Author: Ramsay Capital Group

The Week on Wall Street
Daily headlines about the coronavirus had little impact on stock market averages last week. Earnings and mergers had more influence.

All three Wall Street benchmarks improved. The Nasdaq Composite rose 2.21%, outpacing the S&P 500, up 1.58%, and the Dow Jones Industrial Average, up 1.02%. The MSCI EAFE index, which tracks developed overseas equity markets, added 0.17%.[1][2]

Jerome Powell Testifies on Capitol Hill
Commenting that the economy is in a “very good place,” Federal Reserve Chairman Jerome Powell told congressional legislators that he did not currently see a significant recession risk.

“There’s nothing about this expansion that is unstable or unsustainable,” Powell remarked during his semi-annual report to the House Financial Services Committee. He did reiterate that the central bank was “carefully” watching the coronavirus outbreak, and that it could “very likely” have residual economic impact on the U.S.[3]

Yearly Inflation Reaches 2.5%
Consumer prices have not advanced to this degree since the 12-month period ending in October 2018. Underneath this January headline inflation number, core inflation (minus food and energy prices, which are often volatile) was up 2.3% year-over-year.

These numbers are from the Consumer Price Index, maintained by the Bureau of Labor Statistics. The Federal Reserve monitors inflation using its core personal consumption expenditures (PCE) index, which remains below the central bank’s 2% yearly inflation target.[4]

Gains in Retail Sales, Sentiment
The Census Bureau said retail sales were up 0.3% in the first month of the year, matching the consensus forecast of analysts polled by MarketWatch. Additionally, the University of Michigan’s preliminary February consumer sentiment index monitoring consumer confidence factors went back above 100 last week (100.9).[5]

Final Thought
The S&P 500 has risen more than 1% since the coronavirus surfaced. During the SARS epidemic of 2003, the MERS outbreak of 2013, and the 2015-16 Zika virus breakout, the index declined.[6]

[1] www.wsj.com/market-data
[2] quotes.wsj.com/index/XX/MSCI%20GLOBAL/990300/historical-prices
[3] finance.yahoo.com/news/powell-testimony-february-2020-us-economic-expansion-not-unstable-or-unsustainable-165916522.html
[4] www.cnbc.com/2020/02/13/us-consumer-price-index-rose-0point1percent-in-january-vs-0point2percent-expected.html
[5] www.marketwatch.com/tools/calendars/economic
[6] www.cnbc.com/2020/02/13/us-futures-point-to-lower-open-on-wall-street.html

This tax season, the IRS expects an uptick in tax-related scams. In most cases, IRS “phishing” scams are bogus phone calls and emails that claim to come from the IRS. Fraudsters use fake refunds or threats of a tax bill or audit to convince recipients to give up their personal and financial information. They then use it to steal a victim’s money or identity. The IRS has the following tips:

• Fraudsters may know a lot about you when they call and may be able to spoof your caller ID to show that they are calling from an official number. Don’t be fooled.
• If you don’t answer the phone, they may leave an urgent callback request.
• If you receive a call that you think might be from the IRS, take down the agent’s information and call them back at the official IRS hotline: 1-800-829-1040.

Remember, the IRS will never:

• Call you without mailing an official notice first.
• Demand that you immediately pay your taxes over the phone.
• Take a debit or credit card number over the phone.
• Threaten to call law enforcement or immigration services to arrest you for failure to pay.

* 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[7]
[7] www.irs.gov/newsroom/tax-scams-consumer-alerts

The Week on Wall Street
Stocks advanced four days out of five during the past market week, erasing the losses of the week before.

The Nasdaq Composite surged 4.04%, the S&P 500 3.17%, and the Dow Jones Industrial Average 3.00%. Foreign stocks also rallied: the MSCI EAFE index added 2.21%.[1][2]

China Plans to Halve Some Tariffs
Thursday, investors woke up to the news that China would be lowering import taxes on about $75 billion of U.S. products. Later this week, a set of 10% tariffs is slated to drop to 5%, and a group of 5% tariffs is scheduled to fall to 2.5%.

This reduction is part of the phase-one trade deal that China agreed to last month, a pact which may be a step toward a trade truce with the U.S.[3]

January’s Net Job Gain: 225,000
The Department of Labor’s latest employment report exceeded expectations. Economists surveyed by Bloomberg projected 165,000 net new hires last month. The main jobless rate ticked north to 3.6%; the U-6 rate including the underemployed rose 0.2% to 6.9%.

This upside surprise points to ongoing strength in the economy. Stocks declined Friday after the report’s release, however, as traders viewing the data saw less reason for a Federal Reserve rate cut in the near future.[4]

A Manufacturing Positive
The U.S. factory sector grew last month, for the first time since July. The Institute for Supply Management’s purchasing managers index for the manufacturing sector, which traders view as a fundamental economic indicator, came in at 50.9 in January; any reading above 50 indicates sector expansion.[5]

What’s Ahead
Investors should note that U.S. stock and bond markets will be closed on Monday, February 17 for Presidents Day.

