There is mounting evidence that global inflation has peaked. Decelerating price increases or outright price declines are primarily witnessed in wholesale/producer prices which may account for as much as half of the unusually sharp rise in inflation this year; service sector prices are expected to follow, perhaps less dramatically. The growing commentary on this development places some pressure on the US Federal Reserve to justify another 75bps rate hike in December, while other central banks are more clearly likely to slow their monetary tightening given the economic weakness being seen outside the US. Although the week was shortened by the Thanksgiving holiday, markets rallied as weak economic data and the latest Fed Open Market Committee (FOMC) minutes (recession is our baseline over the next year) saw investors dial back their rate hike expectations. Signs of slower growth are seen as bringing fewer inflation pressures and hence fewer rate hikes. We believe investors are only now beginning to consider incorporating the earnings implications of the higher interest rates. At the time markets seriously reset 2023 earnings expectations there will be a better indication of market stability. On the wealth planning front, we discuss how the 65 day rule may provide potential tax savings. The 65-day Rule, a friendly term for the IRC 663(b) election, allows the distributions from a trust to its beneficiaries within the first 65 days of the year to be treated as prior-year distributions. We also discuss the advantages of an HSA and its benefits for tax and offsetting healthcare inflation.
Click Here to Read the November 28, 2022, Economic Commentary
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