Posts made in March 2020

If you or someone you love is getting married, keep these important tax issues in mind. Taking care of them now can help reduce your stress at tax time.

Change names: IRS rules require that the names and Social Security numbers on your tax return match your Social Security Administration records. To formally change your name, file Form SS-5, “Application for a Social Security Card,” with the Social Security Administration.

Change filing status: If you’re married on or before December 31, you are considered married for the whole year as far as tax purposes are concerned. You and your spouse can choose to file your federal income tax return either jointly or separately each year. You may want to ask a tax professional to run the numbers and see which status results in the lowest tax liability.

For more information about filing taxes as a newlywed, consult a tax professional in your area.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[11]
[11] IRS.gov, March 5, 2019

The Week on Wall Street
The stock market suffered through another volatile week as it wrestled with the health and economic fallout of the domestic spread of the coronavirus. Swift and decisive actions by the Federal Reserve and policy responses from the federal government did not keep stocks from recording losses for the week.

The Dow Jones Industrial Average slumped 17.3%, while the Standard & Poor 500 lost 14.98%. The Nasdaq Composite index declined 12.64% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 6.64%.[1][2][3]

Stocks Slide Further
The stock market continued its retreat amid fears of a darkening economic impact from the coronavirus pandemic. Despite a Sunday night announcement by the Federal Reserve that it was cutting its benchmark interest rate by 100 basis points to nearly zero and taking steps to increase market liquidity, stocks opened the week sharply lower, setting the stage for another difficult week for investors.[4]

Progress was reported on coronavirus testing capacity and on the efforts to combat the infection. At the same time, Washington, D.C., advanced legislation to provide financial assistance to unemployed workers and affected businesses. Neither did much to help investor anxieties, however. Stocks slid in the closing hours of the trading week, leaving stock indices near their lows of the week.[5]

Central Bankers Go Big
The response of global central bankers to mitigate the economic impact of the coronavirus has been broad ranging. In addition to its 100 basis point cut in the federal funds rate, the Federal Reserve also took actions to provide additional credit access to banks, committed to buy at least $700 billion in Treasury and mortgage bonds, and set up a new lending facility to backstop money market funds.[6]

The European Central Bank also announced an $800 billion-plus bond buying program to support member economies. The Bank of England cut its benchmark lending rate to 0.1% and pledged to buy over $200 billion in government and investment grade corporate bonds, while the Bank of Japan said that it would double its purchases of stocks and increase loans to businesses.[7][8][9]

Final Thought
Investors are struggling with answers to two unknowns: the trajectory of the coronavirus spread and its economic cost. With coronavirus testing beginning to ramp up, these numbers may begin drawing a firmer picture of the growth of coronavirus infections in the U.S. Economic indicators, such as jobless claims for unemployment insurance and the Index of Leading Economic Indicators, may provide clues regarding the economy.

[1] The Wall Street Journal, March 20, 2020
[2] The Wall Street Journal, March 20, 2020
[3] The Wall Street Journal, March 20, 2020
[4] CNBC.com, March 15, 2020
[5] CNBC.com, March 20, 2020
[6] The Wall Street Journal, March 19, 2020
[7] CNBC.com, March 19, 2020
[8] Pension & Investments, March 19, 2020
[9] Financial Times, March 16, 2020

We witnessed an extraordinary move in the financial markets on Monday, March 9.

The Dow Industrials lost over 2,000 points, as Coronavirus fears continued to worry investors. At the same time, oil prices lost nearly 25 percent, on news that Saudi Arabia was dropping crude oil prices and raising production as well. Meanwhile, the 10-year Treasury bond yield touched an all-time low of 0.318 percent during the trading session, as unnerved investors looked for some stability.[1]

In times like this, I frequently hear that some find it difficult to stay committed to an investment program when fear has gripped the financial markets.

But for me, a quick look at recent history helps me keep these events in perspective.

Remember when the trade dispute with China ramped up back in February 2018? In just six trading days, stock prices had undergone a rollercoaster ride on their way to a 10-percent market correction. On February 8, 2018, CNBC reported that the Dow Industrials traveled 22,000-plus points over the course of February’s first full week of trading, due to trade-related fears.[2]

How about the 4th quarter of 2018? On October 10 of that year, the Dow saw an 800-point drop, largely due to rising interest rates and global economic concerns. And who can forget the holiday market trading two months later? It was a breathtaking event as the Dow lost over 600 points on Christmas Eve, then soared 1,000 points the day after Christmas.[3],[4]

In the past few weeks, I’ll admit that I’ve done a few “double takes” at my computer screen, as we’ve watched major swings in stock prices and movements in the bond and crude oil markets.

But just like always, I am here to help you and your family answer any questions that might surface. Whatever decisions you’re considering, I’d be honored to support you through them. Reach out to me anytime.

