STRONG INCREASE IN PERSONAL INCOME IN NOVEMBER: In November, personal income for the average American increased by 0.5% from the prior month.
THE U.S. CONSUMER IS SPENDING: U.S. consumers increased their spending by 0.4% in November from the prior month. November spending was 2.4% higher than one year ago. Durable goods including automobiles, led the way rising 1%.
THE YIELD CURVE STEEPENS: A fairly reliable predictor of recessions is when the so-called yield curve inverts. This occurs when the yield you can obtain on the ten-year U.S. Treasury is less than the yield you can get on a two-year U.S. Treasury. That is interpreted as an indicator of loss of confidence in the future prospects of the economy, and thus a predictor of recessions. The yield curve inverted for the briefest of moments in August which set off alarm bells, and we discussed that here in detail. On Thursday, the U.S. Treasury yield curve reached its steepest point in over a year at 31 basis points. Federal Reserve policy easing and signs of improving economic data seems to have reversed the direction of this indicator.
U.S. HOME SALES IMPROVE: At the end of 2018 and into 2019, sales of U.S. homes slumped due to higher mortgage rates, worry about the stock market and fears of an economic slowdown. Overall, through June of 2019, we had 16 consecutive months where home sales were lower than the year before. In November, existing home sales were 2.7% higher than November of a year ago. This is now the fifth month in a row that there has been a year-over-year increase in sales.
UP AGAIN: With a major stumbling block to stock market growth (U.S./China trade tension) seemingly out of the way (for now), markets have roared ahead. When you add to that encouraging economic reports from both countries, it is a recipe for strong markets. On Friday, the S&P 500 and other indices hit new record closes.
THE SECURE ACT: This past week, the President signed Congressional legislation called the SECURE Act, which will make some changes to retirement planning. Here are some of the changes:
- The age for required minimum distributions is being moved from 70 and one half to 72. (NOTE: If you turned 70.5 in 2019, you still need to take your required minimum distribution this year. People turning 70.5 in 2020, however, can wait until they are 72).
- Non-spouse IRA inheritors now have to withdraw the money faster. Under the current law, if you inherit your IRA from a non-spouse, you can stretch the withdrawals (and hence the tax deferral) for your lifetime. Now it all has to be taken out in ten years.
- Small employers now will get a tax credit to offset the costs of starting a 401(k) plan if they include auto-enrollment.
- Annuities will be a more likely option in retirement plans as the SECURE Act makes it easier to put such investments in these plans.
- New parents will be able to withdraw up to $5,000 from their retirement plans, without penalty (but still pay the income taxes) to cover expenses related to the birth or adoption of their new child.
SET YOUR PRIORITIES: I’ll end this week with a quote I just read by an American humorist who passed away over 20 years ago now. This comes from a column she wrote after she learned she was dying of cancer, and which she titled, “If I Had My Life to Live Over Again”: