Weekly Market Commentary

by | Feb 20, 2025 | Carson

The Markets

Why are stock markets wary of tariffs?

In two of the last three weeks, tariff announcements led to late week stock market sell-offs. Stocks quickly recovered lost value, but uncertainty about the administration’s trade policy and the potential impact of that policy on U.S. companies remained. That’s likely to be the case until it becomes clear whether the Trump administration sees tariffs as a negotiating tactic or a means to cover the cost of extending 2017 tax cuts.

If tariffs are a negotiating tactic and unlikely to be implemented, the effect on the U.S. economy, businesses, and stocks may be less significant than if tariffs are put in place. The Tax Foundation evaluated the administration’s proposal for a universal baseline tariff and reported, “the 10 percent tariff would generate $2 trillion of increased revenue, while the 20 percent tariff would generate $3.3 trillion over a decade.”

While increased tax revenue is alluring, the catch is that tariffs are taxes added to the prices of materials and goods purchased by American businesses. Often, the cost is passed on to consumers, reported Anshu Siripurapu and Noah Berman of the Council on Foreign Relations (CFR). As a result, the trillions of dollars that could be generated would come from American pockets. According to CFR estimates:

“A 25 percent tariff on Canada and Mexico will raise production costs for U.S. automakers, adding up to $3,000 to the price of some of the roughly sixteen million cars sold in the United States each year. Grocery costs could rise, too, as Mexico is the United States’ biggest source of fresh produce, supplying more than 60 percent of U.S. vegetable imports and nearly half of all fruit and nut imports.”

Higher prices may reduce demand for goods and services, slowing sales and reducing companies’ profits (and earnings). If earnings growth slows, publicly traded companies’ stock prices could be affected. David Kostin, chief U.S. equity strategist at Goldman Sachs Research reported, “…every five-percentage-point increase in the U.S. tariff rate is estimated to reduce [Standard & Poor’s 500 Index] earnings per share by roughly 1-2 [percent].” Goldman’s estimates suggest the 10 percent tariff placed on China in early February could raise the effective U.S. tariff rate by about 4.7 percentage points.

In addition, businesses may be vulnerable to retaliatory tariffs imposed by other nations. For example, “American farmers and ranchers incurred the most widespread damage from this retaliation following the 2018 tariffs. The damage was so great that the [first] Trump administration authorized $61 billion in emergency relief payments to cushion farmers and ranchers from the blow…an amount roughly equivalent to all of the tariff revenue collected from U.S. businesses,” reported Adam S. Hersh and Josh Bivens of The Economic Policy Institute.

Investors appeared to shrug off concerns about tariffs and trade wars last week. Denitsa Tsekova of Bloomberg reported, “This week’s vow for reciprocal tariffs comes not long after [President Trump] delayed threats against Canada and Mexico, signaling to many investors that he won’t take action that enacts lasting damage to Wall Street.”

Last week, higher than expected inflation numbers and weaker than expected retail sales data gave investors pause, but major U.S. stock indices finished the week higher. The yield on the benchmark 10-year U.S. Treasury moved lower over the week.

WHAT DO YOU KNOW ABOUT BUYING A HOUSE? First-time home buyers have a lot to think about. A house is a big investment, so it’s important to do the research and develop some checklists that can help you compare and evaluate the options available to you. One checklist might include key points to observe during home showings. For example, did you know it’s a good idea to begin your home tour in the basement (assuming the house has one)? If you find issues that significantly affect the structure’s integrity, end the tour there.

Here are a few things to consider:

  • The inspection. Many people have been told that requiring an inspection may mean they won’t get the house. But waiving an inspection can be costly, especially if the home has significant problems. One option “is to include a home inspection ‘for informational purposes’ in your contract. This means that you won’t hold home sellers responsible for making repairs or fronting the money for them—and could make sellers more likely to accept your offer,” reported Kelsey Ogletree of Realtor.com. If the home has serious issues, you can back away from the sale although your earnest money may be at risk.
  • The neighborhood. You can learn a lot about prospective neighborhoods online, but it’s a good idea to spend time there, too. Drive through the community. Take walks through the neighborhood at different times of the day and different days of the week. Chat with people you see. The more information you gather, the more confident you will be about your decision.
  • Your actual monthly costs. After buying a home, the amount you owe each month is usually several hundred dollars more than your mortgage expense. That’s because the payment to your lender will include property taxes and homeowner’s insurance costs that are held in escrow and, usually, paid by the lender when due.

When you’re ready to buy a home, leverage your resources—including online research and friends and family members—and gather the information you need to feel confident that you’re making a sound decision.

Weekly Focus – Think About It
“In love of home, the love of country has its rise.”
—Charles Dickens, novelist

 

Sources:

https://abcnews.go.com/538/americans-trumps-tariffs/story?id=118796434

https://taxfoundation.org/blog/trump-tariffs-revenue-estimates/

https://www.cfr.org/backgrounder/what-are-tariffs

https://www.cfr.org/article/what-trumps-trade-war-would-mean-nine-charts

https://www.goldmansachs.com/insights/articles/how-tariffs-are-forecast-to-affect-us-stocks

https://www.epi.org/publication/tariffs-everything-you-need-to-know-but-were-afraid-to-ask/

https://www.bloomberg.com/news/articles/2025-02-14/fearless-wall-street-traders-refuse-to-panic-as-trade-war-flares (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/02-17-25_Bloomberg_Fearless%20Wall%20Street%20Traders%20Refuse%20to%20Panic_7.pdf)

https://www.barrons.com/market-data?mod=BOL_TOPNAV (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2025/02-17-25_Barrons_Data_8.pdf)

https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202502

https://www.groundworks.com/resources/common-basement-problems-to-deal-with-when-owning-a-home/

https://www.realtor.com/advice/buy/should-i-waive-a-home-inspection/

https://www.realtor.com/advice/buy/bad-neighborhood-red-flags-when-buying-a-home/

https://www.consumerfinance.gov/ask-cfpb/what-costs-come-with-taking-out-a-mortgage-en-153/

https://www.today.com/life/inspiration/quotes-about-home-rcna81557

 

Weekly Market Insights | Markets Advance Amid Volatile Week

by | Feb 18, 2025 | Weekly Stock Market Commentary

Stocks advanced last week despite some intra-week volatility as investors showed concern about the economy’s strength. 

The Standard & Poor’s 500 Index gained 1.47 percent, while the Nasdaq Composite Index picked up 2.58 percent. The Dow Jones Industrial Average added 0.55 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, tacked on 2.53 percent.1,2

The Fed Is in “No Hurry”

Stocks opened the week higher, quickly discounting news that the White House would impose 25 percent tariffs on all steel and aluminum imports. Tuesday was a volatility session, punctuated by comments from Fed Chair Powell, who told lawmakers the central bank doesn’t “need to be in a hurry” to lower interior rates further.3,4

Stocks opened lower Wednesday after a warmer-than-expected update on consumer prices. But stocks showed some resilience and rallied throughout the day. The Nasdaq managed to claw back its losses before Wednesday’s close.5

On Thursday, the White House announced a plan for reciprocal tariffs (levies on goods imported into the U.S. from countries that impose tariffs on U.S.-exported goods). But markets rallied on news that the administration would pause tariffs until they determine how much to levy on each country. Stocks took a breather on Friday, shrugging off a weaker-than-expected retail sales report.

The S&P ended shy of a record close, and the Nasdaq finished the week above the 20,000 mark.6

 
 

Inflation in Focus

The Consumer Price Index report showed prices rose 0.5 percent in January–slightly hotter than expected. Shelter costs remained elevated, increasing 0.4 percent for the month.

Core CPI, which excludes volatile food and energy prices, was also above forecast. Food prices rose 0.4 percent, pushed by a 15.2 percent increase in egg prices related to ongoing issues forcing farmers to cull chicken flocks. Energy prices picked up 1.1 percent as gasoline prices rose.7,8

This Week: Key Economic Data

Tuesday:  Homebuilder Confidence Index. San Francisco Fed President Mary Daly speaks.

Wednesday:  Housing Starts & Building Permits. Minutes from January Fed meeting.

