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The Bull Market Continues – WEEKLY UPDATE – AUGUST 27, 2018

Last week marked a noteworthy milestone in our economy: On Wednesday, August 22, the bull market entered its 3,453rd day, the longest such run in U.S. history. In the past 9 plus years, domestic indexes have come quite a ways since the dark days of the financial crisis. The S&P 500 is now more than 4 times the level that it was when the bull market began on March 9, 2009.[1]

In fact, both the S&P 500 and NASDAQ closed last week with new record highs.[2] The S&P 500 added 0.86%, the Dow increased 0.47%%, and the NASDAQ gained 1.66%.[3] International stocks in the MSCI EAFE also grew, increasing 1.52% for the week.[4]

This domestic growth occurred against a backdrop of geopolitical events. Investors considered new tariffs between China and the U.S., as well as legal developments potentially related to President Trump. However, economic updates seemed to hold the most sway over market performance last week.[5]

What did we learn about the economy last week?
Beyond passing a major milestone in the bull market, we also received some key economic updates, including:

  • The Fed's interest rate increases should continue at a gradual pace.
    In talks last week, Fed Chairman Jerome Powell called the economy "strong" and said inflation isn't overheating. He indicated the central bank intends to maintain its current pace of interest-rate raises. Markets increased after his remarks.[6]
  • The labor market remains strong.
    New claims for unemployment fell for the 3rd week in a row and were below expectations, continuing on July's trend that included the lowest numbers since 1969. This data indicates that, despite U.S. companies facing ongoing trade tension, the labor market remains on solid ground.[7]
  • Business investment may be on the rise.
    Data for durable goods orders includes details that can hint at how businesses plan to approach spending. This so-called "non-defense capital goods excluding aircraft" grew far more than anticipated in July. The reports indicate that business investments started the 3rd quarter on solid ground.[8]

These updates may help support economists' perspectives that the bull market still has life left.[9] If you have questions about where your financial life stands today and in the future, we're here to talk.

[1] https://money.cnn.com/2018/08/22/investing/bull-market-longest-stocks/index.html
[2] www.cnbc.com/2018/08/24/us-stocks-china-trade-talks-end-powell-to-speak-at-jackson-hole.html
[3] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
[4]www.msci.com/end-of-day-data-search
[5] www.cnbc.com/2018/08/24/us-stocks-china-trade-talks-end-powell-to-speak-at-jackson-hole.html
[6] www.forbes.com/sites/jjkinahan/2018/08/25/markets-hit-new-highs-after-powells-speech-as-some-hear-dovish-tone/#7f1f132518c8
[7] www.cnbc.com/2018/08/23/us-weekly-jobless-claims-aug-18-2018.html
[8] www.cnbc.com/2018/08/24/durable-goods-orders-july-2018.html
[9] money.cnn.com/2018/08/22/investing/bull-market-longest-stocks/index.html

Trade & Turkey Drive Markets – WEEKLY UPDATE – AUGUST 20, 2018

Challenges in emerging markets affected both U.S. and global stock performance last week, with the S&P 500 experiencing several down days.[1] By market close on Friday, however, two of the three major domestics posted gains for the week. The S&P 500 added 0.59%, the Dow increased 1.41%, and the NASDAQ lost 0.29%.[2] Meanwhile, the MSCI EAFE international stocks slipped 1.18%.[3]

As several reports deepened our understanding of the economy’s underlying health, investors balanced the news with updates on Turkey and trade disputes.[4] Here are some key highlights of the various developments:

Economy: Mixed Picture

The latest unemployment data beat expectations, indicating continuing strength as the labor market is near full employment. However, new home construction missed its 7.4% projected growth, increasing only 0.9% in July – following June’s 12.3% decline.[5] Nevertheless, more positive news emerged: Thanks to tax cuts, a solid labor market, and economic growth, retail sales increased 6.4% in July year-over-year. Retail sales have now risen for the past 6 months.[6] 

