Investment Commentary – July 27th, 2016

Market Indices as of Market Close July 27th, 2016
Dow 18,472 (6.01% YTD)
S&P 2,166 (6.00% YTD)
NASDAQ 5,139 (2.64% YTD)
Global DOW 2,400 (2,033 week low/high 2,549)
10-year Treasury 1.50 (1.32 52 week low /2.38 high)
Gold 1,347 ($1,053 52 week low /high $1,384)
Oil $41.91 ($32.85 52 week low /high $54.91)
Fed leaves rates unchanged, says risks to outlook reduced

The Federal Reserve left interest rates unchanged on Wednesday but said near-term risks to the U.S. economic outlook had diminished, opening the door to a resumption of monetary policy tightening this year.

The U.S. central bank said the economy had expanded at a moderate rate and job gains were strong in June. It added that household spending also had been “growing strongly,” and pointed to an increase in labor utilization.

While Fed policymakers said they continued to closely monitor inflation data and global economic and financial developments, they indicated less worry about possible shocks that could push the economy off course.

“Near-term risks to the economic outlook have diminished,” the Fed’s policy-setting committee said in its statement following a two-day meeting in which it left its benchmark overnight interest rate in a range of 0.25 percent to 0.50 percent.

The Fed noted, however, that inflation expectations were on balance little changed in recent months, and gave no firm indication of whether it would raise rates at its next policy meeting in September.

Most Fed policymakers had urged caution in raising rates until there was concrete progress in moving inflation toward the central bank’s 2 percent target
“It’s a little bit more hawkish, but not much,” said Walter Todd, chief investment officer at Greenwood Capital Associates in South Carolina.
Lord Abbett: Roth IRA or Roth 401(k)—What’s the Difference?

While Roth 401(k)s are similar to Roth IRAs in many ways, there also are a number of key differences between the two types of accounts.

Both investment vehicles follow the same basic premise: a retirement investor can fund an account with aftertax dollars, and withdrawals, including any growth, are withdrawn free of income taxes. Qualifying for beneficial tax treatment requires the holding of the account for five years and reaching age 59½. But that’s where the likeness ends. Here’s how:

Eligibility/Contribution Limits
Anyone, regardless of household income, marital status, or tax filing, is eligible to make Roth 401(k), 403(b), or 457(b) contributions up to $18,000 ($24,000 for those participants age 50 and older).

Roth IRA eligibility, on the other hand, is another story. Here, there is an annual income test that depends upon an individual’s tax-filing status, and the contribution limit is significantly less than that for a 401(k): there is a maximum of $5,500 ($6,500 for those investors age 50 and older). Roth IRA contributions for tax year 2016 are prohibited if the household income for married clients filing jointly is greater than $194,000 ($132,000 for single filers). See our article discussing how high income earners can fund a Roth.

An investor whose income qualifies can fund both Roth vehicles up to a total of $23,000 ($30,500 for those investors age 50 and older).


Distributions, Including Required Minimum Distributions (RMDs)
Distribution rules differ, too. Roth IRA distribution rules are liberal, thus allowing an investor to access their principal without any tax implications. A Roth IRA investor is permitted to access his or her basis, free of taxes and or penalties, regardless of age, reason, or holding period. Roth IRAs are never subject to lifetime RMDs, for either the account owner and or the surviving spouse. In other words, the account is first subject to minimum distributions upon an inheritance by any non-spouse beneficiary.



July 27th, 1933 Fiscal Frustration
On this day in 1933, the Great Depression had long since spread from the shores of the United States to vast areas of Europe. Earlier in the decade, America’s decision to raise revenues by adopting hefty tariffs had shattered Europe’s fragile finances.

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.