Thursday:  Weekly Jobless Claims. Leading Economic Indicators. Fed Officials Austan Goolsbee and Alberto Musalem speak.

Friday:  Existing Home Sales. Consumer Sentiment.

Source: Investors Business Daily – Econoday economic calendar; February 14, 2025
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:  Arista Networks, Inc. (ANET), Medtronic (MDT)

Wednesday:  Analog Devices, Inc. (ADI)

Thursday:  Walmart Inc. (WMT), Booking Holdings Inc. (BKNG), The Southern Company (SO)

Source: Zacks, February 14, 2025. 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.

“Better shun the bait than struggle in the snare.”

– John Dryden

You May Be Able to File Your State and Federal Tax Returns for Free

Taxpayers whose adjusted gross income is $79,000 or less may be able to file their federal taxes for free using IRS Free File and do their state taxes at no charge through the same service. More than 20 states have a Free File program similar to the federal service.

IRS Free File partners also feature several helpful online products. Through Free File, taxpayers can choose the Free File option, guided tax preparation, or Free File Fillable Forms. Make sure to filter for the free options because some additional services may have a charge.

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

Tip adapted from IRS9

What is Meatless Monday?

Thanks to new (and much more delicious) meat substitutes, more people are swapping at least one meal weekly for a vegetarian dish. One of the most popular ways to do this is starting Meatless Monday in your household!

Eating less meat and more plant-based choices has many potential health and environmental benefits. While you might not be ready or interested in giving up meat entirely, subbing in meatless meals on Monday is an excellent change of pace and might open your eyes to more delicious plant-based meals like:

  • Veggie lasagna
  • Vegetarian pizza
  • Pasta with lentils
  • Homemade falafel and hummus
  • Protein-packed salads

The possibilities for Meatless Monday are endless! Your body and the environment will thank you for eating more plants.

Tip adapted from The Monday Campaigns10

I’m comprised of solid ground, and yet I see water all around. What exactly am I?

Last week’s riddle: Each morning, I show up at your feet, yet at midday, I nearly retreat. No matter how fast you move, I follow. What am I?
Answer: Your shadow.

North American Bull Elk

Maxwell Wildlife Preserve, Kansas
 

Footnotes and Sources

1. The Wall Street Journal, February 14, 2025

2. Investing.com, February 14, 2025

3. MarketWatch.com, February 10, 2025

4. CNBC.com, February 11, 2025

5. The Wall Street Journal, February 12, 2025

6. CNBC.com, February 14, 2025

7. The Wall Street Journal, February 12, 2025

8. MarketWatch.com, February 10, 2025 

9. IRS.gov, August 20, 2024

10. The Monday Campaigns, October 3, 2024

Weekly Market Insights | Markets Process Tariff Deals, New Data

by | Feb 10, 2025 | Weekly Stock Market Commentary

Stocks posted modest losses last week as tariff deals, January jobs data, and Q4 corporate reports injected volatility into markets.

The Standard & Poor’s 500 Index slipped 0.24 percent, while the Nasdaq Composite Index lost 0.53 percent. The Dow Jones Industrial Average fell 0.54 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, edged ahead 0.17 percent.1,2

Tariffs, Q4 Reports, and Jobs

On Monday, stocks opened lower on news that tariffs on Mexico, Canada, and China went into effect over the weekend. However, markets rebounded midmorning following news of a U.S.-Mexico deal that delayed new trade rules. News of a similar last-minute agreement with Canada followed.3

Stocks continued their rally midweek, led by technology stocks from companies that provided upbeat Q4 corporate reports.4,5

The S&P 500 and Nasdaq rose for the third consecutive day on Thursday, while the Dow experienced a slight fall as investors digested more corporate earnings reports. The week closed on a down note as a mixed jobs report and a cautionary inflation outlook disappointed investors.6,7

 
 

Mixed Signals on the Labor Market

As has happened several times in recent years, two job reports told conflicting stories about the state of the jobs market. On Friday, the Bureau of Labor Statistics reported that 143,000 jobs had been added for the month–a four-year low. Earlier in the week, the ADP report showed the economy added 188,000 new jobs, ahead of the 150,000 economists expected.8,9

Why do the reports tell different stories? Economists point to various factors, including how January can be challenging to measure accurately, typically due to the more significant number of laid-off seasonal workers.10

This Week: Key Economic Data

Tuesday:  Cleveland Fed President Beth Hammack and New York Fed President John Williams speak.

