Mid-February Update

Markets On Fire, But Many Are Still Worried

A blistering open to 2019 has powered nearly every publicly traded business in the U.S.A. As of this writing* 26 of the 30 holdings in the DOW and 465 of the 500 holdings in the S&P have risen this year with industrials and Real Estate leading the charge. Tech shares have also been a force in the amazing start to 2019 with Facebook and Amazon leading the way. However, many are still worried because more than 30 companies in the S&P 500 including Netflix and Delta airlines have provided us with Q1 earnings forecasts that fell short of analysist projections citing deteriorating outlooks for the world economy and uncertainty around trade.

The forecasts have put companies in the broad equity index on track to report a 1.9% decline in profits in the first Quarter from year earlier. These developments appear to be nothing less than a potential “earnings slump” which has investors and advisors alike worried. But the markets have been climbing a wall of worry since the great depression and it’s almost impossible to predict when and how these events will effect share prices, so it’s more effective to establish a long-term plan rather than trying to “time the effects of an earning slump” or any other worrisome event.

*2/8/2019

 
Mid-February Update

IRS Waives Penalty For Not Withholding Enough:  Tax Planning

The Tax Cuts and Jobs Act which was enacted in December 2017, brought about a host of changes for taxpayers. Among the changes was the amount of withholdings as calculated by revised tax tables.

The IRS announced that it is waiving the estimated tax penalty for various taxpayers whose 2018 federal income withholding and estimated tax payments fell short of total taxes owed.

The penalty will be waived for those taxpayers that have at least paid 85 percent of their total tax liability through withholdings and quarterly payments.

When the revised tax brackets were released under the new tax plan, many taxpayers calculated lower withholdings assuming less taxes owed. But the problem that arose was that other factors such as dependency exemptions and itemized deductions didn’t factor into the revised withholding tables.

Source: IRS; www.irs.gov/newsroom/

 

Rates Head Lower While Fed Holds Steady:  Fixed Income Update

Overall bond prices rose in January as the prospect of the Fed raising rates in 2019 considerably lessened. The Fed announced that it would refrain from its previous strategy of increasing short-term rates as well as hold off on shrinking its balance sheet. Both monetary tactics are expected to keep interest rates at current levels, without any additional increases just yet.

Interest rates fell in January as the Federal Reserve signaled that it would hold off on additional rate increases until economic data warranted a rise. Bond prices, which move inversely to bond yields, rose across all fixed income sectors, alleviating concerns of further rate increases.

It is expected that the Fed won’t raise again until it has validation about economic and wage growth producing inflationary pressures.

Central banks from around the globe continue to shrink their balance sheet, emulating the latest actions by the Federal Reserve in the United States. Shrinking or reducing a central bank balance sheet is a form of monetary tightening, thus an indirect method of raising short term rates. So far, the Fed’s balance sheet has fallen from a peak of $4.5 trillion four years ago in January 2015 to $4 trillion in January 2019.

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

*Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations.