Investor optimism and fears of missing out on future gains propelled stocks higher in the last full week of trading before year-end.

The Dow Jones Industrial Average added 0.22%, while the Standard & Poor’s 500 gained 0.75%. The Nasdaq Composite index advanced 1.21% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 0.51%.^1,2,3

Stocks Build on Gains

The current market narrative of declining inflation, easing interest rates, and better earnings ahead continued to fuel stock market gains, with some of the year’s laggards, such as smaller cap stocks and energy names, leading the way.

While the stock market has repeatedly seen gains gather steam in the final trading hours, a late-day sell-off on Wednesday unnerved investors. While it’s difficult to know precisely why, the sharp decline may have resulted from profit-taking and low trading volumes, which can result in unexpected volatility or other technical reasons. Whatever the case, stocks rebounded nicely the following day and Friday.

Housing Revival?

The housing market struggled this year amid higher mortgage rates and rising home prices. Last week, several housing reports suggested the housing market may be improving.

New home construction rose 14.8% in November, reaching levels not seen since May, while existing home sales rebounded 0.8%, reversing five straight months of declines. Existing home sales have been hurt by low inventory since many homeowners with low-rate mortgages are hesitant to move and take on a higher-rate mortgage. This logjam may loosen as 30-year mortgage rates fell from 7.79% at the end of October to 6.95% in mid-November.^{4, 5}

New home sales disappointed, however, falling 12.2%, though they came in 1.4% higher from November a year ago.⁶

This Week: Key Economic Data

Thursday: Jobless Claims.

^{Source: Econoday, December 22, 2023
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

No companies reporting earnings this week.

^{Source: Zacks, December 22, 2023
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

“Humor is laughing at what you haven’t got when you ought to have it.”

– Langston Hughes

Tax Tips for Those in the Military

The Internal Revenue Service has certain special tax breaks and programs for members of the U.S. Armed Forces.

• If you get nontaxable combat pay, you may include it in your taxable income. Having it may boost your earned income tax credit, meaning you may owe less tax and could get a larger refund.
• As a rule, both spouses typically must sign a joint income tax return. If your spouse is absent due to military duty, you may be able to sign for your spouse. Remember, however, that you may need a power of attorney to file a joint return.
• If you leave the military and look for work, you may be able to deduct some job search expenses. You can include travel costs, resume preparation, and job placement agency fees.

*This information is not intended to substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁷

Stay Healthy During Flu Season

This flu season, it’s more important than ever to stay healthy. Fortunately, you may reduce your risk this flu season with a few simple steps.

• Get the flu vaccination: The Centers for Disease Control estimates that last year, just over half of all Americans got the flu vaccine. Recent studies show that the flu vaccine can reduce the risk of flu illness by 40% to 60%; this is especially important for anyone with a chronic health condition and those 65 years and older.
• Wash your hands: Handwashing remains one of the most effective ways to prevent the flu. Wash your hands with soap and water for at least 20 seconds, and wash your hands often.
• Disinfect: Disinfect objects that you touch every day, like doorknobs, your car’s steering wheel, and other household items that you use regularly.

While this information should not substitute for medical advice from your healthcare provider, implementing better habits, like frequent handwashing, wearing a face mask, and avoiding anyone ill, may help you and your loved ones stay healthy this flu season.

Tip adapted from The Centers for Disease Control⁸

Liz went into a convenience store at 1:58 AM on Sunday to get a coffee. She drove six miles away and then returned to the store to get a lotto ticket, also at 1:58 AM. The store’s clock was working perfectly, so how could it be 1:58 AM again when she returned?

Last week’s riddle: Ray slipped off of a 30-foot escalator and landed on a sidewalk. He was embarrassed, yet uninjured. How could this be?  Answer: He slipped off the escalator’s bottom step.

The hidden beach in Marietas Islands, Puerto Vallarta, Mexico

Footnotes and Sources

^{1. The Wall Street Journal, December 22, 2023}

^{2. The Wall Street Journal, December 22, 2023}

^{3. The Wall Street Journal, December 22, 2023}

^{4. MarketWatch, December 19, 2023}

^{5. Fox Business, December 20, 2023}

^{6. U.S. Census Bureau, December 22, 2023.}

^{7.  IRS.gov, October 23, 2023}

^{8. CDC.gov, December 11, 2023}

Markets reacted positively last week to cooler inflation and the idea of potential rate cuts next year, adding to the gains of the market’s year-end rally.

