"Pullbacks, Indicators, Barometers, and Fear"

Jeffrey D. Saut, Chief Investment Strategist

So most know we took one of our South Florida speaking tours last week.  Such tours consist of meeting with portfolio managers, presentations to clients of Raymond James, branch visits with our financial advisors, doing the media thing, well you get the idea.  To all of those emailers/callers we were unable to respond to – apologies – but, the fact of the matter is we were doing five or six events a day, interspersed with a massive amount of phone calls, and then drive to the next event.  While there were many questions about the bond/stock/commodity markets, the economy, earnings, etc., by far the most questions were about the December Low Indicator, because we broke below the December low last week.  Recall, we brought this indicator to the attention of Jeff and Yale Hirsch decades ago and they have published it in The Stock Trader’s Almanac ever since.  Since then it has been quoted by many Wall Street pundits, yet Lucien Hooper’s December Low Indicator would likely have been lost if not scribed by us a long, long time ago.  We like this story:
It was back in the early 1970s, when I was working on Wall Street that I encountered Lucien.  At that time Lucien, then in his 70s, was considered one of the savviest “players” in this business.  While known for many market axioms and insights, the one that stuck with me was Lucien’s “December Low Indicator.”  It seems like only yesterday we were sitting at Harry’s at the Amex Bar & Grill having lunch when he explained it.  “Jeff,” he began, “Forget all the noise you hear about the January barometer; pay much more attention to the December low.  That would be the lowest closing price for the Dow Jones during the month of December.  If that low is violated during the first quarter of the New Year, watch out!”
Now the track record of Lucien’s indicator over the past 50 years is pretty good, especially when taken in concert with the January Barometer (“So goes the month of January so goes the year”).  In the more recent history, however, Andrew Adam’s comments of last Friday are worth repeating.  To wit:
One potential red flag, however, is that that the Dow Jones Industrial Average did close below its December closing low of 24410 to give us violation of the "December Low Indicator" we referenced last month.  . . . The last time it happened was only two years ago back in 2016, though the situation was very different considering January 2016 began almost right where the December 2015 low sat, and the Dow ended up closing beneath it on the third trading day of the year.  That, of course, culminated in the January/February correction that ended on February 11 and saw the Dow ultimately fall about 14% from its previous trading high of early November 2015.  After that, though, the market went almost straight up to finish the year comfortably higher.  Overall, the December Low Indicator has a rather mixed history going back to 2000.  It is actually not uncommon at all to get a violation, with 12 occurrences since 2000, and the forward returns have been surprisingly encouraging.  From the point of the December low being broken, the Dow was up after three months 8 out of 12 times, up after six months 7 out of 12 times, and up after 12 months 9 out of 12 times.  So, while it does bear watching, we don't think the indicator, by itself, is enough to be overly concerned about, especially with stocks already near downside extremes.
Speaking to “downside extremes,” the envisioned February Flop came three sessions before our February 1 target, but it was within the +/- three-session window our models allow.  Subsequently, we got the anticipated selling climax last Tuesday, as related on CNBC that day.  Then, as is the typical pattern, the indices experienced a sharp throwback rally that we chatted about on that same CNBC appearance and said that it should fail, with the indices sliding to lower lows.  “The textbook chart pattern,” we said, “would be for an undercut low of Tuesday’s selling climax low.”  Well, that’s pretty much what has happened. What we find interesting is that pundits that NEVER saw this decline coming have been rushing out over the past few weeks touting various support levels; you pick the index, as well as their various stock buy ideas, all of which are pretty worthless until the equity markets exhaust themselves on the downside.  Ladies and gentlemen, when the stock market gets into one of the selling stampedes, all such comments are pretty useless!  So what now?
Well, while normally our mantra of “never on a Friday” should have applied to last Friday’s Flop, meaning stocks in a selling skein rarely bottom on a Friday, that mantra probably doesn’t play this time.  Indeed, the bottoming process we laid out weeks ago was almost textbook, punctuated by last Friday’s undercut low.  As written:

What should happen here is a selling climax low today followed by a throwback rally that fails, leading to a retest of the recent intraday lows.  The perfect chart pattern would be for a marginal undercut low downside test of this early week's trading lows, which would turn EVERYBODY bearish looking for another huge leg to the downside, yet we would BUY it, believing the worst has been seen in a continuing secular bull market.
And then there was this over the weekend from Canada’s savviest oracle ever, our pal Leon Tuey:
What a tumultuous week!  Don’t sweat and be happy as the correction is over and the great bull market has resumed.  On Tuesday, what investors saw was a classic selling climax, which comes at the end of a selling squall.  A selling climax is an emotional catharsis when investors “throw the baby out with the bathwater.”  Besieged by fear, investors are willing to sell at any price.  They fear that their holdings will go to zero.  Consequently, stocks move from weak hands into strong hands.  How fearful?  On Monday, my phone rang off the hook and it didn’t stop ringing until 9:30 p.m.  Most of the callers were  practitioners in the business, retired or active, and they came from Europe, Asia, and local.  That was the most phone calls that I’ve fielded in one day for more than 35 years!  They were all very calm and collected.  I am flattered that they called, but the calls were instructive.  Globally, investors panicked, which is very bullish.  Remember what Warren Buffett advised: “Be fearful when others are greedy and be greedy when others are fearful!” 
The call for this week: Well, it’s Saturday and we are still on the road.  Since we are writing this from Orlando, a fitting title for the last few weeks would be “Mr. Toad’s Wild Ride” (Toad); but we digress.  Speaking to yet another ubiquitous question from last week was, “Did we get a Dow Theory sell signal?”  The answer, at least by our interpretation of Dow Theory, is a resounding NO!  So, as stated, the bottoming process was picture perfect.  We called the downturn, last Tuesday’s selling climax, the subsequent failed throwback rally, and Friday’s undercut low (the print low below last Tuesday’s selling climax low).  Indeed, “picture perfect!”  Our energy models are calling for an upside energy whoosh this week, so we think the selling stampede is over!  

To see graph and read more please follow the link below:

https://raymondjames.bluematrix.com/sellside/EmailDocViewer?encrypt=f44853a4-3c56-4acf-a917-93aef2edefea&mime=pdf&co=RaymondJames&id=Matt.Goodrich@RaymondJames.com&source=mail

The Impact of the Tax Act on You

Greetings,

Here is an article with some important information we’d like to share with you regarding tax cuts and jobs and how it may impact you in 2018.

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, a sweeping $1.5 trillion tax-cut package that fundamentally changes the individual and business tax landscape. While many of the provisions in the new legislation are permanent, others (including most of the tax cuts that apply to individuals) will expire in eight years. Some of the major changes included in the legislation that affect individuals are summarized below; unless otherwise noted, the provisions are effective for tax years 2018 through 2025.

Individual income tax rates
The legislation replaces most of the seven current marginal income tax brackets (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%) with corresponding lower rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The legislation also establishes new marginal income tax brackets for estates and trusts, and replaces existing "kiddie tax" provisions (under which a child's unearned income is taxed at his or her parents' tax rate) by effectively taxing a child's unearned income using the estate and trust rates.

