Recent legislation made permanent the provision for individuals age 70 ½ and older to be allowed to make tax-free distributions of any of their required minimum distribution or up to $100,000 from individual retirement accounts (IRAs) to a qualified charitable organization. These types of IRA distributions are being referred to as “Qualified Charitable Distributions” or “QCD”.
As this money is not included in taxable income, it is not included in charitable contributions if you itemize deductions for income tax purposes. For some people, you may have the same bottom line tax result by using the QCD or making the contribution from personal funds. For others, especially those who do not itemize, it could help you save taxes. For some people, the QCD could reduce the portion of Social Security which is taxed on Form 1040. Finally, the QCD could help higher income Medicare participants to reduce the additional premium for Medicare Part B or prescription drug coverage.
If you feel this may apply to your tax situation or need more information, please contact us as soon as possible. If you do not contact us, we will assume that we can proceed with the required minimum distribution withdrawal as currently scheduled.
Most of the time, the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.
CONSUMER SPENDING: This grade equals B+ (very favorable). Gasoline prices continue to drop. These trends put more money in the pockets of Americans in 2016.
THE FED AND ITS POLICIES: This factor is rated B (favorable). The U.S. economy can handle higher rates as long as the pace of future interest rate increases is slow. Fed Chair Janet Yellen made clear in her press conference after the December meeting that the path higher would be “gradual”.
The Fed’s plan to gradually raise rates in the coming years won’t derail the economy and brings some certainty to the market, says Morningstar’s Bob Johnson. The market consensus on the 2016 pace of increase is somewhere around two to possibly three rate increase of .25% each.
BUSINESS PROFITABILITY: This factor’s grade is a C (average). To date, the earnings reports for the quarter ending 12/31/2015 are mixed. The forward looking outlook is not positive for the most part. We will continue to monitor for several more weeks before adjusting this factor’s grade.
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 7 due to Saudi Arabia severing diplomatic ties with Iran and the potential for social/political upheaval in China. These risks deserve our ongoing attention.
Last week, U.S. Stocks and Foreign Stocks and Bonds all increased. During the last 12 months, BONDS outperformed STOCKS.
Returns through 1-29-2016
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
.5
1.4
-.2
2.1
3.5
4.7
US Stocks-Standard & Poor’s 500
1.8
-5.0
-.7
11.3
10.9
6.5
Foreign Stocks- MS EAFE Developed Countries
1.5
-7.2
-8.4
.7
1.6
1.7
Source: 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.
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 guest host Mark Bacak of the Social Security Administration will discuss: “Social Security Changes”
Laurie and Mark will take your calls on these topics and other inquiries this week. Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie. This show will be broadcast at the regular time. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton and Phillipsburg area– or listen to it online from anywhere on the internet. For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.
Stocks jumped Friday, turning an otherwise punk week into a winner. The major indexes rose about 2%, and investors cheered a surprise action by the Bank of Japan overnight Thursday to move its benchmark interest rate below zero.
With U.S. fourth-quarter gross-domestic-product numbers—out Friday morning—showing poor growth, 0.7% annualized, the BOJ move rescued a market worried that energy-sector carnage will hurt overall growth.
Crude oil, too, cooperated, up for a second consecutive week, 4.4% to $33.62 per barrel. A Federal Reserve statement Wednesday said it was watching “global economic and financial developments,” in a nod to market volatility over the past two months. However, the market was disappointed there were no indications it is backing away from the expected four rate hikes this year.
The Dow Jones Industrial Average gained 373 points, or 2.3%, to 16466.30 last week, while the Standard & Poor’s 500 index rose 33 to 1940.24. Both fell over 5% last month. The Nasdaq picked up 0.5%, to 4613.95, last week.
Some of the factors pressuring the market—weak oil prices and fear of a global growth slowdown—were temporarily relieved, says Peter Boockvar, chief market analyst at Lindsey Group. “The market continues to respond positively to any global easing,” he adds. The BOJ move was welcome given investors are fretting over whether the Fed will push back its rate-hike plan.
There will be diminishing returns to easing moves, however, predicts Boockvar, who notes many sectors and countries are already in a bear market, even if the U.S. isn’t—yet. Bear markets—not bulls—are characterized by these sharp, violent moves upward, he adds.
Concern has grown that the oil-patch weakness of the past 18 months won’t stay confined to that sector and will eventually “leak into” and affect the wider economy, says Anwiti Bahuguna, a senior portfolio manager at Columbia Threadneedle Investments.
The equity rally could continue with more central bank action, she adds, but investors remain skittish. “If we don’t see better U.S. economic data, we haven’t seen the end of market weakness,” Bahuguna says.
Some investors might see two up weeks in a row as a turning point, but if that were true then why did defensive sectors—such as telecom, utilities, and consumer staples, up 3% to 4%—make up three of the top four sectors last week?
We are back to bad news is good again, something that’s characterized the market’s churning since midsummer. Since the top last May, with each new rally we’ve seen a cycle of lower highs, not a particularly encouraging sign.
