Weekly Update — January 14th, 2019
After months of volatility, markets relaxed a bit last week. For the first time since October, the S&P 500 went 5 days without a 1% gain or loss.[i] The Cboe Volatility Index, or VIX, also fell to lower than 20—in December, it spiked above 35.[ii]
For the week, the S&P 500 added 2.54%, the Dow gained 2.40%, and the NASDAQ increased 3.45%. All three indexes are in positive territory for 2019.[iii] International stocks in the MSCI EAFE grew as well, with a 2.85% weekly gain.[iv]
What drove last week’s gains?
Updates on trade and monetary policy contributed to investor decisions, yet again.[v]
- The Federal Reserve made dovish comments.
Last week, multiple Fed officials gave speeches indicating our central bank would carefully approach its interest rate decisions in 2019. Fed Chairman Jerome Powell described the policies as “flexible” and “patient.”[vi]
- A trade resolution seemed more likely.
Many investors believe that efforts to resolve trade tension between the U.S. and China made progress last week. On Wednesday, January 9, talks concluded in Beijing after three days of negotiations, and China said the “in-depth” meetings made a resolution possible.[vii] The next day, U.S. Treasury Secretary Steve Mnuchin announced that a high-level Chinese policy advisor is coming to D.C. later this month for further talks.[viii]
What is ahead?
Last week’s trade and policy headlines seemed to ease some of the risks on investors’ minds.[ix] However, both challenges and opportunities remain.
This week marks the beginning of U.S. corporate earnings season. Analysts have low expectations for companies’ 4th-quarter performance, especially after a number of large corporations released warnings about their results. However, analysts still predict that S&P 500 companies experienced 14.5% profit growth. In addition, the generally sour, pessimistic mood surrounding earnings could support equities in two ways: 1) Investors may not react strongly if companies miss projections, and 2) any companies that have surprisingly good results could see stock price jumps.[x]
Along with earnings results, investors will be paying close attention to companies’ commentary on business in China.[xi]Some experts believe Chinese economic growth is slowing, which is already affecting market performance. On Friday, markets stumbled a bit as analysts considered data and commentary on China’s economy. These details will remain important to watch—and see how it relates to trade.[xii]
In addition, while the U.S. federal government shutdown has not yet had a large market impact, if it continues for too long, it could sizably affect the economy.[xiii]
We will continue to monitor these and other financial perspectives as we determine where the markets are—and what may be on the horizon. If you have any questions, we’re here to talk and listen.
Wednesday: Retail Sales, Housing Market Index
Thursday: Housing Starts, Jobless Claims
Friday: Industrial Production, Consumer Sentiment
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
“The key is not to prioritize what’s on your schedule, but to schedule your priorities.”
— Stephen R. Covey
Tax Benefit and Credits: FAQs for Retirees
Lots of questions can come up about income taxes after one has retired. Listed are answers to just a few common questions for retired taxpayers.
What types of income are taxable?
Some common types of taxable income: military retirement pay, all or part of pensions and annuities, all or part of Individual Retirement Accounts (IRA), unemployment compensation, gambling income, bonuses and awards for outstanding work, and alimony or prizes.
What types of income are non-taxable?
A few examples of non-taxable income: veteran’s benefits, disability pay for certain military or government-related incidents, worker’s compensation, and cash rebates from a dealer or manufacturer of an item you purchase.
Why is my pension taxed?
It depends on how the money was put into the pension plan. For example, if all the money was contributed by the employer or the money was not taxed before going into the plan, it would be taxable. When your contribution is from already-taxed dollars, that portion of the pension is not taxed, but must be recovered over your life expectancy.
* 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.[xiv]
Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues.
If you have any questions or would like to learn more about developing strategies to pursue a prosperous and safe future, contact me today at Derek.Merkler@Parsonex.com! You can also visit my website to learn about how I help our service members and veterans plan for and achieve financial independence.
My blog discusses a myriad of financial topics and challenges, book reviews, and commentary on current events in the financial world to benefit our military and veteran community. I attempt to be as thorough as possible when examining each subject but can never account for every possible scenario. Please remember to consult with your advisers for advice on your particular situation. Thank you for reading!
Advisory Services offered through Parsonex Advisory Services, Inc. 8310 S. Valley Highway, Ste. 110, Englewood, CO 80112 (303) 662-8700