Daily Archives: November 7, 2016

Heads Up!

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TRENTON — Motorists may be fuming over having to pay 23 cents a gallon more at the pump come November, but the deal to restore New Jersey transportation funding will bring significant savings to retired residents living in the Garden State.

Legislation signed by Gov. Chris Christie last week raising the gasoline tax 23 cents per gallon included $1.4 billion in tax cuts.  That includes a five-fold increase in the income tax break for retirees. Right now, married couples filing jointly can get out of paying any state income tax for their first $20,000 in retirement income. That will jump to $100,000 by 2020.

The limit for a married couple filing jointly will jump from $20,000 to $40,000 in 2017, to $60,000 in 2018, to $80,000 in 2019 and $100,000 in 2020. For a married person filing separately, it will gradually increase from $10,000 to $50,000, and for a individual filing as a single taxpayer, from $15,000 to $75,000.

Anyone with more than $100,000 in taxable New Jersey income would have to pay the full state income tax. The tax break applies to residents 62 and older.

So, if your NJ income is over $100,000, you do not get any part of the exclusion. There is no phase-out. It is all or none.  I just wanted to make sure we were all clear on that. I am already getting calls from folks that are evaluating moving to PA, but wanted to stay in NJ because their pension was going to have this large exclusion. Not the case if their total income is over $100k.

The “Heat Map”

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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 is A- (very favorable). Favorable activity in the housing market continues to support growth in the level of spending.

THE FED AND ITS POLICIES: This factor is rated A (very favorable). Following the Federal Open Market Committee meeting last Wednesday; the Fed left monetary policy on hold. A quarter-point hike in the federal funds rate, to 0.5%-0.75%, is expected at the next meeting, on Dec. 13-14 and indicating the Fed probably will remain on a long and slow path to hiking rates.

BUSINESS PROFITABILITY: This factor’s grade is rated a B- (above average). FactSet Research says that with 85% of the companies in the Standard & Poor’s 500 index reporting, 71% beat earnings-per-share estimates. Third-quarter aggregate growth in per-share earnings is currently 2.7%, which would be the first quarterly rise since March 2015.

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 4.  These risks deserve our ongoing attention.

The Numbers

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Last week, Bonds increased. But U.S. Stocks and Foreign Stocks decreased. During the last 12 months, BONDS outperformed STOCK (this represents a change).

Returns through 11-4-2016

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

.2

5.2

4.9

3.6

2.7

4.7

US Stocks-Standard & Poor’s 500

-1.9

3.9

1.4

7.9

13.1

6.6

Foreign Stocks- MS EAFE Developed Countries

-1.6

-1.9

-4.1

-1.6

5.2

1.1

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.

“Your Financial Choices”

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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 guests Attorney Connie Nelson and Attorney Allen Tullar of Gross McGinley LLP of Allentown will discuss:

“What to know about Divorce before it happens”

Laurie, Connie, and Allen 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.

The Markets This Week

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U.S. stocks skidded lower on the week ahead of U.S. elections on Tuesday, Nov. 8. Investors fretted about a presidential race whose outcome appears much tighter than previously thought, raising the odds of a contest with no clear winner. The major indexes fell 2% in mostly uninspired trading.

For the past two weeks, there has been growing market fear of a victory by Republican candidate Donald Trump, whose antitrade and anti-immigration policies are anathema to capital markets.

Lost in the electoral anxiety were third-quarter earnings reports that were generally good, albeit against lowered expectations. Also ignored was the FED’s decision to wait to raise interest rates.

Last week, the Dow Jones Industrial Average fell 273 points, or 1.5%, to 17,888.28; it has fallen for seven straight sessions. The S&P 500 fell 41, to 2085.18, and is down nine consecutive days. The Nasdaq Composite gave up 2.8%, to 5046.37.

Sentiment is hanging on the election, says Mark Heppenstall, chief investment officer at Penn Mutual Asset Management. It has worsened in the face of recent polls suggesting that the verdict will be very close or potentially disputed.

The market wants a Clinton victory with Republicans holding on to Congress to rein in Democratic spending. However, “if there’s no clear winner, that’s a problem,” says Heppenstall. And there’s a “unanimous” view in the market that if Trump wins, the market will be in trouble.

After the surprise United Kingdom vote in June to exit the European Union, investors are hypervigilant about an unexpected outcome, says Jake Dollarhide, CEO of Longbow Asset Management. A Trump victory would lead to weeks of heavy volatility and seesaw action, he adds.

For the investor with the longer view, there’s some solace from past performance: the November-to-April period has been the best time to be in stocks over history.

(Source: Barrons Online)