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Rising concerns about further rate hikes sent stocks lower to kick off the second half of trading.

The Dow Jones Industrial Average lost 1.96%, while the Standard & Poor’s 500 retreated 1.16%. The Nasdaq Composite index surrendered 0.92% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, tumbled 2.57%.^1,2,3

Stocks Slide

Stocks were dragged lower last week by news reigniting fears of additional rate interest rate increases. It started with the minutes from June’s Federal Open Market Committee meeting, which revealed a majority of voting members supported at least two more rate hikes. But a strong employment report from Automated Data Processing (ADP), a payroll processor, unnerved investors, sending stocks lower and bond yields higher.

Markets stabilized after Friday morning’s federal government’s monthly employment release showed a less-than-expected increase in nonfarm payrolls. But stock prices turned down in the afternoon, adding to the week’s losses.

Mixed Labor Market Signals

Wall Street was rattled by an unexpected surge in new private-sector jobs last Thursday. ADP reported private sector employers had added 497,000 jobs in June, blowing away the consensus estimate of 220,000. Leisure and hospitality led the gains with 232,000 new hires, followed by construction (97,000).⁴

Friday’s release of monthly employment data painted a more moderate picture, with 209,000 new jobs added in June, well below the estimate of 240,000 and May’s downwardly revised total of 306,000. Friday’s report added to data released earlier in the week (a decline in job openings and a rise in jobless claims) that suggested that the labor market may be cooling.⁵

Footnotes and Sources

1. ^{The Wall Street Journal, July 7, 2023.}
2. ^{The Wall Street Journal, July 7, 2023.}
3. ^{The Wall Street Journal, July 7, 2023.}
4. ^{CNBC, July 6, 2023.}
5. ^{CNBC, July 7, 2023.}

Even though you may not be able to claim the child tax credit, you may be able to claim the credit for other dependents under your care. The Internal Revenue Service issues a max of $500 for each dependent who meets specific conditions.

These conditions include:

• Dependents who are age 17 or older on December 31 of the tax year.
• Dependents who have individual taxpayer identification numbers.
• Dependents living with the taxpayer for more than six months of the year (remember the special rules for divorced or separated parents or parents who live apart).

The credit begins to phase out when the taxpayer’s income exceeds $200,000. This phaseout begins for married couples filing a joint tax return at $400,000.

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

Tip adapted from IRS.gov⁵

 

Footnotes and Sources

5. ^{IRS.gov, October 18, 2022.}

Stocks posted gains for the week to close out a stellar month, aided by positive economic data and reports that all major banks had passed the Federal Reserve’s annual stress test.

The Dow Jones Industrial Average gained 2.02%, while the Standard & Poor’s 500 rose 2.35%. The Nasdaq Composite index added 2.19%. The MSCI EAFE index, which tracks developed overseas stock markets, increased by 0.76%.1,2,3

Stocks Climb as Recession Fears Ease

Investors shrugged off weekend news of a short-lived insurrection in Russia and calls later in the week for more restrictive monetary policies from global central bankers.

What powered early-week gains? New home sales, durable goods orders, and a rise in consumer confidence proved influential. More so were Thursday’s reports of a drop in initial jobless claims and an upward revision in first quarter Gross Domestic Product growth, which helped allay recession fears. The results of the Fed’s annual bank stress tests, which all major banks passed–further emboldened investors.

Stock prices rallied Friday following an encouraging inflation report, capping the end to a solid week, month, and first half.

Global Central Bankers Meet

At last week’s European Central Bank Forum, central-bank governors from around the world gathered to discuss their monetary outlook and the policies needed to manage inflation amid unexpected economic strength.

Fed Chair Powell reiterated that more rate hikes were coming owing to a robust labor market. He added that he wouldn’t dismiss the idea of hiking rates at consecutive Federal Open Market Committee (FOMC) meetings. While saying there is a possibility of an economic downturn, Powell didn’t believe it was the most likely case.

