Stocks continued last week’s selloff through Tuesday but surged on Wednesday following some positive corporate earnings reports and strengthening consumer sentiment.  This turned into a selloff on Thursday as the reality of a continuing tight labor market and upwardly revised gross domestic product indicated resistance to lowering inflation and the likelihood of continued FED rate hikes.  Stocks recovered some on Friday following November personal spending and PCE price increases being slower than expected.  For the week major indices were mixed with the Dow Jones 30 Industrial Average modestly higher and most other indices modestly lower.

The Bank of Japan, that had been fighting deflation for decades, has been seeing modest increases in inflation and a weakening currency.  Unlike most central banks which strive to control short term rates, the BOE had intervened in the markets to keep their 10 year treasury bond at 0.25% or lower.  This week, the BOE raised the upper limit for the 10-year treasury bond to 0.5% in order to stop the decline in the value of the yen.

Congress passed the omnibus spending bill funding the federal government for 2023.  The bill also included important retirement savings changes:

• The age for required minimum distributions from retirement accounts, currently at age 72 rises to 73 in 2023 and age 74 beginning in 2030.
  • The age to make charitable gifts from IRAs remains at 70.5.
• Most 401k plans will be required to have automatic enrollment beginning in 2025.
• Employers will be allowed to contribute to the 401k plans the amount of employee payments to student debt.
• Beginning in 2024 employees will be permitted to take a $1000 penalty free withdrawal from their 401k once every three years. This was designed to increase participation.
• Beginning in 2025, employees aged 60 to 63 would be allowed to make a larger catchup contribution of the greater than $10,000 or 50% more than the standard over age 50 catchup, currently at $6500.
  • To offset the lost tax revenue from the larger catchup amount, beginning in 2024, anyone making over $145,000 a year would have their catchup contributions be after-tax Roth contributions.
• Beginning in 2026 there would be an enhanced saver’s tax credit for lower income people’s retirement savings that would match 50% of contributions but would not exceed $1000.
• Beginning in 2025 part time workers with two years of 500 hours or more will be eligible to participate in 401k plans, down from the current three year requirement.

Russia announced that it was cutting oil production by 700,000 barrels per day in response to the oil price caps that have been enacted.  The price cap, bars Western companies from insuring, financing or shipping Russian crude at prices higher than $60 a barrel.  

Treasury bond yields rose with the 30-year bond at 3.821% and the 10-Year note at 3.749%.  30-year mortgage rates rose to 6.34%.  Crude oil rose to $79.67 a barrel and natural gas fell to $5.121 per MMBTUs.  The U.S. dollar index fell to 104.33 and gold rose to $1805.40 an ounce.

• The Commerce Department reported:
  • Housing starts fell 0.5% in the month of November and were down 16.4% from a year ago.
    • Single family housing starts fell 4.1% and are down 32.1% from a year ago.
    • Multifamily starts increased as buildings with five or more units rose 4.8% and are up 24.5% from a year ago.
  • Permits to build, a measure of future housing starts, fell 11.2%.

• • The second revision to 3^rd quarter gross domestic product increased the annualized rate of growth from 2.9% to 3.2%.
    • Personal consumption was revised from 1.7% to 2.3%
  • Personal spending rose 0.1% in November.
    • Adjusted for inflation, personal spending was unchanged in November.
  • The price index for personal consumption expenditures rose 0.1% in November.
    • Excluding volatile food and energy, the core PCE index rose 0.2%.  This is the FED’s preferred measure of inflation.
    • From a year ago, the PCE index was up 5.5% and the core PCE was up 4.7%.
  • Personal incomes rose 0.4% in November.
  • The personal savings rate was 2.4%.
  • New home sales rose 5.8% above October’s revised rate.  From a year earlier, new home sales have fallen 15.3%.
    • The median sales price of a new home sale was $471,200.
• The National Association of Realtors reported:
  • Existing home sales fell 7.7% in November.
  • This set a record for 10 consecutive monthly declines.
  • Existing home sales are now down 35.4% from November 2021 due largely to higher mortgage rates.
  • The median home price sold in November declined for the 5^th month in a row to $370,700.
    • This is 3.5% above November 2021 but down from the record high of $418.800 in June.
• The Labor Department reported:
  • Seasonally adjusted first-time claims for unemployment were 216,000, up from a revised 214,000 in the prior week.

• • • The 4-week moving average of claims, designed to smooth out volatility, was 221,750 down from a revised 227,250 in the prior week.
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
  • Field production of crude oil was unchanged at 12.1MM BPD.
  • Natural gas storage fell 87BN cubic feet and is about at 5-year average at this time of year.
• Baker Hughes reported the number of active oil rigs rose 2 to 622.  The number of active natural gas rigs rose 1 to 155.

Please call us if you have any questions.

Thank you,

Loren C. Rex, CFP^®, MA                                                                     Erik A Smith, AIF®

Founder / Emeritus                                                                            President & C.E.O.                                  269-441-4143                                                                                    517-795-2025

Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.