Turkey: Sanctions and a Tumbling Lira 

On Monday, August 13, the Turkish lira hit its lowest point ever against the U.S. dollar.[7] The U.S. has threatened more sanctions on Turkey if the country does not release U.S. Pastor Andrew Brunson. In addition, Turkey’s inflation is swelling, and President Recep Tayyip Erdogan may be suppressing the central bank’s ability to increase interest rates. The lira may continue to decline in value until interest rates rise.[8] Some analysts are optimistic that these developments won’t create contagion in other markets. Not only is Turkey’s economy relatively small and investors have priced in some risk, opportunities still exist to help calm Turkey’s challenges.[9]

Trade Update: Positive Movement

Later in the week, we received positive updates on trade challenges with China and the North American Free Trade Agreement (NAFTA). Mexican economy minister, Ildefonso Guajardo, announced that he hoped to finalize some NAFTA negotiations by this week.[10] In addition, officials from the U.S. and China will be meeting in Washington, D.C. this week to discuss the ongoing trade disputes. These talks come before the anticipated meeting in November between President Trump and Chinese Leader Xi. A trade war with China has been one of the market’s largest concerns, so if the tension lessens, that is likely good news for equities.[11]

Looking Ahead

This week, we’ll receive more information about the housing market that reveals how this key industry is currently performing. We will also continue to track developments in trade and Turkey. As always, if you have any questions about what you read here or what you’re hearing elsewhere we’re available to talk.

[1] lplresearch.com/2018/08/16/market-update-thursday-august-16-2018/

[2] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

[3] www.msci.com/end-of-day-data-search

[4] www.cnbc.com/2018/08/17/us-markets-china-us-trade-developments-earnings-data-on-the-agenda.html

[5] lplresearch.com/2018/08/16/market-update-thursday-august-16-2018/

[6] www.ftportfolios.com/Commentary/EconomicResearch/2018/8/15/retail-sales-rose-0.5percent-in-july

[7] www.cnbc.com/2018/08/13/turkish-lira-turkey-currency-hits-new-record-low.html

[8]www.cnbc.com/2018/08/17/us-markets-china-us-trade-developments-earnings-data-on-the-agenda.html

[9] lplresearch.com/2018/08/16/market-update-thursday-august-16-2018/

[10] www.reuters.com/article/us-usa-stocks/wall-street-rises-on-upbeat-trade-news-idUSKBN1L215L

[11] www.cnbc.com/2018/08/17/us-markets-china-us-trade-developments-earnings-data-on-the-agenda.html

Tax Tips – IRS Provides Helpful Tools, Resources for Retirees

The IRS provides resources to people who have recently retired or who are planning to retire. The resources can help taxpayers with challenges and tips to prepare for retirement.

 

Here are some links with information for retirees.

 

Other details may apply, and you can find more information on the IRS website.

 

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

 

 

Tip adapted from IRS.gov[13]

[13] www.irs.gov/newsroom/retirees-can-visit-irsgov-for-helpful-tools-and-resources

Stocks Up as Data Comes In

Domestic markets ended last week in positive territory, as the S&P gained 0.76%, the Dow was up 0.05%, and the NASDAQ increased 0.96%.[1] This performance marked the 5th week in a row that the S&P 500 and Dow posted gains.[2] Meanwhile, international stocks in the MSCI EAFE stumbled, losing 1.47% for the week.[3] 

Once again, trade and corporate earnings were in the news last week. We learned that the U.S. is considering increasing tariffs on $200 billion of Chinese imports. In response, China announced their own tariffs ranging from 5%-25% on $60 billion of U.S. products.[4]

Corporate earnings season also continued, and so far, more than 78% of S&P 500 companies have beaten estimates.[5] If the trend holds, the 2nd quarter will likely average more than 20% growth in earnings per share. Companies have also detailed positive perspectives for the rest of 2018, showing that this strong corporate performance should continue.[6]

Of course, last week’s trade and earnings weren’t the only topics on investors’ minds. We also received a number of data reports that shaped our understanding of the economy’s health.