Meanwhile, bankers from the European Central Bank and the U.K. echoed Powell’s comments, declaring that further rate hikes are needed to tame their still-elevated inflation rates.⁴

Footnotes and Sources

1. ^{The Wall Street Journal, June 30, 2023.}
2. ^{The Wall Street Journal, June 30, 2023.}
3. ^{The Wall Street Journal, June 30, 2023.}
4. ^{CNBC, June 28, 2023.}

When a household starts a business, couples find themselves learning about the tax responsibilities related to that business. There are some things to consider when working together.

Here are a few items to consider:

• You should first establish if you have a partnership business (where both spouses have an equal say in the affairs, services, and capital of the business) or an employee/employer relationship (one spouse substantially controls management decisions). These relationships face different tax situations.
• If there is an employee/employer relationship, the second spouse (employee) may be subject to income, Social Security, and Medicare
• You may need to file the U.S. Return of Partnership Income form if there is a partnership relationship.

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

Tip adapted from IRS.gov⁷

Footnotes and Sources

7. ^{IRS.gov, February 22, 2023}

Stocks took a breather last week as investors digested the previous week’s surge and the month-to-date solid gains.

The Dow Jones Industrial Average lost 1.67%, while the Standard & Poor’s 500 fell 1.39%. The Nasdaq Composite index dropped 1.44% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, tumbled 2.00%.^1,2,3

Rally Stalls

The stock market drifted lower last week as the tug-of-war between bulls and bears played out in a week that was light on market-moving news.

After falling in the first days of a holiday-shortened trading week, stocks rebounded on Thursday to recover some of the week’s losses. Stocks looked past Congressional testimony by Fed Chair Powell, who said two more rate hikes are likely in the wake of interest rate hikes by central bankers in the U.K., Switzerland, Norway, and Turkey.

The retreat continued into Friday, fueled by global growth fears from new economic data indicating more robust economic slowdowns in the eurozone, Japan, and Australia.

Housing Sentiment Improves

Home builders’ confidence edged into positive territory for the first time in 11 months, aided by strong demand, low inventory, and a recovering supply chain. May’s new home sales, which rose 21.7%–the most significant percentage gain since October 2016, validated this confidence. The number of new home starts in May (1.63 million) hit a 13-month high, with both single- and multi-family homes up substantially.^4,5

Sales of existing homes in May rose 0.2% month-over-month while declining 20.4% from a year ago. The existing home market continues to suffer from low inventory and still-high prices. The median price of a home sold in May declined 3.1% year-over-year to $396,100.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, June 23, 2023.} 
2. ^{The Wall Street Journal, June 23, 2023.}
3. ^{The Wall Street Journal, June 23, 2023.}
4. ^{National Association of Home Builders, June 19, 2023}
5. ^{Reuters, June 20, 2023.}
6. ^{CNBC, June 22, 2023.}

When you sell a capital asset, like an investment or a piece of property, the sale can result in a capital gain or loss. The Internal Revenue Service (IRS) defines a capital asset as “almost anything you own for personal use or own as an investment.” Here are three facts you should keep in mind:

1. A capital gain or loss is the difference between what you originally paid for the asset (your basis) and the amount you get when you sell an asset.
2. The IRS may allow you to deduct capital losses on the sale of an investment or piece of property.
3. If your total net capital loss is more than the limit you can deduct, you may be able to carry it over to next year’s tax return.

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

Tip adapted from IRS.gov⁷

Footnotes And Sources

7. ^{IRS.gov, January 26, 2023}

Stocks climbed last week as reassuring inflation data boosted investor hopes that the rate-hike cycle was nearing an end amid fresh economic data pointing to continued economic resilience.

The Dow Jones Industrial Average rose 1.25%, while the Standard & Poor’s 500 picked up 2.58%. The Nasdaq Composite index gained 3.25% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 2.42%.^1,2,3

Stocks Rally

Stock market momentum gathered steam last week, blowing past the 4,300 and 4,400 thresholds in the S&P 500–a remarkable feat considering the time it took to break the 4,200 resistance level.

