November 2024 - Page 2 of 2 - Research Financial Strategies

Weekly Market Insights | Stocks Surge Post-Election; Fed Cuts Quarter Point

by Jim Streight | Nov 12, 2024 | Weekly Stock Market Commentary

Stocks surged higher last week, fueled by the Fed’s rate cut decision and post-election enthusiasm as investors looked to future policy impacts of a Republican-controlled Senate and executive branch. (The House of Representatives remains undecided.)

The Standard & Poor’s 500 Index spiked 4.65 percent, while the Nasdaq Composite Index gained 5.74 percent. The Dow Jones Industrial Average rose 4.61 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, was flat (-0.02 percent).1,2

Stocks Extend Rally on Election News

It was a shaky start to the week for stocks as investors anxiously awaited election results and the Fed’s interest-rate decision.3

On Election Day, stocks rallied broadly before polling places closed. After the election was called early the next morning, stocks opened higher and climbed throughout the trading session. The yield on the 10-year Treasury fell to 4.307 percent.4,5

Stocks opened higher Thursday, and the rally picked up momentum after the Federal Reserve approved its second consecutive interest rate cut. Economic news that showed a 2.2 percent rise in third-quarter productivity helped support the move.6,7

Stocks finished the week with a number of records: the S&P 500 crossed the 6,000 mark, and the Dow breached 44,000 for the first time on Friday. While the S&P and Dow closed slightly below those record levels, each had their best week in a year.8

Fed Cuts Rates

As expected, the Federal Reserve cut interest rates by a quarter percentage point at its November meeting.

However, Fed Chair Jerome Powell signaled some uncertainty about the pace of future rate cuts, which slightly unsettled the markets.

Citing a desire to “steer between the risk of moving too quickly and perhaps undermining our progress on inflation, or moving too slowly and allowing the labor market to weaken too much,” Powell said the Fed will continue to monitor the economy’s progress.9

This Week: Key Economic Data

Tuesday: Fed Officials Neel Kashkari and Patrick Harker speak.

Wednesday: Consumer Price Index. Fed Officials Lorie Logan, Alberto Musalem, and Jeffrey Schmid speak. Treasury Buyback Announcement.

Thursday: Producer Price Index. Fed Chair Jerome Powell speaks. Weekly Jobless Claims.

Friday: Retail Sales. Industrial Production. Import and Export Prices. Business Inventories.

Source: Investors Business Daily – Econoday economic calendar; November 8, 2024
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: The Home Depot, Inc. (HD), Shopify Inc. (SHOP), Spotify Technology (SPOT)

Wednesday: Cisco Systems, Inc. (CSCO)

Thursday: The Walt Disney Company (DIS), Applied Materials, Inc. (AMAT), Brookfield Corporation (BN)

Source: Zacks, November 8, 2024.
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.

“Many men go fishing all of their lives without knowing that it is not fish they are after.”

– Henry David Thoreau

Be On the Lookout for Tax Carryovers

Deductions or credits not used fully one tax year that may be eligible to be carried over into future years include:

When you have a net operating loss
When your total expenses for a permitted deduction exceed the amount you’re allowed to deduct in a given year
When a credit you qualify for exceeds the amount of tax you owe in a year
Adoption tax credits
Foreign tax credits
Credits for energy efficiency

Track these (or have your software do it) so you don’t forget them from one year to the next.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS10

Know Your Key Health Numbers

According to the American Heart Association, adults should know their key health numbers, including total cholesterol, HDL (good cholesterol), blood pressure, blood sugar, and body mass index. If you’re unsure what your “numbers” are, schedule a visit with your doctor to monitor them and understand why each is important. Here’s a quick definition of each metric:

Cholesterol – Cholesterol is a lipoprotein in our body’s tissues that forms and maintains cell membranes.
Body mass index (BMI) – Your BMI is calculated using your height and weight and can help determine whether you’re underweight, at a healthy weight, or overweight.
Blood pressure – Blood pressure refers to the amount of force the heart must use to pump blood throughout the body.
Blood sugar – Blood sugar measures the concentration of glucose in the blood.

Tip adapted from American Heart Association11

What common English-language word becomes shorter when you make it longer?

Last week’s riddle: I am only one syllable long and too heavy for one person to lift, but if you reverse me, I am not. What am I? Answer: A ton.