Key Findings from Last Week

  • Consumers are earning and spending more. The latest data for personal consumption and personal income revealed both measures increased by 0.4% in June. In addition, the report included revised data from 2013-2017, which indicated that people earned $1.05 trillion more during that time period than initially thought.[7] 
  • Tariff concerns are affecting manufacturing. The manufacturing sector continues to expand at a faster rate than in 2017, but the pace of growth slowed more than anticipated in July. Respondents to the ISM Manufacturing Index survey shared concerns about tariffs, steel and aluminum disruptions, and transportation challenges.[8]
  • The Federal Reserve is on track for a September rate hike. The Fed didn’t raise rates this month, but projections show a 93.6% chance that it will do so in September.[9] The latest jobs report detailed steady wage increases, which helped ease Fed concerns about inflation.[10] 

This week is relatively light on economic data, but we will continue to analyze last week’s reports and the remaining corporate earnings releases. If you have any questions about where the economy is today or what may lie ahead, we’re here to talk.

[1] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

[2] www.cnbc.com/2018/08/03/us-stocks-point-to-lower-open-as-investors-await-jobs-report.html

[3] www.msci.com/end-of-day-data-search

[4] www.cnbc.com/2018/08/03/us-stocks-point-to-lower-open-as-investors-await-jobs-report.html

[5] www.reuters.com/article/us-usa-stocks/wall-street-gains-as-upbeat-earnings-trump-trade-jitters-idUSKBN1KO1IH

[6] www.barrons.com/articles/after-the-bell-stocks-steamroll-tariff-and-job-worries-to-end-higher-1533330996

[7] www.ftportfolios.com/Commentary/EconomicResearch/2018/7/31/personal-income-and-personal-consumption-both-rose-0.4percent-in-june

[8] www.bloomberg.com/news/articles/2018-08-01/u-s-manufacturing-cools-as-orders-gauge-falls-to-one-year-low

[9] www.cnbc.com/2018/08/03/us-stocks-point-to-lower-open-as-investors-await-jobs-report.html

[10] wsj-us.econoday.com/byshoweventfull.asp?fid=485658&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

Tax Tips: What Do You Do If You Get a Letter From the IRS?*

You get a letter from the IRS. First, don’t panic.

The agency sends millions of letters to taxpayers every year.

What do you do? Here are some tips:

  • Don’t ignore the letter. Most IRS correspondences are about tax returns or tax accounts and deals with specific issues. The letters provide specific instructions about what to do.
  • Don’t panic. Most of the time taxpayers need only to read the letter carefully and do what it says.
  • Be prompt. IRS notices may refer to changes in taxpayers’ accounts, taxes owed, or payment requests. Responding to inquiries helps minimize potential charges for interest or penalties.
  • Review the letter carefully. Notices may request changes or corrections to tax returns. Compare the information in the letter with your original return. If you agree with the changes, make the changes on your personal copy of your return. Keep it for your records.
  • Don’t respond unless you’re told to. You don’t have to respond to an IRS notice unless the agency specifically requests a response. However, if you owe money, respond promptly. Go to https://www.irs.gov/payments for more information.
  • Respond to a dispute. If you don’t agree with the IRS, mail a letter to the agency explaining why you disagree with the information in a notice. Mail your letter to the address on the stub at the bottom of the notice. Include documents and other information to support your position. Allow at least 30 days for the IRS to respond.
  • Don’t call. You usually don’t have to call the IRS. If you do, use the number on the upper right-hand corner of the notice.
  • Avoid the scams. The IRS doesn’t use social media or text messages to make contact. The agency’s first contact is usually by mail.

 

Other details may apply, and you can find more information on the IRS website.

 

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

 

Tip adapted from IRS.gov[12]

 

[12] www.irs.gov/newsroom/dos-and-donts-for-taxpayers-who-get-a-letter-from-the-irs

Tax Tips: IRS’s ‘Free File’ Available Until October 15*

October 15 is the filing deadline for taxpayers who requested extensions on their 2017 tax returns.

The IRS provides several resources to help taxpayers file their forms:

Taxpayers who made $66,000 or less can go to https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free for information on filing for free. Those who made more may use the IRS’s Free File Fillable Forms, which are the agency’s electronic versions of the paper forms.

Taxpayers can go to https://www.irs.gov/help/ita to get many of their tax questions answered.