Single

If taxable income is:                                               Then income tax equals:

Not over $9,525                                                                                                    10% of the taxable income

Over $9,525 but not over $38,700                                      $952.50 plus 12% of the excess over $9,525

Over $38,700 but not over $82,500                                   $4,453.50 plus 22% of the excess over $38,700

Over $82,500 but not over $157,500                                 $14,089.50 plus 24% of the excess over $82,500

Over $157,500 but not Over $200,000                              $32,089.50 plus 32% of the excess over $157,500

Over $200,000 but not over $500,000                             $45,689.50 plus 35% of the excess over $200,000

Over $500,000                                                                    $150,689.50 plus 37% of the excess over $500,000

Head of Household

If taxable income is:                                               Then income tax equals:

Not over $13,600                                                                     10% of the taxable income

Over $13,600 but not over $51,800                                      $1,360 plus 12% of the excess over $13,600

Over $51,800 but not over $82,500                                   $5,944 plus 22% of the excess over $51,800

Over $82,500 but not over $157,500                                 $12,698 plus 24% of the excess over 82,500

Over $157,500 but not over $200,000                              $30,698 plus 32% of the excess over 157,500

Over $200,00  but not over $500,000                              $44,298 plus 35% of the excess over 200,000

Over $500,000                                                                    $149,298 plus 37% of the excess over $500,000

Married Individuals Filing Joint Returns

If taxable income is:                                                              Then income tax equals:

Not over $19,050                                                                                     10% of the taxable income

Over $19,050 but not over $77,400                                                       $1,905 plus 12% of the excess over $19,050

Over $77,400 but not over $165,000                                                     $8,907 plus 22% of the excess over $77,400

Over $165,000 but not over $315,000                                                   $28,179 plus 24% of the excess over $165,000  

Over $315,000 but not over $400,000                                                 $64,179 plus 32% of the excess over $315,000

 Over $400,000 but not over $600,000                                               $91,379 plus 35% of the excess over $400,000

Over $600,000                                                                                       $161,379 plus 37% of the excess over $600,000

Married Individuals Filing Separate Returns

 If taxable income is:                                              Then income tax equals:

Not over $9,525                                                                     10% of the taxable income

Over $9,525 but not over $38,700                                    $952.50 plus 12% of the excess over $9,525

Over $38,700 but not over $82,500                                $4,453.50 plus 22% of the excess over $38,700

Over $82,500 but not over $157,500                              $14,089.50 plus 24% of the excess over $82,500

Over $157,500 but not over $200,000                           $32,089.50 plus 32% of the excess over $157,500

Over $200,000 but not over $300,00                            $45,689.50 plus 35% of the excess over 200,000

Over $300,000                                                                 $80,689.50 plus 37% of the excess over $300,000

Standard deduction and personal exemptions
The legislation roughly doubles existing standard deduction amounts, but repeals the deduction for personal exemptions. Additional standard deduction amounts allowed for the elderly and the blind are not affected by the legislation and will remain available for those who qualify. Higher standard deduction amounts will generally mean that fewer taxpayers will itemize deductions going forward.

2018 Standard Deduction Amounts
Filing Status                                              Before Tax Cuts and Jobs Act                                             After Tax Cuts and Jobs Act

Single or Married Filing Separately                         $65,000                                                                                       $12,000

Head of Household                                                   $9,550                                                                                         $18,000

Married Filing Jointly                                                $13,000                                                                                         $24,000

Itemized deductions
The overall limit on itemized deductions that applied to higher-income taxpayers (commonly known as the "Pease limitation") is repealed, and the following changes are made to individual deductions:

 • State and local taxes — Individuals are only able to claim an itemized deduction of up to $10,000 ($5,000 if married filing a separate return) for state and local property taxes and state and local income taxes (or sales taxes in lieu of income).

• Home mortgage interest deduction — Individuals can deduct mortgage interest on no more than $750,000 ($375,000 for married individuals filing separately) of qualifying mortgage debt. For mortgage debt incurred prior to December 16, 2017, the prior $1 million limit will continue to apply. No deduction is allowed for interest on home equity indebtedness.

• Medical expenses — The adjusted gross income (AGI) threshold for deducting unreimbursed medical expenses is retroactively reduced from 10% to 7.5% for tax years 2017 and 2018, after which it returns to 10%. The 7.5% AGI threshold applies for purposes of calculating the alternative minimum tax (AMT) for the two years as well.

 • Charitable contributions — The top adjusted gross income (AGI) limitation percentage that applies to deducting certain cash gifts is increased from 50% to 60%.

• Casualty and theft losses — The deduction for personal casualty and theft losses is eliminated, except for casualty losses suffered in a federal disaster area.

• Miscellaneous itemized deductions — Miscellaneous itemized deductions that would be subject to the 2% AGI threshold, including tax-preparation expenses and unreimbursed employee business expenses, are no longer deductible.

Child tax credit
The child tax credit is doubled from $1,000 to $2,000 for each qualifying child under the age of 17. The maximum amount of the credit that may be refunded is $1,400 per qualifying child, and the earned income threshold for refundability falls from $3,000 to $2,500 (allowing those with lower earned incomes to receive more of the refundable credit). The income level at which the credit begins to phase out is significantly increased to $400,000 for married couples filing jointly and $200,000 for all other filers. The credit will not be allowed unless a Social Security number is provided for each qualifying child.

 A new $500 nonrefundable credit is available for qualifying dependents who are not qualifying children under age 17.

Alternative minimum tax (AMT)
The AMT is essentially a separate, parallel federal income tax system with its own rates and rules — for example, the AMT effectively disallows a number of itemized deductions, as well as the standard deduction. The legislation significantly narrows the application of the AMT by increasing AMT exemption amounts and dramatically increasing the income threshold at which the exemptions begin to phase out.

2018 AMT Exemption Amounts
Filing Status                                             Before Tax Cuts and Jobs Act                                           After Tax Cuts and Jobs Act

Single or Head of Household                                 $55,400                                                                                  $70,300                     

Married Filing Jointly                                               $86,200                                                                                 $109,400

Married Filing Separately                                       $43,100                                                                                    $54,700

2018 AMT Exemption Phaseout Thresholds
Filing Status                                             Before Tax Cuts and Jobs Act                                            After Tax Cuts and Jobs Act

Single or Head of Household                                $123,100                                                                                  $500,000

 Married Filing Jointly                                            $164,100                                                                                  $1,000,000

 Married Filing Separately                                      $82,050                                                                                 $500,000

Other noteworthy changes

• The Affordable Care Act individual responsibility payment (the penalty for failing to have adequate health insurance coverage) is permanently repealed starting in 2019 

. • Application of the federal estate and gift tax is narrowed by doubling the estate and gift tax exemption amount to about $11.2 million in 2018, with inflation adjustments in following years.  

• In a permanent change that starts in 2018, Roth conversions cannot be reversed by

recharacterizing the conversion as a traditional IRA contribution by the return due date. 

• For divorce or separation agreements executed after December 31, 2018 (or modified after that date to specifically apply this provision), alimony and separate maintenance payments are not deductible by the paying spouse, and are not included in the income of the recipient. This is also a permanent change.

This information was developed by Broadridge, an independent third party. It is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Investments and strategies mentioned may not be suitable for all investors. Past performance may not be indicative of future results. Raymond James & Associates, Inc. member New York Stock Exchange/SIPC does not provide advice on tax, legal or mortgage issues. These matters should be discussed with an appropriate professional.

Done Deal: Tax Bill Takes Effect

Ed Mills, Washington Policy Analyst, breaks down the major components of the new tax legislation.

January 11, 2018

The tax bill lowering the corporate tax rate and making a number of adjustments to the individual tax code was signed into law on December 22, 2017. The final tax bill sets a corporate tax rate of 21% starting January 1, 2018, and makes a number of changes to individual tax rates (including lowering the top individual to 37%). Key changes on the individual side include doubling the standard deduction ($12,000 for individuals and $24,000 for joint filers) but the bill reduces and/or removes many existing deductions. On the corporate side of the bill, businesses will have the benefit of 100% depreciation of qualified capital expenditures for the next five years, repeal of the corporate AMT, and a shift towards a territorial tax system (from a worldwide tax system). The bill also repeals the individual mandate of the Affordable Care Act (ACA). In this report, we review the changes to the corporate and individual tax code and cover next steps on tax legislation in 2018.

Individual Changes

Seven tax brackets are retained, but the bill provides tax relief by changing the income thresholds and tax rate for most taxpayers. The bill also lowers the top rate to 37% (starting at $600,000 for joint filers). The standard deduction is doubled to $12,000 for individuals and $24,000 for joint filers. Personal exemptions are eliminated, and SALT deductions are capped at $10,000. Mortgage interest deductions are capped interest on loans below $750,000, but grandfathers existing loans at $1 million. The individual AMT is retained, but narrowed with a raised phase-out threshold at $1 million.

Corporate Changes

Lowering the corporate tax rate to 21% and moving to territorial taxation are the key parts of the corporate tax changes. The corporate alternative minimum tax (AMT) is eliminated. Repatriated earnings will be subject to a 15.5% tax on liquid assets and 8% on other earnings and profits with an eight-year repayment window. Net interest deduction is limited to 30% of adjusted taxable income, and net operating loss deductions are capped at 80% of taxable income. Capital expenditures see full depreciation and are 100% deductible for five years. For small businesses, the capital investment deduction limit under Section 179 is increased from $500,000 to $1 million.

Next Steps

Guidance and interpretations are expected from the IRS over the course of the year. House Ways and Means Committee Chairman Kevin Brady (R-TX) anticipates work will continue on tax legislation with corrections to streamline and clarify provisions in the final bill expected this year. Congressional Republicans may attempt to work with Democrats on fixes that require 60 votes to pass the Senate, but have also signaled that the budget reconciliation measure used to pass tax reform with a 51 majority vote may be used again on issues where bipartisan compromise cannot be reached. This will usher in a new round of debates about which provisions could see further revision (including a potential SALT fix).

See below the changes to the corporate and individual tax code in the final tax bill.

Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.

Themes to Watch in 2018

Review key themes that are likely to occupy headlines and conversations in the coming year.

January 3, 2018

The following key themes are likely to occupy headlines and conversations in the coming year.

International Investing

Change always matters in financial markets, and the simple question for international investors in 2018 is, "How much faith do you have in countries and companies outside the U.S.?" The good news is that valuations are generally lower and, in many cases, corporate earnings levels are growing more quickly than in the U.S. The missing ingredient is a belief that Brexit compromises between the U.K. and the European Union can be reached, and reform initiatives to boost economies in Asia and Europe have credibility, political drive and support.

The signs heading into 2018 on this front are positive, building on progress made in 2017. Such progress includes the well-received National People’s Congress in China as well as Macron’s election victory and actions thus far in France. Still, much work needs to be done. If further progress is made, a likely impact would be a stronger British pound, euro and Japanese yen relative to the U.S. dollar, enhancing the potential diversification benefits for U.S. investors.

Economic Growth

There has been much hand-wringing about the moderate pace of U.S. economic growth in recent years. However, we’ve seen a similar moderation in global economic growth, driven largely by the same factors as in the U.S. – that is, demographic constraints on labor force growth and a lackluster pace of productivity growth, likely related in part to slower capital investment. The demographic constraints are still there, but productivity growth appears to be picking up around the world. Brexit will be messy, Chinese debt levels are a concern and geopolitical tensions could be a problem, but the global economic outlook for 2018 is brighter. How central banks respond will dictate what happens in 2019 and beyond.

Geopolitics

It’s hard not to conclude that the key geopolitical relationship is between the United States and China ("G2"). The latter continues to spread its wings. This is best shown by its expansive "Belt and Road" initiative, which aims to link Europe and China in a giant economic region, as well as a continuation of its large trade surplus with the United States. The ‘free versus fair trade’ debate continues to rumble on, but, given the proclivity of both Chinese and Japanese investors to buy Treasury bonds, pushing too hard may have more significant consequences. A plausible compromise may be found via a lower dollar, which would take the competitive edge off of the surplus countries and reduce the need to aggressively renegotiate other trade deals (such as NAFTA), potentially benefiting global economic and market confidence. With Europe looking inward and the Middle East/Russia more focused on keeping oil prices firm, North Korea becomes the remaining significant geopolitical issue for 2018. Considerable Chinese economic influence on the ‘Hermit Kingdom’ adds another dimension to G2 interactions.

Central Bank Policy

Current Federal Reserve Governor Jerome "Jay" Powell is set to be sworn in as Fed chair on February 3, and President Trump is expected to fill a number of vacancies on the Fed’s Board of Governors. The change in leadership is expected to be smooth. The focus for monetary policy should not change. The unwinding of the Fed’s balance sheet has been mapped out, and officials will stick to that plan.

However, the outlook for short-term interest rates gets cloudier beyond the middle of 2018. How will officials respond to a tighter labor market and a strong economy? The Fed’s monetary policy has long been the focus for financial market participants, but regulatory policy will be placed front and center. Outside of the U.S., global investors will look to central banks to tighten policy at some point, which ought to have some impact on the dollar and on long-term interest rates here and abroad.

The Modern Investor

The investment industry is constantly evolving as technological advancements create potentially faster, cheaper and more accessible methods to participate in the global financial markets. The near instantaneous transmission of information has created new trading patterns. Packaged products for individual investors have proliferated in a market that was previously dominated by institutions that traded far fewer investments. Handwritten stock orders have been replaced with high-frequency trading programs, and intricate retirement income solutions have largely supplanted individual bonds. These advancements have infused additional complexity into today’s markets. The modern investor is faced with more choices and information than ever before. Fortunately, financial planning applications have been developed to navigate this intricate investing environment and enhance professional advisement, enabling investors to more easily work toward their long-term financial objectives.

The Secular Bull Market

U.S. stocks remain in a multiyear, broad-based bull market that shares more similarities to the 20-year post-World War II and 1982 - 2000 periods than the lost decades of the 1970s or 2000s. Secular bull markets have, on average, lasted about 14 years and enjoyed annualized returns of around 16%. Moreover, just like no one begins to measure the 1982 - 2000 bull market from the absolute price low in the S&P 500 set in 1974, we believe this secular bull market began not at the low of March 2009, but when it broke out above the prior-2007 peak in 2013, meaning it remains relatively early in its cycle. Stocks will fall at times during secular bull markets but, historically, these have offered more favorable opportunities to buy rather than reasons to worry. The S&P 500 is up about 285% (on a cumulative basis) since the March 2009 bottom, but this pales in comparison to the 1400% gained during the 1982 - 2000 period.

To read more from Raymond James Quarterly strategy, please click on the link below:

https://www.raymondjames.com/branches/library/features/investment_strategy/investment_strategy.pdf

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. Past performance is not an indication of future results and there is no assurance that any of the forecasts mentioned will occur. There is no assurance any investment strategy will be successful. Investing involves risk including the possible loss of capital. International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. The S&P 500 is an unmanaged index of 500 widely held stocks. Investors cannot invest in it directly. The performance noted does not include fees or charges, which would reduce an investor's returns.

Start the New Year with an Organized Outlook

Consider getting organized this winter season by decluttering and updating your financial plan.

