2024 | April 1

The Markets

Stocks Rise



The S&P 500 and the Dow both finished at record-high closing levels in a holiday-shortened trading week that concluded on Thursday, prior to a Friday report on inflation. The S&P 500 and the Dow both posted fractional weekly gains while the NASDAQ slipped. March marked the fifth positive month in a row for the major U.S. stock indexes, and the S&P 500 posted its strongest first-quarter result since 2019.

Friday’s reading from the U.S. Federal Reserve’s preferred gauge for tracking inflation showed that consumer prices rose at a much slower pace than they had been a few months earlier. The Personal Consumption Expenditures Price Index rose at a 2.8% annual rate in February, excluding food and energy prices. That result was unchanged from the previous month’s figure, which was the slowest increase since March 2021.

A boost from consumer spending prompted the government to adjust its final estimate of fourth-quarter economic growth. GDP rose at a 3.4% annual rate, up from an earlier estimate of 3.2%. The result marked the sixth quarter in a row that the annual growth rate has exceeded 2.0%. 

Expectations are modestly positive heading into earnings season, which opens in mid-April as major banks begin reporting first-quarter results. As of Thursday, analysts surveyed by FactSet were expecting companies in the S&P 500 to post an average earnings increase of 3.6% compared with the same period a year earlier—potentially the third consecutive quarter of year-over-year earnings growth.

A monthly labor market report due out on Friday will show whether the recent trend of better-than-expected jobs numbers extended into March. In February, the economy generated 275,000 new jobs—above the roughly 200,000 that most economists had been expecting. The unemployment rate rose to 3.9% and wage growth slowed.

Source: John Hancock Investment Management

Historical Asset Class Performance

3 Reasons Tax Payers Get Notices From the IRS

Receiving a notice from the Internal Revenue Service (IRS) can be daunting. While some notices are resolved fairly easily, others require an audit.

So, how does the IRS determine who gets a notice? Michelle Singletary of the Washington Post reported, “The IRS examines returns to ensure that income, expenses, deductions, and credits are reported accurately. When an inconsistency is found, a taxpayer may undergo an audit or be notified that adjustments were made that could result in a refund or a required tax payment.”

Here are three issues that can bring a tax notice to your mailbox:

1. Math mistakes. Taxes are a great example of the importance of math in real life. In 2022, the IRS issued more than 9 million notices because of math errors. The top triggers were calculations related to the Recovery Rebate Credit and the Child Tax Credit. Most notices simply adjusted taxpayers’ returns and indicated whether additional amounts were owed, or higher refunds were due.

2. Missing income. Tax returns are supposed to account for all income a tax filer earned over the tax year. Income typically is reported by employers, mortgage companies, banks (or other sources of income) on Forms W-2 and 1099, and other forms. The IRS Automated Underreporter program systematically matches tax returns and informational tax forms. When the information does not match, the tax filer gets a notice.

3. Unusual tax deductions. The IRS uses statistics to determine normal levels for various deductions. If your deductions are higher-than-average, your return may be flagged. Joy Taylor of Kiplinger Personal Finance reported,

“If the deductions, losses, or credits on your return are disproportionately large compared with your income, the IRS may want to take a second look at your return. Taking a big loss from the sale of rental property or other investments can also spike the IRS's curiosity. Ditto for bad debt deductions or worthless stock.”

That doesn’t mean you shouldn’t take a deduction or tax credit, just make sure you have proper documentation.

If you have any questions about taxes, talk with a tax professional. They can help minimize the chance that your tax return will trigger an audit or a notice from the IRS.

Phone: (615) 709-8709

Fax: (615) 505-3306

eMoney

Charles Schwab

Advyzon

Emily Triano

Operations Manager

emily@ajadvice.com

Maya Laws

Operations Associate

maya@ajadvice.com

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