Finance
China’s stimulus measures are just trickling through the economy
A large advertisement touting China’s “trade-in” policy hangs outside a housing construction project in Nanjing, China, on Nov. 29, 2024.
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China’s latest efforts to kickstart growth haven’t had a broad impact yet, data and company earnings show, indicating the world’s second-largest economy won’t be roaring back soon.
Growth in pockets from real estate to manufacturing has improved since Beijing began announcing stimulus measures in late September. Companies, however, have maintained a cautious tone when sharing outlooks in the last few weeks.
When asked on an earnings call Friday about the impact of stimulus, food delivery giant Meituan only said that in October, the average hotel order value in its newer travel booking business fell less than in the prior months, on an year-on-year basis.
“While it will take some time for the positive effect to fully materialize and to further [expand] to more consumption categories, we are confident that these policies will gradually provide more support for the real economy and incentivize consumer spending, bringing more growth opportunities for our business,” said Shaohui Chen, Meituan CFO and senior vice president, according to a recording of the earnings call.
Executives from e-commerce company Alibaba and social media operator Tencent shared similar comments last month in their earnings calls, saying stimulus would take time to translate into growth.
The ramp-up in stimulus measures is aimed at reaching this year’s official target of around 5%, and a similar pace next year — while preventing financial instability, Gabriel Wildau, managing director at Teneo, said in a note Monday. To him, the tone on the economy indicates that “technological self-sufficiency and national security remain the top priorities” for China.
“Looking ahead, our sources expect that stimulus in 2025 will trickle out incrementally and in a data-dependent fashion,” Wildau said. “‘Just enough’ rather than ‘whatever it takes’ will be the guiding principle.”
Preliminary economic indicators for November reinforce a picture of improving, but not explosive, growth.
The Caixin purchasing managers’ index for manufacturing showed further expansion in factory activity with a print of 51.5, its highest reading since June, according to LSEG data. The official PMI came in at 50.3, the highest since April. Retail sales and industrial data for November are due Dec. 16.
Caixin’s measure of manufacturing labor showed employment contracted for a third straight month in November. That indicates “the effect of economic stimulus is yet to be felt in the labor market and businesses’ confidence in expanding workforce needs to be strengthened,” Wang Zhe, senior economist at Caixin Insight Group, said in a report.
“While the economic downturn appears to be bottoming out, it needs further consolidation,” Wang said, noting the rising risk of “external uncertainties.”
The U.S. on Monday issued yet another round of restrictions aimed at crimping Chinese chipmakers. President-elect Donald Trump last week announced plans to impose 10% tariffs on all U.S. imports of Chinese goods once he takes office in January.
“Markets will only be salivating for more and more stimulus as the geopolitical temperature rises,” according to U.S.-based advisory firm China Beige Book’s survey of Chinese businesses released Monday.
The firm surveyed 1,502 companies from Nov. 14 to Nov. 26, and found that retail spending improved from a year ago, along with home sales, despite “widespread” weakness in consumption of services. The report also noted that the share of the respondents borrowing more rose to the highest since May 2022, indicating a pickup in demand.
“Beijing’s stimulus measures encouraged firms to come off the sidelines this month,” the report said. “But it’s unlikely to last without pledges of additional support.”
China’s Ministry of Finance has said more fiscal support could come next year. Investors are also watching for details from China’s annual economic planning meeting, typically held in mid-December.
An exchange-traded fund provider is helping investors make more bets on Wall Street’s most profitable momentum trades.
GraniteShares, which debuted its first installment of single-stock ETFs in 2022, now manages 20 of them. It includes the GraniteShares YieldBoost TSLA ETF (TSYY), which launched last month. The fund gives investors exposure to Tesla.
“This is about more and more people taking charge of their own finances,” GraniteShares CEO William Rhind told CNBC’s “ETF Edge” this week. “They want to be able to actively manage that and maybe try and outperform… That’s where we see things like leverage, single stocks really playing.”
He calls demand “a worldwide phenomenon” because it’s not just an opportunity for U.S. investors.
