Institute. Daily S&P 500® returns from 9/1/92–8/31/22.)

Realistic Approach That Supports Your Retirement Lifestyle

Instead of market timing, the 60/40 portfolio remains a reliable basis for asset allocation.

In fact, it’s achieved a compounded annual growth rate of 7.3% over the 200 years’ worth of analyzed data (from 1820 to September 30, 2023), according to Morgan Stanley research.

Certainly, the past doesn’t predict the future.

60/40 Example

In a recent client communication, we provided an approximate 60/40 portfolio example using a conservative 6% annual return to show how a couple with $2 million in retirement savings could grow their wealth to $2.6 million while adhering to the 4% annual withdrawal rule. See the realistic example here: 3 Steps To Help Your Money Outlive—You.

Stay the Course

Trying to time the market, i.e., moving all your money into cash, can be detrimental to your long-term investing success, including missing out on compound interest.

Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it. – Attributed to Albert Einstein

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

3 Steps To Help Your Money Outlive—You

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Today, we help you understand how to make your money outlive you.

The topic of “outliving your money” arises often.

To help ensure your money outlives you, understand these three concepts:

#1—Understand the 4% Withdrawal Rule

#2—Include Retirement “Smile” Spending Changes

#3—Apply Sophisticated Financial Modeling Guardrails

Let’s look at each step in detail and dispel a popular retirement money myth.

Step #1—Understand the 4% Withdrawal Rule

The 4% retirement income withdrawal rule has been used for decades by many investors and financial advisors.

It’s a general rule-of-thumb to help ensure you don’t overspend and, therefore, run out of money during retirement.

Specifically, 4% is considered a sustainable annual withdrawal rate that maintains your savings throughout retirement.

It’s a helpful benchmark.

However, it often doesn’t include all income forms (e.g., apartment rental, Social Security, pension, etc.), or life events (e.g., divorce and helping adult children financially).

4% Rule in Action: Married Couple Example

The below chart depicts a married couple beginning retirement with $2 million in savings, and after applying the 4% rule, having roughly $2.6 million in savings 30 years later.1

That’s right, they end up with more money than they started with.

This example accounts annually for: 2.5% inflation, 6% portfolio growth and 4% income withdrawal, with the couple starting retirement on January 1 and withdrawing $80,000 for the year.

4% withdrawal rule chart
1This is a hypothetical example, simplified for illustration purposes. The ending values do not reflect taxes, investment costs or expenses.

Generally speaking, when you use the annual 4% sustainable withdrawal rate, you likely won’t run out of money in retirement.

Deep Dive: See Fidelity’s comprehensive explanation of the 4% withdrawal rule.

Step #2—Include the Retirement “Smile” Spending Changes

In reality, most retirees spend similar to the retirement smile.

Specifically, spending is higher in initial retirement years, dips during middle years and then increases again in later years.

Simple Example:

Many retirees spend extra on travel during early retirement. Then as you age travel drops off, while health care spending grows.

Up, down, up = smile.

Retirement Smile Spending Chart
Retirement Smile
Image created using Microsoft’s AI image creator.

Continuing the 4% rule example above, the couple would withdraw at least $80,000 from savings each year to cover their expenses.

However, this number isn’t always reflective of reality.

Some years the couple’s withdrawal rate may need to be higher, perhaps $120,000.

Why?

Because hot water heaters break, pool liners tear, vehicles become unreliable and adult children sometimes ask for loans.

We can budget (links to/downloads our budgeting worksheet) till we’re blue in the face and we should! But, life happens.

Therefore, to help make your retirement savings last, consider how spending changes throughout retirement.

Step #3—Apply Sophisticated Financial Modeling Guardrails

There’s a popular myth about retirement.

Specifically, many retirees believe stock market performance could cause them to run out of money.

This isn’t likely true.

Instead, your greatest financial risk is generally longevity risk.

Stock market risk can be greatly reduced by how your portfolio is constructed.

For Example:

The market generally falls about 14% in a given year and bounces back, and one out of five years it typically drops up to 30% for a period.

We help protect you from these fluctuations during retirement by putting about two-to-three years of money aside (cash-like investments still earning interest), so you’re not selling during a down market to fund living expenses.

Managing longevity risk, however, requires sophisticated financial modeling to help reduce the possibility of running out of money in retirement.

Our team uses several financial modeling programs to help you understand what you can spend each year during retirement without running out of money.

One key feature is the ability to apply “guardrails” that show how your money performs during both up and down years.

Ultimately, we stress test your money by applying different scenarios, e.g., retiring during the 2007 financial crisis.

The goal is to keep your spending within the guardrails. Ultimately, your annual “paycheck” may fluctuate some year to year.

Here’s one program in action, using the couple’s $2 million:

The following graph depicts upper (green) and lower (red) guardrails with the couple’s portfolio balance in blue.