Wednesday:  Consumer Price Index (CPI). Atlanta Fed President Raphael Bostic speaks. Federal budget.

Thursday:  Weekly Jobless Claims. Producer Price Index (PPI).

Friday:  Import Price Index. Retail Sales. Industrial Production. Business Inventories.

Source: Investors Business Daily – Econoday economic calendar; February 7, 2025
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

Monday:  McDonald’s Corporation (MCD), Vertex Pharmaceuticals Incorporated (VRTX)

Tuesday:  The CocaCola Company (KO), S&P Global Inc. (SPGI), Shopify Inc. (SHOP), Gilead Sciences, Inc. (GILD)

Wednesday:  Cisco Systems, Inc. (CSCO), AppLovin Corporation (APP)

Thursday:  Applied Materials, Inc. (AMAT), Deere & Company (DE), Palo Alto Networks, Inc. (PANW), Brookfield Corporation (BN), Moody’s Corporation (MCO)

Source: Zacks, February 7, 2025. 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.

“Understanding is a two-way street.”

– Eleanor Roosevelt

Beware of Ghost Preparers

Ghost preparers don’t sign the tax returns they prepare, which is unethical and illegal. All paid preparers must sign and include their Preparer Tax Identification Number (PTIN) on the return, and if they don’t, this is a big red flag. These preparers might also promise unrealistic refunds or charge fees based on the size of the refund. 

The IRS also has a page on IRS.gov dedicated to helping taxpayers choose a reputable tax professional and a Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.

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

Tip adapted from IRS11

Two Leg Stretches to Try at Your Desk

We spend so much time sitting at our desks, so getting some stretches here is good, especially after a long day. The good news is that you don’t have to leave your desk to get these two stretches in!

  • Hip and Knee Flexion Stretch. For this stretch, hug one knee at a time and gently pull it toward your chest. Hold the pose for 10-30 seconds and repeat on both sides. This post will stretch your quads, hamstrings, and hips.
  • Hamstring Stretch. For this stretch, remain seated and extend one leg straight before you. Reach toward your toes without hyperextending, and hold the stretch for 10-30 seconds. Repeat on the other side. You’ll feel this stretch in your hamstrings and lower back.

Tip adapted from Healthline12

Each morning, I show up at your feet, yet at midday, I nearly retreat. No matter how fast you move, I follow. What am I?

Last week’s riddle: It sits when it stands. It walks in jumps. It can grow up to 8′ tall. What is it?
Answer: A kangaroo.

Plitvice Lakes National Park

Republic of Croatia, Croatia
 

Footnotes and Sources

1. The Wall Street Journal, February 7, 2025

2. Investing.com, February 7, 2025

3. The Wall Street Journal, February 3, 2025

4. CNBC.com, February 4, 2025

5. CNBC.com, February 5, 2025

6. The Wall Street Journal, February 6, 2025

7.  The Wall Street Journal, February 7, 2025

8. MarketWatch.com, February 4, 2025

9. MarketWatch.com, February 5, 2025

10. The Wall Street Journal, February 7, 2025

11. IRS.gov, February 23, 2024

12. Healthline, October 3, 2024

Weekly Market Commentary

by | Jan 30, 2025 | Carson

The Markets

What moves financial markets? The short answer is: Lots of things!

Almost one hundred years ago, Benjamin Graham and David L. Dodd wrote, “the market is a voting machine, whereon countless individuals register choices which are the product partly of reason and partly of emotion.” Today, the same holds true. Stock prices are influenced by many factors. Here are three examples:

  1. Market trends. Last year, companies with strong momentum characteristics—meaning their prices were trending higher—generally did well. “The main rationale behind momentum investing is that once a trend is well-established, it is likely to continue,” reported the Corporate Finance Institute.

