3 Things You Need to Know This Week | US Jobs, Japan Politics, Roth Conversions

Transcript

Austin Standiford:

Hello, and welcome to 3 Things You Need to Know This Week, our regular series designed to help you sift through the noise across financial media and understand what really matters for markets. To stay up to date with our latest market insights, subscribe to our YouTube channel or visit fisherinvestments.com. And with that, here are three things you need to know this week.

First, September jobs reports.

On Friday, we'll get a new non-farm payroll and unemployment data for September, which will provide a fresh look into the state of the US labor market. While some investors may interpret a slowing job market as a potential sign of economic recession, we believe this concern is likely misplaced. For example, August jobs reports showed a slowdown, but this is not new information for markets. Stocks, which are forward-looking, have had months to process the economic uncertainty tied to tariffs announced on Liberation Day. These tariffs likely contributed to earlier slowdowns in business investment and hiring, as reflected in weak job growth and downward revisions to past reports such as June's data, which turn from positive to negative. However, markets appear to have already digested these developments. At this stage, recent labor data is unlikely to deliver significant surprises. Jobs data, like most economic indicators, are backwards looking and subject to revisions. Relying on a single data set can lead to misleading conclusions, so we believe it's essential to consider multiple indicators for a more comprehensive view of economic conditions and market impacts.

Next, Japan's premiership woes.

Japan's ruling political party, the Liberal Democratic Party, or LDP, will hold a leadership contest on October 4th to select the party's head and prime minister. This follows Prime Minister Shigeru Ishiba's September 7th resignation, continuing a trend of frequent leadership changes in Japan. For investors, the winner of this week's leadership election matters less than the political environment they will navigate. With the minority government, the new prime minister will likely prioritize rebuilding the party's popularity over passing major legislation. This could result in political gridlock, which often benefits stocks by reducing the risk of disruptive policy changes. While some view gridlock as a barrier to necessary economic reforms in Japan, it can also create a more stable environment for businesses by minimizing regulatory uncertainty.

Now, concerns about weak economic data, such as industrial production and retail sales may seem alarming. However, markets are forward looking and tend to discount backward-looking data, which is often revised. For example, Japan's Q2 GDP growth was recently revised up from 1% to 2.2%. To us, we believe markets are looking beyond current political headlines in Japan and towards a more optimistic future than some might expect.

Finally, Roth IRA conversions.

Roth conversions take funds from a traditional IRA and convert them to Roth status. While this process triggers taxes in the year of the conversion, it can be advantageous, particularly if you are in a lower tax bracket now than you expect to be in in the future. The benefit of a Roth conversion is that assets then grow tax free, and are not subject to required minimum distributions or RMDs for the original account owner, and offer tax free withdrawals in retirement. For high-net-worth investors with significant assets, Roth accounts can also play a vital role in estate planning. The tax free nature of these accounts make them an attractive vehicle for transferring wealth to heirs. However, before converting, it's crucial to assess factors like current and future tax rates, time horizon and long-term goals. We suggest consulting with a trusted financial advisor and tax advisor to ensure that a Roth conversion aligns with your unique financial situation.

And that's it for this episode of 3 Things You Need to Know This Week.

For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit FisherInvestments.com. Thank you for tuning in, and don't forget to hit the 'Like' and 'Subscribe' button.