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What Happened Last Week and What It Means to You: Week Ending July 7, 2023

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Week Ending July 7, 2023

Nonfarm payrolls increased by 209,000 in June… The consensus was 220,000 and there were downward revisions to April and May that, combined, showed 110,000 fewer jobs than originally thought.

What does it mean – Par for the course. Another day of confusion by the Bureau of Labor Statistics (BLS). According to the payroll survey, it looks like there is strong growth, yet the household survey says there were job losses, and the unemployment rate rose .3%, which suggests the household survey might be a bit more accurate, yet still way off.

I would not bet on the BLS. Payroll numbers may be much slower, but we are not sure what the real numbers are as the government continues to report numbers that get revised down. The point of this is that Wall St and the media, and of course the White House, grab the payroll headline number and claim job growth is strong. However, reality might be it is slow now, and getting slower.

The real problem is what numbers is the Fed using? We do not know. The best estimate based on conversations with economists is there are less jobs being created than the data indicate, but there is still growth.

 

And the crowd goes wild…The third estimate for Q1 GDP saw an upward revision to 2.0% from 1.4%.

What does it mean – Don’t get too excited. In real terms it’s a rounding error. One must remember this is based on an annualized number not the quarter. This means that GDP growth for the year is expected to go up 2% for the year based on this quarter’s number. The good news is it is up from just over a 1.4% estimate for 2023.

What is missing from the media is that government spending increased over 5% for the quarter accounted for .85% of Q1 growth. Along with the $4 Trillion increase in debt, government spending is unsustainable at this level.

 

Import prices fall…On a year-over-year basis, import prices were down 1.2%, and down 0.7% excluding fuel.

What does it mean – Globally, inflation is easing a bit. Not to mention as the Fed increases interest rates, this also strengthens the dollar against foreign currency if those countries are unable to react to the rise in interest rates by the Fed making the dollar more attractive to international investors. From the graph below you can see as the Fed was raising rates the dollar strengthened vs. almost every major trading partner.

Manufacturing down…The ISM Manufacturing PMI report showed further deterioration in US factory activity last month.

What does it mean – Hard to see real economic growth if we do not make stuff people want or can afford to buy.

Manufacturing employment has shifted back into the negative supporting the household survey.

 

Real Estate continues to struggle…With mortgage rates near 7%, cost of financing continues to put pressure on buyers and sellers.

What does it mean – as well as depressed inventories, interest rates remain a headwind for the housing market. See graph below.

Tighter credit conditions typically precede labor market weakness…Cost of capital and tightening of credit usually hits the job market.

What does it mean – The slowdown in job openings has been concentrated in rate-sensitive sectors but is starting to spread.

 

You could have to pay taxes on your catch-up contributions to your 401K if you make over $145,000 per year…In 2022 Congress passed the Secure 2.0 Act. They promised you that you would not pay more in taxes.

What does it mean – If you make more than $145,000 per year starting in 2024 and are over 50 years old contributing to the catch-up in your 401K, the amount in the catch up will be taxable and treated as a ROTH contribution. Meaning the contribution will be an after-tax contribution and would result in higher taxes. The good news is the contribution will go into a ROTH account and grow tax free. Per the IRS, this section fully applies to individuals who earn $145,000 or more. They may fully deduct the income that they contribute to a 401(k) account up to the standard annual limit. They cannot deduct any income that they use for catch-up contributions and must pay taxes on that money. They must put this money into a Roth account, which will return its growth untaxed.

 

Let’s roll America!!

Doug De Groote, CFP®, MBA, CTC
Managing Director

De Groote Financial Group, LLC is a federally registered investment adviser that maintains a principal office in the State of California. The information contained in this message is confidential, protected from disclosure and may be legally privileged. If the reader of this message is not the intended recipient or an employee or agent responsible for delivering this message to the intended recipient, you are hereby notified that any disclosure, distribution, copying, or any action taken or action omitted in reliance on it, is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by replying to this message and destroy the material in its entirety, whether in electronic or hard copy format.

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Jeannie Ewing-Nicholson

Operations Manager

Jeannie started her career in the Financial Services industry in 1994 with Oppenheimer & Company. As part of the De Groote Financial Group, Jeannie is responsible for the operational needs of the firm including cash management and account administration. With her upbeat attitude and attention to detail, Jeannie provides an efficient streamlines experience to ensure clients meet their goals. Jeannie enjoys travel, outdoor activities, Pilates, and is a football and basketball fan. She resides in Westlake Village with her husband, daughter and son.

