ABCs of the Market for December 16th, 2023

Happy Friday! It’s Dec. 15, 2023. We have three great stories to wrap up the past two weeks in markets, business, and the economy for you and your family.

Here are the highlights:

• The AI race is heating up. It’s not just OpenAI anymore.
• Bringing down your tax bill. What can you do before the year ends?
• Crypto is back? Why some coins are up, but companies are out.

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AI Accelerates: The Race Is Gearing Up

Stocks are near all-time highs, but we can’t just thank the Federal Reserve and Jerome Powell for delivering the soft landing — we have to thank OpenAI, too. The ChatGPT creator celebrated the AI’s first birthday in late November, marking the end of an unprecedented year for the fortunes of co-investor Microsoft and new competition.

• Tech giant Microsoft is up more than 52% this year, boosted by revenue from its Azure cloud division, which offers developers a sandbox to build with OpenAI’s models.
• Semiconductor giant NVIDIA, which makes the powerful computer hardware that makes AI models like ChatGPT work, became one of the world’s most valuable companies this year as ChatGPT went mainstream — and competition jumped into the game.
• Meta rose more than 167% this year, while launching the latest version of its own open-source AI model, LLaMA. It also rolled out its Meta AI virtual assistant across its social media platforms like Facebook, WhatsApp, and Instagram.
• And Google rose more than 48% this year — impressing investors with its own new and controversial ChatGPT competitor, Gemini.

Why does it matter for EarlyBird families?

AI isn’t coming — it’s already here. And it’s having an impact on the stock market now, so imagine what impact it could have on the world in the coming years. Acquainting yourself and your family with trends and changes in the AI industry might help you stay ahead of the curve, especially since the various AI models all offer something a little different. Over your holiday, consider playing around with one or more models with family… see how it can make your life a little easier.

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Bringing Down Your Tax Bill: Last Minute Tricks Before Year-End

American statesman Benjamin Franklin once famously said that there were two certainties: death and taxes. But Mr. Franklin didn’t have a 401(K), did he? With the year drawing to a close, a little bit of tax planning can go a long way to reducing your bill this tax season — here’s a few ways you can:

• Contributing to your child’s EarlyBird account: Although there are no upfront deductions for contributing to an UGMA account, contributing to your child’s EarlyBird account will allow them to benefit from the long-term appreciation of investing — and proceeds will be taxed at their lower tax rate.
• Pre-Tax Retirement Contributions: If you expect to make less in retirement or live in a lower-tax region, you could reduce your taxes by contributing to a standard Individual Retirement Account or 401(K). This could help you reduce your income dollar-for-dollar up to $29,000 (or $37,500 if over age 50.)
• 529 Contributions: Some states offer state tax deductions for making contributions to qualified education plans like a 529. For more information, you might want to search your state’s 529 rules.
• Sell Capital Losses: It has been a good year for the stock market, but if you’re sitting on any losers — now might be the time to part ways. The IRS allows you to recognize up to $3,000 in capital losses each year, which can offset any capital gains, and then income.

Why does it matter for EarlyBird families?

Unless you’re a truly fantastic (crazy) spender, taxes will probably be your largest lifetime expense — and finding ways to minimize or defer them is one way you can impact your year-end refund. By saving for yourself and your family’s future now, you could avoid pesky tax bills now, and maybe even minimize your taxable income over the long-run.

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Crypto is Back, but Some Companies Are Leaving

Word on the street is that crypto is back. The world’s most valuable cryptocurrency, Bitcoin, has soldiered for a 158% gain since the start of 2023 — even as industry drama has dominated the headlines.

• Failed crypto exchanges and yield services such as FTX, Celsius, Voyager, and Prime Trust helped blow up the crypto market last year — but as their respective bankruptcy proceedings continue, the market has soldiered back.
• Most of the optimism has come from reports that a Bitcoin exchange-traded fund (ETF) will be approved early next year, potentially attracting billions in new institutional money to the crypto market.
• Still, in spite of the upside, some companies are checking out — the world’s largest crypto exchange, Binance, paid $4B after pleading guilty to charges brought by the Justice Department and downsized its U.S. operations while fintech firm SoFi decided to exit crypto entirely last month by selling its business.

Why does it matter for EarlyBird families?

If 2022 taught us anything, it’s that markets can be volatile — and crypto can be extremely speculative. However, a healthy allocation to a riskier asset like Bitcoin could be welcome for people who can tolerate losses. But before jumping onboard the crypto industry’s latest run, be cognizant — the industry’s surprising gains this year might not last after its long-awaited ETF is approved.

What else is up?

• Fed rate decision helps stocks to all-time highs: The Nasdaq-100 and Dow Jones Industrial Average hit an all-time high after the Federal Reserve kept its target interest rate set at 5.5%, with plans to drop the rate by up to 0.75% next year. And the S&P 500 was just 2% away from joining them. Read more.
• Three industries led the majority of job gains in Nov. 2023: Healthcare, government, and manufacturing friends — rejoice. These three industries led the pack in Nov. 2023’s Jobs data, demonstrating that the market is very much so alive and well. Read more.
• The curious case of Ohtani. The MLB star signed a record $700M contract, making him the highest-paid athlete in the history of North American sport. But what might be even more magnificent than is the deal he made — which will help him avoid a hefty tax bill because of it. Read more.