Author: Ramsay Capital Group

Weekly Market Insights: Stocks Stage Comeback After Heavy Monday

Stocks ended last week with modest losses, masking a volatile five-day trading period that saw investors embrace recession concerns and then dismiss the slow-down talk as speculation as the week progressed.

The Dow Jones Industrial Average slipped 0.60 percent, while the Standard & Poor’s 500 Index ended flat (-0.04 percent). The Nasdaq Composite dipped 0.18 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 1.21 percent.^1,2

Stocks Stage Comeback

Monday was the worst day for the S&P 500 and the Dow in nearly two years. As recession talk grew louder, investors took a “risk off” position.

On Monday, the Japanese market had its worst drop since 1987 as market participants unwound positions from a popular trading strategy called a “carry trade” amid a global sell-off in stock prices.³

But on Thursday, initial jobless claims fell less than expected—a positive sign for the labor markets— which quieted some of the recession talk. Also, as the week progressed, there was growing speculation that the July jobs report was more of an outlier than a lead indicator of a pending recession.

By Friday’s close, all three major averages had regained most of the week’s losses.⁴

Mortgage Update

Last Thursday, the average rate on a 30-year fixed mortgage dropped to 6.47 percent—a 15-month low. Many home buyers welcomed the news, and it appeared to help support Thursday’s rally.⁵

But the announcement left some wondering whether rates would continue to trend lower. Mortgage rates are tied to the interest rates set by the Federal Reserve. Some speculated the drop was due to market participants anticipating the Fed would adjust rates in September, which remains anything but certain.⁶

Footnotes and Sources

^{The Wall Street Journal, August 9, 2024}
^{Investing.com, August 9, 2024}
^{CNBC.com, August 5, 2024}
^{The Wall Street Journal, August 8, 2024}
^{The Wall Street Journal, August 8, 2024}
^{The Wall Street Journal, August 9, 2024}

Is it Time for a Paycheck Checkup?

There’s no better time to check your withholding status and make sure your paycheck accurately reflects the taxes you should be paying. These paycheck checkups are a great practice when something happens in your life that may change your tax status, such as getting married or getting divorced, having a baby, getting a new job, or getting a raise or promotion at work. You can also adjust your withholding status if you want to change the tax withheld due to other circumstances.

Other factors can also be checked during your paycheck checkup, such as how much you contribute to your health insurance retirement plan. These expenses can also impact your tax liability.

*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.gov⁸

Footnotes and Sources

^{IRS.gov, May 8. 2024}

Weekly Market Insights: Fed Goes Dove; Investors Retreat

Stocks fell broadly last week as investors looked past upbeat Fed comments and focused on disappointing corporate reports and weaker-than-expected economic data.

The Dow Jones Industrial Average lost 2.20 percent, while the Standard & Poor’s 500 Index fell 2.06 percent. The Nasdaq Composite Index dropped 3.35 percent. By contrast, the MSCI EAFE Index, which tracks developed overseas stock markets, gained 0.19 percent for the week through Thursday’s close.¹

Volatile Week of Trading

Stocks were under pressure early in the week as investors appeared to focus on the Fed’s meeting, which ended on Wednesday. It was a big week for Q2 corporate reports, with five of the ten largest names in the S&P 500 (by market capitalization) reporting numbers. But attention was mainly on the Fed’s meeting.^2,3

Stocks rallied on Wednesday when Fed Chair Powell indicated a September interest rate cut was “on the table.”⁴

But selling picked up on Thursday as investors’ attention quickly shifted to disappointing corporate reports and weak economic data. Friday morning’s disappointing June jobs report raised even more concerns about the economy’s strength. The Nasdaq ended the week in correction territory, down more than 10 percent from its recent all-time high.^5,6

Economic Concerns

Fresh economic data suggested weakening manufacturing, construction, and employment outlooks. On Friday, the Labor Department’s July jobs report showed a sharper-than-expected job growth slowdown and an unemployment uptick to 4.3 percent—the highest rate in 2½ years.

