Tax myths are a lot like a bad date. They are annoying and seem to last forever. Yet people have beliefs about income taxes that have no basis in reality.

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The Markets Domestic equities continued to shake off their winter chill as the S&P 500 and Russell 2000 squeaked into record territory once again. The Dow industrials rose above 18,000 for the first time since New Year’s Eve, and the Nasdaq’s 3% gain put the index at its highest level since March 2000.  Meanwhile, oil prices that remained above $50 a barrel and not-terrible European economic data provided some reassurance about the state of global growth.

Last Week’s Headlines

• Greece’s relationship with the rest of the eurozone remained a source of uncertainty after a meeting of finance ministers on Monday. Greece’s newly elected government, which promised to ease austerity measures, reportedly rejected a joint statement announcing a six-month extension of the existing bailout agreement, which is set to expire on February 28.
• A 0.7% increase in German economic growth helped the eurozone’s gross domestic product rise 0.3% (0.4% for the full 28-member European Union) during Q4 of 2014. Both were improvements from Q3, and represented annual growth of 0.9% for the eurozone and 1.4% for the EU.
• Germany, Russia, France, and Ukraine appeared to have reached a cease-fire agreement designed to end the struggle for control over eastern Ukraine. However, reports of fresh equipment and fighting immediately afterwards raised questions about whether the EU would impose additional economic sanctions against Russia next week.
• U.S. job openings in December finally surpassed their prerecession high. According to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, there were 5 million openings and 5.1 million new hires (the most since November 2007). Higher turnover and a willingness to change jobs suggests that workers are increasingly confident about the economy.
• After a strong Q4, retail sales dropped off in January. However, the Commerce Department said that some of the 0.8% decline was the result of lower gas prices cutting into total sales at gas stations. Excluding gas, sales were basically flat.

Eye on the Week Ahead

In a holiday-shortened week, reaction to the showdown between Greece and the rest of the eurozone is likely to remain a focus. U.S. manufacturing and housing data as well as minutes of the most recent Federal Open Market Committee meeting also are on tap.

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All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. Prepared by Broadridge Investor Communication Solutions, Inc. 2015.

Do you think today’s 50-year-olds can count on getting their Social Security benefits when they retire?

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The Markets

Hit the reset button: A rebound in the price of oil and some promising economic data helped equities recoup their losses of the week before, returning them to roughly even for the year. As oil rose above $50 a barrel once again and investors regained confidence in equities, the yield of the benchmark 10-year Treasury note rose as prices fell. 

Last Week’s Headlines

• The U.S. economy added 257,000 jobs in January, and the Bureau of Labor Statistics figures for jobs created in November and December were revised upward substantially. Even more encouraging, average hourly earnings rose 12 cents to $24.75. However, because more jobs drew more workers back into the workforce, the unemployment rate was little changed at 5.7%; it has been within 0.1% of that level since October.
• The Federal Communications Commission announced proposed regulations that would treat Internet service providers much like telecommunications companies. The regulations, which would prevent providers from varying service speeds based on how much a customer paid for service, are scheduled to be voted on by the full commission at its February 26 meeting.
• More signs of slowing growth prompted China’s central bank to ease its reserve requirements for the country’s commercial banks, which should make more money available for lending. HSBC’s China Services PMI–a key measure of non-manufacturing activity–showed that growth had fallen in January to 51.8%, its lowest level in six months and just barely in expansion territory. The official National Bureau of Statistics’ non-manufacturing PMI index hit 53.4%, also indicating slower growth, while the NBS’s equivalent gauge for the manufacturing sector actually showed a slight contraction with a reading of 49.8%.
• Personal income rose 0.3% in December, according to the Bureau of Economic Analysis; adjusted for inflation, the increase was 0.5%. Meanwhile, personal consumption was down 0.3%.
• During a tour aimed at convincing European leaders to modify the terms of its bailout agreements, Greek Finance Minister Yanis Varoufakis proposed a “bridge agreement” until a more lasting solution to restructuring the country’s debt can be crafted. The European Central Bank said it would not allow Greek sovereign debt to be used as collateral for loans from the bank, but investors were partly reassured by the ECB’s authorization of emergency liquidity assistance for Greece’s central bank in case of a run on Greek banks.
• U.S. manufacturing growth slowed slightly in January, according to the Institute for Supply Management, but growth in the services sector accelerated by 0.2% during the month.
• The Commerce Department said construction spending was up 0.4% in December, with residential building accounting for most of the increase. For all of 2014, construction was 5.6% higher than in 2013, driven largely by a 10.5% increase in nonresidential construction.
• The Commerce Department said new orders at U.S. manufacturers fell 3.4% in January–the fifth straight monthly decline–but that business orders for capital equipment slipped only 0.1%.

