If you are charitably inclined and have adequate cash flow available, might it be time to put the brakes on Required Minimum Distributions taken from your IRA’s in the early months of the year? Depending on what tax proposals eventually make it into law, those 70 ½ and older may benefit more from making their larger charitable contributions directly out of their IRA whereby that income won’t be reported on page 1 of your return. These types of charitable distributions are not deducted, therefore, on the Schedule A for itemized deductions. With proposed higher standard deductions in the possible 2017 Income Tax Simplification, many older taxpayers won’t benefit from itemizing anymore and wouldn’t receive a tax benefit from charitable giving. If you make your charitable contributions through the Qualified Charitable Distribution (QCD) strategy, there is an opportunity to save income taxes whether you itemize or not. Ask us for details and what you should review to make sure this strategy is available to you.
Daily Archives: January 9, 2017
Update On Washington
The U.S. stock market has jumped since the November 8th election. Let’s identify and track the 4 initiatives upon which the U.S. stock market is speculating will be successfully accomplished early in the Trump administration.
The 4 initiatives will have a tremendous influence on the “Heat Map” which forms the basis of our forward looking view of the U.S. economy. We consider the success or failure of the 4 initiatives to be “leading” indicators for the “Heat Map.”
Below are the 4 Trump administration initiatives upon which the stock market is speculating and what progress, if any, has been made:
- Tax cuts and tax reforms benefiting most individuals and businesses- NO PROGRESS RECENTLY. CUMULATIVE PROGRESS TOWARD GOAL: 0%
- Infrastructure spending of up to $1 Trillion over the upcoming 7 to 10 years. NO PROGRESS RECENTLY. CUMULATIVE PROGRESS TOWARD GOAL: 0%
- Affordable Care Act amendment, reform or reorganization. NO PROGRESS RECENTLY. CUMULATIVE PROGRESS TOWARD GOAL: 0%
- Roll back of government regulations and Executive Orders considered to be difficult for businesses. NO PROGRESS RECENTLY. HEARINGS AND CONGRESSIONAL APPROVAL (OR NOT) ON TRUMP APPOINTEES FORMS A LITMUS TEST FOR FUTURE EFFECTIVENESS OF THE TRUMP ADMINISTRATION. CUMULATIVE PROGRESS TOWARD GOAL: 0%
As the action happens in Washington on these 4 initiatives, don’t be surprised if the political “tug and pull” contest results in a wilder than normal stock and bond market.
We will continue to report in future issues on the progress on each initiative.
The “Heat Map”
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. This category’s grade will improve if and when the Trump legislation is passed.
THE FED AND ITS POLICIES: This factor is rated C-. The FED stated it would take a wait and see attitude toward the economic impact of legislation the Trump Administrations has proposed. Some experts believe the FED could raise rates at a faster pace if and when the Trump proposed legislation is passed into law. The FED is in the process of turning from a friend to the stock market to an anchor weighing down profitability, reducing valuations, and constraining growth.
BUSINESS PROFITABILITY: This factor’s grade is rated a B- (above average). Trump’s goal is a 4% growth rate for the U.S. economy. This will increase business profits significantly.
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 3. These risks deserve our ongoing attention.
The Numbers
Last week, U.S. Stocks, Foreign Stocks and Bonds all increased. During the last 12 months, STOCKS outperformed BONDS.
|
Returns through 1-6-2017 |
1-week |
Y-T-D |
1-Year |
3-Years |
5-Years |
10-Years |
|
Bonds- BarCap Aggregate Index |
.2 |
.2 |
2.4 |
3.0 |
2.3 |
4.3 |
|
US Stocks-Standard & Poor’s 500 |
1.8 |
1.8 |
16.9 |
9.9 |
14.7 |
7.2 |
|
Foreign Stocks- MS EAFE Developed Countries |
1.8 |
1.8 |
6.9 |
-.6 |
7.0 |
1.0 |
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”
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 will discuss:
“Financial implications of being a beneficiary.”
Laurie 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.
Motivational Quote of the Week
“A stream cuts through a rock not because of its strength but because of its persistence.”
– Unknown
The Markets This Week
Multiple attempts were made on Mount Everest over a period of 20-some-odd years before Edmund Hillary and Tenzing Norgay summited its peak in 1953. Hopefully it won’t take that long for the Dow Jones Industrial Average to reach 20,000.
Last Friday, the Dow came within 0.37 point of reaching that big round number, the closest it has come since Barron’s put the blue-chip benchmark on 20,000-watch on Dec. 10. Lost amid all the will-it-or-won’t-it was the fact that the Standard & Poor’s 500 index and the Nasdaq Composite closed at record highs last week, even as the Dow ultimately fell short.
The Nasdaq Composite climbed 2.6% to 5521.06. The Dow Jones Industrial Average rose 201.20 points, or 1%, to 19,963.80, its second-highest close on record.
Should we worry that the Dow faltered just as it seemed it would finally take 20,000? Probably not, says Sameer Samana, global quantitative strategist at Wells Fargo. The Dow has been making its attempt for only a few weeks, and its failure to break through has come after a 9.2% rally since Nov. 4. If the market stays in a rut, he might get worried. For now, Samana contends it’s “just a matter of time.”
And time appears to be on the market’s side. Even a “disappointing” payrolls report last Friday was unable to derail the stock market’s surge higher. Yes, the U.S. created 156,000 new jobs in December, fewer than the 175,000 predicted by economists. But the headline miss didn’t take into account the upward revisions to previous months, which easily offset the December shortfall. “We’re generating more jobs than there are people to fill them,” says Jonathan Golub, Chief U.S. Market Strategist at RBC. “It just feeds this,” he continues, “this” being the stock market rally, of course.
(Source: Barrons Online)