Our winter edition of Financial Edge 2019 is now available. The latest on Walgreens/Aspen Dental, Practice Growth via Social Media and your new favorite recipe, Shrimp and Grits. Don’t forget to send us a photo of your creation to be featured on our website. Please share your feedback and requests on content for our next Financial Edge.
2019 Interest rates and inflation shouldn’t represent a serious roadblock to equities.
Economic and corporate earnings fundamentals have remained relatively positive over the past few months amid increasing volatility; many stocks have entered correction territory. Investor concerns have grown as a number of issues remain unclear; trade talks, oil price declines, strengthening (U.S.) dollar and unresolved monetary policy. The year 2018 is almost in the rear-view mirror, but significant events over the last 12 months will continue to shape economic outcomes.
On the whole, we think the global economy is expanding and reasonably solid, but recent trade conflict presents a significant and serious threat.
Check out our latest Dentists Financial Edge newsletter for 2018. This newsletter includes updates you’ll want to know about the Tax Reform, some insight on how to better your success rate in setting appointments, and maybe even your new favorite weekend recipe. Don’t forget to send us a photo of your creation to be featured on our website. Please share your feedback and requests on content for our next Financial Edge.
U.S. stocks ended the week slightly lower after reaching new all-time highs last week, with the S&P 500 Index dropping 0.5%. Materials, financials and consumer staples were among the biggest detractors, while telecom, health care and technology moved higher. U.S. Treasury prices and the dollar also advanced and oil prices ended the week up 3% amid growing concerns over tightening supply as a result of U.S. sanctions on exports from Iran.
Vicissitudes in the market should not come as a surprise, equity prices simply don’t move in linear fashion. However, we are entering the fourth quarter (when markets typically post the strongest returns of the year). In theory, investors can breathe a sigh of relief during this time of year. We are not postulating a linear move higher heading into year-end, but we have analyzed data collected on S&P 500 performance from 1980-2017. The way we see it, the final quarter of the year has generated average gains of 4.59%, compared to gains of 2.34%, 2.67% and 0.3% for 1Q, 2Q and 3Q, respectively.
Earlier this year, Twitter started putting some of its users in “time-out” as one of the company’s new measures designed to curb abusive behavior. As spelled out in an email sent to those placed in time- out, Twitter said that “creating a safer environment for people to freely express themselves is critical to the Twitter community.” The email then went on to explain the infraction and the duration of the time-out.
Recently, Twitter gave InforWars’ Alex Jones a weeklong time-out and suggested that additional restrictions to combat the “spread of fake news, misinformation and hate speech” might be on the way. As a publicly traded company, a good question is “what might this mean for Twitter shareholders?”
History of Twitter
Twitter was created in March of 2006 and launched in July of that year. Current CEO Jack Dorsey published the first Twitter message at 9:50 p.m. Pacific Time that read: “just setting up my twttr.”
Dorsey has explained the origin of the “Twitter” title: as follows:
“we came across the word ‘twitter’, and it was just perfect. The definition was ‘a short burst of inconsequential information,’ and ‘chirps from birds’. And that’s exactly what the product was.”
In September of 2013, Twitter announced that it had filed papers in advance of an Initial Public Offering and less than two months later, Twitter shares opened at $26.00/share and closed at $44.90, giving Twitter a valuation of approximately $31 billion.
Fast forward to the summer of 2018, Twitter is trading in the $32 range with a valuation of approximately $24 billion.
Stocks prices continued moving higher last week as if to say a somewhat disappointing July jobs report and ongoing trade-related tensions between the U.S. and China are not a serious threat, yet. The Dow Jones Industrial Average and the S&P 500 both climbed 0.5%, while the Nasdaq Composite inched up 0.1%. Second-quarter earnings were mostly above expectations and provided much of the direction for the week. The biggest market story, however, was the sharp rebound in tech stocks following a selloff the prior week. The momentum pushed Apple’s market capitalization to an unprecedented $1 trillion.
