Posts made in August 2020

Deductions may help you manage the amount of taxes you owe, but it’s important to understand the different types of deductions. You have the choice of either taking a standard deduction or itemizing your deductions. Here are some details to help you understand the difference between the two:

• The standard deduction may adjust every year and can vary by filing status. It also depends on a number of factors. You may be able to find the standard tax deductions on the first page of your filing form (such as Form 1040 or Form 1040-SR).
• Itemized deductions refer to individual expenses, such as state and local income or sales taxes, real estate taxes, mortgage interest, mortgage insurance premiums, and more. Taxpayers may be able to itemize deductions when the amount is greater than the standard deduction.

* 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[10]
[10] IRS.gov, August 21, 2020

The Week on Wall Street
Stocks powered to another week of gains as the S&P 500 and Nasdaq Composite set multiple new record highs along the way.

The Dow Jones Industrial Average was essentially unchanged while the Standard & Poor’s 500 rose by 0.72%. The Nasdaq Composite index added 2.65% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.71%.[1][2][3]

The S&P 500 Sets Record High
The S&P 500 closed at a record high on Tuesday, erasing the steep losses suffered in February and March. The recovery has been powered by unprecedented monetary accommodation, fiscal stimulus, and investor willingness to look ahead with confidence that global economies will get past the pandemic challenge. Technology stocks continued to lead the market and helped push the NASDAQ Composite to new highs.[4]

Stocks were mixed as the week progressed amid some weak economic news, a message of economic caution from the Fed, and continuing uncertainty over a new fiscal stimulus plan.Technology momentum provided support for the broader market, with a late Friday afternoon rally pushing the S&P 500 and Nasdaq Composite to close out the week at fresh record highs.[5]

Not All Sectors Are Participating
Behind last Tuesday’s headline that the S&P 500 had set a new record high lies a story of a deeply bifurcated market.

Despite a new high, more than half the companies in the index were still trading below where they began the year. When dissected on an industry sector basis, the year-to-date performance dispersion was quite wide, with sectors like Technology (+25.53%), Consumer Discretionary (+16.68%), and Communication Services (+12.70%) posting strong performance, while Energy (-37.56%) and Financials (-20.08%) remained sharply down. In fact, nearly half (5 out of 11) of S&P 500 sectors were still in negative territory year-to-date.[6][7][8]

[1] The Wall Street Journal, August 21, 2020
[2] The Wall Street Journal, August 21, 2020
[3] The Wall Street Journal, August 21, 2020
[4] The Wall Street Journal, August 18, 2020
[5] CNBC, August 19, 2020
[6] BBC News, August 18, 2020
[7] FactSet.com, August 21, 2020
[8] FactSet.com, August 21, 2020

When you’re looking for a tax preparer, you want to make sure to find someone you trust. These tips will help you find a responsible professional and wisely prepare yourself:

• Check the preparer’s qualifications
• Ask about service fees
• Make sure the preparer is available
• Never sign a blank tax return
• Review your tax return before signing
• Ensure that the preparer signs the return and includes their Preparer Tax Identification Number

These tips will help you find the right tax preparer. If needed, you can report abusive tax preparers to the IRS using Form 14157.

* 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[10]
[10] IRS.gov, January 16, 2020

The Week on Wall Street
Stock prices drifted higher in an otherwise quiet news week, as a slowdown in new COVID-19 cases outweighed a Congressional impasse on a new fiscal-spending measure.

The Dow Jones Industrial Average gained 1.81%, while the Standard & Poor’s 500 rose by 0.64%. The Nasdaq Composite Index inched 0.08% higher for the week. The MSCI EAFE Index, which tracks developed stock markets overseas, advanced 3.11%.[1][2][3]

S&P 500 Nears All-Time High
Stocks prices were supported by a falling rate of COVID-19 cases nationwide and optimism that – despite a lack of progress on a fiscal-aid bill – Congress would eventually come to a spending agreement.[4]

The industrial and financial sectors saw solid gains, while technology stocks, after slipping earlier in the week, found some footing as the week came to a close.

The S&P 500 Index flirted all week with setting a new record high. At one point on Thursday, it traded above its February 2020 record close before closing slightly lower. Stocks treaded water into Friday, as Congress recessed for the summer.[5]

Consumer Prices Jump
On Wednesday, the Labor Department said that the Consumer Price Index rose 0.6% in July, matching the 0.6% increase in June. The increase was double the consensus estimate of 0.3%. The general view is that the acceleration in consumer prices is more indicative of a healing economy than the beginning of a cycle of higher inflation.[6][7]

The Fed does not appear concerned about these recent monthly price jumps. It remains more worried about disinflation. However, if inflation continues to pick up, the Fed may be forced to reconsider its COVID-19 monetary policy.[8]

[1] The Wall Street Journal, August 14, 2020
[2] The Wall Street Journal, August 14, 2020
[3] The Wall Street Journal, August 14, 2020
[4] CNBC, August 12, 2020
[5] CNBC, August 13, 2020
[6] The Wall Street Journal, August 12, 2020
[7] The Wall Street Journal, August 12, 2020
[8] CNBC, August 12, 2020

IRS Free File, a tool from the IRS, helps some taxpayers file for free. This may include military members and their families. The tool is designed for individuals or families whose adjusted gross income was $69,000 or less last year, but there may also be a special offer for members of the military and their families. Using Free File, users have access to guides on how to get started, online software, fillable forms, and more. There may be 10 software partners offering their services.