[1] www.wsj.com/market-data
[2] quotes.wsj.com/index/XX/MSCI%20GLOBAL/990300/historical-prices
[3] www.cnn.com/2020/02/06/economy/china-tariffs-coronavirus/index.html
[4] finance.yahoo.com/news/jobs-report-january-2020-labor-market-bls-002348568.html
[5] ycharts.com/indicators/us_pmi

All income you receive is taxable unless the rules explicitly state that it isn’t. According to the IRS, taxable income includes earned income, like wages, as well as any income earned by bartering or the exchange of property or services. Rental income is taxable, as are other forms of unearned income, like interest and dividends or Social Security.

Some income is not taxable unless certain conditions are met. For example, life insurance proceeds are usually not taxable to the beneficiary unless you redeem a life insurance policy for cash. Any amount you receive above the cost of the policy is taxable. State and local income tax refunds may be taxable and should be reported on your federal taxes.

There are also some forms of income that are usually not taxable:

• Gifts and inheritances.
• Child support payments.
• Welfare benefits.
• Damage awards for physical injury or sickness.
• Cash rebates from a dealer or manufacturer for an item you buy.
• Reimbursements for qualified adoption expenses.

* 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/what-is-taxable-and-nontaxable-income

The Week on Wall Street
Stock benchmarks declined for a second straight week as coronavirus news tempered risk appetite.
The S&P 500 fell 2.14% on the week. The Nasdaq Composite dipped 1.76%, and the Dow Jones Industrial Average, 2.55%. Away from North America, developed markets slumped 2.24%, according to MSCI’s EAFE index.[1][2]

The Fed Makes a Minor Move
The Federal Reserve left short-term interest rates alone at its January meeting, but it did make what Fed chairman Jerome Powell called a “small technical adjustment” in view of its continuing purchases of Treasuries. Wednesday, it slightly increased the interest rate paid to banks that park excess capital reserves at the Fed.

The move may give the Fed a bit more control over short-term rates this quarter and assist the operations of U.S. financial markets.[3]

Encouraging New Consumer Data
Rising to 131.6 in January, the Conference Board’s Consumer Confidence Index reached its highest level since August. Consumer spending increased 0.3% in December, according to a new Department of Commerce report.[4][5]

Economy Expanded at a 2.1% Pace in Fourth Quarter
The Bureau of Economic Analysis released this estimate Thursday. That number matches the gross domestic product of the third quarter and affirms that the U.S. avoided a fall slowdown.[6]

[1] www.wsj.com/market-data
[2] quotes.wsj.com/index/XX/MSCI%20GLOBAL/990300/historical-prices
[3] www.marketwatch.com/story/fed-holds-benchmark-interest-rate-steady-sees-economy-growing-at-moderate-pace-2020-01-29
[4] www.investing.com/economic-calendar/cb-consumer-confidence-48
[5] www.investing.com/economic-calendar/personal-spending-235
[6] www.marketwatch.com/story/economy-grows-21-in-the-4th-quarter-as-gdp-gets-big-boost-from-falling-trade-deficit-2020-01-30

If you owe federal taxes, you should pay by the April deadline even if you get an extension. Here are some options for making your payment easy:

• Use Direct Pay. IRS Direct Pay is a free and secure way to pay directly from your checking or savings account.
• Pay by Debit or Credit Card. If you don’t want to link a bank account, you can use your credit or debit card. Keep in mind that you’ll have to pay a processing fee and may incur interest charges.
• Pay When You E-File. If you file your federal tax return electronically, you can pay directly from your bank account using Electronic Funds Withdrawal.

If you can’t pay the full amount that you owe now, you can set up a payment agreement to pay your taxes over time using direct debit.

For more information about filing your taxes, consult a qualified tax expert.
* 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[7]
[7] www.irs.gov/pub/irs-pdf/p4849.pdf

The Week on Wall Street
Stock prices fell last week as investors considered the potential health and economic risks of the flu-like coronavirus.

Foreign stock markets, as tracked by the broad MSCI EAFE index, fell 1.03% for the week. Coincidentally, the S&P 500 lost exactly that much across a 4-day Wall Street trading week. The Dow Jones Industrial Average declined 1.22%, the Nasdaq Composite 0.79%.[1][2]

Futures Markets Eye Coronavirus Outbreak
By Friday’s closing bell, two cases of coronavirus had been confirmed in the U.S. by the Centers for Disease Control and Prevention. Sixty-three other potential cases were being monitored. Twenty-six people had died from the virus in China, where more than 30 million people faced travel restrictions.