The agency provides a search directory of tax preparers at https://irs.treasury.gov/rpo/rpo.jsf.

The IRS urges taxpayers to retain copies of returns and other supporting documents for at least three years.

Other details may apply, and you can find more information on the IRS website.

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

Tip adapted from IRS.gov[13]

[13] www.irs.gov/newsroom/irs-free-file-and-other-resources-are-available-until-october-15

 

Mixed Results as Turkey Stumbles

Stocks ended the week in mixed territory as trouble with Turkey’s currency affected U.S. equity performance on Friday, August 10.[1] For the week, the S&P lost 0.25%, the Dow declined 0.59%, and the NASDAQ increased 0.35%.[2] International stocks in the MSCI EAFE stumbled, giving back 1.57%.[3] 

Although last week brought relatively few economic updates, we did learn that the labor market continues to improve and consumer prices are on the rise.[4] While this news may have affected market performance, the challenges facing Turkey’s economy had an outsized impact on global stocks.[5] 

What happened to the Turkish lira?

The Turkish lira dropped 14% to 6.46 per dollar, the weakest on record with the largest drop in more than 17 years. The lira ended the week at a record low against the U.S. dollar.[6] Tension between the U.S. and Turkey played a part in the decline as President Trump tweeted plans to double tariffs on Turkish steel and aluminum imports. This potential tariff hike followed a stalled conversation between the two countries concerning an imprisoned U.S. pastor who Turkey believes supported a 2016 attempted coup.[7] 

How did investors react?

The resulting drop in the lira’s value concerned investors and led to losses in markets worldwide. Friday, the S&P 500 marked its largest daily decline since June after getting close to a new record high.[8]

Why do investors care?

The lira’s drop is another sign that emerging markets are experiencing challenges in their economies.[9] Some investors worry that Turkey’s economic crisis could spread to other countries or affect interest in other emerging markets.[10]

Should you be concerned?

Probably not for now. U.S. companies don’t have a tremendous amount of exposure to Turkish markets.[11] 

We know that global dynamics can be complex and understanding their specific effects on your financial life may seem challenging. If you have any questions, contact us any time.

[1] www.cnbc.com/2018/08/10/us-markets-political-concerns-keep-investors-on-edge.html

[2] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=!DJI®ion=usa&culture=en-US

http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

[3] www.msci.com/end-of-day-data-search

[4] wsj-us.econoday.com/byshoweventfull.asp?fid=485230&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

www.cnbc.com/2018/08/10/us-cpi-july-2018.html

[5] www.marketwatch.com/story/us-stocks-pulled-into-global-selloff-as-turkeys-currency-crisis-raises-the-alarm-2018-08-10?dist=markets

[6] www.bloomberg.com/news/articles/2018-08-09/asia-stocks-face-mixed-open-dollar-strengthens-markets-wrap

[7] www.cnbc.com/2018/08/10/turkish-lira-loss-deepens-as-pm-erdogan-calls-for-citizens-to-convert-.html?recirc=taboolainternal

[8] www.marketwatch.com/story/us-stocks-pulled-into-global-selloff-as-turkeys-currency-crisis-raises-the-alarm-2018-08-10?dist=markets

[9] www.marketwatch.com/story/us-stocks-pulled-into-global-selloff-as-turkeys-currency-crisis-raises-the-alarm-2018-08-10?dist=markets

[10] www.marketwatch.com/story/worried-about-turkey-heres-what-it-will-take-to-push-wall-streets-buttons-2018-08-10

[11] www.marketwatch.com/story/us-stocks-pulled-into-global-selloff-as-turkeys-currency-crisis-raises-the-alarm-2018-08-10?dist=markets

IRS Makes Inflation Adjustments for New Tax Law

The Internal Revenue Service has made inflation adjustments for 2018 to accommodate changes in the tax code for the Tax Cuts and Jobs Act. The changes will apply to 2018 returns filed in 2019.

The top items for 2018 returns include:

• The standard deduction for married couples filing jointly increases to $24,000. The deduction for single taxpayers and married people filing separately increases to $12,000. The deduction for heads of households is $18,000.