December 26, 2017

Still trying to think of a New Year’s resolution? Consider organizing, decluttering and updating your financial plan. To start, going paperless, embracing online file sharing and organizing your tax documents from the beginning can help you avoid frantic filing. Review these market closure dates and timely tips to start the new year off on an organized note.

Winter 2017–2018 Market Closures

Monday, January 1: New Year’s Day
Monday, January 15: Martin Luther King Jr. Day
Monday, February 19: Presidents Day
Friday, March 30: Good Friday

Planning To-Do's

Get organized: Sign up to view your accounts online and go paperless to reduce clutter. Additionally, consider organizing your personal and financial documents by uploading them to a file sharing or content management platform.

Rev up your retirement: Confirm that employer retirement plan contributions take advantage of any available employer match. Maximize IRA contributions early in the year so they will have more time to generate tax-deferred gains; you have until mid-April to do so for the previous year. If you are 50 or older, ask your advisor about catch-up contributions.

Optimize health spending: If you participate in a flexible spending account (FSA) or health savings account (HSA), review your contribution levels to take full advantage based on your family’s needs – without exceeding applicable limits. If you have an FSA, utilize available funds before your plan’s use-it-or-lose-it deadline.

Face the future: Have major new expenses that must be planned for in advance? Conduct a cash flow and liquidity analysis for the coming year to garner essential information. Additionally, prioritize how you’ll apply available savings, perhaps by paying down high-interest debt, building or maintaining an emergency fund, or increasing retirement savings.

Bolster benefits: Research your company's open enrollment schedule and decide whether you need to make changes to your benefits.

Avoid frenzied filing: Keep your tax documents organized as they arrive so you’re prepared when it’s time to file. Talk to your advisor about coordinating with your tax professional to ensure everything is in order.

Download the complete checklist below and talk to your advisor to make sure you don't miss any important financial planning dates this winter season.

http://www.raymondjames.com/pointofview/resources/articles/a-plan-for-all-seasons-winter.pdf

The Capitals Long January To-Do List

According to Ed Mills, Washington Policy Analyst, this month boasts one of the longest lists of “must-pass” items on the congressional agenda in memory.

January 2, 2018

We enter January with one of the longest lists of “must-pass” items on the congressional agenda in memory. Government funding faces a January 19 deadline and the U.S. Treasury is using extraordinary measures while waiting for Congress to lift the debt ceiling. A disaster aid bill, potential fixes to the Affordable Care Act (ACA), a long-term solution to the Deferred Action for Childhood Arrivals (DACA) program, an extension for the Children’s Health Insurance Program (CHIP), an extension of a variety of expiring tax provisions, and a Senate vote on a bill to alter the Dodd-Frank Wall Street Reform Act are all up for debate in January.

Longer-term, President Trump and congressional Republicans would like to debate an infrastructure bill and entitlement reform in 2018. Funding the government and dealing with the debt limit both require a 60-vote threshold in the Senate, which will require votes from Senate Democrats. While congressional Democrats were willing to support a temporary government funding bill in December, they have signaled that they will not vote for another funding bill unless it includes a solution to a number of the agenda items listed above. Ultimately, we believe a deal is within reach, but do caution that this month is set to produce a series of negative macro headlines coming out of DC and a return of brinkmanship.

Government Funding

Government funding expires on January 19 and this is the debate to track. A funding bill will likely serve as the legislative vehicle for compromises reached on other agenda items. President Trump and congressional leaders are set to meet this week to start negotiations, but we expect a fight up to the deadline. All government funding bills require a simple majority vote in the House of Representatives, but face a 60-vote (out of 100) threshold in the Senate. Congress passed a series of short-term extensions at the end of the year to avoid some of the more politically difficult issues now facing congress out of concern it could have jeopardized the tax bill, and Democrats did not want to shut down the government right before Christmas. With the tax bill signed, this gives Congressional Republicans greater ability to cut a deal with Democrats. A final deal will likely see some of the more conservative House and Senate Republicans voting against the final bill, but the bill passing with the support of congressional Democrats. The most likely provisions to be attached to a final bill (in order of likelihood) include: the debt limit, CHIP, disaster relief, tax extenders, a DACA fix, and a potential ACA fix.

Debt Ceiling

Congress had previously waived the debt limit through December 8, 2017 and the Secretary of Treasury is now using extraordinary measures to prevent breaching the debt limit. These extraordinary measures have become more commonplace in recent years. Treasury has warned that these measures can be maintained until some point this month, but no hard deadline has yet been set. When congress voted on the debt limit in 2017, there was an agreement between President Trump and the leadership of Congressional Democrats to come up with a solution that would prevent the need for future increases in the debt limit. Raising the debt limit is also subject to the 60-vote threshold in the Senate and we fully believe a compromise will be reached to deal with the debt limit, but this represents a significant point of leverage congressional Democrats have in negotiations on other agenda items.

CHIP

The Children’s Healthcare Insurance Program (CHIP) has been funded through a series of short-term funding bills following the end of its full funding at the end of FY17. Providing longer-term funding for CHIP is a main priority for congressional Democrats in government funding negotiations. Funding for this program remains likely in any government funding bill.

Disaster Relief

Funding for rebuilding efforts in California, Florida, Texas, and Puerto Rico following a variety of natural disasters in 2017 remains a top congressional priority, but the final amount and details of the relief remain in flux. In late December, the House voted for an $81 billion disaster relief bill, but the Senate has yet to unveil its bill. The $81 billion House bill would set a record for a disaster relief bill in U.S. history, but the affected communities have raised concerns that the bill may not be enough to meet their rebuilding needs. A disaster relief bill could be voted on as a standalone bill, but in the interest of time it is a top contender to be added to the final government funding/debt ceiling bill as a way to garner votes from members representing disaster impacted areas. We will also be monitoring the bill for potential relief for Puerto Rico, especially if it is used to fix some of the concerns raised by the island in the recently passed tax bill.

Tax Extenders

Despite the passage of the tax bill, there is a list of tax provisions that have expired and that Chairman of the Senate Finance Committee, Orrin Hatch (R-UT), is seeking to extend. Senator Hatch released a tax extender bill in late December and among the provisions he is seeking to extend is the ability to deduct mortgage insurance, a variety of energy provisions, and several tax provisions important to Puerto Rico. House Ways and Means Committee Chairman, Kevin Brady (R-TX) has indicated he generally opposes the continuation of the tradition of a tax extenders package, but expect this to emerge as a bargaining chip in other negotiations.

DACA

A March 5 deadline looms for the Deferred Action for Childhood Arrivals (DACA) program and congressional Democrats, especially members of the Congressional Hispanic Caucus, have made a legislative fix for DACA a priority before supporting another government funding bill. Senator Jeff Flake (R-AZ) was also promised a vote on DACA in exchange for his support for the tax bill. This will likely be the most contentious fight surrounding the government funding/debt limit debate. President Trump has signaled he supports working to find compromise, but funding for a border wall with Mexico must be included in any deal – something congressional Democrats have stated is a non-starter. We believe a permanent solution on DACA is possible, but far from certain. The debate over DACA and the border wall will likely push these funding/debt limit fights to the deadline.

ACA Fix

With the repeal of the individual mandate for health insurance in the final tax reform package, Senator Susan Collins (R-ME) was promised a vote on legislation that restores payments to health insurers intended to subsidize premiums in the individual market. Among the provisions possible are a bi-partisan deal worked out by Senators Lamar Alexander (R-TN) and Patty Murray (DWA) restoring these insurance subsidies, and a bill from Senators Collins (R-ME) and Bill Nelson (D-FL) compensating health insurers for high-cost patients. These provisions enjoy broad support in the Senate, but are opposed by a number of House Republicans. A number of House Republicans have stated that inclusion of these provisions in a government funding bill would cause them to vote against any government funding bill. Inclusion in any final deal is possible, but these provisions currently rank low in terms of likelihood in a final bill.