Mary-Ellen Lykken

Executive Assistant

Mary-Ellen, Executive Assistant at DFG, keeps the office running smoothly by providing administrative support and assisting with scheduling and organization. With a background in human resource and office management, Mary-Ellen comes from the non-profit and services industries.

Outside of the office, Mary-Ellen is committed to the advancement of independence and productivity for those with disabilities. By telling her story of the challenges and joys of raising a child with complicated disabilities, she hopes to help others navigate similar circumstances.

She is happiest when visiting her two grown sons. Otherwise, you can find her competing on the pickleball courts.

Sara Mariniello

Operations Manager

Sara is new to the financial industry only starting in 2022 when she was hired at De Groote Financial. As Operations Manager, Sara is responsible for all the paperwork surrounding opening accounts and investment paperwork and is also responsible for much of the client communication. Sara has her bachelor’s in science and nursing from Concordia University, Texas and worked as nurse for over a year prior to moving back to California. She loves all things sports and church related and is likely spending every free moment with her Husband visiting family in Texas and New Jersey.

Fadi Ahmed

Chief Operations Officer and Chief Compliance Officer

Fadi works with clients to ensure an exceptional experience. He coordinates and assures the planning process and wealth management tools are at your fingertips to provide the clarity you deserve and the transparency and access to all your accounts. Fadi ensures the data and information is reflective in our planning software. All changes and updates flow through his desk and he coordinates those changes with the rest of our team.

Andrew Krout

Wealth Advisor, Co-Chief Investment Officer

Andrew Krout is a Wealth Advisor at De Groote Financial Group, LLC. He also serves as a Co-Chief Investment Officer for the firm, focused on wealth management.

Previously, Andrew served as CIO with Kelly Financial in Boston Massachusetts since 2013. He is a licensed investment advisor representative and insurance producer. He graduated from Saint Francis University with a bachelor’s degree in both finance and accounting. He is a candidate for CERTIFIED FINANCIAL PLANNER™ designation. Andrew holds life insurance licenses in Massachusetts, New Hampshire and Connecticut.

Andrew is passionate about serving his clients and investment management and how to apply news and current events to investment decisions. He played Division 1 golf in college, and still enjoys playing and watching the sport in his free time.

David Darst

Co-Chief Information Officer

David Martin Darst, CFA is an Investment Advisor to DeGroote Financial Group, specializing in asset allocation and product selection. Previously, David served for 17 years as a Managing Director and Chief Investment Strategist at Morgan Stanley Wealth Management, with the responsibility for Asset Allocation and Investment Strategy. He joined Morgan Stanley in 1996 from Goldman Sachs, where he held Senior Management Posts within the Equities Division and earlier, for six years as Resident Manager of their Private Bank in Zurich.

David is the author of 13 books, including bestsellers The Art of Asset Allocation, 2nd Edition (McGraw-Hill), and The Little Book that Still Saves Your Assets (John Wiley & Sons). He also appears as a frequent guest on CNBC, Bloomberg, FOX, PBS, and others, and has contributed articles across a variety of publications.

David graduated with a BA in Economics from Yale University, and earned his MBA from Harvard Business School. He has lectured extensively at Wharton, Columbia, INSEAD, and New York University Business Schools, and for nine years, David served as a visiting member at Yale College, Yale School of Management, and Harvard Business School. He is a CFA Charterholder and a member of the New York Society of Security Analysts and the CFA Institute. 

Doug De Groote

Managing Director

Doug is a Certified Financial Planner™ (CFP®) with an MBA in Financial Planning, and is an active member of the Financial Planning Association (FPA). Before establishing De Groote Financial Group, Doug founded the United Wealth Management division of United Capital. Prior to that, Doug was a partner at Crowell, Weedon and Co. He regularly contributes to a variety of financial and general media.

Doug’s passion, and what he believes, is that everyone deserves the opportunity; they deserve to have the freedom and responsibility to be pro-active in achieving independence and financial success.

Doug’s life is focused around his family, wife and three children, and making sure they get the foundation that is necessary for them to have the awareness of the opportunities that abound in our great country.

Doug helps increase his client’s awareness and success, to identify and take advantage of opportunities that present themselves and help protect them from some of the pitfalls or obstacles that are thrown in our paths. With regards to their financial circumstances, Doug helps his clients identify their goals, plan for various outcomes and manage their assets to help them make their vision a reality.