Friday Five

Happy Friday January 26th!

Stocks continue to climb on strong GDP and earnings reports. Attention Students: 529 educational funds can now be rolled into Roth IRAs! 20-year-old golf amateur wins on the PGA Tour! Dwayne now has a lock on “The Rock.”

DSG Advisors 2024 Outlook

This week we published our 2024 Outlook entitled, Magnificent Rebounds, Great Expectations & Elections. Click the link below for our thoughts on what drove the market surge in 2023 and what we expect to occur in 2024.

DSG Advisors 2024 Outlook

#1 – Weekly Market Recap – Stocks continued to climb as strong earnings and a robust Q4 GDP report fueled soft-landing optimism. Through Thursday’s market close, the NASDAQ and the S&P 500 advanced +1.2% and 1.1% respectively, while the Dow Jones added +0.5%. Both the S&P 500 and the NASDAQ have set all-time record highs this week.

A slew of strong earnings reports helped lift investor sentiment. Of the 85 S&P 500 stocks reporting Q4 earnings so far, 68% have beaten consensus estimates — above the 25-year average of 62%. Next week is the ‘heart’ of earnings season, with 108 companies in the S&P 500 reporting. Additionally, 5 of the 6 largest companies in the US report next week, including Microsoft, Apple, Google, Amazon, and Meta.

#2 – Great GDP Growth –Real US GDP grew at a 3.3% annualized rate in the 4th quarter, notably stronger than consensus expectations of 2.5%. While the strength was primarily driven by a combination of robust consumer spending (+2.8% vs +2.5% expected) and more temperate inflation (+1.5% vs +2.2% expected), both government spending and private investment contributed positively as well.

Consumer spending advanced +2.6% in 2023 compared to just +1.2% in 2022, driven by a resilient labor market, strong wage growth, and moderating inflationary pressures. Consumer spending patterns in 2023 appeared to be more balanced with goods spending rebounding +3.5% following a dismal 2022 when spending on consumer goods fell for the first time since 2008.

Overall, 2023 was a strong year for the US Economy, with real GDP advancing 3.1% driven by a strong 3rd and 4th Quarter. GDP is expected to grow just +1.3% this year, but if we have learned anything over the past few years, it is that the consensus expectation can be wrong. With 2024 being an election year, we would not be surprised to see stronger economic growth in the year ahead.

#3 – 529 to Roth Conversion – Changes have arrived for 529 plans! Starting in 2024, students who complete their education and have leftover 529 funds can roll those funds to a Roth IRA without taxes or penalties. The 529 to Roth conversion is a great way for students who have completed their education to save tax-free for retirement.

529 plans are state-sponsored, tax-advantaged educational savings plans often used for college expenses. In the past, if the student beneficiary had money left in the 529 account after they finished college or post-college, the funds could be transferred to a different 529 plan (i.e., for a siblings 529 plan). But those funds could not be withdrawn for non-educational costs without incurring penalties.

Under the SECURE 2.0 Act, the new rollover provision allows money held in a 529 college savings plan for 15 years to be converted into a Roth account tax -free.

The change ushered in this year removes a significant objection to 529s, potentially making the popular accounts attractive to more investors. Of course, there are several limitations, so if you are interested, please click on the following link for more details.

CNBC

CNBC

#4 – Sophomore Sensation – Nick Dunlap, a University of Alabama sophomore, made waves in the golfing world last week by becoming the first amateur to win on the PGA Tour in over three decades. The 20-year-old’s victory at the American Express 2024 Tournament in La Quinta, California, was an historic moment as he was the first amateur to win on the PGA Tour since Phil Mickelson in 1991. Unfortunately, as an amateur, Dunlap was not entitled to win the $1.5 million purse and 500 FedEx Cup points.

In a statement on Monday, Dunlap expressed the life-changing nature of the victory and revealed his decision to return home to Alabama to be with family, friends, and teammates. Dunlap made the decision to turn professional on Thursday, securing his PGA Tour card through 2026 and gained eligibility for all remaining 2024 signature events. This includes coveted spots in the Masters, PGA Championship, and Players Championship.

Despite forfeiting the $1.5 million winner’s purse and the 500 FedEx Cup points, Dunlap reflected on the surreal experience, stating, “A week ago today, if you told me I’d have the opportunity to live out my dream as a 20-year-old, it’s pretty surreal. But it’s also scary, there’s a lot of changes. It was the easiest, hardest decision I’ve ever had to make, by far.”

Dunlap, the only golfer besides Tiger Woods to claim victories in both the U.S. Junior Amateur and the U.S. Amateur, departs Alabama holding the coveted No. 1 spot in the World Amateur Golf Rankings. His decision to turn pro adds a compelling chapter to his golfing narrative, leaving fans and experts alike eager to witness the next steps in the promising career of this young golf prodigy.

CBS Sports

#5 – A Lock on ‘The Rock’ – Dwayne Johnson, popularly known as “The Rock,” has never legally owned his iconic nickname…until now.

Johnson finally obtained full ownership of his professional wrestling moniker, which was previously owned by WWE (World Wrestling Entertainment). Under a new agreement with WWE, Johnson gained legal ownership of the nickname and will join the board of TKO Group, the sports and entertainment company that owns WWE and UFC.

Johnson said the name means a lot to him personally. “The Rock” has roots stemming from Johnson’s father, WWE Hall of Famer Rocky Johnson, who was the first Black champion in WWE history alongside his partner, Tony Atlas.

“I owe that name everything,” Johnson said. “Without that name there’d be now wrestling career. There’d be no Hollywood career.”

The news of Johnson gaining ownership of his nickname comes amid speculation that “The Rock” may return to the ring for a WWE match against his cousin, WWE Universal Champion Roman Reigns. If confirmed, it would be Johnson’s first WWE match in eight years.