S&P 500 in Correction Territory
The S&P 500, a key U.S. equities index, has experienced a decline of just over 10% from its peak on July 31. This drop is fueled by concerns that the U.S. economy is heading towards a recession. This correction is the first of its kind since the market bottomed out in the fourth quarter of 2022. In contrast, the prices of safe haven assets such as gold and bitcoin have been on the rise.
Mounting Fears of Recession
The S&P 500 index has dropped to 4,117 points, marking a decline of just over 10% from its peak on July 31 of 4,577 points. Similarly, the Dow Jones Industrial Average ended the last week of October 2023 1.7% lower at just under 32,420 points. These declines occurred shortly after reports that the yield on 10-year U.S. Treasury notes had exceeded 5% for the first time since 2007.
Media reports have classified the drop in the S&P 500 as a movement to correction territory. Experts on the U.S. economy, including Jim Bianco of Bianco Research, agree with this characterization and believe that this trend will continue until it becomes a significant issue. Bianco, who has been warning about the global economy post-COVID, stated in a post on X (formerly Twitter) that this is the first time the market has bottomed since October 2022.
Flight to Safe Haven Assets
Amidst concerns about the U.S. economy, investors are seeking refuge in safe haven assets. Gold, for instance, has surpassed $2,000 per ounce for the first time since May. Additionally, bitcoin (BTC) has experienced a surge in performance, surpassing the $35,000 mark for the first time since March 2022. This rise in bitcoin's value is linked to speculation that the U.S. Securities and Exchange Commission (SEC) will approve spot bitcoin exchange-traded funds (ETF).
Some crypto enthusiasts speculate that the rise in bitcoin's value, similar to that of gold, may be tied to fears of an impending recession in the U.S. economy, reminiscent of the 2008 financial crisis.
What are your thoughts on this story? Let us know in the comments section below.
Frequently Asked Questions
How much should I contribute to my Roth IRA account?
Roth IRAs let you save tax on retirement by allowing you to deposit your own money. These accounts are not allowed to be withdrawn before the age of 59 1/2. If you decide to withdraw some of your contributions, you will need to follow certain rules. First, your principal (the deposit amount originally made) is not transferable. This means that no matter how much you contribute, you can never take out more than what was initially contributed to this account. If you are able to take out more that what you have initially contributed, you must pay taxes.
You cannot withhold your earnings from income taxes. Also, taxes will be due on any earnings you take. Consider, for instance, that you contribute $5,000 per year to your Roth IRA. Let’s say you earn $10,000 each year after contributing. On the earnings, you would be responsible for $3,500 federal income taxes. That leaves you with only $6,500 left. Because you can only withdraw what you have initially contributed, this is all you can take out.
The $4,000 you take out of your earnings would be subject to taxes. You’d still owe $1,500 in taxes. You would also lose half of your earnings because they are subject to another 50% tax (half off 40%). You only got back $4,000. Even though you were able to withdraw $7,000 from your Roth IRA,
There are two types if Roth IRAs, Roth and Traditional. Traditional IRAs allow you to deduct pretax contributions from your taxable income. To withdraw your retirement contribution balance plus interest, your traditional IRA is available to you. A traditional IRA can be withdrawn up to the maximum amount allowed.
Roth IRAs are not allowed to allow you deductions for contributions. But once you’ve retired, you can withdraw the entire contribution amount plus any accrued interest. There is no minimum withdrawal limit, unlike traditional IRAs. You don’t need to wait until your 70 1/2 year old age before you can withdraw your contribution.
How much of your IRA should include precious metals?
It is important to remember that precious metals can be a good investment for anyone. You don’t need to be rich to make an investment in precious metals. You can actually make money without spending a lot on gold or silver investments.
You might think about buying physical coins such a bullion bar or round. Also, you could buy shares in companies producing precious metals. Another option is to make use of the IRA rollover programs offered by your retirement plan provider.
Regardless of your choice, you’ll still benefit from owning precious metals. These metals are not stocks, but they can still provide long-term growth.
And unlike traditional investments, they tend to increase in value over time. So, if you decide to sell your investment down the road, you’ll likely see more profit than you would with traditional investments.
Should you open a Precious Metal IRA
Before opening an IRA, it is important to understand that precious metals aren’t covered by insurance. There is no way to recover money that you have invested in precious metals. This includes any loss of investments from theft, fire, flood or other circumstances.
It is best to invest in physical gold coins and silver coins to avoid this type loss. These coins have been around for thousands and represent a real asset that can never be lost. These items are worth more today than they were when first produced.
If you decide to open an IRA account, choose a reputable company that offers competitive rates and products. It is also a smart idea to use a third-party trustee who will help you have access to your assets at all times.
If you decide to open an account, remember that you won’t see any returns until after you retire. So, don’t forget about the future!
Statistics
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- If you take distributions before hitting 59.5, you’ll owe a 10% penalty on the amount withdrawn. (lendedu.com)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