At Wednesday’s Fed press conference, investors welcomed Powell’s unusually candid and upbeat comments. However, as the week progressed, investors started questioning whether the Fed was misreading the economy and moving too slowly in adjusting interest rates.⁷

Footnotes and Sources

^{The Wall Street Journal, August 2, 2024}
^{The Wall Street Journal, August 2, 2024}
^{S&P Global, July 31, 2024}
^{The Wall Street Journal, July 31, 2024}
^{The Wall Street Journal, August 1, 2024}
^{CNBC.com, August 2, 2024}
^{The Wall Street Journal, August 2, 2024}

Start a New Business Off on the Right Foot

Starting a new business? There are some tax tips to know to get yourself moving in a positive direction something like that the Internal Revenue Service (IRS) shares for new business owners:

Choose the proper business structure: The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are a sole proprietorship, a partnership, a corporation, an S corporation, and an LLC.

Apply for an Employer Identification Number (EIN): An EIN is used to identify a business.

*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.gov⁶

Footnotes and Sources

^{IRS.gov, May 8, 2024}

Weekly Market Insights: Down Corporate Reports Shake Investors

Stocks had a mixed, see-saw week as disappointing corporate reports unsettled investors who appeared to rotate away from some leading groups in favor of other names.

The Dow Jones Industrial Average picked up 0.75 percent. Meanwhile, the Standard & Poor’s 500 Index declined 0.83 percent, and the Nasdaq Composite Index dropped 2.08 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 1.49 percent for the week through Thursday’s close.¹

Q2 Corporate Reports Start

Last week began with some positive momentum, but after Tuesday’s close, two influential tech companies reported disappointing Q2 numbers, which soured sentiment. On Wednesday, the S&P dropped 2 percent, and the Nasdaq fell more than 3 percent.

Stocks attempted to rebound on Thursday on news that gross domestic product grew much faster than expected in Q2, but sellers swooped in near the close.³

Stocks rallied broadly on Friday after a positive inflation report. The personal consumption expenditures index, widely considered the Fed’s preferred inflation measure, showed only a slight uptick in June—in line with expectations.⁴

Watch the Rotation

July 26 saw the end of the third consecutive week in which the Dow led the other two averages and its fourth straight week of gains.

At the same time, the S&P and Nasdaq have been under pressure, with both posting losses for the second consecutive week.

So far in July, the Dow is up nearly 4 percent, the S&P is down slightly, and the Nasdaq is off by over 2 percent. That’s a marked change from earlier in the year when the Nasdaq led.⁵

Footnotes and Sources

^{The Wall Street Journal, July 26, 2024}
^{The Wall Street Journal, July 26, 2024}
^{The Wall Street Journal, July 25, 2024}
^{CNBC.com, July 26, 2024}
^{The Wall Street Journal, July 26, 2024}

Protect Your Tax Data

The Internal Revenue Service (IRS) shared guidelines that tax pros should follow to protect taxpayer data, but these principles are sound for everyone to practice.

Anti-virus software: This software scans computer files for malicious software or malware on the device. Anti-virus vendors find new issues and update malware daily. Always install the latest software updates on your computer.

Two-factor authentication: Two-factor authentication adds an extra layer of protection beyond just a password. Not only do you enter your username and password, but you also enter a security code that the service provider can send to another device for extra protection.

Drive encryption: Drive encryption transforms sensitive data into unreadable code that unauthorized people cannot decipher easily, so only the authorized person can access the data.

*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.gov⁹

Footnotes and Sources

^{IRS.gov, May 8, 2024}

Weekly Market Insights: Investors Shift, Anticipating Lower Interest Rates

Stocks were under pressure last week as investors appeared to rotate out of mega-cap tech stocks and into areas that may benefit from lower interest rates.

The Standard & Poor’s 500 Index fell 1.97 percent, while Nasdaq Composite Index declined 3.65 percent. The Dow Jones Industrial Average bucked the downward trend, up 0.72 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, slid 1.48 percent for the week through Thursday’s close.¹

Dow Leads Again

The week began very differently than it ended.

All three averages rallied over the first couple of days this week, with the Dow leading on both days. Fed Chair Powell indicated the Fed may not wait for inflation to reach its 2 percent target before considering a rate move, buoying the markets.^2,3

Then, markets hit a speed bump as investors appeared to take profits and rotated away from mega-cap tech names. The selling broadened beyond tech-related names on Thursday as all but one of the S&P 500’s 11 sectors fell.

