17 Record Highs in 50 Trading Days

The S&P 500 set 17 record closing highs in the first 50 trading days of 2024 through March 13, according to Bespoke Investment Group.

That’s the most record highs to start a year since the 20 in 1998. Here’s another bit of investment trivia: There have been only five years since 1953 that record highs were reached on at least 30% of the first 50 trading days of the calendar year.

What does this mean for investors? Is this a sign that investors are excessively optimistic, and the index has been pushed to extreme levels?

History says that’s likely not the case. A string of new record highs tends to be followed by more record highs. 

For example, of the four other times that record highs were set on 30% or more of a year’s first 50 trading days, the S&P 500 was higher at the end of the year three times. The fourth time was 1987, when the index finished down 14.8%.

When 50-day periods in general are examined, record highs tend to be followed by below-average returns in the immediately following week and month, but returns over the following six months and 12 months were average or higher.

The economic and market fundamentals tend to matter more than momentum, which can change quickly. But history indicates that a series of record highs isn’t a reason to become pessimistic and expect a sharp turn in the markets.

President’s Budget Proposes an End to Backdoor Roth IRAs

The fiscal year 2025 budget proposal issued by President Biden last week asks Congress to end backdoor Roth IRAs as well as what the document calls “excess retirement accumulations.”

I’ve told Retirement Watch readers about the backdoor Roth IRA strategies for years, most recently in the December 2023 issue. The most profitable strategy is to make after-tax contributions to a traditional 401(k) plan and eventually roll those contributions over to a Roth IRA.

The strategy allows a taxpayer to accumulate far more in a Roth IRA than would be possible by making regular Roth IRA contributions. Also, people whose incomes exceed the limit for making contributions to Roth IRAs can use the strategy to establish Roth IRAs.

President Biden’s budget proposal would eliminate the strategy by prohibiting a high-income taxpayer from making a rollover to a Roth IRA from any employer retirement plan that is not a designated Roth account.

Another proposal in the budget would create a version of a Stealth Tax that was eliminated years ago, the tax on distributions of excess accumulations in retirement plans.

The president’s budget would require a high-income taxpayer with a retirement account balance exceeding $10 million to distribute at least 50% of the excess amount. The distribution then would be taxed.

The proposal, as written, wouldn’t affect many taxpayers. But, like other Stealth Taxes, over time more and more taxpayers are likely to be swept into it by amendments and inflation.

These are only proposals. Proposals in presidential budgets have a history of disappearing quickly after they are presented. They represent a presidential wish list. But sometimes they make their way into the tax code during legislative negotiations. So, I’ll be paying attention to what Congress does this year.

Central Banks Continue to Explore Digital Currencies

Central bank digital currencies (CBDCs) continue to attract the attention of central banks around the world.

Currently, 130 countries that represent 98% of global gross domestic product (GDP) are in various stages of studying or developing CBDCs, according to the Atlantic Council, which tracks CBDC activity.

A CBDC is a virtual money that is backed and issued by a central bank.

There are two kinds of CBDCs. A wholesale CBDC connects central banks and member banks of different countries. They are a payment processing system.

The other type is a retail CBDC that can be used by anyone to transfer money.

In most countries with an advanced retail CBDC project, the CBDC is or is planned to be distributed through financial institutions and payment service providers. China has a direct CBDC option that individuals can access by applying through the central bank. 

Most central banks with CBDC projects are working on both types of CBDCs.

CBDCs generally are associated by many people with cryptocurrencies, such as bitcoin. But cryptocurrencies use blockchain technology, while a CBDC doesn’t have to use the technology, and many don’t or won’t.

Only three countries have fully launched CBDCs: the Bahamas, Jamaica and Nigeria. Ecuador and Senegal had CBDCs but canceled them. There are 68 countries in what the Atlantic Council labels an advanced phase of exploration of CBDCs. 

