Market Digest          
1.17.18          
OBSERVATIONS
Education Savings and the New Tax Law
The Tax Cuts and Jobs Act that was signed into law in December, brings major changes to corporate and personal tax rates and deductions. But there is a less well-known area of the law that could positively impact clients who are saving for the education of their children or grandchildren: an expansion of the benefits of 529 plans.

What is a 529 Plan?
529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. 529 plans, legally known as "qualified tuition plans," are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code. Since 1996, funds invested in these programs have not been taxed federally when used for "qualified higher education expenses."

Expanded Benefits
Previously, 529 withdrawals were tax-free as long as the funds were spent towards qualified higher education expenses, including tuition, room and board, computer software and/or equipment at any  eligible post-secondary institutionWith the new tax bill, parents who send their children to private elementary and high school will have more options when it comes to saving for tuition. Now withdrawals of up to $10,000 per year from 529 plans can be used for K-12 tuition expenses. This allows families to save tax-free for private and religious schools. Families who are currently saving with a Coverdell ESA and want to switch to a 529 plan can do a rollover with no tax consequences.

Why Utilize a 529 Plan?
  • Income Tax Breaks: Although contributions are not deductible, earnings in a 529 plan grow federally tax-free and will not be taxed when the money is taken out to pay for college or private school tuition in grades K-12.
  • State Tax Breaks: In addition to the federal tax savings, over 30 states currently offer a full or partial tax deduction or credit for 529 plan contributions.
  • Donor Control: With few exceptions, the named beneficiary has no legal rights to the funds so you can assure the money will be used for its intended purpose.
  • Eligibility: Unlike Roth IRAs and Coverdell Education Savings Accounts, 529 plans have no income limits, age limits or annual contribution limits.
If you would like to discuss how the new tax law might affect your tuition savings goals, please give us a call.
MARKET UPDATE
As earnings season kicked off last week, stocks recorded another week of solid gains. Investors were buoyed by economic data including strong retail sales data which lifted the share price of both Amazon and "Big Box" retailers like Home Depot, Costco and Walmart. Data and analytics firm FactSet is predicting a rise in corporate earnings of the S&P 500 firms of 10.5% over last year.   
Equity Index Returns through January 12_ 2018
Source: Yahoo Finance
ECONOMIC NEWS
> 4th Quarter At A Glance: As of year-end, Bloomberg economists' consensus forecast for the 4th quarter GDP stood at 2.7%. Leading economic indicators point to continued solid growth in 2018, potentially supported by the new tax law. The latest guidance from the Federal Reserve (Fed) is for three interest rate hikes in 2018 as labor markets continue to tighten incrementally amid signs of budding inflation pressures.

Q42017 At A Glance

> Retail Sales Apocalypse:   Improved holiday sales suggest that the full retail apocalypse is still a ways off. Last week, Target reported healthy holiday sales growth of 3.4% above last year's figure. Target joins several big chains that took advantage of an improved shopping environment to ring up stronger holiday sales in the latest season.
 
Holiday Retail Sales 2017 vs 2016
Source: Bloomberg,Company Reports


> Core Inflation:  Last Friday, the Labor Department reported that Core CPI (the Consumer Price Index, excluding the volatile food and energy components), rose 0.3% in December. That was the biggest advance since January 2017 and followed a 0.1% gain in November. S trong gains in the cost of housing and healthcare have bolstered expectations that inflation will accelerate this year. 

Core CPI December 2017

THE WATERCOOLER
Historical Figures
Today would be the 312th birthday of this profoundly influential American. Can you guess who it is?
First Political Cartoon Join or Die

  • He created and published the first political cartoon (see image at right)
  • He was an author who wrote under the pseudonym Richard Saunders
  • Among his inventions were swim fins and a flexible urinary catheter
  • He was the first Postmaster General of the United States
  • He was the primary founder of the University of Pennsylvania
  • He was the first American Diplomat
Any guesses yet? If not, these pearls of wisdom may help:

An investment in knowledge pays the best interest.
Well done is better than well said.
A penny saved is a penny earned.
Honesty is the best policy.
You may delay, but time will not.
Never leave that till tomorrow which you can do today.
Wine is constant proof that God loves us and loves to see us happy.

Of course we're talking about statesman, author, publisher, scientist, inventor, diplomat and founding father, Benjamin Franklin. More than 200 years after his death, Franklin remains one of the most celebrated figures in US history. 
NEW MARKETS. NEW ADVICE.
New Market Wealth Management offers modern investment solutions backed by extensive research and experience serving the needs of wealthy families. Through our strategic partnership with Cliffwater LLC , we have access to institutional-quality research, investment due diligence and asset allocation tools. We believe this level of experience and unique access to in-depth, sophisticated research are essential for success in today's complex world markets.

New Market Wealth Management
(657) 900-1899