At the close of February, the IRS released an updated tax withholding calculator on IRS.gov and issued a new Form W-4. It is recommended that you review the online calculator to check your 2018 tax withholding following the passage of the Tax Cuts and Jobs Act in December. You can find the IRS Withholding Calculator on the attached announcement or by using the following link: https://www.irs.gov/individuals/irs-withholding-calculator
There are several reasons to check your withholding:
Checking your withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.
At the same time, with the average refund topping $2,800, you may prefer to have less tax withheld up front and receive more in your paychecks.
If you are an employee, the Withholding Calculator helps you determine whether you need to give your employer a new Form W-4, Employee’s Withholding Allowance Certificate. You can use your results from the Calculator to help fill out the form and adjust your income tax withholding.
Last week, a long-established word was suddenly brought back into our everyday vocabulary. It’s spelled with one “r” and two “f’s” – tariff. Thankfully, we have spell-checker to make sure we got it right. That stimulated interest. How many times have we included the word “tariff” in The Weekly Commentary issues during the last 11 years? None – we ran a search on the past issues.
However, the news media has puffed-up its usage. Have they made too much of the steel tariff announcement? Probably, if history is a guide. We will continue to evaluate how tariffs affect you the consumer, business profits, and FED actions; but, we do not see an impact where we need to change your portfolio at this time.
By the way, tariffs were once the chief source of income for the U.S. Government before the passage of the Federal Income Tax legislation in 1913.
The U.S. stock market has jumped since the November 8th election. We identified 4 initiatives on which the U.S. stock market is speculating to be successfully accomplished early in the Trump administration. What will happen next? It is still to be determined!
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. THE MOST SIGNIFICANT TAX LEGISLATION IN A GENERATION WAS SIGNED INTO LAW LAST YEAR. CUMULATIVE PROGRESS TOWARD GOAL: 100%
Infrastructure spending of up to $1 Trillion over the upcoming 7 to 10 years. PROGRESS TOWARD GOAL: 20%. ON THURSDAY, A RUMOR CIRCULATED AROUND WASHINGTON INDICATING THE INFRASTRUCTURE BILL MAY NOT BE CONSIDERED IN 2018.
Affordable Care Act amendment, reform or reorganization. THE TAX REFORM LAW REMOVED THE REQUIREMENT EACH INDIVIDUAL OBTAIN HEALTHCARE COVERAGE. PROGRESS TOWARD THIS GOAL IS 35%.
Roll back of government regulations and Executive Orders considered to be difficult for businesses. ROLL BACKS HAVE CONTINUED. CUMULATIVE PROGRESS TOWARD GOAL: 55%
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.
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+ (extremely favorable). Consumer spending is expected to strengthen as individuals with lower tax rates spend their windfalls.
THE FED AND ITS POLICIES: This factor is rated C- (Below average).
BUSINESS PROFITABILITY: This factor’s grade is A- (very favorable). The 4th quarter earnings season was stellar, with S&P profits growing at a fast pace.
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 5. These risks deserve our ongoing attention.
Last week, U.S. Stocks and Foreign Stocks increased, and Bonds declined. During the last 12 months, STOCKS outperformed BONDS.
Returns through 3-9-2018
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
-.1
-2.2
1.7
1.4
1.8
3.7
US Stocks-Standard & Poor’s 500
3.5
1.7
20.2
12.6
14.8
10.3
Foreign Stocks- MS EAFE Developed Countries
1.9
-.1
19.9
6.4
6.7
3.1
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.
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:
“Health Savings Accounts and other related issues”
Laurie will take your calls on this or other topics. 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.
Nine years ago, the market decided it couldn’t go any lower. Now we’re still wondering just how high it can go.
On March 9, 2009, the Standard & Poor’s 500 index closed at 676.53, in what would prove to be the closing low of the financial crisis. And while the index has more than quadrupled since then, it proved that it still has some juice left in its tank.
The S&P 500 gained 3.5%, to 2786.57, last week, while the Dow Jones Industrial Average rose 3.3%, to 25,335.74, and the Nasdaq Composite climbed 4.2%, to 7560.81.
Even more impressive was the way the market earned those gains. We expected it to rise when the Trump administration’s tariffs were watered down to exempt Canada and Mexico. The rally on Friday, when the Dow gained 440.53 points, was another thing altogether. It came after Friday’s blockbuster payrolls report, with 313,000 jobs added to the U.S. economy, well above the 200,000 predicted by economists, and slightly weaker-than-expected wage growth—a combination that implies healthy growth and limited inflation pressures.
You’d expect the market to open higher with a number like that—which it did—but the trend following the 10 strongest reports since 1998 has been for the market to open up, rally a bit, and then give back most of the gains, according to Bespoke Investment Group data. That certainly wasn’t the case this time. And the fact that the data was almost the reverse of the previous month’s, which kick-started a correction with concerns of a more proactive Federal Reserve, didn’t go unnoticed.
“The market was gearing up for the worst, and when it doesn’t happen, you get 400 points in the Dow,” says Paul Hickey, Bespoke’s co-founder.
That doesn’t mean that the market is going straight up from here. Quincy Krosby, chief market strategist at Prudential Financial, notes that the concerns that have lingered over the market—inflation, rate hikes, and rising bond yields, among them—haven’t gone away, and there’s still a lot of data to come that could shake things up again.
The consumer-price index is set to be released next Tuesday, and it will be followed by the producer-price index on Wednesday. And even if wage growth was softer, job growth like February’s will eventually lead to higher wages. “This is a data-dependent market,” she says. “It will continue to feel vulnerable as inflation-related data is released.”
But vulnerable isn’t the same thing as weak. The Nasdaq Composite closed at an all-time high last week, while the S&P 500 and Dow are just 3% and 4.8%, respectively, below their own records. The Nasdaq has been given a lift by its heavy weighting to technology—the sector has gained more than 12% during the past month—and its lack of exposure to the likes of utilities and consumer staples, which have gained less than 1% during that period. But make no mistake, if the Nasdaq can do it, so can the S&P 500 and the Dow. “It’s not like other areas haven’t been moving up,” says Instinet’s Frank Cappelleri. “They just haven’t as quickly.”