Gateway Arch

Saint Louis, Missouri

Footnotes and Sources

1. The Wall Street Journal, November 8, 2024

2. Investing.com, November 8, 2024

3. CNBC.com, November 4, 2024

4. CNBC.com, November 5, 2024

5. The Wall Street Journal, November 6, 2024

6. The Wall Street Journal, November 7, 2024

7. MarketWatch.com, November 7, 2024

8. The Wall Street Journal, November 8, 2024

9. The Wall Street Journal, November 7, 2024

10. IRS.gov, January 30, 2024

11. American Heart Association, July 24, 2024

Weekly Market Commentary November 11, 2024

by Jim Streight | Nov 11, 2024 | Carson

The Markets

Stock markets celebrated the results of the presidential election. Bond markets were less enthusiastic.

Last week, United States stock markets rallied, and the U.S. dollar gained against other currencies, following the presidential election. The CBOE Volatility Index, Wall Street’s Fear gauge, also moved lower after concerns about a long wait for election results were quelled by a swift result, reported Alexandra Semenova of Bloomberg.

“…the [stock] markets roared in approval of this Trumpvember surprise…Yes, expect tax cuts, less regulation, fewer guardrails, and a government no longer picking winners and losers (except for tariffs), all reasons why investors perceive the incipient environment to be advantageous. And yet, with all the dancing, dancing, dancing in the streets, note that this new freedom could be accompanied by greater risk in the capital markets,” reported Andy Serwer of Barron’s.

The bond market’s response to the election was measured. The Federal Reserve (Fed) began lowering the federal funds rate in September. Typically, Fed rate cuts lead to lower borrowing costs for consumers and businesses, which supports economic growth. However, the yield on the 10-year U.S. Treasury, which is a benchmark for mortgage rates, corporate bonds, and other loan rates, has trended higher since September as strong economic data caused the market to rethink its expectations for future rate cuts.

Now, the bond market is evaluating future rate cuts in the context of the new administration’s policies. “…the outlook for further rate cuts has been clouded by expectations that key elements of Trump’s economic platform such as tax cuts and tariffs will lead to faster growth and higher consumer prices. That could make the Fed wary of risking an inflationary rebound by cutting rates too deeply next year,” reported Davide Barbuscia and Lewis Krauskopf of Reuters.

Markets are likely to remain volatile over the coming weeks as investors speculate about the impact of new policies on financial markets. Last week, major U.S. stock indices surged higher. Yields on U.S. Treasuries were mixed with yields moving lower on the shortest and longest maturities and rising for other maturities.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

IT’S A DIRTY JOB…If you’re a fan of baseball, you probably know that major league baseball teams don’t use balls that are fresh out of the box. In fact, the Official Baseball Rules for 2024 explains umpires’ pregame duties which include:

“Receive from the home Club a supply of regulation baseballs, the number and make to be certified to the home Club by the Office of the Commissioner. The umpire shall inspect the baseballs and ensure they are regulation baseballs and that they are properly rubbed so that the gloss is removed. The umpire shall be the sole judge of the fitness of the balls to be used in the game.”

Usually, the gloss is removed by rubbing Lena Blackburne Baseball Rubbing Mud into the unused baseballs. “Originally marketed as ‘magic,’ it’s just a little thicker than chocolate pudding—a tiny dab is enough to remove the factory gloss from a new ball without mucking up the seams or getting the cover too filthy. Equipment managers rub it on before every game, allowing pitchers to get a dependable grip,” reported Emma Baccellieri of Sports Illustrated.

The mud is sourced from a secret location, somewhere along a tributary of the Delaware River, has been passed from generation to generation of this family business since the 1930s. The mud is unique because it has “a high clay content in the soil, an oddity for the area, plus brackish water from the tributary mixing with ‘cedar water’ dropping from nearby trees. Perfect conditions exist for only about a mile.” Jim Bintliff told Baccellieri.

Recently, researchers at the University of Pennsylvania School of Engineering and Applied Science and School of Arts & Sciences studied the mud and then published their findings in Proceedings of the National Academy of Sciences. According to ScienceDaily, the paper’s lead author devised three experiments to determine whether mudding baseballs is a superstition, like rally caps and playoff beards, or a value-adding process. The experiments measured the mud’s spread-ability and stickiness, as well as any change in “friction against the fingertips.”

The experiments confirmed baseball players’ long-held belief that magic mud really does improve the performance of baseballs. The substance “spreads like a skin cream and grips like sandpaper,” according to the research.

