2018 pension plan limitations, Japanese stock market

We thought it would be beneficial for the readers to change up the column a bit to address more of the broader issues impacting the financial markets and investors. With the format below, it is possible to provide information and insight on a more timely fashion with the intent of helping you reach more informed decisions regarding your financial future. That said, we welcome your comments at www.faganasset.com.

The IRS recently announced increases in contribution limits to 401(k), 403(b), government thrift savings and most qualified deferred compensation plans for 2018. For those under the age of 50, the IRS raised the amount you can contribute by $500 to $18,500 for those over by $500 to $24,500.

The IRS also raised the income phase-out range for traditional and Roth IRAs in order to determine whether or not you are able to contribute was well as, for traditional IRAs, if that contribution is deductible. However, the IRS did keep the contribution limits for traditional and Roth IRA accounts at $5,500 for those under the age of 50 and $6,500 for those 50 or over.

For more information regarding these as well as other changes please search on www.IRS.gov.

The Japanese stock market (Nikkei 225) closed lower Wednesday for the first time after sixteen consecutive up days and in doing so concluded an unprecedented streak in terms of consecutive winning days. That said, investors must keep in mind that although this index closed Wednesday at 21,707 it is still more than forty-four percent off its all-time high of 38,916 set during December 1989. Consider the pain that this index inflicted on Japanese investors over the past 28 years. Lesson – it pays to diversify into some income producing securities such as dividend paying stocks and intermediate term bonds.

Chipotle plunges. Shares of Chipotle Mexican Grill (CMG) once a darling of foodies and investors alike has tumbled from a 52-week high of $499 to around $280, a decline of some 44% as company earnings this past quarter were hurt by higher food costs and slower than expected demand for its recently released queso sauce. Let this be a warning for investors regarding every cult stock where a group of product and stock devotees come together to create temporary demand. Once one or both of these groups heads for the exits, a freefall for the stock price will not be far behind. Let’s hope Chipotle gets its house in order. Full disclosure, we eat there and love it.

Treasury Yields Head Higher. The yield on the 10-year U.S. Treasury Note closed this past Wednesday at 2.44%, about where it closed calendar year 2016 but far above the yield of 2.10% on September 6th. We are not concerned about the absolute level of the 10year but would begin to be concerned if the pace of the increase that we have seen since the early September low continues. We believe that interest rates will rise only gradually thereby providing a tailwind to stocks as this would portend improving economic conditions.

Let’s leave with a quote by Margaret Thatcher, “being powerful is like being a lady. If you have to tell people you are, you aren’t.”

Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, Please call 518-279-1044.