Broker Check

November 19, 2018

| December 18, 2018
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Thanksgiving is a true American holiday. It celebrates generosity and gratitude, and it recognizes the relationships that helped colonists who arrived on the Mayflower in 1620 survive beyond their first winter. History.com explained:

“Only half of the Mayflower’s original passengers and crew lived to see their first New England spring. In March, the remaining settlers moved ashore, where they received an astonishing visit from an Abenaki Indian who greeted them in English. Several days later, he returned with another Native American, Squanto, a member of the Pawtuxet tribe who had been kidnapped by an English sea captain and sold into slavery before escaping to London and returning to his homeland on an exploratory expedition. Squanto taught the Pilgrims, weakened by malnutrition and illness, how to cultivate corn, extract sap from maple trees, catch fish in the rivers, and avoid poisonous plants. He also helped the settlers forge an alliance with the Wampanoag, a local tribe, which would endure for more than 50 years…”

We’re honored and grateful you’ve chosen us to help you pursue your financial goals and we thank you for your continued confidence in us.

Happy Thanksgiving!

The Markets

Keep your eyes on the horizon. Motion sickness happens when your body receives conflicting signals from your eyes, ears, and other body parts. One way to manage the anxiety and queasiness that accompany the condition is by keeping your eyes on the horizon.

The motion of the stock markets has been causing some investors to experience similar symptoms. Surprisingly, the remedy is the same: Keep your eyes on the horizon, your financial planning horizon.

A planning horizon is the length of time over which an investor would like to achieve his or her financial goals. For instance, perhaps you want to pay off student loans by age 30, fund a child’s college tuition when they reach age 18, or retire at age 60.

When stock markets are volatile, an investor may receive conflicting signals from various sources, which may induce anxiety and queasiness. When you start to worry about the effects of market volatility on your portfolio, remember stock markets have trended higher, historically, even after significant downturns.

For instance, during the financial crisis, the Dow Jones Industrial Average lost about 50 percent from it’s high in late 2007 to the bottom in March 2009. It finished 2008 at 8,776. The drop sparked tremendous anxiety among investors who wondered whether their portfolios would ever recover. Last week, the Dow closed at 25,413.

While stock markets have trended higher historically, there is no guarantee they always will. That’s why asset allocation and diversification are so important. A carefully selected mix of assets and investments can reduce the impact of any single asset class or investment on a portfolio’s performance. Keep in mind, of course, past performance is no guarantee of future results.

Last week, stock markets finished lower. MarketWatch reported U.S. stocks moved higher on Friday after President Trump indicated he might not pursue tariffs against China.

The ongoing uncertainty about trade and economic growth is starting to weigh on markets. The direct effects of tariffs and rate hikes are important, but not as important as the indirect effect on investment and consumer spending.

Source: FactSet

In the United States, a key supplier to Apple warned decreasing orders from the iPhone manufacturer would hurt its fiscal outlook. United States consumer spending increased more than expected last month, but a deeper analysis showed the gains were driven by higher gas prices and spending on items used in cleaning up from the hurricane season. After adjusting for one-time factors, spending looked weaker.

Both Japan and Germany experienced a decline in gross domestic product (GDP) last quarter, although much of the decline can be attributed to special circumstances. Natural disasters disrupting exports and weaker consumer spending pushed Japanese GDP lower. Germany released its third-quarter GDP, and it also showed a contracting economy. Germany’s GDP shrank by 0.2 percent in the third quarter. Much of the decline came from regulation changes delaying auto sales, but the weakness was broad.

The data indicates uncertainty is slowing down investment and restraining spending on key items. As consumers and corporate financiers become less certain about economic growth and the regulatory environment, they slow down their own activity. That means fewer iPhones get purchased and investment in new factories or equipment declines. Trade restrictions on one product affect far more than just a few companies in the targeted country.

It is also important to note that the economy continues to grow with a rapidly growing GDP and record low unemployment.  Corporate earnings have been robust and retail sales this Christmas Season will be closely examined.

The concerns for investors have included a Congress that is now split with Democrats controlling the House and Republicans the Senate; the upcoming Brexit; rising interest rates; the talk of tariffs and a trade war with China.

There have also been some indications that certain sectors of the economy are weakening.  Both existing home sales and new home sales have tapered off. New car sales are soft. Rising interest rates may have had an impact on both.  We would not be surprised if the Fed skips the next anticipated rate hike in December.

Key Points For The Week

  • Stocks fell sharply last week based on concerns that global economic growth is slowing.
  • Japanese and German economic growth slowed last quarter.
  • U.S. retail sales showed signs consumer spending growth is declining.

