Author: Ramsay Capital Group

Weekly Market Insights | Stocks Decline Slightly as New Year Dawns

Stocks edged lower last week despite a powerful end-of-week rally.

The Standard & Poor’s 500 Index lost 0.48 percent, while the Nasdaq Composite Index slid 0.51 percent. The Dow Jones Industrial Average fell 0.60 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, dropped 0.90 percent.^1,2

Selling Then Buying

Stocks were under pressure right out of the gate on Monday for no apparent reason other than worries over the loss of year-end momentum. By the end of trading on Monday, markets recovered some losses, but the selling picked up again on Tuesday.^3,4

After being closed for the New Year’s holiday, stocks opened higher for the first trading day of 2025. But sellers gained the upper hand by the end of trading. On Friday, Investors perked up with tech stocks leading a recovery rally that erased most of the week’s losses.^5,6

Megacap’s Mega Influence

Megacap tech stocks have captured many headlines over the last two years as the S&P 500 posted double-digit returns (24 percent for 2023 and 23 percent for 2024).

And for a good reason—megacap tech stocks were doing most of the work. For example, during the past 12 months of trading, more than half (53 percent) of the S&P 500’s return can be attributed to the Magnificent Seven–the seven megacap tech companies that most investors would consider household names.⁷

Footnotes and Sources

^{The Wall Street Journal, January 3, 2025}
^{Investing.com, January 3, 2025}
^{CNBC.com, December 30, 2024}
^{The Wall Street Journal, December 31, 2024}
^{CNBC.com, January 2, 2025}
^{CNBC.com, January 3, 2025}
^{The Wall Street Journal, December 31, 2024}
^{IRS.gov, October 2, 2024}

Do You Have To Pay Taxes On Your Hobby?

Whether you picked up embroidering, dog grooming, or making jewelry, a side hobby may or may not require paying taxes.

Does your kids’ lemonade stand need to pay taxes? Probably not but if you’re doing something like selling cookies out of your kitchen, you might need to check out the rules.

Here are some things to consider when determining whether your activity is a hobby or business:

Is your hobby carried out in a businesslike manner?
Do you maintain complete and accurate books and records for your hobby?
Is the effort you put into your hobby intended to make a profit?
Do you depend on the income from your hobby for your livelihood?
Do you know how to carry out your hobby as a successful business?
Have you made a profit from your hobby?

If you receive income from your hobby with no intention of making a profit, you may have to report the income to the IRS.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS⁷

Footnotes And Sources

^{IRS.gov, March 18, 2024}

Weekly Market Insights | Holiday Spending Up

Stocks notched a slight gain over the holiday week. A tech-driven rally in the first half of the week was clawed back in the second half as investors took profits following the market holiday.

The Standard & Poor’s 500 Index advanced 0.67 percent, while the Nasdaq Composite Index rose 0.76 percent. The Dow Jones Industrial Average added 0.35 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, rose 1.54 percent.^1,2

Ho-Ho, Then No-Go

Stocks rallied during the first half of a shortened holiday trading week. Holiday cheer won out despite news of declining consumer confidence in December, a drop in durable goods, and new home sales reporting below expectations.^3,4

The “Santa rally” lost its ho-ho-go after the midweek holiday. Megacap technology stocks led markets down on Friday, giving back most of the gains from the first half of the week.^4,5

The Real Santa

While Santa got the headlines, the consumer drove the holiday shopping sleigh this year.

Holiday spending—defined by the period from November 1 through December 24—rose 3.8 percent in 2024, compared with 3.1 percent in 2023. Economists closely follow consumer activity since consumer spending makes up roughly two-thirds of total gross domestic product. Market watchers attributed the strong job market and growth in household wealth as the primary drivers of consumer strength.⁶

Footnotes And Sources

^{The Wall Street Journal, December 27, 2024}
^{Investing.com, December 27, 2024}
^{MarketWatch.com, December 23, 2024}
^{CNBC.com, December 26, 2024}
^{The Wall Street Journal, December 27, 2024}
^{MarketWatch.com, December 26, 2024}

What is the Lifetime Learning Credit?

