“For unto you is born this day in the City of David a Savior, who is Christ the Lord” Luke 2:11 ESV
Christmas and New Year’s Market and Office Schedule:
The U.S. stock exchanges will close early on Christmas Eve, December 24th at 12:00 noon CST, 1:00pm EST. They will also be closed all day on Tuesday, Christmas Day. This year our offices will be closed all day on Christmas Eve, Christmas Day, and December 26th in observance of the Christmas Holidays. We will be open as usual on Thursday, December 27th. The stock exchanges will also be closed on Tuesday, January 1st for New Year’s Day. Our offices will be closed Monday, December 31st and Tuesday, January 1st for the New Year’s Holiday. We will be open as usual on Wednesday, January 2nd at 7:30am. If for any reason you ever need us when our offices are closed, you can call and leave a voicemail and we will receive it and respond as needed. We also will be checking email as well. We all wish you a VERY MERRY CHRISTMAS and a safe and HAPPY NEW YEAR!
After October’s negative returns for stock indices, November managed to produce small net gains in the major U.S. Stock indices. For the month of November, the 30 Down Jones Industrial Average was up 1.7%, the Standard & Poor’s 500 stock index rose 1.8%, and the NASDAQ Composite increased by just 0.3%. For the 11 months ending November 30th, the Dow was up 3.3% while the S&P 500 up 3.2%. (MarketWatch) Foreign markets haven’t fared nearly as well in 2018, with the MSCI World Index minus US stocks is down 11.7% through November 30th, with the MSCI Emerging Markets index off 14.1% in U.S. dollars. (MSCI.com)
Uncertainty continued through November, even after the conclusion of the midterm elections which failed to soothe concerns through much of the month. Anxieties facing the markets include higher interest rates, trade war/tariffs with China, and a moderation in economic growth.
Eight .25 percentage-point rate hikes by the Fed have done little to discourage investors since late 2015, at least through September. While rates remain low by historical standards, concerns have cropped up that the Fed’s desire to gradually raise rates throughout 2019 might begin to crimp growth moving forward.
Maybe it’s temporary or just statistical noise, but we are seeing signs that U.S. growth is slowing in the fourth quarter. Global growth has moderated, which will likely create a headwind for U.S. exports. And trade tensions are creating uncertainty, which may be impacting business investment. Recent development such as the temporary suspension of the additional tariffs with China for the time being have helped, but only on a short-term basis and since the announcement, the markets seemed calmed for only one trading day at this point as of today.
Housing sales have turned lower, and housing starts have slipped. In addition, first-time claims for unemployment insurance, a good leading indicator, have inched off September lows, according to the Department of Labor. Given the heightened uncertainty, analysts have been trimming profit forecasts for 2019. Still, the sell-off for stocks has been fairly modest since the late September peak.
As the month concluded, Fed Chief Jerome Powell appeared to take a slightly more dovish tone regarding rate hikes. Expect another 0.25 percentage point increase in December, but a gradual series of increases next year seem less uncertain. Interest rates have moved lower in the past few weeks, and as of today, December 4, 2018, the yield for the 10-year U.S. Treasury is back below 3% to 2.925%. (MarketWatch) This will help our current fixed income/bond holdings-when interest rates fall, bond prices rise. The national average for a 30-year fixed mortgage is now 4.68%, while the 15-year fixed rate is 4.02%. (Bankrate.com)
We have remained invested in a more cautious mode since earlier this year and have reduced exposure to stocks/equities for all risk levels during the first quarter in an effort to reduce overall portfolio volatility given the markets so far this year. Our fixed income/bond positions have helped mitigate the increased volatility on a daily basis, but so far this year, have also been a bit of a headwind due to rising rates. We have diversified portfolios based on some caution signs we saw earlier in the year, and these changes have helped on days where the pure stock indices fall sharply. We all know at some point we will see another “bear market” and economic recession, the big question is when? No one knows, and data and sentiment can change quickly. We will continue to monitor the situation and can make adjustments as warranted. We will keep you posted.
As a new year approaches, many of us will reflect on the year that has passed. Personal and professional accomplishments may take center stage. And we may take stock of any disappointments and recalibrate as 2019 approaches. But in any case, we know it’s a busy time. Christmas shopping, holiday parties, tree trimming, family visits, and year-end cheer may already be on the calendar.