“We have investors all around the world that are looking to the U.S. ETF market first because that’s the biggest source of liquidity,” added Rhind. “They’re looking to the names that they know and love – the Teslas of the world [and] the Nvidias of the world. They’re only available here in the U.S., and that’s why people come here to trade them.”
But the firm acknowledges the strategy isn’t suited for everyone.
GraniteShares includes a disclosure in bold on its website: “An investment in these ETFs involve significant risks.”
As of Friday’s close, Tesla stock is nearly $100, or about 19%, off its all-time high – hit on Dec. 18.
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They say you get better as you get older. This might just be true for 401(k) plans in 2025 for those striding into their golden years. Planning for retirement just got a significant boost for Americans aged 60 to 63, thanks to provisions in the SECURE Act 2.0.
Beginning in 2025, individuals in this age group will be eligible for something called a “super catch-up” contribution limit for employer-sponsored retirement plans, including 401(k)s. This exciting change, recently clarified by the IRS, provides a unique opportunity to accelerate your retirement savings during those crucial pre-retirement years.
The basics: Catch-up contributions
Catch-up contributions allow individuals aged 50 and older to save extra money for retirement beyond the standard contribution limits. For 2024, the catch-up contribution limit was $7,500, on top of the $22,500 annual contribution cap for 401(k)s and similar plans. These additional contributions are designed to help older workers close any retirement savings gaps they may have accumulated over the years.
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Introducing the super catch-up
Under the SECURE Act 2.0, individuals aged 60, 61, 62, and 63 can contribute even more to their retirement accounts starting in 2025. The new “super catch-up” limit will be the greater of $10,000 or 150% of the regular catch-up contribution limit for the given year, adjusted annually for inflation. At 64, you go to the regular catch-up.
401(k)s just got a little better for those who are aged 60-63, thanks to new catch-up provisions. (Reuters)
For example, if the regular catch-up contribution in 2025 remains at $7,500, the super catch-up limit would increase to $11,250 (150% of $7,500). If the $10,000 floor is adjusted for inflation, it could rise even higher, allowing individuals to add substantially more to their retirement savings.
Why is this important?
This enhancement comes at a pivotal time for many individuals. Those in their early 60s often find themselves at the peak of their earning potential, with more disposable income available for saving. At the same time, they are rapidly approaching retirement and may feel pressure to bolster their nest eggs. The super catch-up offers a golden opportunity to bridge any shortfalls and strengthen their financial security.
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Additionally, this provision aligns with the reality that many Americans are living longer. Increasing retirement savings can help ensure a more comfortable and secure retirement in the face of rising healthcare costs, inflation, and other financial challenges.
Key considerations
To take full advantage of the super catch-up, it’s essential to plan strategically:
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- Evaluate Your Budget: Ensure you have the financial flexibility to maximize contributions. Cutting unnecessary expenses or reallocating resources may be necessary.
- Consult a Financial Advisor: Professional guidance can help optimize your savings strategy, factoring in tax implications and long-term goals. One good place to start is at Exit Wealth to learn more about this technique.
- Understand Tax Implications: Contributions to traditional 401(k)s are tax-deferred, reducing your taxable income now but subject to taxes during retirement withdrawals. Consider how this fits into your overall tax strategy and whether the regular 401(k) or the Roth 401(k) make more sense for your situation.
- Stay Informed: Keep an eye on annual IRS updates regarding contribution limits and inflation adjustments.
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The super catch-up offers a golden opportunity to bridge any shortfalls and strengthen their financial security.
A new era of retirement savings
The super catch-up contribution is a testament to the growing focus on enhancing retirement readiness for Americans. By leveraging this opportunity, individuals aged 60 to 63 can significantly boost their retirement savings, potentially lower their overall tax liability, and provide greater peace of mind as they transition into their golden years.
If you’re approaching this age bracket, now is the time to review your retirement strategy and prepare to make the most of this exciting new provision. Retirement is a journey, and with the super catch-up, you can ensure yours is as secure and fulfilling as possible.
Ted Jenkin is president of Exit Stage Left Advisors and partner at Exit Wealth.
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