There are 36 countries whose CBDCs are in the pilot phase, the last phase before a full launch. 

The United States is behind most countries in developing a CBDC. The Federal Reserve and Department of the Treasury say they still are studying the issue and are not near launching a pilot project. They also have said they would not act without authorization from Congress. 

There are concerns a CBDC would reduce financial privacy in the U.S. 

Some people confuse the recently launched FedNow system with a CBDC. But they are different.

As I explained in a recent Bob’s Journal, FedNow is a payment system that is an improvement of the Fed’s pre-existing ACH payments system. 

A CBDC is a digital form of an existing currency. The central bank issues electronic coins or currency instead of printing money. Here’s a post from the Cato Institute explaining why FedNow is not a CBDC. 

The Data  

The Consumer Sentiment Index from the University of Michigan declined to 76.5 through the first half of March from 76.9 at the end of February. 

Homebuilder optimism increased for the fourth consecutive month in March. The Housing Market Index from the National Association of Home Builders (NAHB) rose to 51, the highest level in eight months, from 48 in February. 

Housing starts rose 10.7% in February following a 12.3% decline in January. Single-family home starts surged 11.6% while multi-family home starts rose 8.6%. 

Retail sales increased 0.6% in February after declining 1.1% in January. Retail sales in February were 1.6% higher than 12 months earlier. 

Excluding gasoline and autos, sales rose 0.3% in February following January’s 0.8% decline. 

The Empire State Manufacturing Index dropped to negative 20.9 in March from negative 2.4 in February. 

Industrial production increased 0.1% in February after falling 0.5% in January. Over 12 months, production was down 0.2% through February and 0.3% through January.

Manufacturing production rose 0.8% in February, following a 1.1% decline in January. Over 12 months, manufacturing production fell 0.7% through February and 1.1% through January.

The Producer Price Index (PPI) increased 0.6% in February after rising 0.3% in January. Over 12 months through February, the PPI was up 1.6% after rising 1.0% through January.

The core PPI, which excludes food and energy, rose 0.3% in February and 0.5% in January. Over 12 months, the core PPI increased 2.0% through both February and January.

New unemployment claims decreased by 1,000 to 209,000 in the latest week. 

Continuing claims, which lag a week behind new claims, increased to 1.811 million from 1.794 million.

The Markets

The S&P 500 rose 0.11% for the week ended with Tuesday’s close. The Dow Jones Industrial Average gained 0.27%. The Russell 2000 lost 1.37%. The All-Country World Index (excluding U.S. stocks) declined 0.92%. Emerging market equities fell 1.74%.

Long-term treasuries lost 2.07% for the week. Investment-grade bonds fell 0.69%. Treasury Inflation-Protected Securities (TIPS) dropped 0.77%. High-yield bonds gained 0.13%.

On the currency front, the U.S. dollar rose 1.01%.

Energy-based commodities increased 3.85%. Broader-based commodities rose 1.68%. Gold added 0.02%.

Bob’s News & Updates

My latest book is “Retirement Watch: The Essential Guide to Retiring in the 2020s.” Learn more and order by clicking here and here. You can be among the first to write a review. 

My previous book, “Where’s My Money: Secrets to Getting the Most out of Your Social Security,” is receiving mostly five-star reviews on Amazon for telling you clearly what your benefit options are in different situations and how to determine the best choice for you. You can find it on www.amazon.com or www.Regnery.com. 

The number of regular viewers for my Retirement Watch Spotlight Series continues to increase. You should sign up because I make in-depth presentations of key retirement finance topics. You can watch these online seminars from the comfort of your home or office at times you choose. To learn more about my new Spotlight Series, click here.

A recent five-star review of my book, “The New Rules of Retirement” on amazon.com said, “A complete retirement guide! One of the best books on this topic!” Click for more details about the revised edition of “The New Rules of Retirement.” 

If you’re interested in my books, check my amazon.com author’s page. 

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