The Dow Jones Industrial Average rose 2.92%, while the Standard & Poor’s 500 gained 2.50%. The Nasdaq Composite index picked up 2.85% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, tacked on 2.75%.^1,2,3

Rally Continues

Stocks gathered momentum last week after upbeat news from two key inflation reports. But the outcome of the Federal Open Market Committee (FOMC) meeting on Wednesday powered the week’s advance. The combination of the FOMC signaling three rate cuts in 2024 and dovish comments by Fed Chair Powell led to a sharp drop in bond yields and a spike in stock prices, with the Dow Industrials closing above 37,000 and setting an all-time high.⁴

The rally continued the following day as beneficiaries of lower rates, such as smaller capitalization stocks and real estate, rallied. A solid retail sales number, which reflected a strong consumer and supported the soft landing thesis, also boosted enthusiasm.

Inflation Eases

The anxiously awaited read on November inflation came close to market expectations, with a 0.1% increase over October and a year-over-year increase of 3.1%. Core inflation, which excludes energy and food prices, came in a bit hotter, rising 0.3% month-over-month and 4.0% from a year ago. A 2.3% decline in energy costs helped offset a 2.9% jump in food prices. Shelter prices remained stubbornly high, rising 0.4% from October and 6.5% from last November.⁵

The inflation news was better on wholesale prices, tracked by the Producer Price Index (PPI). Producer prices were unchanged in November and higher by just 0.9% year-over-year. Excluding energy and food, the monthly increase was also unchanged.⁶

This Week: Key Economic Data

Tuesday: Housing Starts.

Wednesday: Consumer Confidence. Existing Home Sales.

Thursday: Gross Domestic Product (GDP). Jobless Claims. Index of Leading Economic Indicators.

Friday: Durable Goods Orders. Personal Income and Outlays. New Home Sales. Consumer Sentiment.

^{Source: Econoday, December 15, 2023
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Tuesday: FedEx Corporation (FDX) 

Wednesday: Micron Technology, Inc. (MU), General Mills, Inc. (GIS)

Thursday: Nike, Inc. (NKE)

^{Source: Zacks, December 15, 2023
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

“I never try to please a certain audience. I think that’s disastrous.”

– Charles Schulz

Tax Benefit and Credits: FAQs for Retirees

Lots of questions can come up about income taxes after one has retired. Some common types of taxable income include military retirement pay, all or part of pensions and annuities, all or part of individual retirement accounts (IRA), unemployment compensation, gambling income, bonuses and awards for outstanding work, and alimony or prizes. A few examples of non-taxable income are veteran’s benefits, disability pay for certain military or government-related incidents, worker’s compensation, and cash rebates from a dealer or manufacturer of an item you purchased.

*This information is not intended to substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁷

Practicing Gratitude in the New Year

Instead of beginning the new year with a list of resolutions, start by examining the good things already in your life by practicing gratitude.

Psychologists have defined gratitude as a positive emotional response to receiving a benefit from someone. In positive psychology, gratitude is the human way of acknowledging the good things in life. Thankfully, you can learn gratitude if it does not come innately.

There are benefits to practicing gratitude, especially in times of stress and uncertainty. Gratitude invites positive emotions that can have physical benefits through the immune and endocrine systems. Research shows that when we think about what we appreciate, the parasympathetic or calming part of the nervous system is triggered, which can have protective benefits for the body—including decreasing levels of the stress hormone cortisol and increasing oxytocin, the bonding hormone involved in relationships that make us feel good.

There are a few great ways to get started today and practice gratitude in your own life:

• Write thank you notes
• Keep a gratitude journal
• Follow-up with family and friends
• Give back to your family, friends, and community
• Pay kindnesses forward

Tip adapted from PsychologyToday.com⁸

Ray slipped off of a 30-foot escalator and landed on a sidewalk. He was embarrassed, yet uninjured. How could this be?

Last week’s riddle: My first is twice in apple but not once in tart. My second is in liver but not in heart. My third is in giant and also in ghost. Whole I’m best when I am roast. What am I?  Answer: A pig.

Mountain lion in the southwest USA

Footnotes and Sources

^{1. The Wall Street Journal, December 15, 2023}

^{2. The Wall Street Journal, December 15, 2023}

^{3. The Wall Street Journal, December 15, 2023}

^{4. CNBC, December 13, 2023}

^{5. CNBC, December 12, 2023}

^{6. CNBC, December 13, 2023}

^{7.  IRS.gov, December 11, 2023}

^{8. PsychologyToday.com, December 11, 2023} 

A late-week, two-day rally left stocks higher, adding to November’s gains as the last month of trading for 2023 began.

The Dow Jones Industrial Average was flat (+0.01%), while the Standard & Poor’s 500 gained 0.21%. The Nasdaq Composite index advanced 0.69% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, was up 0.37%.^1,2,3

Stocks Extend Gains

The relationship between the bond and stock markets–which pushed stocks higher in November (i.e., falling bond yields, rising stock prices)–disappeared last week, with stocks falling in the first three days of the week despite declining yields. Yields dropped following a weak job openings report, the ADP employment update, and a substantial productivity revision.