Dodd-Frank Repeal?

Among the few items on the list that could see bi-partisan support in January is a bill in the Senate to make changes to the Dodd-Frank Wall Street Reform Act. This is far from a repeal, but this bill would provide meaningful regulatory relief for a number of community and regional banks. We expect that this bill can clear the Senate in late January, with a possible compromise reached with the house by the end of 1Q18.

Infrastructure and Entitlement Reform?

Beyond the rush to complete the January agenda, President Trump and congressional Republicans have been discussing a potential infrastructure bill and a debate on entitlement reform. There is some belief that infrastructure might be one of the few bi-partisan efforts that could be accomplished in 2018 and Speaker Paul Ryan has long wanted to tackle entitlement reform. We remain skeptical at this point on these efforts for a variety of reasons, but will be looking for how this month’s negotiations play out and will be updating our thoughts as warranted.

Key Dates and Deadlines

• January 3: Senate reconvenes
• January 6-7: Camp David retreat with President Trump and Congressional leaders
• January 8: House reconvenes
• January 19: Deadline for government funding agreement
• January TBD: Deadline to raise debt ceiling
• March 5: Deferred Action for Childhood Arrivals (DACA) expires
• March 31: Funding for Children's Health Insurance Program (CHIP) expires

Note that legislative and regulatory agendas are subject to change at the discretion of leadership or as dictated by events.

Source: Raymond James Research

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the trends mentioned will continue or that any of the forecasts mentioned will occur. Economic and market conditions are subject to change

What can I do to crack down on robocalls?

You may not mind if a legitimate robocall provides a helpful announcement from your child's school or an appointment reminder from a doctor's office. But sadly, criminals often use robocalls to collect consumers' personal information and/or conduct various scams. Newer "spoofing" technology displays fake numbers to make it look as though calls are local, rather than coming from overseas, which could trick more people into answering the phone.

Robocalls have been illegal since 2009 (unless the telemarketer has the consumer's prior consent). In mid-2017, federal agencies announced they are ramping up enforcement by fining violators and encouraging blocking technologies. What should you do if you want to help put an end to this nuisance?

1. Don't answer calls when you don't recognize the phone number. If you pick up an unwanted robocall, just hang up. Don't answer "yes" or "no" questions, provide personal information, or press a number to "opt out." Responding to the call in any way verifies that it has reached a real number and could prompt additional calls.
2. Look into robocall blocking solutions that may be offered by your phone service provider. If they're available, you may need to follow specific instructions to "opt in." Otherwise, consider a mobile app or cloud-based service designed to block robocalls; some of them are free or cost just a few dollars.
3. Consider registering your phone number on the National Do Not Call Registry. While taking this step can help mitigate the amount of robocalls you receive, it's only a partial solution to the problem. The Federal Trade Commission advises consumers whose numbers are on the registry but still receive unwanted calls to report robocall violations at complaints.donotcall.gov. The phone numbers provided by consumers will be released each day to companies that are working on call-blocking technologies, which largely depend on "blacklists" with numbers associated with multiple complaints.

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable--we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Copyright 2018 by Broadridge Investor Communication Solutions Inc.
All Rights Reserved.

Bitcoin and Other Cryptocurrencies May Shake up Boring Markets

Clients and friends - in light of the current news about BitCoin, we thought that we would re-post this article from October - Matt & Larry

October 24, 2017

Even beyond the dog days of summer, global capital markets have become boring

Investor complacency appears to have won the day—at least for the moment. The poster child for this unusual sense of calm has been the CBOE Volatility Index (VIX). The VIX, dubbed the fear gauge, as it measures implied expectations of U.S. market movements by tracking option prices, seems anchored near its all-time low. The message from the options market is that investors are content and not at all interested in buying downside protection.

Market participants have been so quiescent that even the threat of nuclear war with a rogue nation such as North Korea caused only a day’s disruption in the steady march to higher equity prices. During the past quarter, certain global equity markets merrily registered record highs. Meanwhile, inflation remained low, as prices across a variety of goods and services barely had the strength to lift themselves any higher. While there’s been some activity among industrial metals, with price increases for copper, zinc, and certain steel products, this has been offset by decade lows for most agricultural commodities, including corn, wheat, soy, cattle, and hogs. No matter how you measure it, inflation hasn’t risen enough to meet the Fed’s 2% target.

If global capital markets can’t get riled up about rising prospects for nuclear war, then we’ve entered a new regime—boring your way to wealth. Could it be that all the attention being paid by investors to their own lack of anxiety is actually an advanced form of nervousness? If so, then perhaps it represents an adequate level of risk awareness. Regardless, we’re not sure what it’ll take to nudge abnormally low VIX readings higher.

Bitcoin price bubble could shake things up

Bitcoin’s collapse could do the trick. Along with other so-called cryptocurrencies, bitcoin has been bid up to ever-higher levels this year. Cryptocurrencies are finding an eager audience among those wishing to convert government-backed notes into an untraceable, non-U.S. dollar medium of exchange. Apparently, a portion of the financial world has some faith in such new synthetic instruments; some market participants even treat bitcoin as a bona fide asset class. We love diversification and often embrace novel investment ideas—but remain unconvinced here.

Turning to more conventional currency markets, the U.S. dollar, a top consensus trade as recently as the fall of 2016, has turned into a relative loser versus most of its major counterparts this year. Such is the fickle nature of foreign exchange. The good news is that a lower U.S. dollar aids American exports and provides a greater degree of monetary easing throughout the global financial system. The weaker U.S. dollar should boost corporate profits, particularly among megacap multinationals that derive a substantial proportion of their revenues from sales outside of America.

Prospects for U.S. equity and high-yield debt have waned

Market multiples make horrible timing signals, but we know that buying expensive assets leads to disappointment more often than not. While the VIX has been abnormally low, history suggests it's only bound to stay low until it doesn’t. Don’t be surprised by a sudden U.S. equity market correction. At this mature stage of the cycle, the risk of a short-term, garden-variety drawdown remains elevated.

While U.S. equity valuations are indeed high, they’re not necessarily unreasonable relative to bonds. Amid an environment of anemic yields, we’ve long been maintaining light exposure to interest-rate risk while leaning into corporate credit, including allocations to lower-rated issues. At last, after a decade of singing the praises of U.S. high-yield debt, we believe it’s time to begin the process of reducing exposure. In late 2008, junk bonds were uniformly being discarded regardless of their coupons or discounts to par. The asset class was then a value vulture’s dream. Today, with option-adjusted spreads paying only a few percentage points over U.S. Treasuries, and with historical default and recovery rates that might wipe out most of that differential, the risks of holding junk bonds are starting to offset the potential rewards. Staying with our low anxiety theme, we anticipate ample liquidity and low default rates for at least the next couple of years, giving investors plenty of time to trim exposure to this asset class.

International equities—especially in emerging markets—show the most promise

The shrinking value of the U.S. dollar has also boosted the returns of international equities for U.S.-based investors. International developed-market equities are up double digits year to date. We’ve maintained a strong and vocal commitment to the benefits of global diversification, and after an extended period of U.S. equity market leadership, the recent shift in momentum adds a measure of validation to our view. Right now, we’re inclined to allocate the marginal investment dollar to markets outside of the United States. Europe continues to follow the U.S. path with a three- or four-year lag, suggesting more favorable market action across the Atlantic is still to come.

