Year End Volatility For Equities – Global Equity Market Overview

Major U.S. equity indices stabilized in November as markets reassessed October’s pullback. The Dow Jones Industrial and S&P 500 indices made up of larger cap stocks rebounded over 1.5% in November, outpacing the tech heavy Nasdaq index for the month.

Emerging market equities rebounded in November as the dollar’s rise slowed and investors found value in various developing economies. Ongoing tariff and trade tensions have been hampering capital investment and trading arrangements for companies in the emerging markets.

Many hope that U.S. companies will use excess cash for capital investment rather than for stock buybacks, which has been a primary use of cash for many domestic companies.

Some analysts expect that the Fed’s perceived slow down in rising rates, along with the trade and tariff arrangements that occurred as a result of the G20, may prove positive and supportive for the markets following weeks of rampant volatility. Some companies have been holding back on hiring and capital expenditures until a resolution is finally achieved on trade.

There is a growing notion that the markets are headed towards a period of lower capital appreciation because of subdued economic and earnings growth. Economically sensitive sectors including industrials and consumer discretionary have pulled back in sync with technology and energy since the beginning of October.

Sources: S&P, Dow Jones, FRED, Bloomberg

Rates Fall In November – Fixed Income Update

The recent trend in rising rates slowed in November as expectations intensified that the Fed may not raise as ambitiously in 2019 as initially projected. The yield on the 10-year Treasury bond fell from 3.24% at the beginning of the month to 3.01% at month’s end. The drop in rates may be interpreted by equity markets as either positive or negative.

Federal Reserve officials acknowledged the adoption of a more flexible process in gradually increasing rates in 2019, where a neutral rate is targeted. The so-called neutral stance taken by the Fed causes uncertainty as to how the Fed perceives the direction of economic growth, as the neutral rate generates monetary policy that is neither stimulative nor restrictive.

Many believe that the impact of the Fed’s rate hikes this year have not yet fully materialized, thus creating a neutral stance for the Fed to allow it time to decide.

Sources: U.S. Treasury Dept., Federal Reserve, U.S. Treasury

Tax Breaks For Family Caregivers – Tax Planning

As the number of elderly has grown nationwide, so has the need for caregivers. The baby boom generation, the largest demographical segment of the U.S. population at 74 million, are now entering their late 60s and early 70s. Many are still very capable of caring for themselves, but others are in need of assistance as they progress into their senior years.

Unfortunately for many, the costs associated with an assisted living facility are not feasible and in other cases, not an option just yet. So instead, a growing number of elderly are staying in their homes or living with their families. Many times, a son or daughter will move in with mom or dad and essentially become their part-time or full-time caregiver. Some elderly end up moving in with family members where they actually become part of the household.

The challenge for family members that act as caregivers is the financial burden that may be imposed. An estimated 34.2 million adults provide some sort of unpaid care for elders aged 50 and older in 2015. Over 85% of these caregivers provide assistance directly for relatives. The average caregiver commits over 24 hours per week in providing care for elders.

Even though there is no actual pay for family member caregivers, there is a tax break when done properly. Under the new tax rules, taking a personal exemption for a qualified friend or family member has been replaced by the larger standard deduction. However, the rules still allow caregivers to claim those receiving care as dependents as long as the following criteria are met for the person being cared for:

The person cared for is a relative as defined by the IRS or a non-resident that has lived with the caretaker for at least six months.

Earns less than $4,050 (2017) per year, not including Social Security or disability benefits.

Is unable to pay over 50% of personal living expenses.

Can’t be claimed as a dependent by anyone else.

In addition, a $500 credit is available for 2018 taxes for non-child dependents intended to assist those caring for disabled or senior family members.

Tax rules allow the caretaker to claim medical expenses incurred by dependents on Schedule A, in excess of 7.5% of the caregivers AGI. Per the IRS Publication 502, medical expenses include the costs of diagnosis, cure, mitigation, treatment, prevention, to mention a few.

In addition to federal tax considerations, some states also allow for special tax credits meant solely for caregivers. Taxpayers should verify with their state of residency to confirm any additional tax credits.

Sources: U.S. Census Bureau, IRS.gov