The Lifetime Learning Credit (LLC) is a tax credit for qualified tuition and related expenses. It can help pay for undergraduate or graduate studies and courses to acquire or improve job skills. The credit is worth up to $2,000 per tax return.

Another thing about this tax credit is that it’s available for unlimited tax years, unlike the American opportunity tax credit which is only for the first four years at an eligible institution.

To claim the LLC, you must pay qualified education expenses for higher education and enroll at an eligible educational institution. Check out the IRS guidelines for more details and to see whether you may qualify.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS⁹

Footnotes and Sources

^{IRS.gov, January 10, 2024}

Weekly Market Insights | Powell Signal Leaves Investors Cold

Stocks were under pressure last week as the Fed Chair’s hawkish comments unsettled investors ahead of the holiday season.

The Dow Jones Industrial Average received the hardest hit, falling 2.25 percent. The Standard & Poor’s 500 Index lost 1.98 percent, while the Nasdaq Composite Index dropped 1.78 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, retreated an eye-catching 3.38 percent.^1,2

No Santa Yet

Divergence marked the start of the week as megacap tech stocks rallied while the Dow Industrials fell for the eighth-straight session—its longest losing streak since 2018.³

Following its scheduled December meeting, the Fed announced it was cutting short-term rates by a quarter point, as widely expected. However, Fed Chair Jerome Powell also signaled fewer rate reductions next year. “From here, it’s a new phase and we’re going to be cautious about further cuts,” he said in his post-meeting news conference.

The rate news surprised investors, who were anticipating more dovish comments from the Fed Chair.^4,5

Markets were under pressure again early Friday as the spending bill to fund the federal government appeared to stall. But a lower-than-expected inflation update boosted the market and helped erase some of the earlier losses.^6,7

Holiday Cheer

Despite a difficult week, stocks are on track to have their second consecutive year of double-digit returns. Year to date, through Friday’s close, the S&P 500 was ahead by about 24 percent. In 2023, the S&P 500 also tacked on 24 percent for the full year.⁸

Footnotes and Sources

^{The Wall Street Journal, December 20, 2024}
^{Investing.com, December 20, 2024}
^{CNBC.com, December 16, 2024}
^{CNBC.com, December 17, 2024}
^{The Wall Street Journal, December 18, 2024}
^{CNBC.com, December 19, 2024}
^{CNBC.com, December 20, 2024}
^{The Wall Street Journal, December 20, 2024}

Have You Created Your IRS Online Account?

The IRS makes it easy to create an online account where you can view all kinds of account information, such as:

Your payoff amount
The balance if you owe taxes
Your payment history
Key information from your most current tax return
Payment plan details if you have one
Select IRS notices
Economic payments (if you have any)
Your address on file with the IRS

You can even pay online and receive a digital copy of your most recent tax return transcript.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS⁹

Footnotes and Sources

^{IRS.gov, August 1, 2024}

Weekly Market Insights | Mixed Data, Mixed Results

Stocks finished the week mixed, bookending losses around midweek gains as investors digested fresh inflation data.

The Standard & Poor’s 500 Index slipped 0.64 percent, while the Nasdaq Composite Index ticked up 0.34 percent. The Dow Jones Industrial Average dropped 1.82 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, slid 1.48 percent.^1,2

Up and Down Week

Stocks fell broadly over the first part of the week. Leading chipmakers who produce semiconductors for artificial intelligence applications were under pressure after Chinese regulators announced an antimonopoly investigation.³

Investors breathed a sigh of relief Wednesday morning following news that consumer inflation in November was in line with expectations. Mega-cap tech stocks led the rally, with the Nasdaq closing above 20,000 for the first time. Meanwhile, the Dow fell as healthcare stocks came under pressure.⁴

Stocks remained in the trading range for the rest of the week on mild concerns about Thursday’s warmer-than-expected wholesale inflation report and a spending slowdown among lower-income consumers. The Dow registered its worst losing streak since 2020.^5,6,7

Final Fed Meeting of 2024

The consumer price index ticked up to 2.7 percent on an annualized basis in November, as expected. The market’s rally following the news reflected investor relief that inflation met expectations and that the increase from the prior month was slight.