On Thursday, investor enthusiasm returned with force on Artificial Intelligence (AI) related news. One AI chip manufacturer announced a new AI chip, followed by a mega-cap tech company unveiling an enhanced version of its AI model for business use. Stocks continued their climb on Friday despite rising yields, as investors viewed a stronger-than-expected employment report as increasing the potential for a soft landing.

Productivity Surges

Higher productivity may be the most effective and preferred way to reduce inflation. Last week’s revised third-quarter productivity report saw an upward revision of the annualized productivity growth from the initial report of 4.7% to 5.2%; this was welcome news on the inflation front and an encouraging development for future corporate profits.⁴

The 5.2% jump in productivity represented the fastest pace since the third quarter of 2020. The report also showed unit labor costs falling at a 1.2% annualized pace, reflecting a cooling of wage-growth inflationary pressures. Productivity has increased for two straight quarters, potentially allowing the Fed to ease its restrictive monetary policy.⁵

This Week: Key Economic Data

Tuesday: Consumer Price Index (CPI).

Wednesday: Producer Price Index (PPI). FOMC Announcement.

Thursday: Retail Sales. Jobless Claims.

Friday: Industrial Production. Purchasing Managers’ Index (PMI) Composite Flash.

^{Source: Econoday, December 8, 2023
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Wednesday: Adobe, Inc. (ADBE)

Thursday: Costco Wholesale Corporation (COST)

Friday: Lennar Corporation (LEN)

^{Source: Zacks, December 8, 2023
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

“The whole fun of living is trying to make something better”

– Charles Kettering

Tax Tips for Children or Grandchildren with Part-Time Job

Many of us have kids or grandkids who work part-time. Whether they’re bussing tables, working in a shop, or other jobs, these tips may help them (and you) understand the tax implications of part-time jobs:

• Withholding: If your child is working for an employer, they will generally withhold taxes from their paycheck. If they are self-employed, however, they may be responsible for paying these taxes directly to the IRS.
• Self-Employment: It’s a good idea to keep records of income and expenses related to self-employed work. Expenses associated with self-employment may be deductible.
• New Employee Paperwork: Talk to your child or grandchild about the paperwork they may need to fill out when starting a new job. This will likely include a W-4 form, which is a form that businesses use to calculate how much federal income should be withheld from their paycheck.
• Tip Income: All tip income is taxable, and if they make more than $20 in cash tips a month, they must report it to their employer. In addition, they must report all yearly tips on their tax returns.
• Payroll Taxes: Even if your kids or grandkids earn too little to owe income tax, they may still have to either pay Social Security and Medicare taxes themselves or have them withheld from their paycheck.

*This information is not intended to substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁶

How to Take a Vacation Without Leaving Home

Vacations provide a ton of benefits and are a great way to relax and take a break from your everyday stressors. But sometimes, you can’t swing a whole vacation. The good news is that you can still enjoy a little getaway without leaving the comfort of your own home.

Here are some fun ways to “get away” without actually getting away:

• Create a themed cocktail or drink based on the place you’re dreaming of. Whip up a fancy French cocktail and pretend you’re sitting on a terrace in Paris, or order a local microbrew from a US destination that you’ve always wanted to go to.
• You can also create a themed dinner night and take a culinary adventure around the world. Bonus points if you design a real menu.
• Visit a museum (virtually). The Google Arts and Culture Project makes it possible to visit the Tate, Reina Sofia, and Acropolis Museum all from the comfort of your own home.

Whether you want to visit a national park, learn a new language, or try a new recipe, there are countless ways to explore the world from your living room.

Tip adapted from Ideas.ted.com⁷

My first is twice in apple but not once in tart. My second is in liver but not in heart. My third is in giant and also in ghost. Whole I’m best when I am roast. What am I?

Last week’s riddle: It has no body, but it has a copper head and copper tail. It can be found in the street and in just about any store. What is it?  Answer: A penny.

Footnotes and Sources

^{1. The Wall Street Journal, December 8, 2023}

^{2. The Wall Street Journal, December 8, 2023}

^{3. The Wall Street Journal, December 8, 2023}

^{4. MarketWatch, December 6, 2023}

^{5. MarketWatch, December 6, 2023}

^{6. IRS.gov, May 1, 2023} 

^{7. Ideas.ted.com, October 9, 2023}

A Friday rally turned an otherwise mixed week for stocks into a solid performance.