In addition, active duty military stationed in combat zones may also have more time to file their tax returns.

* 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[12]
[12] IRS.gov, January 21, 2020

The Week on Wall Street
Overlooking stalled efforts by Congress to pass a new fiscal stimulus bill, stocks marched higher last week with the Dow Jones Industrials leading the way and the NASDAQ Composite setting multiple fresh record highs.

The Dow Jones Industrial Average gained 3.80%, while the Standard & Poor’s 500 rose by 2.45%. The Nasdaq Composite index climbed 2.47% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 2.31%.[1][2][3]

Earnings Season Winds Down
A string of encouraging news reports, including a decline in new COVID-19 cases nationwide, pushed stock prices higher throughout the week. Stocks also rallied on signs of a pick-up in manufacturing activity, factory orders that came in well above estimates, and a better-than-expected new jobless claims number.[4][5]

Congress wasn’t able to come to an agreement on a stimulus package, which disappointed some investors. But it wasn’t enough to slow the daily climb in the equity markets, with the NASDAQ Composite index closing above 11,000 for the first time, while the S&P 500 index closed in on its record high set in February of this year.[6]

Stocks drifted on Friday even though the employment report showed that employers added 1.8 million jobs in July, lowering the unemployment rate to 10.2%.[7]

One Eye on Bonds, Gold
The continued rally in stock prices appears to suggest that the U.S. economy may maintain its recovery through the second half of the year and into 2021. But the bond market and gold prices suggest a different outlook.

Last week the yield on 10-year Treasuries touched their lowest level since early March, signaling that bond investors may be less convinced about economic prospects.[8]

Meanwhile, gold traded over $2,000 per ounce. While the rise in gold prices this year has been largely propelled by historically low interest rates, its reputation as a store of value has attracted investors worried about stock market volatility and a potential uptick in inflation.[9]

Final Thoughts
It was reported last week that the U.S. and China agreed to meet by videoconference on August 15 to discuss compliance with the terms of the Phase One trade deal.[10]

With tensions running high between the two nations, expect Wall Street to keep a close eye on any developments that may appear connected to the virtual meeting.

[1] The Wall Street Journal, August 7, 2020
[2] The Wall Street Journal, August 7, 2020
[3] The Wall Street Journal, August 7, 2020
[4] MarketWatch.com, August 4, 2020
[5] The Wall Street Journal, August 6, 2020
[6] CNBC, August 6, 2020
[7] The Wall Street Journal, August 7, 2020
[8] MarketWatch, August 4, 2020
[9] The Wall Street Journal, August 5, 2020
[10] CNBC.com, August 4, 2020

The IRS has established a Taxpayer Bill of Rights to protect all taxpayers. You have the right to:

• Receive prompt, courteous, and professional service from the IRS
• Easily understand what the IRS is saying
• Receive clear and easy-to-understand communication from the IRS
• Speak to a supervisor if you receive inadequate service
• Have your questions answered promptly, accurately, and thoroughly
• Objective advice

Head over to the Taxpayer Bill of Rights on IRS.gov to understand what you’re entitled to.

* 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[10]
[10] IRS.gov, July 31, 2020

The Week on Wall Street
Stocks were mixed last week amid a busy week of earnings, some troubling economic data, and seemingly little progress on a new fiscal stimulus package.

The Dow Jones Industrial Average slipped 0.16%, while the Standard & Poor’s 500 increased by 1.73%. The Nasdaq Composite Index surged 3.69% for the week. The MSCI EAFE Index, which tracks developed stock markets overseas, dipped 0.75%.[1][2][3]

Stocks Buffeted by Crosswinds
Stocks rode a roller coaster last week, reacting to a conflicting stream of corporate events and economic data.

Investors were optimistic on Monday about the ability of mega-cap technology companies to thrive in an uncertain economy, but worried on Tuesday about pending Congressional testimony involving the CEOs of these firms.

On the economic front, a strong June durable goods orders report on Monday bolstered investor sentiment. But the optimism faded on a disappointing jobless claims number and a troubling second-quarter GDP number that-while anticipated-was a bit unsettling.[4][5][6]

Following some exceptional earnings results from the mega-cap technology companies, stocks managed to rally in the final hour of trading on Friday.

U.S. Dollar Continues Its Decline
Since peaking in mid-March, the U.S. dollar has dropped nearly 9%. Some of the potential beneficiaries of a weak dollar are global American businesses whose products and services become less expensive in overseas markets.[7]

Conversely, international companies may suffer lower sales in the U.S. as their products become more expensive. It’s a mixed bag of potential outcomes, but Wall Street has become more and more focused on the dollar’s trajectory.

Final Thoughts
August has historically been a particularly volatile month. For instance, in 2019, the S&P 500 posted moves of more than one percent in 22 trading days.[8]

One of the possible reasons is that many traders are away on vacation, resulting in light volume, which may amplify market volatility. But this year, it’s uncertain whether traders will be away on vacation due to the pandemic. Should markets become volatile in the weeks ahead, investors may want to remind themselves of the seasonal trends that may be at work.

[1] The Wall Street Journal, July 31, 2020
[2] The Wall Street Journal, July 31, 2020
[3] The Wall Street Journal, July 31, 2020
[4] CNBC.com, July 27, 2020
[5] CNBC.com, July 30, 2020
[6] BEA.gov, July 30, 2020
[7] Reuters.com, July 28, 2020
[8] CNBC.com, August 31, 2019