Those two factors may reinforce the belief that the Fed would follow through with the December rate adjustment, which it penciled in back in September. The bellwether inflation measure was the last critical data point before the Fed’s two-day meeting, scheduled to end on December 18.⁸

Footnotes and Sources

^{The Wall Street Journal, December 13, 2024}
^{Investing.com, December 13, 2024}
^{CNBC.com, December 10, 2024}
^{The Wall Street Journal, December 11, 2024}
^{The Wall Street Journal, December 12, 2024}
^{CNBC.com, December 13, 2024}
^{The Wall Street Journal, December 13, 2024}
^{The Wall Street Journal, December 11, 2024}

Beware of the Fake Charity Scam

There are so many scams out there. One of the most heartless is taking advantage of people who want to give money to a legitimate charity, especially after a tragedy or disaster. Scammers can set up fake organizations to take advantage of people’s generosity.

These scams are usually over the phone, and while the organization may sound legitimate, the person on the other end might demand a donation immediately. Remember, a charity will happily receive a donation anytime, so you shouldn’t feel pressured.

You can research charity organizations using the IRS Tax Exempt Organization Search tool—this will help you narrow down a list of legitimate charities. You may even be able to claim a deduction on your tax return.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS¹⁰

Footnotes and Sources

^{IRS.gov, April 4, 2024}

Weekly Market Insights | Markets Mixed; Jobs Back on Track

Stocks were mixed during the first trading week of December. Technology stocks led, while the widely followed Dow Jones Industrial Average struggled.

The tech-heavy Nasdaq Composite Index picked up 3.34 percent while the Dow Industrials lost 0.60 percent. The Standard & Poor’s 500 Index added 0.96 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, gained 1.46 percent.^1,2

Tech Takes Charge

The S&P and Nasdaq rallied to start the week, closing at record highs Monday and Tuesday. The Dow fell on both days. During a conference speech, Fed governor Christopher Waller said he supports a rate adjustment in December for now, which seemed to add momentum to the S&P’s and Nasdaq’s gains.^3,4

Tech shares continued to propel stock gains midweek on the strength of a few better-than-expected Q3 reports.⁵

On Friday, the S&P and Nasdaq hit new record highs following the November jobs report. Both notched their third consecutive winning week. By contrast, the Dow was down four of the five trading days, ending the week in the red after two back-to-back weekly gains.^6,7,8

Jobs Rebound

After two hurricanes and an aircraft maker strike weighed on the labor market in October, the November jobs report released Friday gave investors what they were looking for: confirmation that the October update was an anomaly.

While November payrolls topped expectations, investors believed the hotter-than-expected report would not influence the Fed’s upcoming decision regarding short-term interest rates. The Fed’s scheduled two-day meeting ends on December 18.⁹

Footnotes and Sources

^{The Wall Street Journal, December 6, 2024}
^{Investing.com, December 6, 2024}
^{CNBC.com, December 2, 2024}
^{MarketWatch.com, December 3, 2024}
^{CNBC.com, December 4, 2024}
^{MarketWatch.com, December 5, 2024}
^{MarketWatch.com, December 6, 2024}
^{The Wall Street Journal, December 6, 2024}
^{The Wall Street Journal, December 6, 2024}

How to Verify Your Identity When Calling the IRS

When calling the IRS, you can expect them to verify your identity before delving into personal information. Here’s what you’ll need to verify your identity:

Social Security number
Birthdate
An Individual Taxpayer Identification Number if you have one instead of your SSN
Your filing status
Your prior tax return. You may need information from your prior year’s return to answer certain questions.
A copy of the tax return you’re calling about
Any letters or notices you’ve received from the IRS

Important note: the IRS will only ask for this in documents or online. Never offer this info to someone who calls you and says they are from the IRS.

Having all this information handy before you call the IRS will make the process faster because IRS phone operators will only speak with the taxpayer or a legally designated representative.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS⁸

Footnotes and Sources

^{IRS.gov, October 23, 2023}