Early Friday morning, a global tech outage caused disruptions for businesses, governments, and financial institutions, contributing to the weekly decline. Despite its losses in the second part of the week, the Dow finished in the green.^4,5,6

Upbeat Economic Data

Although stocks were under pressure, some investors saw “green shoots” in a few economic reports. Housing starts rose 3 percent in June. Building permits also ticked higher during the month. Retail sales were unchanged in June, which was better than expected. Investors were encouraged that consumers were still spending despite ongoing inflation.^7,8

Footnotes and Sources

^{The Wall Street Journal, July 19, 2024}
^{CNBC.com, July 15, 2024}
^{CNBC.com, July 16, 2024}
^{MarketWatch.com, July 17, 2024}
^{CNBC.com, July 18, 2024}
^{The Wall Street Journal, July 19, 2024}
^{KPMG.com, July 17, 2024}
^{AP.com, July 16, 2024}

Give Back to Your Community By Working as a Tax Volunteer

If you’re looking for a way to give back to your community and help people with low-to-moderate incomes, consider applying to volunteer with the Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs. These programs offer free tax help to senior citizens, persons with disabilities, and those who speak limited English to understand their tax situations.

Here are some of the perks of being a VITA or TCE volunteer:

Flexible hours: Generally, volunteers contribute 3-5 hours per week. Some sites are open all year, but most programs are open from January to April.
Convenience: Thousands of VITA and TCE sites are set up in neighborhoods across the country, so it’s convenient to volunteer at a location close to home. These locations are usually community centers, libraries, schools, and malls.
No experience needed: You don’t have to be a tax pro to volunteer because all volunteers receive special training and can serve in various roles.

*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.gov⁶

Footnotes and Sources

^{IRS.gov, May 8. 2024}

Weekly Market Insights: Stocks Advance After New Inflation Data

Stocks advanced last week as market leadership shifted amid fresh inflation data and quarterly corporate reports starting to roll in.

The Standard & Poor’s 500 Index advanced 0.87 percent, while the Dow Jones Industrial Average picked up 1.59 percent. The tech-heavy Nasdaq Composite Index, which has led all year, rose 0.25 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, rallied 1.62 percent for the week through Thursday’s close.¹

Dow Breaks 40,000 (Again)

Mega-cap tech led modest gains for the S&P 500 and Nasdaq in the first two days of the week, with the Dow posting modest losses both days.

But that narrow trading range didn’t last long as market leadership shifted midweek. Upbeat corporate earnings reports and milder-than-expected consumer inflation in June drove momentum in a handful of larger industrial and consumer stocks.^2,3

Q2 earnings season got into full swing later in the week, dominated mostly by financial and consumer-oriented companies. Markets seemed initially unfazed by better-than-expected reports from some money center banks. Some observers suggested higher interest rates may be one of the reasons for the market’s lukewarm response.⁴

The Dow ended the week with a solid gain after three consecutive weeks of trailing the S&P 500 and Nasdaq. The Dow also closed above 40,000, the first time it had done so since May, and hit a 52-week intraday high on Friday.

Mixed Inflation News

Two inflation reports came out last week: PPI and CPI.

The Producer Price Index, which measures the change in wholesale prices, rose 2.6 percent in June year over year—its largest increase in 16 months. By contrast, the Consumer Price Index, which tracks consumer prices, showed that the pace of inflation slowed in June.

Markets shrugged off the conflicting data, instead embracing the cooler CPI data. The Fed is likely taking notes for its next Fed meeting, scheduled for July 30-31.⁵

Footnotes and Sources

^{The Wall Street Journal, July 12, 2024}
^{The Wall Street Journal, July 12, 2024}
^{The Wall Street Journal, July 11, 2024}
^{The Wall Street Journal, July 12, 2024}
^{The Wall Street Journal, July 12, 2024}

How To Apply For Tax-Exempt Status For Organizations

If an organization wants to apply for tax-exempt status under Section 501(c)(3), it starts by filling out a Form 1023-series application. It must submit a complete application and the user fee. Organizations also need their employer identification number to complete the application. Generally, an organization that is required to apply for recognition of exemption must notify the Internal Revenue Service (IRS) within 27 months from the date of formation.

Some organizations (including churches or public charities whose annual gross receipts are less than $5,000) may not need to apply for 501(c)(3) status to be tax-exempt. When the IRS determines an organization qualifies for exemption under Section 501(c)(3), it will also be classified as a foundation unless it is a public charity.

*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.gov⁷

Footnotes And Sources

^{IRS.gov, May 7, 2024}