
By: Sean Schmid, Chief Operating Officer – Penn Investment Advisors
Weekly Update – March 9, 2020
The Week on Wall Street
Heightened coronavirus fears, falling yields, and Super Tuesday primary results sent stocks on a rollercoaster ride of sharp price swings, leaving stocks marginally higher for the week.
The Dow Jones Industrial Average improved 1.79%; the S&P 500, 0.61%; the Nasdaq Composite, 0.10%. Outside the U.S., developed equity markets tracked by the MSCI EAFE Index rose 2.60%.[1],[2]
A Swift Fed Decision
Wednesday morning, the Federal Reserve lowered its short-term interest rate by 0.5% to a range of 1.00%-1.25%, making its biggest cut since 2008. Addressing the media, Fed Chairman Jerome Powell said that the move was made to give the economy a “meaningful” lift and “help boost household and business confidence.”
The question is whether reducing borrowing costs can effectively address growing business and consumer anxieties about shopping, traveling, and gathering.[3]
A Push Toward Treasuries
The uncertainty on Wall Street has heightened demand for Treasury bonds. Their yields typically fall as their prices rise, and fall they did last week. The yield on the 10-year Treasury dipped under 0.70% during Friday’s market day, an all-time low.[4]
Winter Hiring Surge Continues
The Department of Labor’s latest employment report showed companies adding 273,000 net new hires last month. Net monthly payroll growth has averaged 243,000 since December.[5]
What’s Ahead
The Fed’s 50-basis-points cut in the federal funds rate has now shifted the sights of investors toward the European Central Bank, which is expected to make a policy announcement on March 12. The ECB has less room to maneuver than the Fed, since its key interest rate currently stands at -0.5%. Negative interest rates have done little to lift eurozone economies, which may necessitate more-creative monetary policy accommodation from the ECB’s new president, Christine Lagarde.
Traders are also focused on whether the Federal Reserve will make another rate cut on March 18, when its next meeting concludes. The half-point rate cut this past week did little to soothe stock market concerns; opinions vary about what the central bank might choose to do next.[6]
The Week Ahead – Key Economic Data:
Wednesday: The Census Bureau publishes a new Consumer Price Index, showing monthly and yearly inflation.
Friday: The University of Michigan presents its initial Consumer Sentiment Index for March, measuring consumer confidence.
Source: Econoday / Federal Reserve, March 6, 2020. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision. The release of data may be delayed without notice for a variety of reasons, including the shutdown of the government agency or change at the private institution that handles the material
The Week Ahead – Companies Reporting Earnings:
Monday: Thor Industries (THO)
Tuesday: Dick’s Sporting Goods (DKS)
Thursday: Adobe (ADBE), Broadcom (AVGO), Dollar General (DG), Oracle (ORCL), Ulta Beauty (ULTA)
Source: Zacks, March 6, 2020, Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
Tax Tips
Tips for Gift Taxes
If you gave someone money or property, you may owe taxes on the gift. Here are some tips to help you determine if your gift is taxable:
Nontaxable Gifts. While the default assumption is that gifts are taxable, the following are nontaxable gifts:
- Gifts that do not exceed the annual exclusion for the calendar year ($15,000 in 2019)
- Tuition or medical expenses you paid directly to a medical or educational institution for someone
- Gifts to your spouse
- Gifts to a political organization for qualified uses
- Gifts to qualifying charities
Annual Exclusion. For 2019, the annual exclusion is $15,000. Gifts under that amount are not subject to the gift tax, even if they don’t fall into one of the categories above. If you give a gift to someone else, the gift tax usually does not apply until the value of the gift exceeds the annual exclusion for the year.
For more information on gifts and taxes, speak to a qualified tax professional.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional. Tip adapted from IRS.gov[7]
Investment advisory services are provided through Penn Investment Advisors, Inc. (PIA), a Registered Investment Adviser. PIA is a wholly-owned subsidiary of Penn Community Bank (Bank). Investment products, securities and services offered by PIA are not a deposit of, or obligation of, or guaranteed by the Bank, or an affiliate of the Bank, are not insured by the FDIC or any agency of the United States, the Bank, or any affiliate of the bank and involve investment risk, including the possibility of loss of principal.
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International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
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Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
These are the views of Penn Investment Advisors, Inc., and other listed sources. This should not be construed as investment advice. Penn Investment Advisors, Inc., does not give tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information. By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.
[1] https://www.wsj.com/market-data
[2] https://www.wsj.com/market-data/quotes/index/XX/MSCI%20GLOBAL/990300/historical-prices
[3] https://www.washingtonpost.com/business/2020/03/03/economy-coronavirus-rate-cuts/
[5] https://finance.yahoo.com/news/nonfarm-payrolls-reach-peak-273k-151603832.html
[6] https://www.fxstreet.com/macroeconomics/central-banks/fed