#44 - Mid-Year 2024 Market and Retirement Plan Update w/ Todd Zempel

Welcome to the quarterly retirement plan update with Gordon Asset Management. In today's episode, Todd Zempel will recap the first half 2024 market performance and discuss the retirement plan provisions most likely to be adopted by plan sponsors according to PlanSponsor.com.

Transcript

Speaker 2: 0:09

Welcome to the Gordon Asset Management Podcast. On today's show, your host, Todd Zempel, will review market performance through the first half of 2024, as well as cover the latest updates on corporate-sponsored retirement plans. Please tune in to the End for important information and disclosures about our firm.

Speaker 1: 0:29

Welcome to the show. This is your host, Todd Zempel, partner and director of Retirement Plan Services. We have a great show lined up for you. Today. There is a lot to report on in the world of investments and retirement plans, so, without any further ado, let's jump right in.

Speaker 1: 0:48

As of June 30th 2024, the stock market, as represented by the S&P 500 index, has shown a robust year-to-date performance, with a total return in excess of 15%. This growth has been driven by significant gains in the technology and consumer discretionary sectors. Despite a volatile economic environment marked by fluctuating interest rates, geopolitical tensions and politics, the stock market has continued its upward trajectory. The technology sector has once again taken the lead, with companies like NVIDIA and Apple driving substantial gains. Nvidia, in particular, has been a standout performer due to its strategic position in the AI and semiconductor markets. Many view NVIDIA as the picks and shovels play in the tech sector. For those who may not be familiar with that analogy, think of NVIDIA as a business that sells mining equipment. During a gold rush, Some miners may strike it rich, many won't, but you can rest assured that those selling the shovels will have the most reliable profits. In the consumer discretionary sector, companies like Amazon have shown robust performance. Amazon's expansion into new markets and continuous innovation in e-commerce and cloud computing have bolstered its stock price.

Speaker 1: 2:15

Turning to fixed income, the bond market has seen varying performance across different segments. Through June 30, 2024, the Bloomberg US Aggregate Bond Index has experienced losses of 0.71%. On the other hand, the Bloomberg US High Yield Index has performed better, showing returns of approximately 4.5%. Interest rates have been a significant factor influencing fixed income performance. A significant factor influencing fixed income performance. The Federal Reserve's monetary policy has seen several rate hikes aimed at curbing inflation, pushing the benchmark interest rates higher. As of June 2024, the yield on the 10-year US Treasury note has risen to about 3.5%, reflecting market expectations of continued economic growth and inflationary pressures.

Speaker 1: 3:07

It's important to understand the inverse relationship between interest rates and bond prices. When interest rates rise, bond prices typically fall. This is because the fixed interest payments of existing bonds become less attractive compared to the new bonds issued at higher rates. Bonds become less attractive compared to the new bonds issued at higher rates. Conversely, when interest rates fall, bond prices generally increase as the older bonds with higher rates become more valuable. With that in mind, as many analysts are anticipating the Fed to start cutting interest rates in September, it is possible we could see some positive momentum in FIX later this year. Here's a quick overview of other key indices' year-to-date performance. Small caps, as represented by the Russell 2000 Index, are up 1.73%, the MSCI Emerging Markets Index experienced a 7.68% gain, the Bloomberg Commodity Index put up a 5.14% return and the tech-heavy NASDAQ, led by stocks like NVIDIA, is up over 18%.

Speaker 1: 4:18

Looking ahead, the upcoming presidential election is a significant event that could impact the markets. Historically, elections haven't mattered all that much for markets over the longer term. Elections haven't mattered all that much for markets over the longer term. However, markets tend to experience heightened volatility in election years as investors react to the uncertainty and potential policy changes. As of the date of this recording, July 18th 2024, we've already seen an assassination attempt on former President Trump and a crescendo of voices on the left calling for Biden to step aside. Not to mention Biden just canceled several events as he isolates with COVID. Despite this, the markets have been surprisingly complacent as investors come to terms with a likely Trump victory. Personally, I'm not buying it. I find it hard to believe the Democrat Party will nominate the oldest and one of the least popular presidential candidates of all time. I suspect political operatives have been working on an ideal replacement for months. Though we all may disagree about politics, I think we can all agree that this season of the Presidential Reality Show has been one of the most gloriously entertaining train wrecks in recent memory.

Speaker 1: 5:34

Switching gears. Let's now discuss the latest developments in corporate-sponsored retirement plans. According to a recent article from Plansponsorcom, plan sponsors are increasingly looking to adopt several key provisions of the SECURE 2.0 Act to enhance their retirement offerings. Here are the top five provisions, ranked from highest to lowest, based on expected use. The top provision, with the highest expected adoption rate of about 60%, is the Increased Special Catch-Up Contribution Limit for participants aged 60 through 63. This provision allows older employees to contribute additional amounts beyond the standard contribution limits to their retirement accounts. It recognizes that individuals nearing retirement may need to accelerate their savings efforts to ensure a more secure financial future.

Speaker 1: 6:30

Coming in second, with about 55% of plan sponsors likely to adopt, is the self-certification of hardships and unforeseeable emergency distributions. This provision simplifies the process for employees to access their retirement funds in times of financial need. Instead of going through a lengthy and often cumbersome verification process, employees can self-certify their eligibility for a hardship withdrawal. Third on the list, with nearly 50% expected adoption is the provision allowing withdrawals for federally declared disasters. This enables employees to access their retirement savings during times of natural disasters or other federally recognized emergencies, providing much-needed financial relief. The fourth most likely provision to be adopted at around 45% is eligible distributions for domestic abuse victims. This important provision allows individuals facing domestic abuse to withdraw from their retirement accounts to cover expenses related to escaping their situation, such as relocation costs, legal fees and medical expenses. Finally, the fifth provision with an expected adoption rate of about 40% is withdrawals for emergency expenses. This allows employees to tap into their retirement funds for unforeseen financial emergencies, such as car repairs, unexpected medical bills or urgent home repairs or urgent home repairs. By permitting these withdrawals, employers help their employees manage sudden financial burdens without resorting to high-interest loans or credit card debt. In essence, it turns the retirement plan into a piggy bank.

Speaker 1: 8:24

As you can guess, I'm not a huge fan of this provision. That wraps up our mid-year 2024 update. I hope you found these insights valuable. Remember, staying informed and proactive about your finances is key to achieving your long-term goals. For more detailed analysis and personalized advice, feel free to reach out to us at wealthqbcom or email us at info at wealthqbcom. Thanks for tuning in and we'll see you in the next episode of the Gordon Asset Management Podcast. Stay smart and stay invested.

Speaker 2: 9:03

Gordon Asset Management LLC is a registered investment advisor. Opinions expressed in this show are those of the speaker and do not necessarily reflect the opinions of Gordon Asset Management LLC. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance is not indicative of future performance. Information Express does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal or investment advisor to determine whether any information presented may be suitable for their specific situation. You