Equities React To Congressional Uncertainty – Global Equity Overview

Domestic equities were off in September and in the third quarter, as stocks retracted further with shutdown concerns increasing towards the end of the quarter. Rising interest rates and the labor union strikes also contributed to market anxiety, as uncertainty drove volatility higher throughout the month.

The energy and communication services sector were the only positive sectors for the third quarter. Elevated fuel prices along with improving technology earnings supported the rise in the sectors. Pessimism amid renewed inflation concerns hindered equity momentum during the quarter.

Developed and emerging market equities also pulled back in September and the quarter as uncertainty surrounding the U.S. dollar and elevated fuel prices drove valuations lower.  (Sources: S&P, Dow Jones, Nasdaq, MSCI, Bloomberg)

Yields On The Rise – Fixed Income Overview

Looming government shutdown threats hindered the bond markets as concerns surrounding heightened funding costs for the government came into focus. Yields on U.S. Treasury bills, notes, and bonds rose in September as confidence regarding reaching a compromise diminished. Analysts expect the rise in government debt yields to be short-term unless another impasse materializes in mid-November as Congress deliberates the federal budget again. The yield on the 10 year Treasury bond surpassed 4.5% at the end of September, luring investors as equity volatility continued to dampen performance. (Sources: Treasury Dept., Congress.gov)

Medicare Coverage Heading Into 2024 – Retirement Planning

With open enrollment upon us, millions of Americans will be deciding on which, if any, changes to make to their Medicare coverage. The Open Enrollment Period for 2024 coverage is from October 15, 2023 to December 7, 2023. Coverage for any changes or new plans begins January 1, 2024.

Since Medicare doesn’t cover all medical expenses, the decision to buy supplemental insurance coverage or to obtain a Medicare Advantage Plan is important for millions of Medicare recipients. Medicare Advantage Plans allow a recipient to get both Medicare Part A and Part B coverage. Medicare Advantage Plans are sometimes called Part C or MA Plans, and are offered by Medicare-approved private companies. Medicare Supplemental Insurance or Medigap helps pay for gaps in coverage not paid for by Medicare. Even though Medicare does pay for many procedures and services, some remaining expenses such as copayments, coinsurance, and deductibles are covered by supplemental plans. Some Medigap policies also cover services that are not covered at all by Medicare, such as coverage while traveling abroad. So it’s worth shopping and determining what expenses are covered by the various supplemental insurance policies. (Source: medicare.gov)

For 28 Million Americans, The Federal Student Loan Payment Pause Is Over

After three and a half years, student loan balances began accruing interest again on Sept. 1, and payments are due in October.  Between Oct. 1, 2023 and Sept. 30, 2024, borrowers who don’t make payments won’t default, but interest will still build, increasing the overall amount owed.  Unless you graduated recently and are currently in your loan grace period, payments will come due in October. Your monthly payment amount and due date depends on your loan terms. You can find that information on your monthly bill, by contacting your servicer or logging into your online account.

The interest-free payment pause began as an emergency pandemic measure in response to the COVID-19 pandemic in March 2020.  Federal student loan borrowers were allowed to skip payments. Loans on autopay were stopped, and collection activities on defaulted loans were also paused. Most importantly, interest did not accrue. In addition, all of the payments that you missed during the freeze count as qualifying payments towards loan forgiveness.

Three years and nine extensions later, renewed student loan bills could come as a shock. There’s no chance of another extension due to a provision in the debt ceiling deal passed by Congress in June.

Consumers Are Saving Less – Consumer Behavior

According to the Bureau of Economic Analysis, data has revealed that Americans are saving less than initially thought. From 2017 through 2022, American consumers were thought to have saved an average of 9.4% of their disposable income. However, revised data figures have identified that the actual savings rate was 8.3%. Various possible explanations as to why such a drop may have occurred include higher fuel prices, recently implemented student loan repayments, lower real wages, and exhaustion of pandemic relief funds.

Economists view decreased savings as a signal that consumers may be shifting expenditure patterns thus altering where their funds are being spent. Inflationary pressures over the past two years have already redirected some consumer funds from non-essentials to more essential items such as food and gasoline. Spending habits adjusted during the pandemic, as stimulus funds padded consumer savings for millions. The National Bureau of Economic Research found that roughly 30% of stimulus checks went to consumer savings, while another 30% went to pay off debt. Personal savings reached a historical high, as retail stores and restaurants were shuttered and stimulus checks went unspent. The savings rate reached 32% of disposable income in April 2020, yet has fallen to 3.9% as of this past August. (Sources: National Bureau of Economic Research, BEA)