Happy Sunday everyone, and welcome to Benzinga’s financial advisor newsletter.

Today we’re talking about the coming Saver’s Match, which is a huge investment in low-income retirement savings - and could bring a whole new group of people to financial advisors.

So, let’s get into the Industry Chatter!

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INDUSTRY CHATTER

Saver's Match: A Game-Changer for Low-Income Savers and Financial Advisors Alike

The Saver's Match, created by the SECURE 2.0 Act of 2022, is poised to transform retirement savings for low-income workers, and could bring a whole new audience to financial advisors. Set to launch in 2027, this program will convert the existing Saver's Credit into a federal government match, offering up to $1,000 at a rate of $0.50 per dollar contributed.

According to the Employee Benefit Research Institute, at least 21.9 million workers will qualify for the Saver's Match. However, industry experts are scrambling to ensure its effective implementation by the 2027 deadline.

Getting the Word Out

Kim Olson from the Pew Charitable Trusts is leading efforts to assist the Treasury and IRS in launching the program. Key focus areas include simplicity, efficiency, and awareness. Pew has convened working groups to address program publicity, eligibility identification, and fund distribution coordination.

Emerson Sprick of the Bipartisan Policy Center highlights the Saver's Match as a significant improvement over the current Saver's Credit, which faces issues such as low federal income tax liability among its target group and lack of awareness.

The Financial “Plumbing” Will Need Work

One major challenge is the "plumbing" with recordkeepers. Spencer Williams of the Retirement Clearinghouse suggests that the existing Portability Services Network could be adapted to support the Saver's Match, providing a system for participant identification, account matching, and fund transfers.

Implementation hurdles include coordinating with state retirement programs, many of which use post-tax Roth accounts that currently can't receive government funds. Solutions may involve creating separate pre-tax accounts for eligible participants.

Significant Investment

Experts stress the importance of a robust public awareness campaign to ensure eligible workers know about and utilize the program. They hope the IRS will prominently feature the Saver's Match during tax filing season.

Despite the challenges, the Saver's Match represents a significant investment in low-to-moderate income workers' retirement savings. Its successful implementation could potentially reduce future reliance on other social assistance programs, making it a crucial development for both beneficiaries and the U.S. retirement system as a whole - and could create a new clientele for financial advisors.

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MARKET RECAP

Tech Stocks Slide On Earnings, US Economy Flexes Muscles, Small-Cap Rally Continues: This Week In The Markets

The tech earnings season started with disappointments for investors as shares of the Magnificent Seven companies all declined during the trading week.

Alphabet Inc. (GOOGL) reported stronger-than-expected earnings and revenue, but missed analysts’ targets on YouTube advertising revenue, leading to the worst week of the year for the Google parent company's stock.

Tesla Inc. (TSLA) missed quarterly earnings forecasts due to thinner profit margins impacted by lower vehicle prices and restructuring charges. The electric-vehicle giant also postponed the announcement of the Robotaxi to October. Shares fell 12.3% in reaction to the earnings report on Wednesday, marking the worst one-day performance since September 2020.

The tech-heavy Nasdaq 100 index notched the second-straight week in the red for the first time since April.

Among mega-cap stocks, Ford Motor Co. (F) and United Parcel Service Inc. (UPS) experienced the largest declines this week, followed by General Motors (GM), amid disappointing earnings reports. The top performers among mega caps were 3M Co. (MMM) and Bristol-Myers Squibb Co. (BMY), buoyed by surprising results.

Small-cap stocks outperformed once again this week, with the Russell 2000 Index marking its third straight week of gains, supported by high expectations for upcoming interest rate cuts.

On the macroeconomic front, the U.S. economy grew at an annualized pace of 2.8% in the second quarter, accelerating from the first quarter and topping expectations of 2% growth.

You might have missed:

Inflation Gauge Falls: An inflation measure followed by the Federal Reserve fell to 2.5% in June, hitting the lowest levels since February 2021 and cementing market expectations of a rate cut in September.

Yet the Fed is seeking a more “durable downward trend” before deciding to cut rates, according to a Comerica Bank economist.

Alphabet Shares Drop: OpenAI plans to launch SearchGPT, a tool aimed at challenging Google’s search dominance, opening a 10,000-person waiting list to test the new product.

Mortgage Rates Ease: Mortgage rates have declined to the lowest levels since February, with the average 30-year fixed interest rate falling to 6.62%, driven by investor anticipation of future interest rate cuts. Despite this, demand among homebuyers remains weak.

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THE WEEK AHEAD

Interest Rate Decisions, Employment Numbers, and Big Tech Earnings

Economic Data

• Monday: Dallas Fed Manufacturing Business Index

• Tuesday: Bank of Japan’s interest rate decision, EU GDP, U.S. job openings

• Wednesday: Fed interest rate decision and statement, U.S. non-farm employment

• Thursday: U.S. manufacturing PMI, Bank of England interest rate decision

• Friday: U.S. employment numbers

Earnings

• Monday: Tilray Brands (TLRY), McDonald’s (MCD)

• Tuesday: Microsoft (MSFT), BP (BP)

• Wednesday: Meta Platforms (META), T-Mobile US (TMUS)

• Thursday: Amazon.com (AMZN), Cigna Group (CI)

• Friday: Chevron (CVX), Plains All American (PAA)

Click here for the full calendar of economic data and earnings reports.

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