The Dow Jones Industrial Average picked up 2.42%, while the Standard & Poor’s 500 gained 0.77%. The Nasdaq Composite index rose 0.38% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, ended marginally higher by 0.13%.^1,2,3

Stocks Move Higher

The stock market digested November’s robust gains for much of last week but rallied strongly amid falling bond yields on the last trading day.

Market sentiment remained positive as the Fed’s preferred measure of inflation showed ongoing signs of softening inflation pressures, boosting hopes that the Fed may be able to end its rate hikes and consider rate cuts sometime next year. Investors also welcomed news of solid spending in early holiday sales reports.

The declines in bond yields reflect that the financial markets are positioning for a rate cut soon, even brushing off Fed Chair Powell’s Friday comments suggesting it was premature to consider monetary loosening.

Inflation Eases

The Personal Consumption Expenditures Price index (PCE)–the Fed’s preferred measure of inflation–was released last week, showing core PCE (excludes energy and food) rose 0.2% in October and 3.5% from a year ago. Both were lower than September’s readings of 0.3% and 3.7%, respectively. Perhaps most notably, core prices rose at a 2.5% annualized rate over the last six months, close to the Fed’s target rate and a big improvement over the previous six-month annualized rate of 4.5% ending April.⁴

The report also reflected a slowdown in consumer spending, as October’s 0.2% increase was lower than September’s 0.7% gain, a possible indication of the impact of the resumption of student loan repayments, higher prices, and shrinking savings.⁵

This Week: Key Economic Data

Monday: Factory Orders. 

Tuesday: Institute for Supply Management (ISM) Services Index. Job Openings and Labor Turnover Survey (JOLTS).

Wednesday: Automated Data Processing (ADP) Employment Report.

Thursday: Jobless Claims.

Friday: Employment Situation. Consumer Sentiment.

^{Source: Econoday, December 1, 2023
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Tuesday: AutoZone, Inc. (AZO), MongoDB, Inc. (MDB)

Thursday: Broadcom, Inc. (AVGO), Dollar General Corporation (DG)

^{Source: Zacks, December 1, 2023
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

“Outstanding people have one thing in common: an absolute sense of mission.”

– Zig Ziglar

Are Social Security Benefits Taxable?

Did you know that if you are receiving Social Security benefits, you may have to pay federal income tax on a portion of these benefits? The amount you have to pay may depend on your specific income and filing status.

To find out whether your Social Security benefits are taxable – if you are single, take one-half of the Social Security money you received throughout the year and add it to your other income, which includes pensions, wages, interest, dividends, and capital gains. If the total comes to more than $25,000, then part of your benefits may be taxable.

If you are married and filing jointly, take half of the Social Security money you received throughout the year and half of your spouse’s Social Security benefits and add both of those amounts to your combined household income. If the total is more than $32,000, part of your benefits may be taxable.

On its website, the IRS then lays out the percentage of benefits that are taxable, based on the above calculation. These percentages vary between 50 percent and 85 percent and depend on your filing status and income levels. For example, if you are filing single with $25,000–$34,000 income, 50 percent of your Social Security benefits may be taxable.

*This information is not intended to substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁶

Benefits of Yoga

In addition to helping you finally be able to touch your toes, yoga has many other potential benefits, from helping you relax to even potentially helping your heart health. Here are some other potential benefits of yoga:

• Of course, yoga can decrease stress and promote relaxation. It’s a great practice to get more in-tune with your body and where you hold stress.
• Yoga may also be able to relieve anxiety. In one study, 34 women diagnosed with an anxiety disorder participated in yoga classes twice weekly for two months. At the end of the study, those who practiced yoga had significantly lower levels of anxiety than the control group.
• Studies show that yoga may help improve heart health and reduce several risk factors for heart disease. One study found that participants over 40 years of age who practiced yoga for five years had lower blood pressure and pulse rate than those who didn’t.

Lastly, yoga may help fight depression. This may be because yoga can decrease levels of cortisol, a stress hormone that influences levels of serotonin, the neurotransmitter often associated with depression.

Tip adapted from Healthline⁷

It has no body, but it has a copper head and copper tail. It can be found in the street and in just about any store. What is it?

Last week’s riddle: What do the letter T and an island have in common?  Answer: They are both in the middle of water.

Sheikh Zayed Grand Mosque in Abu Dhabi, United Arab Emirates

Footnotes and Sources

^{1. The Wall Street Journal, December 1, 2023}

^{2. The Wall Street Journal, December 1, 2023}

^{3. The Wall Street Journal, December 1, 2023}

^{4. The Wall Street Journal, November 30, 2023}

^{5. The Wall Street Journal, November 30, 2023}

^{6. IRS.gov, March 28, 2023}

^{7. Healthline.com, October 10, 2023}