☠️ RIP “Higher for Longer”

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What’s on the Menu 🍴

Financial markets and economic conditions shift way before the masses understand what’s happening.

Thankfully, we’re here to keep you up to speed with the most important insights and trends.

Today, we’re reflecting on interest rate predictions from earlier this year, and doing a deep dive into the big “short squeeze” in the stock market yesterday.

Here’s what we’re serving up today:

• RIP “Higher for Longer” ☠️

• How To Save Money With Tax Loss Harvesting 💸

• New Bull Market or a TRAP? ⚠️

Today’s newsletter is a 4 minute read.

RIP “Higher for Longer” ☠️

The October CPI inflation report was released Tuesday morning, and it confirmed what savvy Daily Dough readers already knew: inflation is cooling again.

The year-over-year inflation rate clocked in at +3.2% for October, which was below expectations.

The year-over-year increase in the CPI excluding shelter was just +1.5%.

Shelter costs, which lag home prices by 1-2 years, have the largest weighting in the CPI.

Shelter inflation figures are still at high levels but are now trending lower, and they should put downward pressure on CPI in 2024.

The late summer head-fake, when year-over-year inflation rates briefly ticked back up, is over. The market can finally see what we’ve been predicting for months now.

It’s no surprise that bonds and stocks spiked higher after the CPI report.

The market is now predicting the Fed is done with rate hikes and could start cutting interest rates at their late spring 2024 meetings:

When September inflation report came out a month ago, the market was fearful about higher inflation and rate hikes, but we explained why we thought that view was wrong.

We don’t just report the financial news here at the Daily Dough; we aim to add real value through unique insights!

We’ll reiterate what we said almost two weeks ago: we are entering the next phase of the macroeconomic cycle.

It’s not all puppies and rainbows however…

Plenty of risks remain:

• Weakening consumer confidence & spending

• Federal Reserve stubbornness to change course on high interest rate policy

• Overly optimistic earnings growth estimates for 2024

• War & geopolitical clashes

• High federal budget deficit spending

• Domestic elections / politics

We’re cautiously optimistic, especially given the recent strength in crypto and stock prices.

We will enjoy the current rally, while also being mindful that short term moves can get overheated quickly.

After all, the past few months have been a perfect reminder that the investing crowd quickly flips from extreme fear to extreme greed!

How To Save Money With
Tax Loss Harvesting 💸

One of the big strategies financial planners use every year is “tax loss harvesting”. It can help investors save on capital gains taxes.

This is a strategy used in taxable brokerage accounts (it doesn’t work the same in retirement accounts because they’re tax deferred anyway.)

This process is simple: sell losses in your taxable investing portfolio to net them against any gains you have for the year.

Here’s an example:

Here’s how to use this strategy efficiently:

1. Don’t tax loss harvest just to tax loss harvest.

   We want to use this strategy with intention. It’s not something you HAVE to do, it’s something you CAN do if it makes sense.

   If you have a loss in your portfolio, it doesn’t necessarily mean you should sell it.

   The idea is to sell stocks that you don’t think will recover anytime soon.

2. Avoid wash sale rules.

   In securities like stocks, you have to watch out for the pesky wash sale rules. These rules do not apply for cryptocurrencies that aren’t considered securities like Bitcoin (so buy and sell away with Bitcoin).

   The wash sale rules prevent you from being able to sell a stock for a tax loss just to immediately buy the stock back.

   To curb this tax savings abuse, the IRS has very strict rules:

   

   So you have a 61 day window (30 days before and 30 days after) where you want to be sure you’re not buying back the stock you sold.

3. Sell any tax losses by the end of the year.

   Don’t wait too last minute to choose which stocks you want to sell for a loss.

   You want to sell and have the trade settle by December 31st to be able to use the loss!

Tax loss harvesting can come in handy big time to save you capital gains taxes.

Keep in mind, that your max capital loss you can claim on your taxes (once you’ve netted all of your gains and losses) is ($3,000) a year.

So, if you harvest more losses than you have gains, your losses will simply carryover into future years to use against future gains.

Happy tax loss harvesting!

New Bull Market or a TRAP? ⚠️

In today’s video, Chris dives into the recent massive short squeeze in the stock market, analyzing its implications and potential future impacts on stocks, cryptocurrencies, and possibly the broader economy.

• We examine the S&P 500 chart, discussing its critical 'do or die' zone, and explaining why, based on technical indicators like the 100 and 200 period moving averages, we might be re-entering a bull market.

• Contrary to mainstream media's recession narrative, we point out the strong price action in the market, buoyed by new inflation data and Federal Reserve rate expectations.

• We also explore the correlation between the stock market and Bitcoin, highlighting Bitcoin's recent gains and pondering its potential to catch up with the stock market, particularly considering the upcoming Bitcoin halving.

• We analyze the FANG+ index and its notable cup and handle formation, indicating strong performance by major tech stocks.

• Then we dive into the broader cryptocurrency market, focusing on altcoins. Using the TOTAL3 chart, which excludes Bitcoin and Ethereum, Chris assesses the signs of an upcoming alt season and the challenges posed by regulatory actions and public perception.

• You’ll also get insights from a range of charts, including Ethereum, and discuss the performance of other large-cap cryptos like Solana, as well as my watchlist of cryptos showing strength relative to Bitcoin.

• Finally, we even touch on the NFT market, sharing our views on its potential, particularly in gaming NFTs.

Delicious Bites 😋

• CPI doomers in shambles

• How housing prices act during recessions

• Comparison of health system performance by country

• Inside the strange, secretive rise of the 'overemployed’

Food For Thought 🧠

"In investing, what is comfortable is rarely profitable."
- Robert Arnott

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.