Kind Regards,

R. Scott Ramsay
Ramsay Capital Group

[1] CNBC.com, March 9, 2020
[2] CNBC.com, February 8, 2018
[3] CNBC.com, October 10, 2018
[4] CNBC.com, December 25, 2018

April 15 is the tax filing deadline for most people in 2020. If you didn’t file a tax return or an extension to file, it’s not too late to take action. Here’s what you can do:

File and pay soon. If you owe taxes, you should file and pay as soon as you can to minimize the interest and penalties that you will owe on any taxes due.

Pay as much as you can. If you owe taxes but can’t pay in full, you should pay as much as you can when you file your tax return.

Remember your refund. If you are owed a refund, you should file as soon as possible to get it. If you don’t file your return within three years, you could lose your right to the refund.

For more information on filing late taxes, speak to a qualified tax professional.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[6]
[6] www.irs.gov/newsroom/irs-opens-2020-filing-season-for-individual-filers-on-jan-27

In your investing lifetime, you may only see a situation like the recent novel coronavirus (COVID-19) a few times. This is a circumstance where complete candor is necessary. The truth is that we can’t yet gauge the full economic impact, and by the time we can, the volatility may have passed.

It’s important to remember that, in terms of market declines, the recent drop isn’t unprecedented. In fact, in the last six day-to-day declines of 3% or greater, the market rebounded higher a month later. Past performance is no indication of future returns, and it’s uncertain whether history is a good teacher in this instance.[i]

Markets Have the Virus

Right now, markets are reacting to the news because the outcome is unknown. In a way, COVID-19 has “infected” markets all around the world. In times of market uncertainty, some traders believe the best approach is to sell. Fear is driving decisions. Nobody would blame you if this uncertainty gave you a bit of anxiety, as well.

You Don’t Buy Snow Tires in a Blizzard

By working together to develop an investment strategy that fits your risk tolerance, time horizon, and goals, we have been preparing to weather turbulence. When a blizzard hits, the people who already own snow tires are usually happier than those venturing out into the cold, hoping they’re still in stock. In the same way, it’s generally best to make decisions during periods of low market volatility. We’re in the middle of the storm right now.

Here to Support You

This may be the time you need a trusted financial professional most. During most volatility, we advise you to “stay the course,” and that generally proves to be the best course of action. In times like this, however, it’s easy to question conventional wisdom.

Remember, I am here to help you and your family during this time. Whatever decisions you make, please allow me to support you through them. Feel free to reach out to me with any questions or concerns.

Kind Regards,
R. Scott Ramsay
Ramsay Capital Group

[1] wstreet.com, February 27, 2020

The Week on Wall Street
Markets remained exceptionally volatile, buffeted by the spreading impact of coronavirus, uncertain responses from federal policymakers, and the sudden drop in oil prices.

The Dow Jones Industrial Average fell 10.36%, while the S&P 500 declined 8.79%. The Nasdaq Composite index slid 8.18% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 17.75%.[1][2]

Markets Grapple with Uncertainty
A dispute between Saudi Arabia and Russia over oil production cuts, mounting fears of the coronavirus, the declaration of the COVID-19 as a global pandemic by the World Health Organization, and the news of a travel ban from Europe unsettled markets throughout the week.

Stock trading was halted twice by circuit breakers, which are designed to briefly stop trading when losses in the S&P 500 reach 7%. Stocks sold off sharply Thursday before ending a tumultuous week with a strong rebound on Friday.[3]

Troubles in the Oil Patch
The failure of Russia to join Saudi Arabia in supporting lower oil production targets left Saudi Arabia fuming. In response, Saudi Arabia announced its intention to raise oil output.

Oil prices plummeted on the news, contributing to the stock market’s drop on Monday. While lower oil prices may represent a boon to consumers in the form of lower gasoline prices and relief to companies with high energy consumption (e.g., airlines, chemical), they also pose a risk to the American energy industry. If low oil prices persist, it may lead to lower capital expenditures and potential issues in the credit markets, as less-well-capitalized companies struggle to manage their debt obligations.[4]

Final Thought
The world’s central bankers have already taken several steps to combat the economic impact of the coronavirus, including lowering short-term interest rates. The financial markets are now looking for a response from the U.S. government. In evaluating any actions from the federal government, investors may focus on the size and timing of policy proposals to determine if they can reduce current levels of economic uncertainty.

[1] www.wsj.com/market-data
[2] quotes.wsj.com/index/XX/990300/historical-prices
[3] www.cnbc.com/2020/03/12/stock-futures-hit-a-limit-down-trading-halt-for-a-second-time-this-week-heres-what-that-means.html
[4] www.cnbc.com/2020/03/09/cramer-9-or-10-oil-companies-may-go-bankrupt-amid-crude-declines.html

If you gave someone money or property, you may owe taxes on the gift. Here are some tips to help you determine if your gift is taxable:

Nontaxable Gifts. While the default assumption is that gifts are taxable, the following are nontaxable gifts:

• Gifts that do not exceed the annual exclusion for the calendar year ($15,000 in 2019)

• Tuition or medical expenses you paid directly to a medical or educational institution for someone

• Gifts to your spouse

• Gifts to a political organization for qualified uses

• Gifts to qualifying charities

Annual Exclusion. For 2019, the annual exclusion is $15,000. Gifts under that amount are not subject to the gift tax, even if they don’t fall into one of the categories above. If you give a gift to someone else, the gift tax usually does not apply until the value of the gift exceeds the annual exclusion for the year.