• The personal exemption drops to $0 under the jobs act.

• New rates for taxpayers dropped to 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The highest rate applies to married taxpayers filing jointly and to surviving spouses with taxable incomes exceeding $600,000. The rate also applies to single people and heads of households with incomes exceeding $500,000 and to married taxpayers filing separately with incomes above $300,000.

• The jobs act does away with limitations for itemized deductions.

• The jobs act significantly increases the exemption amount for the Alternative Minimum Tax. The single taxpayer's exemption is $70,300; it begins to phase out at $500,000. For married couples filing jointly, the exemption is $109,400 and begins phasing out at $1 million.

• The exclusion for estates of people who die in 2018 is $11,180,000.

Other details may apply, and you can find more information on the IRS website.

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

Tip adapted from IRS.gov[10]

https://www.irs.gov/newsroom/inflation-adjustments-under-recently-enacted-tax-law

Trade and Interest Rates

In This Issue

Quote Of The Week
Recipe Of The Week
Tax Tips
Golf Tip
Healthy Lifestyle
Green Living

 

 

Last week stocks showed mixed results as political headlines continued to dominate the news. The Dow lost 0.89% and the S&P 500 was almost flat with a 0.02% gain.[1] The NASDAQ, on the other hand, reached a record high on Thursday and ended the week up 1.32%.[2] Both the S&P 500 and NASDAQ experienced their 4th week of gains in a row.[3] International stocks in the MSCI EAFE lost ground, posting a 0.52% decline

Two Key Perspectives From Last Week

1. Trade tension continued.
Spats with U.S. allies - including Canada - and ongoing threats of a trade war with China captured investors' attention last week. On Friday, equities briefly stumbled when the U.S. pledged new tariffs on Chinese goods, and China responded by promising the same level of tariffs on the U.S.[5] A true trade war could slow global economic growth, but the current tariff tension may be little more than negotiation tactics.[6]

2. Interest rates increased.
On Wednesday, June 13, the Federal Reserve raised its benchmark interest rates for the 2nd time this year. Fed Chairman Powell said, "...the economy is doing very well. Most people who want to find jobs are finding them and unemployment and inflation are low."[7] The Fed believes economic growth will continue at a faster rate than they last predicted. They also project that unemployment will fall to 3.6% by the end of 2018. The Fed may raise rates twice more this year.[8]

The Takeaway
Getting caught up in the news cycles and international headlines is easy, but they often provide little perspective on what may actually lie ahead for investors. Instead of trying to predict market performance, we encourage you to focus on the data.

This week, we'll gain new perspectives on the housing market, as well as employment. The insight will continue to help us build a picture of where the economy is today-and how to help our clients make the most of their opportunities.

ECONOMIC CALENDAR
Monday: Housing Market Index
Tuesday: Housing Starts
Wednesday: Existing Home Sales
Thursday: Jobless Claims

What You Need to Know about Early Withdrawals from Retirement Plans*

Taking an early withdrawal from your Individual Retirement Account (IRA) may be tempting. But the tax penalty can make a significant dent in your long-term financial plan.

Here are some terms and requirements to keep in mind before considering an early withdrawal:

  • Early withdrawals are defined as taking distributions from your IRA or retirement plans before the age of 59½.
  • Taxpayers must report withdrawals to the IRS when they file their tax returns. They may owe income tax on withdrawals and pay an additional 10% tax penalty.
  • Nontaxable withdrawals aren’t subject to the 10% tax penalty. Examples include contributions on which taxpayers paid taxes before the money was deposited into the plan.
  • Rollovers happen when plan holders move money or other assets from 1 plan to another. The IRS allows a maximum of 60 days to complete a rollover to keep it tax-free.
  • Certain exceptions exempt plan holders from the 10% tax penalty. Many retirement plan and IRA rules differ.
  • Disaster Relief provisions exempt plan holders in certain disaster areas from the 10% tax penalty.

* 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 advisor.

Tip adapted from IRS.gov[14]

[14] www.irs.gov/newsroom/things-to-remember-when-considering-early-withdrawals-from-retirement-plans