Rallies and Retreat

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.

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)

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.

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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.

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Consult your financial professional before making any investment decision.

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