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Stocks had a strong start to 2019. We think growth can continue because valuations are reasonable and corporate profits are projected to continue increasing.
Also, bond yields have improved over the past few years. With the promise of restraint by the Fed, bonds could post a solid year.
Alternative investments have started 2019 in the green. The best performing alternatives have been pipelines and commercial real estate.
For additional market comments from the fourth quarter of 2018, click here:
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It is current law that on March 29, Great Britain will be exiting the EU – unless the law changes. Prime Minister Theresa May put forth her proposed terms of this Brexit, which were rejected by a parliamentary vote of 432 to 202 on January 15. As a next step, May is trying to develop new terms for Brexit that might pass Parliament and be approved by EU member nations.
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Whatever form Brexit takes, the probable GDP impact would be hardest on England, with a minor negative effect on the EU, and even less of an impact outside the EU. In short, Brexit is not as important to the geopolitical backdrop as other items, most notably the trade dispute with China.
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Add to Your Retirement Savings
For 2018, the deadline for contributing to IRAs and Roth IRAs is April 15, 2019. But contributions to business retirement accounts can be delayed until your extended filing date, as late as October 15 for some businesses.
Save for Education
For 2019, it is a good idea to put money into a college savings plan early in 2019 – especially if you missed the deadline for 2018. In Illinois, you are allowed to deduct 529 contributions from your income – up to $20,000 if you are married or $10,000 if you are single. That would save 4.95% of Illinois income tax – or nearly $1,000 for a married couple adding the maximum.
In Illinois, 529 money can only be used for college or trade schools. Despite the federal change to allow use of 529 plans for elementary, middle, or high school, Illinois is among the 17 states that did not go along with this change.
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Give to Charity
You can start early for 2019 by making charitable contributions. If you are at least 70 ½ and you plan to give money to a charity, you can make a qualified charitable deduction (QCD) of up to $100,000 from your IRA. This would count toward your required minimum distribution. The advantage is that the QCD does not count as income, which might result in lower taxes for you.
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Tax audits are not a pleasant experience. So, keep in mind the following audit triggers. Granted, some are out of one’s control.
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1)
Making a lot of money
2)
Failing to report all taxable income
3)
Taking higher than average deductions
4)
Running a cash intensive business
5)
Taking large charitable deductions
6)
Claiming rental losses
7)
Deducting alimony
8)
Claiming business losses considered hobby losses
9)
Deducting business meals, travel & entertainment
10)
Not reporting a foreign bank account
11)
Claiming 100% business use of a vehicle
12)
Misreporting health premium tax credit
13)
Early IRA or 401(k) payout
14)
Claiming day trading losses
15)
Operating a marijuana business
16)
Not reporting gambling winnings
17)
Currency transactions close to the $10,000 trigger point
18)
Claiming the foreign earned income exclusion
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If You Get a Letter From the IRS
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First of all, don’t panic. Requests for more information from the IRS are usually routine. Make sure you understand what the IRS is looking for so you can answer appropriately. Call the IRS if you need further clarification (when the partial government shutdown ends). If you are working with a tax preparer, seek his or her input. Most IRS requests for information do not result in an audit.
Reminder: The IRS would not call. They would send a letter. So, if you get a call from someone claiming to be from the IRS, it is probably a scam.
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A group of Harvard researchers texted the scent of passion fruit from Paris to New York using a new technology. Currently, money is being raised to further develop these proprietary devices. These store and blend 3,000 scents to match the scent from the text request. Will this become commercially viable? We don’t know, but it is an example of the continued innovation around us.
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It has been shown over the years that stock prices generally correlate with corporate earnings. In 2018, S&P 500 earnings are expected to have risen by 20%, but S&P 500 stock prices declined by 6%. In 2019, S&P 500 earnings are expected to increase an additional 6.9% to another all-time high. This is creating a growing gap between stock fundamentals and stock prices. Over time, we expect this gap to close.
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If earnings come in around their forecast, the resolution of this gap should be a healthy increase in stock prices. If earnings come in below estimates, we might see muted stock price gains or flat to lower stock prices. As always, we will keep our attention on earnings.
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New Website
If you have not seen it yet, please take a minute to visit our updated website. It should be easier to navigate.
This update was important because more clients have been signing into their secure on-line portals – to access their portfolio updates and important financial documents in their individual, personalized vaults.
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