December 2024 - Research Financial Strategies

Weekly Market Insights | Holiday Spending Up

by Jim Streight | Dec 30, 2024 | Weekly Stock Market Commentary

Stocks notched a slight gain over the holiday week. A tech-driven rally in the first half of the week was clawed back in the second half as investors took profits following the market holiday.

The Standard & Poor’s 500 Index advanced 0.67 percent, while the Nasdaq Composite Index rose 0.76 percent. The Dow Jones Industrial Average added 0.35 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, rose 1.54 percent.^1,2

Ho-Ho, Then No-Go

Stocks rallied during the first half of a shortened holiday trading week. Holiday cheer won out despite news of declining consumer confidence in December, a drop in durable goods, and new home sales reporting below expectations.^3,4

The “Santa rally” lost its ho-ho-go after the midweek holiday. Megacap technology stocks led markets down on Friday, giving back most of the gains from the first half of the week.^4,5

^{Source: YCharts.com, December 28, 2024. Weekly performance is measured from Friday, December 20, to Friday, December 27.}^{TR = total return for the index, which includes any dividends as well as any other cash distributions during the period.}^{Treasury note yield is expressed in basis points.}

The Real Santa

While Santa got the headlines, the consumer drove the holiday shopping sleigh this year.

Holiday spending—defined by the period from November 1 through December 24—rose 3.8 percent in 2024, compared with 3.1 percent in 2023. Economists closely follow consumer activity since consumer spending makes up roughly two-thirds of total gross domestic product. Market watchers attributed the strong job market and growth in household wealth as the primary drivers of consumer strength.⁶

This Week: Key Economic Data

Monday: Pending Home Sales. 3-Month Treasury Bill Auction.

Tuesday: Case-Shiller Home Price Index.

Wednesday: Stock market closed.

Thursday: Jobless Claims. EIA Petroleum Status Report. Fed Balance Sheet. 30-Year Treasury Bond Announcement.

Friday: Motor Vehicle Sales. ISM Manufacturing Index. Federal Reserve Officials Thomas Barkin and Mary Daly speak.

^{Source: Investors Business Daily - Econoday economic calendar; December 27, 2024}^{The Econoday 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.}

This Week: Companies Reporting Earnings

Friday: The Greenbrier Companies, Inc. (GBX)

^{Source: Zacks, December 27, 2024.}^{Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. 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.}

“The strongest of all warriors are these two — Time and Patience.”

– Leo Tolstoy

Do You Have to Pay Taxes on Your Hobby?

Whether you picked up embroidering, dog grooming, or making jewelry, a side hobby may or may not require paying taxes.

Does your kids' lemonade stand need to pay taxes? Probably not but if you're doing something like selling cookies out of your kitchen, you might need to check out the rules.

Here are some things to consider when determining whether your activity is a hobby or business:

Is your hobby carried out in a businesslike manner?
Do you maintain complete and accurate books and records for your hobby?
Is the effort you put into your hobby intended to make a profit?
Do you depend on the income from your hobby for your livelihood?
Do you know how to carry out your hobby as a successful business?
Have you made a profit from your hobby?

If you receive income from your hobby with no intention of making a profit, you may have to report the income to the IRS.

This information is not a substitute for individualized tax advice. Please discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS⁷

How Well Do You Know Your Sunburn Protection Factor?

We all know that protecting your skin from the sun is important, but did you know that not all sunscreens are made equal? Dermatologists have some specific recommendations when it comes to your Sunburn Protection Factor (SPF). Here are some tips:

Choose a broad-spectrum sunscreen that protects you from both UVB and UVA rays.
Always use at least SPF 30
Choose a water-resistant sunscreen.
Don’t forget your lips! Apply sunscreen to your lips or use a chapstick with SPF 30 or higher.
Reapply your sunscreen every 2 hours if you’re sweating a lot in the water.
Apply enough sunscreen to cover all skin that clothing will not cover. Most adults need about 1 ounce—or enough to fill a shot glass—to cover their bodies completely.
Apply your sunscreen 15 minutes before going outdoors.

These tips will help you choose the best sunscreen to protect your skin for years.

Tip adapted from American Academy of Dermatology⁸

Throughout Friday, Hanna asks her mother the same four-word question. On each occasion, her mother gives her a different answer. What is the question?

Last week’s riddle: It softly goes up and down the stairs in many homes and office buildings, yet it never moves. What could it be?
Answer: Carpet.

Delicate Arch

Arches National Park, Utah, USA

Footnotes and Sources

^{1. The Wall Street Journal, December 27, 2024}

^{2. Investing.com, December 27, 2024}

^{3. MarketWatch.com, December 23, 2024}

^{4. CNBC.com, December 26, 2024}

^{5. The Wall Street Journal, December 27, 2024}

^{6. MarketWatch.com, December 26, 2024}

^{7. IRS.gov, March 18, 2024}

^{8. American Academy of Dermatology, August 1, 2024}

Weekly Market Commentary December 26, 2024

by Jim Streight | Dec 26, 2024 | Carson

The Markets

But that’s not what I wanted!

Last week, markets were about as happy as a toddler opening a gift they didn’t like.

The first upsetting event followed the Federal Reserve (Fed)’s final policy meeting for 2024. The Fed met expectations by lowering its policy rate one-quarter of a percentage point, as many economists had anticipated. The federal funds rate is now a full percentage point lower than it was at the start of September.

