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What Moves the Needle: From advisor Matthew McDaniel—

When you work in the money and tax space, you are often asked a variation of the following question.

“What is the one thing, the one investment to purchase, or the one tactic I can do right now to improve my financial position or lower my tax bill?”

The answer is, unfortunately, “there is no one thing.”

Your financial outcomes derive from a combination of many decisions.

Below are a few examples.

  • How much do you earn in comparison to how much you spend?
  • Are your investments diversified?
  • Do you have the proper type and amount of insurance?
  • Are you contributing to the right accounts?
  • What is the longevity of your job or profession?
  • What is the plan for the kid’s education?

The areas listed above are within your discretion. You can change or alter them tomorrow.

However, if you were to open this week’s edition of Barron’s or the Wall Street Journal, you would be bombarded with stories on inflation, China’s economic policy, and the Fed.

Do those decisions impact your life? Sure, I’ll concede every decision has a trickle-down effect. Do you influence how that decision is made? No.

Focus 100% of your time on the areas where you have influence or control. It’s incredible how this change in thinking can impact your finances and, even more importantly, your life.

I’ll leave you today with a story about a boy named James.

James grew up in Michigan in the 1930s. He had a debilitating stutter. Constantly tongue-tied and refused to speak. He withdrew because of his impediment. He was considered a mute for years.

What came of this young man’s life?

You might know him. Or heard his miraculous voice. Perhaps you have watched The Lion King, Sandlot, Star Wars, or Field of Dreams.

The boy’s name is James Earl Jones.

Mortgage Rates: We found this chart interesting:

Despite the problematic rates and crazy housing market over the past several years, data shows that most mortgage rates are below 6%.

Some economists believe that the more than ten years of home price gains could soon come to a close once the Federal Reserve’s tightening cycle ends. Since early 2012, home prices have climbed steadily, peaking in June 2022. Fed rate hikes boosted mortgage rates, keeping existing homes off the market but adding to homebuyer demand. Some believe that rate cuts would bring housing costs down as the higher rates have constrained the housing supply. Others believe that with the unpredictability of the Fed, the ten years of steady home price gains that investors assumed would continue will end. It’s hard to tell, but it’s an important economic factor to keep our eye on as we consider the economy’s overall health.

Business Briefing

  • Interest Rate Hike: On Wednesday, the Federal Reserve raised its benchmark short-term interest rate a quarter percentage point, its 11th hike in 17 months under an aggressive campaign to slow the economy and bring down high inflation. The change put the rate in a range between 5.1% and 5.3%, a 22-year high. Inflation in the last month eased to its slowest pace in two years but remains above the Fed’s 2% target. Fed Chair Jerome Powell left the door open to another rate hike in September and said given the economy’s resilience, the central bank’s economists “are no longer forecasting a recession.” (Bloomberg, The Associated Press).
  • Economic Growth: U.S. economic growth accelerated to a 2.4% annual rate in the second quarter, up from 2% growth in the first quarter in the latest sign of resilience despite the Federal Reserve’s aggressive interest rate hikes to bring down inflation. The expansion, reported Thursday by the Commerce Department, outpaced the 1.5% growth in gross domestic product, a measure of total goods and services output, that economists had predicted. The growth was fueled by a surge of investment by businesses in such things as factories and equipment. Consumer spending, the economy’s main engine, remained solid but slowed to a 1.6% annual rate from 4.2% the previous quarter. (The Associated Press)
  • Gas Prices Jump: According to AAA data, national gas prices jumped 4 cents to $3.64 on Tuesday in the biggest one-day increase since June 2022. Gas prices are higher than in the same period in 2021 but far below what they were in June 2022, when the national average rose above $5 per gallon for the first time. The decline in gas prices in the last year helped reduce inflation from its peak of 9.1% last summer to 3% annually, last month. Oil prices have also risen recently. (The Wall Street Journal)

Happy Hour: 5:00 p.m. is the new 7:00 p.m. in the States. According to Yelp, restaurants are now seating 10% of diners between 2 p.m. and 5 p.m., up from 5% in 2019. Dinner parties are starting as early as 5 p.m. The dining-hour shift is credited to another response to shifts with the COVID-19 pandemic. With more employees working from home, by 5 p.m., they are ready to close the laptop and have real, human interaction. The ripple effect is increased Uber rides at 4 p.m. (up by 10%), Broadway shows starting at 7 p.m., late seatings at restaurants being 8:30 p.m. (they used to be 11 p.m.), and happy hour menus beginning at 5 p.m. (instead of 5:30 p.m.). We’re definitely not trending towards a more European schedule!