Friday’s jobs (non-farm) report showed that the U.S. economy generated 157,000 positions in July, well below the consensus forecast of 190,000. Moreover, the latest numbers are significantly lower than the six-month average of 219,000. The unemployment rate also ticked lower, to 3.9%, while wage growth held steady at a 2.7% annual rate. Looking under the hood, jobs were most plentiful in manufacturing, healthcare, and professional and business services. Overall, the headline jobs number, while weaker than in recent months, appears reasonable at this stage of the economic cycle. As the Federal Reserve meets this week in Jackson Hole, we are anticipating plenty of discussion about the economy’s potential for employment growth. We also expect two more rate hikes in 2018.
The Tax Cuts and Jobs Act, characterized as the first major reform of the Internal Revenue Code in 31 years, brings a lot of changes to individuals and businesses alike.
The legislation slashes the top corporate tax rate to 21 percent, lowers the top marginal rate for individual taxpayers to 37 percent, eliminates or scales back several popular deductions, reduces taxes on business income earned by pass-through businesses, doubles the estate tax exemption, and substantially enhances immediate expensing of capital investments.
It also impacts how families save for college—especially with respect to 529 plans. But there are some details still being worked out. Let’s explore.
Designed to promote saving for future college costs, a 529 plan is a tax-advantaged savings plan authorized by Section 529 of the Internal Revenue Code. Sponsored by every state and the District of Columbia, there are two types of 529 plans: Prepaid Tuition Plans and College Savings Plans.
In simple terms, a Prepaid Tuition Plan allows you to effectively lock-in tuition costs to avoid tuition inflation; whereas, a College Savings Plan is a tax-advantaged investment account.
Last week brought modest gains for stocks and volume was underwhelming. The Dow Jones Industrial Average rose 0.4% and the S&P 500 increased 0.1%, while the Nasdaq Composite was flat. Trade-war concerns surfaced again mid-week, as the Trump administration issued a new list of tariffs on $200 billion of Chinese goods, but the market was largely in rally mode ahead of second-quarter earnings. The Dow climbed 2.3%, the Nasdaq was up 1.8%, and the S&P 500 increased 1.5%. Year-to-date, the S&P 500 is up 4.8% and the Dow has also turned positive with a 1.2% rise.
The 10-year Treasury yield ended Friday at 2.83% and remains range bound. Last week’s economic news was mixed and included a modest decline in the small business confidence index for June from May’s strong reading. Finding qualified workers appears to be the culprit for lower optimism. The consumer price index moved higher by 0.1% in June and is now at 2.9% over the past year. Medical care and autos were among the largest gainers while housing costs were flat and energy prices moved lower. The takeaway, however, is that the inflation is running warmer than the Fed would like and it has justification to pursue its continuing rate hike campaign.
On July 4, 1776, the Second Continental Congress formally adopted the United States Declaration of Independence. The American Revolutionary War, which began in 1775, continued until 1783 when the British Empire abandoned their claim to the United States. Like the war, the American flag took many years to become what flies so proudly today. Here are some parts of that journey:
- During the Second Continental Congress in Philadelphia on June 14, 1777, the following resolution was adopted:
Resolved, that the flag of the United States be thirteen stripes, alternate red and white; that the union be thirteen stars, white in a blue field representing a new constellation.
The resolution was vague on instructions such as how the stars should be arranged and how many points the stars should have. This caused flags to be created differently across the 13 states with some flags scattering the stars without any specific design and others arranging the stars in rows or circles. The stars were also not consistent as some had six points and others had eight.
These days you’re probably thinking about the beach, the mountains, or a road trip with the family. But summer, when life may be a little slower and your mind a little less cluttered, is actually a good time to do a quick midyear financial reality check.
A midyear checkup can accomplish several things. You can stop and think about your financial goals, such as saving for retirement, a house, a child’s education, or a financial cushion, and then make sure that you are investing appropriately for those goals. And while you are looking at your accounts, take care of “housekeeping” items too, like checking beneficiaries, which isn’t complicated but can have serious consequences if neglected.
Here are 5 things to do in a midyear review:
- Review your financial goals
- Check your investemnets
- Get a tax break
- Protect what’s yours
- Review important paperwork