Each vertical line shows an intersection whereby the couple can withdraw more than their annual $80,000.

How are the guardrails set?

Our goal is to keep you from hitting the red guardrail.

Therefore, when establishing your unique guardrails we consider your age, goals, health, risk tolerance and how much money you have, while also putting aside a couple years of spending so we don’t have to invade the portfolio during market down years.

In general, we construct your portfolio to stay in between the market’s highs and lows.

We also use historical data to drive the highs and lows. (It goes without saying we don’t know what the future holds.)

Your Money Outliving You Using Financial Modeling Guardrails
Modeling Program: Income Lab

As you can see, there’s a lot going on here, including establishing guardrails and spending limits based on unknown longevity.

Reach out anytime to discuss. We’re happy to show you various retirement withdrawal scenarios using your unique guardrails.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Prices Are Falling Some; Retailers Are Feeling the Squeeze

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Here’s some good news:

Several large companies are lowering prices on popular items, including food and everyday essentials.

Certainly, we welcome these savings, but what’s really going on?

Essentially, consumers have slowed their spending, and retailers are feeling the squeeze.

In response, Walgreens, Amazon Fresh, Target and Walmart have cut prices on 1,300, 4,000, 5,000 and 7,000 products, respectively.

Best Buy, Ford, Ikea and fast-food chains are also lowering prices, according to the Washington Post.

Reasons Why Prices Are Falling:

Economic Jitters: Retailers are feeling nervous after raising prices due to inflation. With households cutting back on spending, stores are yielding in the game of chicken between stores and shoppers, according to a WCVB article.

High Interest Rates: Financing big-ticket items like cars and appliances is more expensive, resulting in consumers forgoing these purchases.

Dwindling Covid-Relief Funds: Most Covid-relief funds are spent, reducing the extra cash households had for discretionary spending.

Competitive Strategies: By lowering prices, businesses aim to attract their competitors’ customers.

These price cuts are a small win, but we’ll take it! Finally, the economic pressure consumers may be feeling has shifted some onto businesses. Still, the tug-of-war between retailers and shoppers is likely just beginning.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Your Portfolio: The Economy and Health Care Costs

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Today we’re addressing our clients’ top two concerns reflected in our recent client questionnaire (see chart below).

Specifically, the two concerns are:

#1—The Economy

#2—Health Care Costs

Outliving Your Money tied for second. We’ll address this concern in a future client letter.

Windsor Wealth Management Client Questionnaire Anonymous Responses

Windsor Wealth Management Client Questionnaire, Topsfield, Mass.

The Economy

It’s not surprising the economy is a priority for many.

Let’s take a look at what’s happening with the economy, and then what we’re doing to strengthen your financial portfolio.

Recession Concerns

There’s a lot of talk about a recession, and it’s often exaggerated due to various opinions and agendas.

Historically, recessions happened about every five years. Today, they’re further apart because the Fed is doing a better job cutting back on the highs and lows. Said differently, economic management is better.

Nevertheless, most of the current recession talk is hype.

We’re not in a recession.

Consumer Spending

Consumer spending is down. The recent inflation has caused many households to spend more cautiously. Remember, consumer spending makes up about two-thirds of the economy.

Interestingly, inflation was low for so long, that many younger people don’t know what inflation looks like. When confronted with an unfamiliar situation, they become cautious and reduce spending, compounding the slowdown.

Economic Growth

Overall, the economy is slowing.

A year ago, the growth rate was 2.9%, today it’s about 2.0%. Some economists believe it’s even lower, hovering around 1%.

This decrease in economic growth is directly related to reduced consumer spending and higher interest rates.

In fact, in nearly every recent client conversation, when the topic of rising costs comes up, typically it’s about the increasing grocery prices.

Still, it’s not just reduced consumer spending slowing economic growth. The $6 trillion spent by the U.S. government because of Covid had many far-reaching effects, and it’s catching up to us.

The Economic Reality…

It’s true, food and other items continue to be expensive and the economy is slowing.

Nevertheless, we can’t stress this next point enough—everything you’re experiencing in regard to pricing and possible feelings of caution are part of a normal process; specifically, we’re in an economic cycle.

Rarely is there a straight line to creating growth within your portfolio.

Generally, to grow your portfolio we need market ups and downs. Of course, it doesn’t always feel good when there’s a sense of uncertainty. But, we need to hang in there and ride out market swings.

Historically, we’ve always recovered from recessions.

Furthermore, the economy is growing—slowly, but it’s still growing.

Unemployment remains low, jobs continue to be created and strong corporate earnings continue to support the market.

Remember, the media often amplify fears to drive viewership and ad sales, i.e., recessions make for a good scare.

Don’t take the bait.

Instead, let us worry about the economy for you.

