🎈 Massive rate cut

and Boeing takes steps

Good morning investors! Fed surprised investors with a large cut and it will be interesting to see how the market reacts today.

Today we cover:

  • A 50 basis points cut

  • Boeing is making changes

  • Maxing out your retirement accounts

📊 Economy and News 

Fed starts rate cuts with a big bomb

The Federal Open Market Committee chose to lower its key overnight borrowing rate by a half percentage point, or 50 basis points, amid signs that inflation was moderating and the labor market was weakening.

It was the first interest rate cut since the early days of the Covid pandemic.

“The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the Federal Reserve statement said.

The Fed officials hiked their expected unemployment rate this year to 4.4%, from the 4% projection at the

The Federal Open Market Committee (FOMC) decided to reduce the key overnight borrowing rate by 0.5%, or 50 basis points, due to signs of slowing inflation and a softening labor market.

This marks the first rate cut since the early stages of the Covid pandemic.

According to a statement from the Federal Reserve, officials have grown more confident that inflation is moving steadily toward the 2% target and believe the risks to achieving both employment and inflation goals are more balanced.

The Fed also adjusted its projections, raising the expected unemployment rate for this year to 4.4%, up from 4% in its previous forecast from June. At the same time, the inflation forecast was revised down to 2.3% from 2.6%, and the core inflation outlook was lowered to 2.6%, a 0.2% decrease from the earlier estimate.

Looking ahead: The FOMC’s "dot plot" reveals that 19 members, including both voters and nonvoters, expect the benchmark federal funds rate to reach 4.4% by year’s end, within a target range of 4.25% to 4.5%. The remaining two meetings for the year are set for November 6-7 and December 17-18.

By 2025, the Fed predicts that interest rates will drop to 3.4%, signaling another full percentage point cut. By 2026, rates are expected to decrease further to 2.9%, reflecting an additional 0.5% reduction.

Global hits:

Just in: Alibaba releases new open-source AI models, releases text-to-video generation tool.

📈 Stocks

S&P 500 5,618.26 (-0.29%)
DJIA 41,503.10 (-0.25%)
NASDAQ 17,573.30 (-0.31%)
BRENT CRUDE 74.15 (+0.68%)
* Prices as of Sep 19th, 12:20 AM UTC

Boeing takes major steps

Boeing is temporarily furloughing executives and other nonunion employees to conserve cash during the ongoing strike by 33,000 members of the International Association of Machinists.

More about the decision: During the strike, affected employees will keep their benefits but will be required to take one week off every four weeks, rotating throughout the strike period to minimize the personal impact. Despite this, a significant number of U.S.-based executives, managers, and staff will be affected, according to an internal communication.

These furloughs, set to begin in the coming days, will not affect the production of 787 Dreamliner jets at Boeing's nonunion facility in South Carolina, which remains operational.

The strike: The strike, which began early Friday, has halted most of Boeing's commercial plane production and is the first strike at the company in 16 years. Since then, the union has made concessions in two rounds of bargaining, including the loss of traditional pension plans, a compromise narrowly accepted by members who feared Boeing might relocate future production to nonunion factories in other states.

Boeing has already taken several measures to manage its finances during the strike, including a hiring freeze, restrictions on travel, and reducing purchases from vendors and suppliers.

Losses: The strike has cost the company and its workers more than $572 million – and the pace of losses is climbing putting more pressure on the management as some expect the problem could cause the company a loss of over a billion or $100 million plus per day.

Some hope: This has caused the stock to fall to $155, its lowest in four years. However, some analysts are hopeful with one expecting the stock to hit the $240 mark once the strike is lifted. But, we suggest you be very careful with this company as the road ahead is rocky.

Interesting: Lunar company Intuitive Machines’ stock jumps more than 40% after NASA moon satellite contract.

Surprising: Apple is in talks with JPMorgan for bank to take over card from Goldman Sachs.

Sponsored by UpMarket

  • No membership fees - it's free to join and explore opportunities

  • Curated investment options - thoroughly vetted by our expert team

  • Lower investment minimums - access institutional-quality funds with smaller checks

  • Diversification potential - add uncorrelated assets to your portfolio

  • Seamless online process - invest and manage your account digitally

  • Robust reporting - stay informed with regular updates and valuations UpMarket has helped deploy over $150 million into alternative investments. Are you ready to unlock the private markets and invest in hedge funds and other alternatives?

💵 Personal Finance

Taxes and maxing out your retirement accounts

Today we’ll talk about saving income tax money by maxing out your retirement accounts and employee benefits.

(If you’re not in the U.S. many countries have similar programs so be sure to look them up.)

Source: The Balance / Nusha Ashjaee

First of all, let's be clear. Maxing out a retirement account may not be the best option for everyone, but if you are looking to save tax money then it can be a good option.

So, what does it mean to max out?

Maxing out refers to matching your employer's maximum contribution match while continuing to contribute as much as you are allowed to. These limits keep changing every year and currently stand at $22,500. The amount goes up to $30,000 for people above the age of 50.

New limits: Contribution maximums will increase from $22,500 to $23,000 for 401(k), 403(b) and most 457 plans, as well as the federal government’s Thrift Savings Plans.

The contribution limit on individual retirement accounts will increase by $500 in 2024, from $6,500 to $7,000.

The amount you can contribute to a Roth IRA phases out based on your adjusted gross income: In 2024, that range will increase to between $146,000 and $161,000 for single individuals and heads of households, up from between $138,000 and $153,000 in 2023.

For married couples filing jointly, the range increases to between $230,000 and $240,000.

How does it impact taxes?

The amount that you contribute is tax deductible, i.e. reduced from your taxable income. This applies to a variety of retirement accounts, including 401(k) and 403(b) plans.

Let’s calculate it now:

  • A 44 year old worker who makes $100,000 this year and contributes the maximum amount ($22,500) to their retirement account will only be taxed on $77,500.

  • On the other hand, a 55 year old worker can contribute an additional $7,500 for a total of $30,000. This brings their total taxable income to $70,000.

The latter will pay even less taxes based on the above calculation.

What if I do not have a retirement plan?

Don’t worry if you do not have a retirement plan, other options are also available. You can contribute up to $6,500 to a traditional individual retirement account to enjoy a tax break. This goes to $7,500 for people above 50.

The SECURE Act may impact how you're taxed (based on your income level) so have a look at what it says.

Interested in knowing more about maximizing your retirement accounts? Check this video:

💰 Be a Better Investor

“When you work on something that only has the capacity to make you 5 dollars, it does not matter how much harder you work – the most you will make is 5 dollars.”

Idowu Koyenikan

Resources:

What did you think of today's newsletter?

Login or Subscribe to participate in polls.

👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.