Weekly Focus – Think About It
“Baseball is 90 percent mental. The other half is physical.”
—Yogi Berra, baseball legend

IRS Releases 2025 Tax Brackets

by Jim Streight | Nov 7, 2024 | Noteworthy

The Internal Revenue Service released the updated income tax brackets, standard deduction, and retirement contribution limits for the 2025 tax year. While these changes won’t impact you for some time, it may benefit you to start thinking ahead.

The top rate remains 37%, but remember that 2017’s Tax Cuts and Jobs Act expires at the end of 2025. Overall, more than 60 provisions have changed at the federal level. Here are a few of the most critical changes in the federal tax bracket and retirement contribution limit. While the IRS has highlighted its changes, keep an eye out for any changes to individual and business taxes that may be pending in your state.¹

Tax Bracket Inflation Adjustment
Overall, tax brackets have been adjusted upwards for 2025. This adjustment is based on the Consumer Price Index and primarily accounts for inflation.

Standard Deduction
The standard deduction has increased to $30,000 for married couples filing jointly, up $800 from the previous year. For single filers, this number increased by $400 to $15,000.

Marginal Rates
Marginal tax rate brackets are also increasing.

Gift Tax
The annual gift tax exclusion for 2025 is $19,000, an increase of $1,000 from the previous year.

Estate Tax Credit
Individuals receiving an inheritance in 2025 will be able to exclude $13,990,000 from federal taxation, up from $13,610,000 in the previous year.

All information sourced from IRS.gov. Remember that we provide updates for informational purposes only, so consult with your tax professional before making any changes in anticipation of the new 2025 levels. You can also contact our offices, and we can provide information about the pending changes. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming don’t levy a state income tax.

^{1. IRS.gov}

Weekly Market Commentary November 04, 2024

by Jim Streight | Nov 4, 2024 | Carson

The Markets

Are we witnessing an historic event?

For an airplane or a spacecraft, a soft landing occurs when the vehicle “touches the ground in a controlled and gradual way that does not damage it,” according to The Britannica Dictionary.

For the American economy, a soft landing happens when the Federal Reserve raises interest rates to cool the economy and push inflation lower—and achieves its goal without causing a recession and significantly higher unemployment. It’s not an easy task.

“Historically, soft landings have been tough to pull off…Keeping unemployment and inflation low while at the same time having robust growth is difficult. Threading that needle has proven to be quite elusive,” reported a source cited by Aly J. Yale of The Wall Street Journal.

Solid economic growth, low unemployment, rising wages, and falling inflation have one Federal Reserve official and several economists declaring that the American economy has achieved this rare event—a soft-landing, reported Bryan Mena of CNN.

So, exactly how well is the U.S. doing?

“The extent to which America has outperformed other countries since the start of the COVID-19 pandemic is breathtaking. Its real GDP has expanded by more than 10 [percent], nearly three times as much as the euro area. Among the G20 group, which includes both rich countries and emerging markets, America is the only one where output is above pre-pandemic expectations, according to the International Monetary Fund,” reported Simon Rabinovitch of The Economist.

Last week, “with an election and Federal Reserve meeting still to come, stocks faltered under the weight of the uncertainty,” reported Teresa Rivas of Barron’s. Major U.S. stock indices finished the week lower. Uncertainty about the direction of future government spending and its possible effect on Federal Reserve policy caused some turmoil in bond markets, too, reported Paul R. LaMonica of Barron’s. Yields on longer maturities of U.S. Treasuries moved higher over the week, while yields on shorter maturities moved lower.

PERCEPTION VS. REALITY. The human brain is complex and powerful. It runs on about 20 watts of power and brains need to be recharged, just like your cell phone does, according to Northwestern Medicine.

It’s interesting to note that brains are not objective. They catalogue our experiences, beliefs, and emotions and then interpret what’s happening around us. As a result, our reality on any given day is affected by “our personal physical abilities, energy levels, feelings, social identities, and more,” reported Jill Suttie in Greater Good Magazine.

For example, studies have found that hills look steeper when people are:

Tired.
Wearing backpacks.
Thinking of people they dislike.

In contrast, hills look less steep when people feel energetic or think of a supportive friend.

An August survey from the National Federation of Independent Business, a small-business advocacy group, reinforced the idea that there is a gap between economic perception and economic reality. The survey found that small business owners were quite optimistic about the financial state of their businesses, reasonably optimistic about the state of their local economies, and pessimistic about the state of the U.S. economy.