Leading the performance parade in 2017, emerging-market equity continues to be among our favorites. Having underperformed U.S. equity for a decade, it has plenty of relative runway to catch up. Strong earnings momentum and more modest valuations also bode well for stocks in emerging economies, especially within Asia. We believe India deserves special attention, as the country’s market reforms have been nothing short of extraordinary. The Indian government’s commitment to strategically simplify the process for starting a new business, combined with the demonetization initiative and the implementation of a goods and services tax, presents a generational change for this country—akin to the opening of China. Results won’t materialize overnight, but the opportunity set in India is vast.

When it comes to markets, remember that boring can be beautiful. It’s easy to forget investing’s basic principles: Remain calm and let the magnificent power of compounding continue. Stay globally diversified, and use these quiet times to read, reflect, and resist the impulse to trade just for trading’s sake. 

https://www.jhinvestmentsblog.com/viewpoints/market-outlook/bitcoin-and-other-cryptocurrencies-may-shake-up-boring-markets?cid=US_JH_IV_OS_RaymondJames_Viewpoints_MarketOutlook_FA_CS_PT_00_00_00_00_EG_00_201712_BitcoinBobBoyda_00&utm_source=OS&utm_medium=RaymondJames&utm_campaign=Viewpoints_MarketOutlook&utm_term=BitcoinBobBoyda_00&utm_content=US_JH_IV_FA_CS_PT_00_00_00_00_EG_00_201712

Disclosure:

Views are those of Robert M. Boyda, co-head of global asset allocation, John Hancock Asset Management, and are subject to change. No forecasts are guaranteed. This commentary is provided for informational purposes only and is not an endorsement of any security, mutual fund, sector, or index.

Past performance does not guarantee future results.

Diversification does not guarantee a profit or eliminate the risk of a loss.

Investing involves risks, including the potential loss of principal. The stock prices of midsize and small companies can change more frequently and dramatically than those of large companies. Growth stocks may be more susceptible to earnings disappointments, and value stocks may decline in price. Large company stocks could fall out of favor, and foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability. Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if an issuer is unable or unwilling to make principal or interest payments. Investments in higher-yielding, lower-rated securities include a higher risk of default. Precious metal and commodity investments can be volatile and are affected by speculation, supply-and-demand dynamics, geopolitical stability, and other factors.

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7 Ways to Travel More in Retirement

Kiplinger

By Nick Wharton
December 12, 2017

When it comes to ways retirees prefer to spend their time in retirement, travel often lands at the top of the list. The catch is, just because you’ve got a lot of time on your hands for travel doesn’t mean you have a lot of money. Still, it’s entirely possible to travel more in retirement with the right focus and with a few tips and tricks.

1. Take advantage of your flexibility

Without the constraints of work, one of the most valuable things that almost every retiree has in their arsenal is flexibility. Due to increased demand, flight and hotel prices go up at peak travel times, but often drop drastically outside of them. So when it comes to travel, being flexible about when you go can mean your travel budget will stretch a lot further than it would during peak times.

Costs in the off season are far cheaper for everything from flights and accommodations, to entrance fees and attractions. You may save so much that you’re even able to put some money aside for your next trip.

2. Use any discounts available

One of the great perks of being classed as a senior citizen is the wide range of travel discounts that you are now eligible for.

Organizations such as AARP offer a host of deals for members on rental cars, hotels, cruises, and flights, though you have to pay the annual membership fee to access them. There are also lots of travel-related companies that offer their own discounts that are free to access. Best Western's 10 percent discount for folks 55 and over, One Travel’s senior travel deals, and Amtrak’s senior program offering a 15 percent discount are just a few.

3. Try a house swap

There are lots of ways to get free or extremely cheap accommodations when you travel. But by the time you retire, you’re probably used to a certain amount of luxury and you don’t want to be couch-surfing or staying in hostels. If you have a permanent home that you’re willing to allow other people use, then house-swapping could be a brilliant option for you.

There are lots of house-swapping sites that make the process extremely simple and safe, and there are even a number specifically dedicated to seniors, such as HomeExchange50Plus.com. You just need to list your property with a description and photographs that show it off. Then you can explore the properties already listed by other members of the community before contacting them to arrange your perfect swap. Though you have to pay an annual fee to join these sites, it’s negligible compared the money you can save.

4. Go for longer and travel slower

Though this may sound counterintuitive, generally, the longer that you travel, the cheaper your average daily costs will become. Rather than trying to cram loads of activities and destinations into one vacation, plan to see just one place, and experience it more thoroughly. By staying put, you’ll spend less on transport to other destinations.

Because you’ve got a more leisurely schedule, when you do want to go somewhere nearby, you can take a slower city bus, for instance, rather than a pricey taxi. You can also negotiate discounts in many accommodations for longer stays. I’ve done this successfully many times and for stays over four weeks, I have managed to create savings of up to 50 percent.

5. Offer to house sit

Though house sitting is open to anyone, it’s a competitive market, so only the best profiles tend to get selected. Homeowners are looking primarily for trustworthy and considerate people to look after their homes while they're away, and being older generally helps to give you an air of reliability. Many people also like house sitters who have been homeowners, and will treat the home in the way they’d treat their own.

It’s similar to a house swap in that you get the use of a home for free, but you don’t need to have a house to reciprocate in return. Often you’ll be required to look after pets as part of the deal, but there is no cost other than the annual membership fee that sites like TrustedHousesitters charge. As with house swaps, you can save a significant amount of money through house sitting.

6. Downsize

Even though there are lots of ways to make travel more affordable, it still costs money. Money that not every retiree has lying around. But if you have a house that's bigger than you need, then you could be sitting on a golden nest egg.

Obviously the idea of downsizing would be to take advantage of any equity that you have in your existing property, which may be significant if you own the property outright. But even if you still have a mortgage, it may be possible to sell your home and buy a smaller one and still make a profit. You can then use this extra cash to fund your travels.

7. Prioritize travel

This is possibly the most important step to traveling more in retirement, and it’s a simple case of making it an absolute priority. One of the best ways to prioritize travel is to make a bucket list of all of the experiences you want to have and all of the places you want to visit. This will help to create a focus and provide you with a whole load of inspiration at the same time.

 

And baby makes three! A Financial Guide for New Parents

Are you a new parent, or planning to be? Check out this financial guide to help guide you for the years to come:

http://www.nylinvestments.com/polos/RISWM86c-111558632.pdf

Savvy Strategies for an Inheritance

by: Laura (Ciarkowski) McCarron
Director, Value Add Marketing, MainStay Investments

Personal loss is never easy. The death of a loved one can be one of the most emotionally trying periods in one’s life. And it is not uncommon for heirs to experience mixed emotions after receiving an inheritance—especially when it is unexpected. Many feel anxiety, stress, or even guilt over financially benefiting from a loved one’s death.