In later remarks, Fed Chair Jerome Powell confirmed the United States economy remained strong, the jobs market remained solid, and progress had been made toward the Fed’s inflation goals. That was all good news. The upset came when Powell pointed out that inflation remained higher than the central bank’s target and the Fed will “be more cautious as we consider further adjustments to our policy rate.”

Powell’s statement was reflected in the “dot plot,” a scatter chart showing projections for the federal funds rate over the next three years. The chart suggested there may be only two rate cuts in 2025, which is fewer than markets had hoped.

“Stocks tumbled 3 [percent] and bonds plunged too, sending yields on benchmark 10-year Treasuries to their highest in seven months…Of course, Powell’s remarks…weren’t a total blindside. Economic data has been hinting at a resilient U.S. economy, while inflation has remained stubbornly above the Fed’s 2 [percent] target. In the $29 trillion U.S. bond market, traders had pushed yields up some 75 basis points on the 10-year Treasury since the central bank first started cutting rates in mid-September,” reported Liz Capo McCormick, Michael Mackenzie, Jess Menton, and Alexandra Semenova of Bloomberg.

The markets’ malaise deepened as the specter of a holiday government shutdown appeared. “The S&P 500 dipped late Wednesday…after [Elon] Musk and [President-elect Donald] Trump derailed the original spending deal,” reported Anita Hamilton, Liz Moyer, Bill Alpert, and Callum Keown of Barron’s. A fast-tracked second deal also failed. The chance of a shutdown loomed as markets closed for the week, but policymakers passed a stopgap funding bill just after midnight, reported Christina Wilkie of CNBC.

Markets were concerned because government shutdowns hurt the American economy. “A shutdown at the end of 2018 that ran through the new year was partial because five of the government’s 12 appropriation bills had been funded. Even still, the shutdown…reduced the U.S. gross domestic product by $11 billion, according to the Congressional Budget Office,” reported Dan Rosenzweig-Ziff of The Washington Post.

Investors’ spirits lifted on Friday after the Fed’s favorite inflation gauge was released. The Personal Consumption Expenditures Index showed that headline inflation was 2.4 percent year over year, slightly higher than the previous month. However, core inflation, which excludes food and energy, cooled significantly month to month.

Last week, major U.S. stock indices finished lower. The yield on the 10-year U.S. Treasury rose last week, steepening the yield curve, reported Liz Capo McCormick of Bloomberg.

WHICH COUNTRY HAD THE BEST ECONOMY IN 2024? Despite high interest rates, stubborn inflation, and wars in Ukraine and the Middle East, there was no stopping the global economy in 2024. In October, the International Monetary Fund forecasted the world economy will grow by 3.2 percent in 2024 with the world’s developed economies growing by 1.8 percent and emerging and developing economies growing by 4.2 percent. The United States was projected to grow by 2.8 percent over the same period.

While the U.S. economy is growing faster than many advanced economies, the United States did not have the best economy in 2024, according to analysis from The Economist. The newspaper reviewed economic and financial indicators, including:

Gross domestic product, or GDP, which is the value of all goods and services produced by a country,
Stock market performance,
Core inflation,
Unemployment, and
Government deficits, which is the difference between what a government receives and what it spends.

When the analysis of 37 nations was complete, The Economist determined that Spain had the “best” economy for 2024.

“While Europe’s other large economies are plunged in gloom, Spain’s is soaring. It is set to grow 3 [percent] this year…almost four times the euro-area average. Hit harder than most by the pandemic, it now boasts 1.8 [million] more jobs than at the end of 2019. Investors have noticed: with faster growth and a lower fiscal deficit than France, Spain has seen its bond yields dip below those of its northern neighbor for the first time since 2007,” reported The Economist.

Ireland, Denmark, Greece, and Italy rounded out the top five. The United States landed in 20^thposition. The U.S. had higher inflation than most of the top five, a slightly higher unemployment rate, and a much higher deficit, which offset solid economic growth and extraordinary share price gains. Three of the top five economies had budget surpluses last year.

Weekly Focus – Think About It
“We cannot cure the world of sorrows, but we can choose to live in joy.”
—Joseph Campbell, writer

Sources:

Weekly Market Insights | Powell Signal Leaves Investors Cold

by Jim Streight | Dec 23, 2024 | Weekly Stock Market Commentary

Stocks were under pressure last week as the Fed Chair's hawkish comments unsettled investors ahead of the holiday season.

The Dow Jones Industrial Average received the hardest hit, falling 2.25 percent. The Standard & Poor’s 500 Index lost 1.98 percent, while the Nasdaq Composite Index dropped 1.78 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, retreated an eye-catching 3.38 percent.^1,2

No Santa Yet

Divergence marked the start of the week as megacap tech stocks rallied while the Dow Industrials fell for the eighth-straight session—its longest losing streak since 2018.³

Following its scheduled December meeting, the Fed announced it was cutting short-term rates by a quarter point, as widely expected. However, Fed Chair Jerome Powell also signaled fewer rate reductions next year. “From here, it’s a new phase and we’re going to be cautious about further cuts,” he said in his post-meeting news conference.

The rate news surprised investors, who were anticipating more dovish comments from the Fed Chair.^4,5

Markets were under pressure again early Friday as the spending bill to fund the federal government appeared to stall. But a lower-than-expected inflation update boosted the market and helped erase some of the earlier losses.^6,7

Holiday Cheer

Despite a difficult week, stocks are on track to have their second consecutive year of double-digit returns. Year to date, through Friday’s close, the S&P 500 was ahead by about 24 percent. In 2023, the S&P 500 also tacked on 24 percent for the full year.⁸