The Markets - January 29, 2024
Even better than expected!
The United States economy is not performing the way anyone thought it would. Instead of tipping into a recession last year, it crushed expectations. Gross domestic product, which is the value of all goods and services produced in the country, expanded 2.5 percent, after inflation, for the year.1
U.S. economic growth1
1Q 2023: 2.2 percent
2Q 2023: 2.1 percent
3Q 2023: 4.9 percent
4Q 2023: 3.3 percent
It’s interesting to note that the U.S. economy has been outperforming other developed countries’ economies. For example, GDP for the Group of Seven (G7), which includes seven countries plus the European Union, has grown 4.7 percent, in total, since the fourth quarter of 2019 (prior to the pandemic). G7 GDP includes – and got a boost from – U.S. economic growth.2
G7 economic growth2
(October 2019 through September 2023)
U.S.: 7.4 percent
G7: 4.7 percent
Canada: 3.5 percent
EU: 3.4 percent
Italy: 3.3 percent
Japan: 2.4 percent
UK: 1.8 percent
France: 1.8 percent
Germany: 0.3 percent
Here’s the really good news: Inflation continued to move lower while the economy grew last quarter. Last week, the personal consumption expenditures index reported that core inflation, which excludes food and energy prices, dropped from 3.2 percent to 2.9 percent. Headline inflation was 2.6 percent.3
Last week, major U.S. stock indices finished higher.4 The yield on the benchmark 10-year U.S. Treasury finished the week in the same place it started.5
HERE’S ANOTHER TAX-ADVANTAGED WAY TO SAVE FOR RETIREMENT. Many people are looking for ways to save more for retirement. An option that is often overlooked is the health savings account, or HSA. While some eligible people are using these accounts for short-term savings, most are not taking advantage of the potential long-term benefits, according to Bank of America’s 2023 Workplace Benefits Report.6
Anyone who is enrolled in a qualifying high-deductible health plan (HDHP) can contribute to an HSA. It’s an attractive option because these accounts offer a triple tax advantage.7
- Contributions are made with after-tax dollars.
- Any investment earnings grow tax deferred.
- Withdrawals taken for qualified medical expenses are tax-free.
This year, individuals can contribute up to $4,150 to an HSA, while families can contribute up to $8,300.8 Depending on the HSA, it may be possible to invest any money that is not used for current medical expenses.
For instance, imagine a 35-year-old saves about $2,000 in an HSA each year until retirement at age 65. They withdrew $500 a year to pay for healthcare, and invest the rest, earning 7 percent a year, on average. At retirement, the individual would have more than $150,000 in the account.9
Best of all, after age 65, the money in an HSA can be withdrawn without penalty for any purpose at all. The caveat is that taxes may be owed on distributions taken for purposes unrelated to healthcare. In addition, the savings could be used to reimburse some Medicare premiums, as well as healthcare costs that are not covered by Medicare.7
If you would like to learn more about HSAs, please get in touch.
Weekly Focus – Think About It
"Remember that sometimes not getting what you want is a wonderful stroke of luck."10
—Tenzin Gyatso, Dalai Lama