We just wanted to remind you of some smart year-end financial planning moves you might still take before this year is over:
Review your income or portfolio strategy:
Are you reaching a milestone in your life such as retirement or a change in your circumstances? Has your tolerance for taking risk changed? If so, this may be just the right time to evaluate your approach. However, we want to caution you about making changes based simply on market performance. One of our goals has always been to remove the emotional component from the investment plan. The one that encourages investors to load up on stocks when the market is soaring or one that prods us to sell when volatility surfaces. The old temptation to “sell low, buy high”, which is just the opposite of a long-term successful investment strategy.
Take stock of changes in your life:
Review insurance policies as well as beneficiaries of your insurance and retirement plans. Let’s be sure you are adequately covered. At the same time, it’s a good idea to update beneficiaries if the need has arisen.
Mind the tax loss deadline:
You have until Monday, December 31 to harvest any tax losses and/or offset any capital gains. But be careful. There are distinctions between short- and long-term capital gains, and you must be aware of wash-sale rules (IRS Publication 550) that could disallow a capital loss. It may be advantageous to time sales in order to maximize tax benefits this year or next. We may also want to book gains and offset any losses. We will be reviewing all clients’ taxable accounts prior to year-end and take advantage of this when possible. If you have any other outside taxable investment accounts, it might be a good idea to review those as well.
Don’t miss the RMD deadline:
Required minimum distributions (RMDs) are minimum amounts a retirement plan account owner must withdraw annually, generally starting with the year that he or she reaches 70½ years of age. Some plans may provide exceptions if you are still working.
The first payment can be delayed until April 1 of the year following the year in which you turn 70½. For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by December 31.
The RMD rules apply to traditional IRAs, SEP IRAs. Simple IRAs, 401(k), profit-sharing, 403(b), 457(b) or other defined contribution plans. They do not apply to ROTH IRAs.
Don’t miss the deadline or you could be subject to steep penalties.
Contribute to a Roth IRA or traditional IRA:
A Roth gives you the potential to earn tax-free growth (not just deferred tax-free growth) and allows for federal-tax-free withdrawals if certain requirements are met. You may also be eligible to contribute to a traditional IRA, and contributions may be fully or partially deductible, depending on your circumstances. Total contributions for both accounts cannot exceed the prescribed limit.
There are income limits, but if you qualify, you may contribute $5,500, or $6,500 if you are 50 or older. In 2019, limits will rise to $6,000 and $7000, respectively.
You can make 2018 IRA contributions until April 15, 2019 or when you file your tax return, whichever is earlier (Note: state holidays can impact final date).
Wrap up charitable giving:
Whether it is cash, stocks or bonds, you can donate to your favorite charity by December 31, potentially offsetting any income. Did you know that you may qualify for what’s called a “qualified charitable distribution (QCD)” if you are over 70½ years old? A QCD is an otherwise taxable distribution from an IRA or inherited IRA that is paid directly from the IRA to a qualified charity (“End-Of-Year Contribution and Distribution Planning for Tax-Favored Accounts”–Kitces.com). This becomes even more valuable in light of tax reform as more taxpayers will no longer be able to itemize, and an RMD that is taken, then donated to a charity, may not provide tax benefits.
Given the increase in the standard deduction and limits on state income and property taxes, annual year-end gifts to your favorite charity may not exceed the higher thresholds. Therefore, you may consider giving an annual gift in early January. Coupled with an annual gift next December, you might reap the tax advantages from itemizing in 2019.
We hope you’ve found this review to be educational and helpful, but keep in mind that it is not all-encompassing. We want to emphasize that it is our job to assist you! If you have any questions or would like to discuss any matters, please feel free to give us a call or send us an email at any time.
As always, we are honored and humbled that you have given us the opportunity to serve as you and look forward to working together in the years ahead. Merry Christmas and Happy New Year!
Your TEAM at F.I.G. Financial Advisory Services, Inc.
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not intended as a solicitation to buy, hold, or sell any securities. Nothing contained herein constitutes tax,
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1 The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be
invested into directly. Past performance does not guarantee future results.
3 The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into
directly. Past performance does not guarantee future results.