Optimism was high to begin the week, with expectations that fresh evidence of cooling inflation would provide the Fed room to pause on further rate hikes. The data cooperated as consumer prices rose 4.0% year-over-year (the lowest 12-month number in two years), and producer prices increased 1.1% from a year ago.⁴

The Fed’s “hawkish pause” briefly unsettled investors, but after some reassessment and aided by healthy economic data, stocks rallied before slipping on Friday as the market digested the week’s gains.

More Rate Hikes To Come?

Federal Reserve officials kept rates steady at last week’s Federal Open Market Committee (FOMC) meeting. However, a majority of committee members indicated at least two more quarter-point rate hikes were likely before year-end.⁴

Fed Chair Jerome Powell commented that he saw progress in fighting inflation and that no decision was made regarding any future rate increase, saying that members will assess the economic impact of the cumulative rate hikes before the July 25-26 FOMC meeting.⁵

The Fed raised its 2023 economic growth forecast to 1%, up from its March forecast of 0.4%. The Fed also lowered its unemployment projection to 4.1% from its earlier estimate of 4.5%.⁶

 

Footnotes And Sources

1. ^{The Wall Street Journal, June 16, 2023.} 
2. ^{The Wall Street Journal, June 16, 2023.}
3. ^{The Wall Street Journal, June 16, 2023.}
4. ^{AP News, June 14, 2023.}
5. ^{CNBC, June 14, 2023.}
6. ^{CNBC, June 14, 2023.}

All income you receive is taxable unless the rules explicitly state it isn’t. According to the Internal Revenue Service (IRS), taxable income includes earned income like wages and any income earned by providing a service or the exchange of property or services. Rental income, interest, dividends, and social security benefits are all examples of taxable unearned income.

Some income is only taxable if 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.

Some forms of income are usually not taxable, like:

• Gifts and inheritances. (State taxes may apply to inheritances.)
• 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.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

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

Tip adapted from IRS.gov⁷

Footnotes and Sources

7. ^{IRS.gov, November 10, 2022.}

A late-week rally sent stocks into positive territory, with the S&P 500 index closing just shy of the 4,300 mark.

The Dow Jones Industrial Average gained 0.34%, while the Standard & Poor’s 500 added 0.39%. The Nasdaq Composite index improved 0.14% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.44%.^1,2,3

Stocks Edge Higher

Stocks bumped along the flatline for much of the week ahead of this week’s two inflation reports and the June meeting of the Federal Open Market Committee.

Amid little news, stocks drifted lower to start the week until Wednesday, when a solid early-day rally evaporated on news of the Bank of Canada’s surprise interest rate hike. Stocks rose again the following day, holding onto their gains, with the S&P 500 hitting a new closing high for 2023.⁴

Stocks added small gains on Friday after weathering some midday weakness, leaving major indices marginally higher for the week.

Better Breadth

One investor concern has been that a handful of mega-cap stocks have driven recent market returns. Last week’s market bucked that trend, with outperformance in small-cap stocks and equally-weighted stock market indices.

For instance, the Russell 2000 index (which measures the performance of 2,000 smaller-cap companies) rose 1.90% this week, outpacing the S&P 500 and the technology-heavy Nasdaq.⁵

Another example of broadening performance was the outperformance of the equally-weighted S&P 500 index, where each stock has equal weighting regardless of size, versus the market-cap S&P 500 index, where mega-cap companies disproportionately impact index performance. Last week’s return of the equally-weighted S&P 500 index exceeded the cap-weighted S&P 500’s return by 0.65%.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, June 9, 2023.} 
2. ^{The Wall Street Journal, June 9, 2023.}
3. ^{The Wall Street Journal, June 9, 2023.}
4. ^{CNBC, June 8, 2023.}
5. ^{The Wall Street Journal, June 8, 2023.}
6. ^{Google Finance, June 9, 2023.}

If you owe federal taxes, you may be required to pay by the April deadline. Remember, if you get an extension to file your taxes, payment is still due by the April deadline. You can set up a payment plan if you can’t pay the full amount you owe now.

Here are some choices for making your payment:

• Use Direct Pay: Internal Revenue Service (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. Remember 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.

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

Tip adapted from IRS.gov⁷

Footnotes and Sources

7. ^{IRS.gov, February 15, 2023}