	Excellent/ Good	Okay	Poor
The current financial state of my business is:	70 percent	25 percent	5 percent
The current state of my local economy is:	36 percent	44 percent	20 percent
The current state of the U.S. economy is:	10 percent	32 percent	58 percent

When survey participants were asked when the United States might experience another recession, 52 percent said the U.S. economy was in a recession right now. A recession is a downturn in economic activity that lasts for a significant period. Economic data show the U.S. economy, as measured by gross domestic product (the value of all goods and services produced in the U.S.), has been growing since late 2020.

The answers were interesting because most businesses—small and large—experience declines in sales and profitability when the national economy is doing poorly or in a recession. The gap in perception and reality may reflect the fact that “people are upbeat about what they see directly but pessimistic about what they glean indirectly through media (and social media),” opined Rabinovitch of The Economist.

Weekly Focus – Think About It
“A politician needs the ability to foretell what is going to happen tomorrow, next week, next month, and next year. And to have the ability afterwards to explain why it didn’t happen.”
—Winston Churchill, former British Prime Minister

Sources:
https://www.britannica.com/dictionary/soft-landing
https://www.wsj.com/buyside/personal-finance/banking/what-is-a-soft-landing (or go to Https://resources.carsongroup.com/hubfs/WMC-Source/2024/11-04-24_Buy%20Side%20from%20WSJ_2.pdf)
https://www.cnn.com/2024/10/30/economy/us-economy-gdp-q3/index.html
https://view.e.economist.com/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/11-04-24_The%20Economist_Money%20Talks_4.pdf)
https://www.barrons.com/articles/market-tricked-investors-election-day-bounce-7ea56c39?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/11-04-24_Barrons_The%20Market%20Tricked%20Investors_5.pdf)
https://www.barrons.com/market-data?mod=BOL_TOPNAV (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/11-04-24_Barrons%20Data_6.pdf)
https://www.barrons.com/articles/bond-yields-jobs-report-treasury-6f6e602e?mod=md_bond_news (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/11-04-24_Barrons_Bond%20Yields%20Fell%20After%20Jobs%20Report_7.pdf)
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2024
https://www.nm.org/healthbeat/healthy-tips/11-fun-facts-about-your-brain
https://greatergood.berkeley.edu/article/item/eight_reasons_to_distrust_your_own_perceptions
https://www.sciencedirect.com/science/article/abs/pii/S002210310800070X#:~
https://strgnfibcom.blob.core.windows.net/nfibcom/Banking-Survey-2023-Part-II.pdf [Questions 20-23]
https://fred.stlouisfed.org/series/GDP#0 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/11-04-24_FRED%20Data_13.pdf)
https://www.investopedia.com/articles/economics/08/recession-affecting-business.asp#:
https://www.azquotes.com/quote/56321?ref=funny-political

Weekly Market Insights | Stocks Retreat on Jobs and Election Concerns

by Jim Streight | Nov 4, 2024 | Weekly Stock Market Commentary

Stocks slid last week as mixed economic data and strong-but-not-spectacular Q3 corporate reports failed to inspire investors.

The Standard & Poor’s 500 Index fell 1.36 percent, while the Nasdaq Composite Index declined 1.50 percent. The Dow Jones Industrial Average edged down 0.15 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, slid 0.96 percent.1,2

Q3 Reports Uninspired

Stocks rallied early Wednesday after the gross domestic product report showed a strong economy that appeared on the path to a soft landing. However, stocks moved lower throughout the day as investors digested mixed Q3 reports from a few mega-cap tech names.3,4

Stocks were under more pressure Thursday as disappointing outlooks for some key tech companies pulled the market down. A softer-than-expected jobs report on Friday unsettled investors, but stocks picked up as the day progressed, and attention shifted to how the Fed may interpret the jobs data.5

By Friday, the Nasdaq’s eight-week winning streak had ended, and the S&P fell for the second week.

Fed Back in Focus After Jobs Report

At its most recent meetings, the Fed has made it clear that it needed to balance the risks of both inflation and employment.

So Friday’s jobs report that showed 12,000 jobs created in October caught some by surprise. Economists expected the Labor Department to report 100,000, down from September’s 223,000 jobs.6

Investors parsed the data and determined the strike at a major aircraft manufacturer and two hurricanes caused the jobs report to fall short of estimates. Investors also appeared to believe the jobs report would prompt the Fed to move on rates at its two-day policy meeting, which ends on November 7.