Weekly Commentary — February 4th, 2019
Last week closed out one of stocks’ top January performances in years. In fact, both the S&P 500 and Dow posted their best January results in at least 3 decades.[i] For the week, major domestic indexes were also up. The S&P 500 gained 1.57%, the Dow added 1.32%, and the NASDAQ increased by 1.38%.[ii] The Dow’s performance marked its 6thweek of gains in a row.[iii] Internationally, MSCI EAFE stocks also posted growth, rising 0.91%.[iv]
What drove stock results last week?
As discussed in our previous market update, last week provided a number of details for investors to focus on. Here are some key items that contributed to market performance:
- Federal Reserve Meeting: The Fed chose not to increase interest rates above its current 2.25% – 2.50% target. When releasing this update, the central bank noted that it would be “patient” when deciding about any future increases.[v]
Market Impact? The Fed’s signal that additional rate hikes may not be imminent helped improve market confidence.[vi]
- Corporate Earnings: By Friday, nearly half of S&P 500 companies had released earnings data for the 4thquarter of 2018. Of them, 70% had higher earnings-per-share than expected and 62% beat revenue projections. Right now, the S&P 500 is poised to have its 5thquarter in a row of double-digit earnings growth. However, the currently projected growth of 12.4% is lower than it has been since 2017.[vii]
Market Impact? With worries of disappointing results calmed, some investors are feeling relieved by earnings season so far.[viii]
- January Labor Report: The latest Employment Situation release from the Bureau of Labor Statistics showed that the economy added 304,000 new jobs in January. At the same time, the unemployment rate increased slightly, as the count included furloughed federal workers. The latest data also indicated that December job growth was lower than initially reported.[ix]
Market Impact? The January job growth was much higher than investors expected and implied the partial government shutdown minimally affected the U.S. economy. These perspectives helped drive stock gains on Friday.[x]
This week brings more corporate earnings and potential developments in the U.S.–China trade negotiations.
Monday: Motor Vehicle Sales, Factory Orders
Tuesday: PMI Services Index, ISM Non-Mfg Index
Wednesday: Jerome Powell Speaks
Thursday: Jobless Claims
*The federal government shutdown may delay some data releases.
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.
“You get in life what you have the courage to ask for.”
– Oprah Winfrey
Home Office Deduction
If your home is your principal place of work and you dedicate an office or portion of your home to work, then you may be able to deduct expenses. This applies to homeowners and renters alike. Here are some requirements to consider for this deduction:
You use your home office regularly and exclusively, and your home is your principal place of business.
- Whether you have an office, studio, or portion of your home for work, you’ll need to figure out the percentage of your home that is dedicated to business. You can still deduct expenses even if you carry on your business in another location as well.
- If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.
If you are an employee and you use a portion of your home for business, you may qualify for a deduction for its business use. Added requirements:
- Your business use must be for the convenience of your employer.
- You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.
* 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[xi]
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