The Balancing Act between Inflation & Employment…brought to you by Jerome Powell

The current federal government shutdown has made headlines, but markets have reacted with a notable degree of calm—and for good reason. Historically, government shutdowns tend to be short-lived and have minimal long-term impact on market performance. Essential functions continue, and once a resolution is reached, delayed services and spending are typically restored. Investors should view this as political noise rather than a structural economic issue. Keeping you invested and focusing on your long-term goals remain our current course of action.

After two years of aggressive tightening, the Federal Reserve has signaled a shift in policy, with rate cuts now on the table. While inflation is still a concern, the Fed’s focus lies with the labor market. The national unemployment rate has ticked up to 4.3%, and hiring has slowed across multiple sectors. The Fed is responding to these signs of economic softness to prevent a deeper slowdown. Lower interest rates could provide support to both the housing and equity markets, and present new opportunities for borrowers and investors alike.

Beginning in 2026, legislative changes from the SECURE 2.0 Act will affect how high earners contribute to their 401(k)s. Individuals earning over $145,000 will be required to make catch-up contributions (for those aged 50 and over) to Roth accounts rather than traditional pre-tax accounts. This change will have tax implications—primarily resulting in upfront taxation on contributions that previously would have been tax-deferred. If you fall into this category, now is a good time to review your options with your Human Resources department and make adjustments before the new rules take effect.

As always, we are here to guide you through these developments and ensure your financial plan remains aligned with your goals. Please reach out with any questions or to schedule a review.

Very truly yours,

Michael F Cantlon
Thomas E Guyett
Robert T Gephart