The funds were likely intended to bring a degree of financial security. But, because many do not know how to appropriately handle a sudden, large sum of money, some may find themselves financially worse off than before their inheritance. Heirs can stay in the right frame of mind after receiving a sizable amount of money with these tips

How to Handle an Inheritance

• Avoid rash, knee-jerk decisions. It is a common occurrence for heirs to spend an inheritance in a few short years because the funds may be viewed as “found money.” With an inheritance, the goal should be to realize the optimal long-term value and not use it to fund a shopping spree.
• Develop a strategy. If possible, consider doing nothing with the new funds for a set period of time—perhaps six months to a year—while carefully assessing one’s financial situation and researching options. It is important to resist the feeling of “having to” do something with the money right away.
• Distinguish between wants and goals. Spend time setting solid financial objectives and understanding how the inheritance can be used to help achieve those objectives. A good way to do that is to ask what the money should accomplish, not what it should be spent on.
• Don’t forget about the inheritance tax. Once the executor of the estate has divided up the assets and distributed them to the beneficiaries, a state inheritance tax may come into play. The beneficiary of the money or property is responsible for paying the inheritance tax, not the estate, so it is important to understand the rules of your state. Depending on an heir’s relationship to the deceased, an exemption or reduction in tax may be granted.

Whether expected or unexpected, losing a loved one is never easy. A trusted financial professional can be a valuable partner when it comes to navigating complex administrative and financial matters during a personally difficult time. He or she can also help heirs establish or realign their financial strategy and outline sound options for an inheritance.

Neither New York Life Investment Management LLC, its affiliates nor representatives provide tax, legal, or accounting advice. Please contact your own professionals.

The information and opinions contained herein are for general information use only. MainStay Investments does not guarantee their accuracy or completeness, nor does MainStay Investments assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. There can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Past performance is no guarantee of future results.

All investments are subject to market risk, including possible loss of principal. Diversification cannot assure a profit or protect against loss in a declining market.

Securities distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.

MainStay Investments® is a registered service mark and name under which New York Life Investment Management LLC does business. MainStay Investments, an indirect subsidiary of New York Life Insurance Company, New York, NY 10010, provides investment advisory products and services. This material is provided as a resource for information only. Neither New York Life Insurance Company, New York Life Investment Management LLC, their affiliates, nor their representatives provide legal, tax, or accounting advice. Please remind your clients to consult their own legal and tax advisors before implementing any plan.

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Check this list-Twice-before year end

Proactive investors know that the months before year-end are an ideal time to make any final tax-saving moves.

November 22, 2017

While keeping in mind your long-term investment goals, meet with your advisor and coordinate with your tax professional to examine nuances and changes that could impact your typical year-end planning.

Mind Your RMDs

Be thoughtful about required minimum distributions (RMDs) to ensure that you comply with the rules. If applicable and you have yet to do so, take your 2017 RMD to avoid a 50% penalty on required amounts not taken. Other considerations:

• By automating your RMDs with your advisor, ensure that you never miss this important deadline.
• You can take your first RMD during the year you reach age 70½, or you can delay it until April 1 of the following year. Know, however, that if you delay and take two distributions in the first year after turning 70½, your income could be inflated, which may affect your tax-bracket standing.
• Subsequent RMDs must be taken no later than December 31 of each calendar year.
• Qualified charitable distributions allow traditional IRA owners who transfer RMDs to qualified charities to exclude the amount donated from their adjusted gross incomes, up to $100,000.
• Be mindful of how taking a distribution will impact your taxable income or tax bracket. If you have space left in your bracket or a down income year, you may want to consider taking additional distributions.

To Harvest or Not to Harvest

Evaluate whether you could benefit from tax-loss harvesting – selling a losing investment to offset gains or establish a deduction of up to $3,000. Excess losses also can be carried forward to future years. With your advisor, examine the following subtleties when aiming to decrease your tax bill:

• Short-term gains are taxed at a higher marginal rate; aim to reduce those first.
• Don’t disrupt your long-term investment strategy when harvesting losses.
• Be aware of “wash sale” rules that affect new purchases before and after the sale of a security. If you sell a security at a loss but purchase another “substantially identical” security – within 30 days before or after the sale date – the IRS likely will consider that a “wash sale” and disallow the loss deduction. The IRS will look at all your accounts – 401(k), IRA, etc. – when determining if a wash sale occurred.

Manage Your Income and Deductions

Those at or near the next tax bracket should pay close attention to anything that might bump them up and plan to reduce taxable income before the end of the year.

• Consider making a donation. Giving to a charity can benefit a cause you care about and reduce your taxable income. Make sure your gifts are well-documented. You also can gift up to $14,000 tax free to as many individuals as you wish.
• Determine if it makes sense to accelerate deductions or defer income, potentially allowing you to minimize your current tax liability. Some companies may give you an opportunity to defer bonuses and so forth into a future year as well.
• Certain retirement plans also can help you defer taxes. Contributing to a traditional 401(k) allows you to pay income tax only when you withdraw money from the plan in the future, at which point your income and tax rate may be lower or you may have more deductions available to offset the income.*
• Evaluate your income sources – earned income, corporate bonds, municipal bonds, qualified dividends, etc. – to reduce the overall tax impact.

Evaluate Life Changes

From welcoming a new family member to moving to a new state, any number of life changes may have impacted your circumstances over the past year. Bring your financial advisor up to speed on major life changes and ask how they could affect your year-end planning.

• Moving, for example, can have a significant impact on taxes and estate planning, especially if you have relocated from a high income tax state to a low income tax state, from a state with an estate income tax to one without or vice versa, or if you have moved to a state with increased asset protection.
• Give thought to your family members’ life changes as well as your own – job changes, births, deaths, weddings and divorces for example can all necessitate changes – and consider updating your estate documents accordingly.

Next Steps
Consider these to-dos as you prepare to make the most of year-end financial moves, and discuss with your financial advisor and tax professional:

• Manage your income and deductions, paying close atten­tion to your tax bracket, especially if you are on the edge.
• Remember to take your RMD, if applicable.
• Evaluate your investments, keeping in mind whether you could benefit from tax-loss harvesting.
• Make a list of the life changes you and your family have experienced during the year

Withdrawals prior to age 59 1/2 may also be subject to a 10% federal penalty tax. RMDs are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation. Raymond James advisors do not provide tax advice

Offset Taxes with Retirement Account Contributions

As investors are faced with higher taxes, there are a few simple steps you can take to lower your tax bill.

November 22, 2017

Even in the wake of such complex tax provisions, a key to lowering your tax bill is really quite simple: Report lower taxable income. Since few of us actually want to earn less, the next option is to stash as much income as you can into tax-advantaged accounts. If you haven’t contributed the maximum amount to a qualified retirement plan at work throughout 2017, consider adding money before it is too late.

• Contributions for 401(k) and other retirement plans for the 2017 tax year are $18,000 a year or $24,000 if you’re 50 or older.
• Consider making additional salary deferrals if you are eligible to participate in an employer supplemental employee retirement plan (SERP). This will enable you to further maximize contributions to reduce your taxable income now and defer more compensation into later years when your tax rate may be lower.
• Also consider saving on a pre-tax basis for healthcare. You can accumulate funds on a tax-deferred basis to pay for healthcare expenses through either a Health Savings Account (HSA) or flexible savings account (FSA). Your workplace may offer one, both or neither of these options, so check with your employer.
• Once you maximize employer retirement plans, consider contributing to an IRA ($5,500/year limit, or $6,500 if you’re 50 or over). Traditional IRA contributions are tax deductible if your modi­fied adjusted gross income is under $72,000 for individuals or $119,000 for joint filers. You must establish a new IRA account by April 17, 2018 for 2017 contributions, and you have until then to make 2017 contributions to an IRA.
• If you work for yourself, consider contributing to a solo 401(k) retirement plan, SEP IRA or SIMPLE plan.

Your financial advisor can help develop a retirement account contribution strategy that works for your situation.