Eye on the Week Ahead

Investors are likely to keep an eye on oil prices and the unfolding situation in Greece. Also, they may watch to see whether additional economic sanctions are in store if Russia ignores German Prime Minister Angela Merkel’s Wednesday deadline to present a plan for resolving the conflict in Ukraine.

Questions?  We are here to help.

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All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. Prepared by Broadridge Investor Communication Solutions, Inc. 2015.

The latest reading on how much we’re saving for retirement shows the average 401K plan is at a record high– $91,300 at the end of 2014.

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The Markets

(Un)Happy New Year: Fresh uncertainties in Europe, slowing economic growth, anticipation of a looming Federal Reserve rate hike, and a stronger dollar all contributed to a volatile month for equities. The losses weren’t good news for believers in the January Effect (the idea that equities’ behavior in January suggests what might happen during the rest of the year). However, it might also be useful to remember that the S&P 500 lost 3.6% last January but ended 2014 up 11.4%.

Oil prices fell below $50 a barrel, but that seemed to be a mixed blessing. Lower gas prices boosted consumers’ spending power, but the sharp declines also raised questions about whether prices would fall so far that energy companies would cut back on jobs and/or ongoing operations. And as investors sought out the safety of U.S. Treasuries, the benchmark 10-year yield lost roughly half a percent in January as prices rose.

The Month in Review

• The U.S. economy grew more slowly in Q4, according to the Bureau of Economic Analysis’s initial estimate. The 2.6% increase in gross domestic product was roughly half the 5% seen in Q3. The BEA said increased imports, cuts in federal government spending, reduced business investment, and a downturn in exports helped slow economic growth. The major bright spot in the report was a 4.3% increase in consumer spending–the fastest growth since before the financial crisis.
• The addition of 252,000 new jobs in December cut the unemployment rate by 0.2% to 5.6%. According to the Bureau of Labor Statistics, those additions exceeded 2014’s 246,000 monthly average gain. Hourly wages fell 5 cents to $24.57, though they were 1.7% higher than in December 2013.
• Europe got a lot of attention in January. The European Central Bank finally announced a long-awaited quantitative easing program worth at least €1.1 trillion ($1.3 trillion) to try to stimulate the sluggish economy there. Coupled with the Swiss National Bank’s abandoning its cap on the value of the Swiss franc, the decision helped weaken an already struggling euro; at one point, the common Eurozone currency was worth less against the U.S. dollar than it had been in 11 years.
• Greece elected a new president, Alexis Tsipras, whose anti-austerity party pledged to renegotiate the terms of bailouts that rescued the country from financial crisis in 2011 and 2013. The potential for confrontation with other European Union countries raised fresh questions about Greece’s financial stability and continued EU membership.
• The Federal Reserve’s monetary policy committee once again said it is in no hurry to begin raising interest rates, in part because it foresees inflation slowing even further in the short term before eventually rising closer to its 2% target. The committee said it expects moderate growth to continue, and its statement expressed little concern about international economic weakness.
• The largest monthly decline in U.S. consumer energy costs since December 2008 was largely responsible for December’s 0.4% drop in the Consumer Price Index; the Bureau of Labor Statistics said consumer prices overall have increased only 0.8% over the last 12 months. Meanwhile, the plunging cost of oil also helped cut wholesale prices 0.3% for the month; the decline–the fourth in the last five months–was the sharpest drop in more than 3 years and left the 12-month wholesale inflation rate at 1.1%.
• After a slow November, sales of new homes were up 11.6% in December, according to the Commerce Department. And existing-home sales bounced back in December; the National Association of Realtors® said sales rose 2.4% during the month. However, the S&P/Case-Shiller 20-City Composite Index suggested that home prices are showing signs of struggling; the index fell 0.2% in November, and the 4.3% increase over November 2013 was less than the 4.5% annual gain seen the previous month.
• The Commerce Department said durable goods orders unexpectedly fell 3.4% in December–the fourth decline in the last five months. Though a 55% drop in commercial aircraft orders played a significant role in the weakness in new orders, the Commerce Department said business spending on capital equipment also fell 9.7%.

