by Connor Darrell CFA, Assistant Vice President – Head of Investments NOTE: Last week, we reported an incorrect number for the December jobs report, which was not released until 1/10. Refer to the “Heat Map” for more details on the most recent employment data.
The U.S. equity market extended its
gains last week as tensions between the U.S. and Iran showed signs of easing. Markets
seem to no longer anticipate an escalation in the conflict between the U.S. and
Iran following what has been seen as a largely unprovocative response to the
killing of Qassem Soleimani on the part of the Iranians. With geopolitical
risks at a heightened level, there remains the risk for additional unsettling
headlines that could spark volatility, but it is unlikely that any such
headlines would have a material impact on global markets.
Here in the U.S., the December jobs
report came in weaker than anticipated, though the unemployment rate remained
at its 50-year low of 3.5%. Wage growth, which had shown signs of picking up
during the latter half of 2019, also came in weaker than expected. The 2.9%
annual rate of increase was the lowest reading since July of 2018. Month-to-month
jobs data tends to be somewhat unpredictable, and we continue to view the
employment situation, and tangentially the U.S. consumer, as the strongest
component of the U.S. economy. In the coming weeks, we will be watching the
beginning of Q4 earnings season for further insights into consumer spending
during the holiday season.
THE NUMBERS Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends. Interest Rates: Federal Reserve, Freddie Mac
U.S. ECONOMIC HEAT MAP
The health of the U.S. economy is a key driver of long-term returns in the stock market. Below, we grade 5 key economic conditions that we believe are of particular importance to investors.
CONSUMER SPENDING
A
Our consumer spending grade remains an A despite recent softening in retail sales numbers. US consumer confidence remains high, and we anticipate a strong holiday shopping season. The consumer has been the bedrock of the US economy through much of the current expansion.
FED POLICIES
B+
With the Federal Reserve expected to refrain from any further adjustments to interest rates without a material change in the economic outlook, we have downgraded our Fed Policies grade to a B+. The low level of interest rates remains a positive for markets, but sentiment will likely no longer be aided by anticipated rate cuts.
BUSINESS PROFITABILITY
B-
As was largely expected by markets, corporate earnings growth was weak during Q3 as a result of the global slowdown and trade policy uncertainty. However, according to Factset, 75% of S&P 500 companies reported a positive earnings surprise, meaning things were not quite as weak as many had feared.
EMPLOYMENT
A
December’s headline jobs growth number of 145,000 missed consensus expectations, though the unemployment rate remained stable at 3.5%; a 50-year low. Despite the softer than anticipated results in December 2019 was an incredibly strong year for the labor market, and it remains the healthiest area of the economy.
INFLATION
A
Inflation is often a sign of “tightening” in the economy and can be a signal that growth is peaking. Recent inflationary data has increased slightly, but inflation remains benign at this time, which bodes well for the extension of the economic cycle.
OTHER CONCERNS
INTERNATIONAL RISKS
7
We have raised our International Risks metric to a 7 following the US airstrike which killed Iranian General Qassem Soleimani. We expect heightened volatility in markets as a result of the further escalation of tensions that this action represents. However, we stress that volatility stemming from geopolitical events tends to be short-term.
The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.
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Form 1099-MISC is also required if you withheld any federal
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payment.
Some payments do not have to be reported on Form 1099-MISC,
although they may be taxable to the recipient. The most common exceptions are
payments to a corporation (including an LLC that is treated as a C or S
corporation), payments of rent to real estate agents or property managers, and
payments made with a credit card or payment card and certain other types of
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Form 1099-MISC are due by January 31, 2020. You can submit
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Returns Electronically (FIRE) system. Please note that if you issue more than
250 information returns, you are required to file electronically and may be
penalized if you fail to do so.
The IRS operates a
centralized call site to answer questions about reporting on Form 1099 and
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The show airs on WDIY Wednesday
evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert
CPA, CFP®, AEP®.
This week, Laurie and her guest, Nicholas Nanovic, Esq., LL.M., AEP®
from Gross McGinley, LLP, will discuss: “Trusts – general estate planning,
minor trusts, A/B trusts and more.”