It’s our job; mitigating your financial stress and seeking financial buying opportunities during turbulent and uncertain times. We monitor the markets every day so you don’t have to. Our key goal is to help ensure you don’t outlive your money.

Health Care Costs

Understandably, health care costs are top of mind for clients.

According to Fidelity’s 22nd Annual Retiree Health Care Cost Estimate, “A 65-year-old retiring this year (2023) can expect to spend an average of $157,500 in health care and medical expenses throughout retirement.”

In our experience, once you retire and begin using Medicare, you’ll likely pay about what you’re paying now through your employer’s plan, including premiums and out-of-pocket expenses. A key exception to this statement is if your employer covers a lot.

Also, for those self-employed, the costs are often lower.

For specific costs, here’s a detailed chart on our website for 2024 Medicare premiums and deductibles. Also, we have an excellent brochure detailing the ins and outs of Medicare. Please reach out if you’d like us to mail you a copy. Or stop by, we’d love to see you!

Keep in mind, similar to most employer-sponsored health insurance plans, with Medicare Advantage plans (Part C) you’re generally protected by an annual out-of-pocket maximum (excluding nursing home and assisted living care). However, Original Medicare does not have out-of-pocket maximums. It’s a key reason why many individuals have Medicare Advantage plans.

Resource: Compare Original Medicare & Medicare Advantage

Day to day, most clients do well managing their health care costs in retirement.

Nevertheless, it’s important to revisit your household budget annually, including updating your health care costs. Use our detailed budgeting worksheet. (Depending on your computer settings, the worksheet may download automatically from our secure website.)

Key Retirement Health Care Financial Challenge

For retirees, the health-care cost challenge generally happens if you need assisted living or nursing home services. In general, both Original Medicare and Medicare Advantage plans might offer limited short-term nursing coverage after a hospital stay; however, not long-term care.

Long-term care insurance can help with some of these costs. Generally, a long-term care insurance policy costs about $7,000 per year. It won’t cover everything, but it helps preserve your money.

For Example:

A nursing home may cost $400 per day. Long-term care insurance will pay about $250 of that, leaving you with $150 per day. No policy is ideal, but it can help protect your estate. (As a fiduciary, we don’t sell insurance. However, we have longstanding relationships with insurance specialists. Several of our clients have long-term care insurance. If you want to work through the numbers, give us a call.)

Here’s a detailed breakout of nursing home care costs by state.

What’s our role in helping you manage your health care costs?

Health care is another topic the media often spin negatively. It’s important to recognize this, since negative news can heighten feelings of uncertainty.

We’re here to help you forecast and budget for your health care costs. We’ll get as involved as you want in this financial discussion. In addition, we help you understand what you can spend during retirement from year to year, given how the markets are performing.

Remember, a key charge for us is to grow your portfolio both now and while you’re retired. This potential growth helps you keep pace with rising inflation and increasing health care costs.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Windsor Money Minute: Cash & Your Portfolio

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Image created using Microsoft’s Image Creator

How does a stash of cash waiting on the sidelines affect you?

Let’s find out…

Investors’ cash held on the sidelines is at an all-time high of $23.6 trillion. To put this in perspective, the stock market is valued at about $50 trillion.

This cash is in money market accounts, CDs and other short-term savings vehicles.

Investors stash cash out of caution. Plus, you can earn roughly 5% on cash today, compared to just 0.01% in 2010.

Why share this fact?

Because when sidelined cash comes back into the markets, something wonderful will likely happen.

Specifically, when cash flows back into the markets, stock prices typically rise, which benefits us since we’re invested in stocks and bonds.

Consequently, many of the stocks you own will likely increase in value. While we do keep some cash reserves, they’re only to ensure we meet your financial goals.

When will cash start pouring back into the markets?

No one knows for sure.

However, two key triggers are likely:

#1—Falling interest rates: When rates go down, investors will no longer be able to earn 5% on their cash and, therefore, they’ll be looking to reinvest in equities or similar.

#2—Increased confidence post-elections: Once we know who the next president is, we’ll likely get back to business-as-usual.

Keep in mind, the Fed is unlikely to cut rates because it knows that the impact of raising and lowering interest rates can benefit a political candidate, and it doesn’t want to appear biased politically. Therefore, the Fed may wait for the election to be settled before acting again.

Overall, we’re optimistic about our investments.

Cash flowing back into the markets will likely boost your portfolio’s performance.

Sincerely,

Dave

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

Q1 Stock Market Overview: Highest Performer and Underdog

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U.S. stocks were up 10% in Q1. Artificial Intelligence (AI) is a key factor fueling growth.

Image created using Microsoft’s AI image creator. Prompt: Create an image depicting the stock market increasing.