Eye on the Month Ahead

As the new Greek government settles in, investors will be assessing its chances of successfully altering the bailout agreement terms imposed by the so-called “troika”–the European Commission, the European Central Bank, and the International Monetary Fund. The current bailout agreement is scheduled to expire on February 28 unless an extension is granted. And with parts of the United States having been hit hard by two successive major winter storms, investors also may begin to wonder whether bad weather might chill the U.S. economy temporarily, as it did last winter.

Questions?  We are here to help.

See our Disclosures.

All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.  Prepared by Broadridge Investor Communication Solutions, Inc. 2015.

The Markets

The strength of the U.S. dollar contributed to weak Q4 earnings reports from some major blue-chip companies that earn a substantial portion of their revenues overseas. That in turn contributed to more losses for equities across the board, with the Dow and S&P 500 suffering the most. As a result, investors continued to seek the security of U.S. Treasuries; the benchmark 10-year yield has now lost roughly half a percentage point since the beginning of the year as demand has driven up prices.

Last Week’s Headlines

• The U.S. economy grew more slowly in Q4, according to the Bureau of Economic Analysis’s initial estimate. The 2.6% increase in gross domestic product was roughly half the 5% seen in Q3. The BEA said increased imports, cuts in federal government spending, reduced business investment, and sluggish exports helped slow economic growth. The major bright spot in the report was a 4.3% increase in consumer spending–the fastest growth since before the financial crisis.
• The Federal Reserve’s monetary policy committee once again said it is in no hurry to begin raising interest rates, in part because it foresees inflation slowing even further in the short term before eventually rising closer to its 2% target. The committee said it expects moderate U.S. growth to continue, and its statement expressed little concern about international economic weakness.
• The Commerce Department said durable goods orders unexpectedly fell 3.4% in December–the fourth decline in the last five months. Though a 55% drop in commercial aircraft orders played a significant role in the weakness in new orders, the Commerce Department said business spending on capital equipment also fell 9.7%.
• After a slow November, sales of new homes were up 11.6% in December, according to the Commerce Department. However, the S&P/Case-Shiller 20-City Composite Index showed that home prices continued to struggle; the index fell 0.2% in November, and the 4.3% increase over November 2013 was less than the 4.5% annual gain seen the previous month.

Eye on the Week Ahead

As the new Greek government settles in, investors will be assessing its chances of success in altering the bailout agreement imposed by the so-called “troika”–the European Commission, the European Central Bank, and the International Monetary Fund. Consumer and manufacturing data are on tap as earnings reports continue to come in. And the release of President Obama’s budget for the upcoming fiscal year will doubtless prompt discussion of the potential impact of any proposed tax reforms.

Questions?  We are here to help.

See our Disclosures. 

All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.Prepared by Broadridge Investor Communication Solutions, Inc. 2015.

A couple working on their retirement plan needs help making the transition from saving to taking income. Here are three key steps to follow.

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