 The idea may seem contrary to the primary rule of investing, sell high and buy low, but the approach is backed by academic research. It “captures the tendency for market trends to persist for a while, whether it’s because more investors are jumping in or are late to absorb new information,” reported Justina Lee of Bloomberg. As one researcher told Lee, “Momentum investing is great until it’s not.”

  1. Investor sentiment. Emotion plays a significant role in stock market volatility. For example, last week, we saw a relief rally. Asian stocks rose and the Standard & Poor’s (S&P) 500 Index hit a new high because the news was less bad than investors had expected. Isabelle Lee, Lu Wang, and Phil Serafino of Bloomberg explained:

“Despite the protectionist threats of the campaign trail, Trump held off on imposing levies on key trading partners this week, and just last night delivered his most mollifying message yet to China by saying that he would rather not have to use tariffs against the world’s second-biggest economy. Cue a relief rally across markets.”

  1. Company fundamentals. Graham and Dodd recommended fundamental analysis to identify stocks with good value. Investors who rely on fundamental analysis study companies’ financial statements, and consider assets and liabilities, revenue and expenses, earnings and cash flow, and other factors. Then they do some math to evaluate the company’s value using various measures like the price-to-earnings ratio. In theory, a company with a low share price relative to its earnings is a good value.

No one knows how markets will perform over the short term. That’s one reason it’s important to hold a diversified portfolio. Owning investments that perform differently in various market conditions helps manage investment risk and may smooth returns over time.

Last week, major U.S. stock indices rose. The S&P 500 moved higher over the week, the Dow Jones Industrial Average gained 2.2 percent, and the Nasdaq Composite rose 1.7 percent, reported Paul R. LaMonica of Barron’s. Yields on U.S. Treasuries were relatively steady.

PLANNING FOR REQUIRED MINIMUM DISTRIBUTIONS. If you save for retirement in a qualified plan, such as a 401(k) plan or an IRA, the government currently requires you to take withdrawals from these accounts during retirement. The withdrawals, known as required minimum distributions or RMDs, are taxable so it’s a good idea to plan ahead and avoid unexpected tax consequences.

Here is some basic information about RMDs. It is offered with the caveat that RMDs have complex rules. It’s important to talk with your financial or tax professional before taking action.

If your 73rd birthday is in 2025, your first RMD must be taken by April 1, 2026. Your second RMD by December 31, 2026, your third RMD by December 31, 2027, and so on.

If you delay your first distribution until April 1, 2026, then you will need to take two RMDs in the same year.

If you have multiple 401(k) plan and IRA accounts, you typically must calculate the RMD for each one of them. You can, however, withdraw the entire amount from a single account.

If you’re still working at age 73, you don’t have to take an RMD from your workplace retirement plan account (as long as the plan allows it). This exception does not apply to traditional IRAs. You must take RMDs from traditional IRAs, even if you’re still working.

If you inherit an IRA from a spouse (after 2019) who already reached age 73, you will normally need to take an RMD for the year of death, if your spouse did not already take one. If your spouse dies before age 73, you may be able to keep the inherited account, roll it over into your IRA, or withdraw the money in a lump sum or over a period of time.

 If you inherit an IRA from someone other than your spouse (after 2019), usually the funds must be completely withdrawn from the account within 10 years. RMDs may be required if the person from whom you inherited the account was already taking RMDs. There are some exceptions.

 If you miss an RMD deadline or you don’t withdraw the full amount, penalties are steep. The penalty tax is 25 percent of the amount you failed to withdraw. If you correct the issue within two years, the penalty tax is lower.

If you own a Roth IRA or Designated Roth account in workplace plan, you do not have to take RMDs—unless you inherited the account. In that case, RMD rules usually apply.

Again, the rules governing RMDs are complex, and calculating RMDs is not always straightforward. If you would like help, or you have questions, please get in touch. 

Weekly Focus – Think About It
“Never wear anything that panics the cat.”
—P.J. O’Rourke, comedian

Weekly Market Insights | Shifted Policy Gears Rev Markets

by | Jan 27, 2025 | Weekly Stock Market Commentary
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