During Today’s Q1 Stock Market Overview Discussion, We:

  • Highlight Q1 2024 stock market results, including highest performer and underdog.
  • Explain what’s driving the results.
  • Clarify a misconception about U.S. oil availability.
  • Describe how AI could make your current work commute faster.
  • Provide inflation and interest rate updates.

Q1 Stock Market Overview

2024 is off to a strong financial start (U.S. stocks are up 10% quarter over quarter). Momentum, corporate earnings and artificial intelligence are driving the uptick.

Nevertheless, election years tend to be volatile.

Why?

Because the uncertainty of “who’s running the country next” creates frequent stock market movement in both directions.

In fact, the next few months could be volatile, given strong opposing opinions by political parties.

Overall, we’re optimistic about the financial environment.

As a reminder, volatility often creates opportunities, i.e., buying stocks on sale.

Related: Read our recent client letter: Upcoming Election vs. Your Portfolio.

Q1 2024 Stock Market Results

January 1 through March 31

  • The U.S. stock market increased by 10%.
  • International stocks were up just over 4.5%. The U.S. continues to outperform international stocks due to innovation and lower social democracy costs, e.g., government provided education, healthcare, public pensions, etc.
  • Bonds were slightly negative, down less than 1%.

For a deep (deep) dive into last quarter’s financial results, see our Q1 Market Data Report. It includes data by asset class and equity style.

The stock market’s highest performing sector was energy, up 13.5%.

Overall, energy companies are doing well.

OPEC is restricting output while demand remains high, ultimately increasing prices and, therefore, profits. A barrel of crude oil is about $85.

Current U.S. Oil Production

Given media coverage, many Americans believe that U.S oil companies are not producing as much oil as in previous years.

The fact is, U.S. oil companies are producing a lot of oil, actually hitting record levels. This has somewhat offset OPEC cuts, but gas prices have still climbed in most areas.

For more details, read the U.S. Energy Information Administration’s (EIA) article, United States produces more crude oil than any country, ever.

Q1 Underdog: Real Estate

The real estate sector was flat last quarter, down 0.65%.

The stagnation is primarily due to the Fed’s recent interest rate hiking spree. Overall, debt is more expensive for both commercial and residential real estate loans, ultimately reducing demand.

Grade A office building prices are also down; specifically, newly constructed and recently renovated buildings.

Interestingly, hedge funds are considering buying these buildings. Typically, hedge funds buy and sell financial instruments, e.g., bonds, commodities, equities and other currencies.

Nevertheless, hedge funds go where they see the biggest value.

Big Tech & Artificial Intelligence (AI)

U.S. tech stocks were up roughly 9% last quarter. Much of this growth is due to the AI frenzy. Keep in mind, AI has been around for a while. For example, Google’s search engine is AI driven. Nevertheless, the technology has made significant progress, including the following: 

Brief “Discussion” with Google’s Gemini AI App

We prompted Google’s Gemini AI App with the following question. The answers are impressive. (To manage reading length, we didn’t include the full response.)

Prompt:

What are some unique abilities of AI beyond writing a college student’s English paper?

Start Reply:

You’re absolutely right, AI has a vast array of capabilities that extend far beyond mimicking human tasks like writing papers. Here are some areas where AI shines with unique abilities:

Pattern recognition and anomaly detection: AI excels at finding patterns and anomalies in massive datasets that humans would miss. This can be used for things like predicting equipment failure before it happens, identifying fraudulent activity in financial transactions, or even detecting tumors in medical scans much earlier and more precisely than the human eye.

Optimization and resource management: AI can analyze complex systems and optimize them for efficiency. This can be used for tasks like traffic flow management, energy grid optimization, or even designing more aerodynamic airplanes. Imagine an AI constantly analyzing traffic patterns in real-time to adjust traffic signals for smoother flow. (Yes, please!)

Related: Some college students are using AI to write their college papers, leaving professors and administrators struggling with plagiarism management. A key hurdle is reliably detecting AI usage. Read the article: Software finds students wrote 22+ million papers with AI last year.

Inflation & Interest Rates

Inflation is down, hovering around 3.4% from an average 8% high in 2022. (The Fed’s target is 2%.)

Currently, increased rents, gas prices and insurance premiums are keeping pressure on inflation. Car insurance has surged 22.2% from a year earlier. Insurers have been hiking premiums to offset their rising costs due to extreme weather and the higher cost of new automobiles.

Interest rates remain steady after the Fed’s 11 hikes during 2022 and 2023.

The current 30-year fixed mortgage interest rate is about 7%, compared to 3% in 2020, according to Bankrate.

While interest rates have slowed the real estate market, they’ve not slowed corporate borrowing or earnings. Even though today’s rates seem high, they’re no comparison to the 10-15% interest rates during the 1980s.

In general, most of the rate hike impact gets passed on to consumers.

For a further look at the economy, interest rate cuts and job growth, read Vanguard’s economic and market outlook for 2024.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.