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Weekly Gains for Big Benchmarks –
February 18, 2020

The Week on Wall Street

Daily headlines about the coronavirus had little impact on stock market averages last week. Earnings and mergers had more influence.

All three Wall Street benchmarks improved. The Nasdaq Composite rose 2.21%, outpacing the S&P 500, up 1.58%, and the Dow Jones Industrial Average, up 1.02%. The MSCI EAFE index, which tracks developed overseas equity markets, added 0.17%.1https://www.wsj.com/market-data,2https://quotes.wsj.com/index/XX/MSCI%20GLOBAL/990300/historical-prices

Jerome Powell Testifies on Capitol Hill

Commenting that the economy is in a “very good place,” Federal Reserve Chairman Jerome Powell told congressional legislators that he did not currently see a significant recession risk.

“There’s nothing about this expansion that is unstable or unsustainable,” Powell remarked during his semi-annual report to the House Financial Services Committee. He did reiterate that the central bank was “carefully” watching the coronavirus outbreak, and that it could “very likely” have residual economic impact on the U.S.3https://finance.yahoo.com/news/powell-testimony-february-2020-us-economic-expansion-not-unstable-or-unsustainable-165916522.html

Yearly Inflation Reaches 2.5%

Consumer prices have not advanced to this degree since the 12-month period ending in October 2018. Underneath this January headline inflation number, core inflation (minus food and energy prices, which are often volatile) was up 2.3% year-over-year.

These numbers are from the Consumer Price Index, maintained by the Bureau of Labor Statistics. The Federal Reserve monitors inflation using its core personal consumption expenditures (PCE) index, which remains below the central bank’s 2% yearly inflation target.4https://www.cnbc.com/2020/02/13/us-consumer-price-index-rose-0point1percent-in-january-vs-0point2percent-expected.html

Gains in Retail Sales, Sentiment

The Census Bureau said retail sales were up 0.3% in the first month of the year, matching the consensus forecast of analysts polled by MarketWatch. Additionally, the University of Michigan’s preliminary February consumer sentiment index monitoring consumer confidence factors went back above 100 last week (100.9).5https://www.marketwatch.com/tools/calendars/economic

Final Thought

The S&P 500 has risen more than 1% since the coronavirus surfaced. During the SARS epidemic of 2003, the MERS outbreak of 2013, and the 2015-16 Zika virus breakout, the index declined.6https://www.cnbc.com/2020/02/13/us-futures-point-to-lower-open-on-wall-street.html

Robert Roman
CEO, Managing Director
MGO | Wealth Advisors

THE WEEK AHEAD:
KEY ECONOMIC DATA

Wednesday: The Federal Reserve releases minutes from its January meeting, and the Census Bureau presents data on January residential construction activity.

Friday: The National Association of Realtors issues its latest existing home sales report.

  

Source: MarketWatch, February 14, 2020

The MarketWatch economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. 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 WEEK AHEAD:
COMPANIES REPORTING EARNINGS

Tuesday: Medtronic (MDT), Walmart (WMT)
Wednesday: Analog Devices (ADI), NetEase (NTES)
Thursday: Dominos (DPZ), Hormel Foods (HRL), Southern (SO)
Friday: Deere & Co. (DE), Royal Bank of Canada (RY)

Source: Zacks, February 14, 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.

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“Act as if what you do makes a difference. It does.”
– William James

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5 Facts About Capital Gains

When you sell a capital asset like an investment or a piece of property, the sale can result in a capital gain or loss. The IRS defines a capital asset as “most property you own for personal use or own as an investment.” Here are six facts you should know about capital gains:

  1. A capital gain or loss is the difference between what you originally paid for the asset (your basis) and the amount you get when you sell an asset.
  2. You must include all capital gains in your income, and you may be subject to the Net Investment Income Tax if your income is above certain amounts. Consult a qualified tax expert for help.
  3. The IRS allows you to deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.
  4. If your total net capital loss is more than the limit you can deduct, you can carry it over to next year’s tax return.

* 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.gov7https://www.irs.gov/taxtopics/tc409

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The Myth of Always Hitting Your Regular Distance

H. Hugh Briss, who plays golf every weekend at the local country club, faces a 170-yard approach shot over a pond. When he’s going good, Hugh can hit a 6-iron 170 yards. He selects his 6-iron. He hits it a little fat, and the ball plops into the water. Hugh, now peeved, was so confident he could reach the green.

Truth be told, Hugh was overconfident. He failed to account for a simple fact: we don’t hit our regular distance all the time. Our approach shots often don’t carry as far as we assume they will. When you really need to carry a hazard, take one club more than you think you might need. You might like the results. Remember, there is usually less trouble behind a green than in front of it. 
Tip adapted from Pipestone Golf8https://www.pipestonegolf.com/blog/41-improve-approach-shots

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Eating To Your Heart’s Content

    Deciding to change your diet can feel daunting. It can be difficult to figure out which one is “best” for you. Many fad diets come and go, but there are a few that have stuck around, the most popular being the Mediterranean diet.

    The Mediterranean diet is less of a traditional diet and more of a lifestyle shift toward healthier eating patterns. It’s modeled after principles of Italian and Greek cuisine, which have remained relatively unchanged since the 1960s. Consuming this diet has been correlated with lower rates of heart disease, type 2 diabetes, and other chronic illnesses. The diet emphasizes eating more fruits, vegetables, legumes, nuts, seeds, fatty fish, whole grains, and olive oil and fewer meats and dairy products. The diet is flexible. Elimination isn’t the intention, rather balance more toward nutrient-rich foods versus energy-dense ones.

    Food is life, and making healthy choices can help support a healthier life. While the Mediterranean diet could be a good option for someone, no single diet will fit everyone’s lifestyle, preferences, and health needs perfectly. So, be sure to discuss any dietary choices you make with your physician or registered dietitian first.

    Tip adapted from Healthline.com9https://www.healthline.com/nutrition/mediterranean-diet-meal-plan

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    Upgrading to an Eco-Friendly Fridge

    Is your refrigerator running? If it’s more than 10 years old, it may be time to upgrade with a more eco-friendly model. Besides saving money on your electric bill, you’ll be reducing your carbon footprint at the same time.

    The most efficient models, according to Energy Star, are refrigerators with freezers located on the top. It doesn’t seem like a small change, but models with freezers on the bottom use an average of 560kWh compared to 360kWh.

    The other big energy saver is to buy a model with LED lights. LED lights are roughly 80% more efficient than traditional light bulbs, which will reduce your energy consumption even further.

    Tip adapted from Green Living Ideas10https://greenlivingideas.com/2019/10/14/buying-a-new-refrigerator-heres-how-to-get-an-eco-friendly-one-to-save-money-and-pollution/

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    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.

    Diversification does not guarantee profit nor is it guaranteed to protect assets.

    International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

    The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

    The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

    The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

    The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia and Southeast Asia.

    The S&P U.S. Investment Grade Corporate Bond Index contains U.S.- and foreign-issued investment-grade corporate bonds denominated in U.S. dollars.

    The SPUSCIG launched on April 09, 2013. All information for an index prior to its Launch Date is back-tested, based on the methodology that was in effect on the Launch Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.

    The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

    The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

    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.

    You cannot invest directly in an index.

    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.

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