IRS RELEASES 2019 INFLATION CHANGES

The Internal Revenue Service has announced the tax year 2019 annual inflation adjustments. The tax year 2019 adjustments generally are used on tax returns filed in 2020. The tax items for tax year 2019 of greatest interest to most taxpayers include the following dollar amounts:

  • The standard deduction for married filing jointly rises to $24,400 for tax year 2019, up $400 from the prior year
  • For single taxpayers and married individuals filing separately, the standard deduction rises to $12,200 for 2019, up $200
  • For heads of households, the standard deduction will be $18,350 for tax year 2019, up $350
  • The personal exemption for tax year 2019 remains at $0, as it was for 2018, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
  • The Alternative Minimum Tax exemption amount for tax year 2019 is $71,700 and begins to phase out at $510,300.
  • For tax year 2019, the monthly limitation for the qualified transportation fringe benefit is $265, as is the monthly limitation for qualified parking, up from $260 for tax year 2018.
  • For calendar year 2019, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is $0, per the Tax Cuts and Jobs act; for 2018 the amount was $695.
  • For the taxable years beginning in 2019, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $2,700, up $50 from the limit for 2018.
  • For tax year 2019, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $116,000, up from $114,000 for tax year 2018.
  • For tax year 2019, the foreign earned income exclusion is $105,900 up from $103,900 for tax year 2018.
  • Estates of decedents who die during 2019 have a basic exclusion amount of $11,400,000, up from a total of $11,180,000 for estates of decedents who died in 2018.
  • The annual exclusion for gifts is $15,000 for calendar year 2019, as it was for calendar year 2018.
  • The maximum credit allowed for adoptions is the amount of qualified adoption expenses up to $14,080, up from $13,810 for 2018.
  • The Sec. 179 amount for tax years beginning in 2019 will be $1,020,000 with a phaseout threshold of $2,550,000.
  • The big news is, of course, the tax brackets and tax rates for 2019. There are still seven (7) tax rates. They are: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Here's how those break out by filing status:

WHAT ARE WE READING

Below are some articles we paid particularly close attention to this week. We encourage our readers to follow the links.

How to Get Your Kids Started in the Kitchen

Teaching kids to cook isn’t just about instilling independence and giving them the tools to feed themselves. It can also be a fun and help bond as a family. As we approach Thanksgiving, click the link above for some tips to get started and also some ideas depending on the age of the child.

Crypto Miner for Black Friday Shopping?

A new device called Coinmine One is now being sold as an easy-to-use home crypto currency mining system. The device cost $799 and can be controlled with an app. The company building the systems claims that the device consumes the same or less power as a vacuum cleaner.

Sneaky Dog Goes Viral After it Drinks Owners' Beer

A dog was caught drinking its owner’s beer by a man who happened to witness it from a bus window. Jake Pulford captured the hilarity by taking pictures, which appear to show the dog checking to make sure the coast was clear before helping itself to the delicious beverage. The owner was unaware of the dog’s actions.

Weekly Focus 

“When dealing with people, remember you are not dealing with creatures of logic, but creatures of emotion.”

~ Dale Carnegie, American writer and lecturer

"You vision will become clear only when you look into your heart, Who looks outside, dreams. Who looks within, awakes."

~ Carl Jung, Psychologist

Links & Disclaimers

RJFS and SPC do not offer or provide legal or tax advice. Tax services and analysis are provided by the related firm, S&M through a separate engagement letter with clients. Portions of this newsletter were prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with RJFS, SPC or S&M.  The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  This information is not intended as a solicitation of an offer to buy, hold or sell any security referred to herein.  There is no assurance any of the trends mentioned will continue in the future.  Any opinions are those of the author and not necessarily those of RJFS.  Any expression of opinion is as of this date and is subject to change without notice.

Opinions expressed are not intended as investment advice or to predict future performance.  Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.  Past performance does not guarantee future results.  Investing involves risk, including loss of principal.  Consult your financial professional before making any investment decision.  Stock investing involves risk including loss of principal.  The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock companies maintained and reviewed by the editors of the Wall Street Journal. Please note direct investment in any index is not possible.

 

The MSCI Emerging Markets is designed to measure equity market performance in 25 emerging market indices. The index's three largest industries are materials, energy, and banks.  Investing in emerging markets can be riskier than investing in well-established foreign markets.

 

Links are being provided for information purposes only.  RJFS, SPC and S&M are not affiliated with and do not endorse, authorize or sponsor any of the listed websites or their respective sponsors, and they are not responsible for the content of any website, or the collection or use of information regarding any website's users and/or members.

 

https://www.history.com/topics/thanksgiving/history-of-thanksgiving

https://www.sharp.com/health-news/does-looking-at-the-horizon-prevent-car-sickness.cfm

http://afcpe.org/assets/pdf/volume_25_2/09013_pg174-196.pdf

https://finance.zacks.com/longterm-stock-market-trends-6294.html

https://finance.yahoo.com/quote/^DJI/history?period1=1167631200&period2=1230789600&interval=1d&filter=history&frequency=1d

https://finance.yahoo.com/quote/^DJI?p=^DJI

https://www.investopedia.com/terms/s/systematicrisk.asp

https://www.marketwatch.com/story/nasdaq-poised-to-fall-1-at-the-open-as-nvidia-weighs-on-stock-market-chip-makers-2018-11-16

https://www.reuters.com/article/us-usa-trade-china/trump-says-u-s-may-not-impose-more-tariffs-on-china-idUSKCN1NL28Q

https://www.brainyquote.com/quotes/dale_carnegie_130727

https://www.irs.gov/pub/irs-drop/rp-18-57.pdf



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