For more information on gifts and taxes, speak to a qualified tax professional.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[8]
[8] www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes

The Week on Wall Street
Heightened coronavirus fears, falling yields, and Super Tuesday primary results sent stocks on a rollercoaster ride of sharp price swings, leaving stocks marginally higher for the week.

The Dow Jones Industrial Average improved 1.79%; the S&P 500, 0.61%; the Nasdaq Composite, 0.10%. Outside the U.S., developed equity markets tracked by the MSCI EAFE Index rose 2.60%.[1][2]

A Swift Fed Decision
Wednesday morning, the Federal Reserve lowered its short-term interest rate by 0.5% to a range of 1.00%-1.25%, making its biggest cut since 2008. Addressing the media, Fed Chairman Jerome Powell said that the move was made to give the economy a “meaningful” lift and “help boost household and business confidence.”

The question is whether reducing borrowing costs can effectively address growing business and consumer anxieties about shopping, traveling, and gathering.[3]

A Push Toward Treasuries
The uncertainty on Wall Street has heightened demand for Treasury bonds. Their yields typically fall as their prices rise, and fall they did last week. The yield on the 10-year Treasury dipped under 0.70% during Friday’s market day, an all-time low.[4]

Winter Hiring Surge Continues
The Department of Labor’s latest employment report showed companies adding 273,000 net new hires last month. Net monthly payroll growth has averaged 243,000 since December.[5]

What’s Ahead
The Fed’s 50-basis-points cut in the federal funds rate has now shifted the sights of investors toward the European Central Bank, which is expected to make a policy announcement on March 12. The ECB has less room to maneuver than the Fed, since its key interest rate currently stands at -0.5%. Negative interest rates have done little to lift eurozone economies, which may necessitate more-creative monetary policy accommodation from the ECB’s new president, Christine Lagarde.

Traders are also focused on whether the Federal Reserve will make another rate cut on March 18, when its next meeting concludes. The half-point rate cut this past week did little to soothe stock market concerns; opinions vary about what the central bank might choose to do next.[6]

[1] www.wsj.com/market-data
[2] www.wsj.com/market-data/quotes/index/XX/MSCI%20GLOBAL/990300/historical-prices
[3] www.washingtonpost.com/business/2020/03/03/economy-coronavirus-rate-cuts/
[4] www.cnbc.com/2020/03/06/the-plunge-in-bond-yields-is-scary-now-but-could-be-helpful-later.html
[5] finance.yahoo.com/news/nonfarm-payrolls-reach-peak-273k-151603832.html
[6] www.fxstreet.com/macroeconomics/central-banks/fed

The Week on Wall Street
Stocks fell sharply last week as Wall Street considered how the coronavirus outbreak might influence global business activity and household spending.

The selloff became a correction for the U.S. markets. The S&P 500 retreated 11.49%; the Dow Jones Industrial Average, 12.36%; the Nasdaq Composite, 10.54%. The MSCI EAFE, tracking developed stock markets outside North America, had fallen 6.75% week-over-week by Friday’s closing bell.

On Friday afternoon, Federal Reserve Chair Jerome Powell stated that central bank officials were willing to “use our tools and act as appropriate to support the economy.”[1][2][3]

Strong Consumer Confidence, Plus a Boost for Incomes
A trio of economic indicators pertaining to U.S. households looked solid last week. The Conference Board’s Consumer Confidence Index notched consecutive months above 130 for the first time since July-August 2019, posting a 130.7 February mark. The University of Michigan’s final February Consumer Sentiment Index came in at 101.0, ticking up from a preliminary 100.9.

Friday, the Department of Commerce reported that Americans increased their personal spending by 0.2% in January, while personal incomes improved 0.6%.[4][5]

Buyers Have Flocked to New Homes
New home sales, according to the Census Bureau, improved 7.9% in January; the annualized pace of new home buying was the best seen since July 2007. Year-over-year, sales were up 18.6%. Housing market analysts cited a favorable economy and favorable weather as factors.[6]

Final Thought
Right now, there is no forecast for how the coronavirus outbreak may affect consumer demand or supply chains. The impact may not be known for months. But remember, your investment strategy should reflect your risk tolerance, time horizon, and goals, and it also should take into consideration periods of market volatility. Fear is driving decisions in the financial markets. Nobody would blame you if this uncertainty gave you a bit of anxiety as well.

[1] www.wsj.com/market-data
[2] quotes.wsj.com/index/XX/MSCI%20GLOBAL/990300/historical-prices
[3] finance.yahoo.com/news/stock-market-news-live-updates-february-28-2020-234447699.html
[4] www.investing.com/economic-calendar/cb-consumer-confidence-48
[5] www.marketwatch.com/tools/calendars/economic
[6] www.marketwatch.com/story/new-home-sales-soar-to-highest-level-since-2007-2020-02-26