This news exerted a drag on stocks in multiple industries. Oil prices also slipped: West Texas Intermediate crude lost 7.4% for the week to settle at $54.19 Friday. Stock and commodity traders wondered if the virus would mimic the SARS scare of 2002-03, which kept Chinese workers and shoppers at home and hurt corporate earnings worldwide.[3][4]

Fewest Homes for Sale in 20 Years
Existing home sales improved 3.6% in December, according to the National Association of Realtors. This happened even as the number of listed properties hit a 20-year low. The NAR says that the rate of total U.S. home sales (existing and new) increased 10.8% in 2019.[5]

What’s Ahead
Traders will watch not only earnings and economic indicators this week, but also the Federal Reserve, which meets Tuesday and Wednesday. Will the central bank’s latest monetary policy statement reveal any subtle change of outlook?

[1] www.wsj.com/market-data
[2] quotes.wsj.com/index/XX/MSCI%20GLOBAL/990300/historical-prices
[3] www.cnbc.com/2020/01/24/cdc-confirms-second-us-case-of-coronavirus-chicago-resident-diagnosed.html
[4] www.cnbc.com/2020/01/24/coronavirus-fear-hits-oil-prices-drop-most-since-may.html
[5] www.marketwatch.com/story/existing-home-sales-rebounded-in-december-but-extraordinarily-lean-inventories-are-a-growing-concern-2020-01-22

If you’re still one of the few taxpayers who files paper returns, consider these reasons to switch to electronic filing:

1. Filing electronically often means a faster refund. By avoiding mail delays and common filing errors, you save time. Get your refund even faster by combining an electronic return with direct deposit of your refund. According to the IRS, the agency issues 9 out of 10 refunds within 30 days or less.

2. IRS e-file is safe and secure and can help you avoid common mistakes. The IRS uses modern encryption technology to protect your sensitive personal information. The agency is also working to help protect taxpayers from refund fraud.

3. You can use multiple options to e-file. Tax preparation software is available commercially, and you can consult a tax expert for help.

* 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/newsroom/with-the-filing-deadline-close-heres-why-taxpayers-should-e-file

The Week on Wall Street
Traders were in an upbeat mood last week, reacting to news out of Washington: the signing of the phase-one trade deal between the U.S. and China as well as the Senate passage of the U.S.-Mexico-Canada Agreement (USMCA). In addition, a new earnings season started. Risk appetite grew and spurred all three of the major Wall Street averages to record settlements on Friday.[1]

For the week, the Nasdaq Composite rose 2.29%; the S&P 500, 1.97%; the Dow Jones Industrial Average, 1.82%. International stocks improved 0.40%, according to MSCI’s EAFE index.[2][3]

Progress on the Trade Front
President Donald Trump and Chinese Vice Premier Liu He signed off on a new, partial U.S.-China trade pact Wednesday. In this deal, China agrees to buy at least $200 billion more of American products, crops, and energy futures over a 2-year period, and it must submit an “action plan” by mid-February, detailing how it will better protect American intellectual property and cut counterfeiting of American goods. The U.S. agrees to halve 15% tariffs on $120 billion of Chinese imports (other tariffs slated for last December were scrapped earlier as part of this agreement).

As for the USMCA, President Trump is expected to sign it into law this week. It was passed 89-10 in the Senate on Thursday and by a wide margin in the House of Representatives in December. Mexico’s government has also approved the USMCA; Canada’s government has yet to do so.[4][5]

Homebuilding Picks Up
The Census Bureau reported a 16.9% surge in housing starts in December. This surpassed expectations; housing market analysts, surveyed by Refinitiv, had expected no increase.[6]

What’s Ahead
U.S. stock markets are closed Monday in observance of Martin Luther King Jr. Day. Post offices and Social Security offices will also be closed Monday, as well as most banks.

[1] www.foxbusiness.com/markets/us-stocks-jan-17-2020
[2] www.wsj.com/market-data
[3] quotes.wsj.com/index/XX/MSCI%20GLOBAL/990300/historical-prices
[4] www.cnbc.com/2020/01/15/trump-and-china-sign-phase-one-trade-agreement.html
[5] www.washingtonpost.com/us-policy/2020/01/16/senate-approves-new-usmca-trade-deal-with-canada-mexico/
[6] www.foxbusiness.com/markets/us-stocks-jan-17-2020

Did you know that if you owe $52,000 or more to the Internal Revenue Service, the IRS can revoke your passport? That’s right. Under the Fixing America’s Surface Transportation (FAST) Act, the IRS has the power to revoke the passport of any taxpayer owing $52,000 or more, including penalties and interest.

Notably, if you are currently paying off the debt or are contesting a tax bill in court, you should not be affected. However, anyone under an IRS tax lien could find their ability to travel hampered.

If you have any questions about tax debts or other complex tax issues, contact a qualified attorney or tax specialist.

* 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.

Adapted from IRS.gov[7]
[7] www.irs.gov/newsroom/individuals-with-significant-tax-debt-should-act-promptly-to-avoid-revocation-of-passports