Tax Cuts Matter, Spending Cuts Matter More

Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 10/30/2017

While tax cuts grab the headlines, the bigger issue for long-term economic growth is government spending.  Tax receipts are above their long-term average as a share of GDP, but the government is still spending over $650 billion more than it takes in.  And this government spending crowds out private sector growth. 
Government spending since 2000 has risen from 17.6% of GDP (when the US had a surplus) to around 21% of GDP today.  The more the government spends, the more it crowds out private sector growth and the slower the economy grows.  It’s not that complicated. 
Yes, tax cuts can help boost growth – at least temporarily – but without cutting spending, faster economic growth can’t be sustained, and eventually politicians will push tax rates back up in an attempt to pay the tab.  Tax cuts are never “permanent” unless spending is contained. 
We got into the current budget mess thanks to the 2009 jump in government spending as TARP and other supposed temporary stimulus programs added $535 billion to already excessive federal spending.  This pushed spending as a share of GDP to 24.4% from 20.2% in a single year.  But instead of unwinding that spending as the economy recovered from the financial crisis, government embraced Milton Friedman’s maxim that “nothing is as permanent as a temporary government program.” 
As Friedman predicted, government spending never went back to its 2008, pre-crisis level of about $3 trillion per year.  It flat-lined near $3.5 trillion over the next five years as the sequester helped contain it, but the sequester has since been scuttled and spending is now up to $3.98 trillion with the new 2018 budget, passed by the House and Senate, pushing it to $4.1 trillion. 
Over recent decades, the US has never balanced its budget when spending was greater than 19.5% of GDP.  As a result, unless tax cuts boost the economic growth rate high enough above the growth rate of spending, tax cuts will not have a long-term impact on GDP and living standards. 
That said, two pieces of good news have developed in recent weeks.  First, tax cuts seem to be on the way.  Second, if the $4.1 trillion budget is passed, spending will be up around 3% from 2017, slightly slower than nominal GDP. This slower growth in spending paired with better policies should help the economy to accelerate in 2018 and drop spending to around 20.5% of GDP.   But what if Congress and the President went one step further and froze spending at the current bloated level?  As the included chart shows, if we make the conservative assumption that tax revenues remain near their historical 65-year average of 17.5% of GDP and if nominal GDP (real GDP plus inflation) grows only 3.5% annually – inline with the 3.6% annual growth rate over the past five years – with a spending freeze, the budget would balance in six years (2023).  If fewer regulations and tax cuts boost nominal growth the budget would be balanced even sooner. 

The last time we saw spending near 17.5% of GDP was in the early 2000’s. And, as you can see from the chart, revenues came in much stronger than their historical average. We don’t think this was a coincidence. A smaller government leads to a larger private sector.  It becomes a virtuous cycle of faster growth, higher tax receipts and less need for government spending.  Living standards would rise. 
There is a lot of fat to trim within government. We believe if the private sector were running all of Washington, spending would fall drastically. 
If President Trump passed a spending freeze, government would be forced to become more and more efficient. No more spending $283,500 on Department of Defense birdwatching, or nearly $150,000 to understand why politics stresses us out, or $65,473 to figure out what bugs do near a lightbulb. There are plenty of areas to cut excess… 
But there are some issues that would need to be addressed with a spending freeze. First our military over the coming years is going to get bigger and stronger. Spending on defense will increase. 

Second, what really drives a large part of government spending today is entitlements like Social Security, Medicare and Medicaid. With demographics and population growth, there is no question that these will continue to grow, but something needs to be done to bring down costs. It sounds trite, but we can even get inefficiencies out of entitlements, and we hope the Trump administration can help government think more efficiently. 
As President Trump said in his inaugural address “… today we are not merely transferring power from one administration to another, or from one party to another –  
but we are transferring power from Washington, D.C. and giving it back to you, the American People.” The best way to do this is by cutting the size of government. Freezing spending would be a big step in the right direction.  

After all, from 1776, when the US was a backwater colony, to 1913, when it had become a leading power and would soon help save Europe in WWI, there was no Federal Reserve, or income tax. Government was much smaller. It’s time to shrink the burden of government and allow that magic of private sector growth to happen again.  

Make the Most of Medicare's Open Enrollment Period

Medicare’s open enrollment season is upon us. That means from now until December 7, you are able to make changes to your Medicare Advantage and prescription drug coverage. If you’re happy with your coverage, you don’t have to do anything.  Even if you’re satisfied, open enrollment presents a great opportunity to make sure you’re getting the most out of Medicare.

Here are some tips to help you get started.

• Ask yourself some important questions: Have your needs changed? Is your current coverage adequate? Will the cost of your current plan be going up? Are there comparable, lower-cost plans available?
• Review the annual notice of change from your current plan provider. You should have received this in September.
• Compare plans using medicare.gov’s Medicare Plan Finder.
•  Get one-on-one assistance from the State Health Insurance Assistance Program.
• Call the Medicare Rights Center at 800.333.4114 for free counseling.

Medicare decisions can be complicated, but with the right tools and information, it doesn’t have to be. Raymond James is partnered with HealthPlanOne to provide you with personalized service, unbiased advice, and additional support from a dedicated licensed agent. There is no cost to use HealthPlanOne’s services and those services don’t end after enrollment. Your licensed agent will continue to provide support throughout the lifetime of your enrollment for coverage questions, appeals and plan renewals.

To learn more about HealthPlanOne, call the dedicated Raymond James number at 844-269-2646.

If you have any questions about open enrollment, or if you’d like to discuss how healthcare costs factor into your overall financial plan, please contact me so we can walk through the process together.

Please click on the link below to read an informational packet regarding your healthcare, retirement and choices:

https://myrjnet.rjf.com/MarketingMaterials/Marketing%20Materials/ALL/Whitepapers/Planning-Retirement-Healthcare-Wild-Card.pdf

A Consolidation of Power

Andrew Adams, CFA, CMT, Senior Research Associate discusses public company consolidation and its impact on investors.

October 20, 2017

Is the stock market experiencing a consolidation of power among a few of the largest companies, and if so, why?

The stock market is shrinking in terms of the number of publicly-traded companies, a fact that is both a result of, and contributing factor to, the increasing importance of a select few, large companies. Since 1996, the total number of listed stocks in the U.S. has been cut in half – from 7,322 to about 3,600 – as annual mergers and acquisitions have doubled and the average number of initial public offerings per year has dropped considerably. Meanwhile, the share of gross domestic product (GDP) generated by America’s 100 biggest companies rose from about 33% in 1994 to 46% in 2013 according to The Economist, meaning not only are there fewer firms in total these days, but a small number of them are taking a greater piece of the pie.

The concentration at the top is, of course, primarily weighted toward the big technology companies, all of which have seen their products and services become increasingly integrated into the lives of their loyal cus­tomers. Through innovation, acquisition and the power of so-called ‘network effects,’ these modern-day conglomer­ates have built dominant, industry-controlling brands that continue to gain value as their huge user bases expand. The digital age has witnessed data evolve into the most important commodity in the world, and much of the suc­cess of these large tech companies is due to the ever-widening ‘data moat’ that exists between them and up-and-comers lacking that established network of bil­lions of existing customers.

Should investors and consumers be worried about the growing importance of mega-cap companies?

Despite the growing importance of these technology com­panies, the impact of the ten largest stocks in the S&P 500 has not really changed much over the last 40 years, even if the specific names on that list have changed. The ten big­gest stocks currently make up a shade over 20% of the index’s market capitalization, which is right around the average since 1980 when the more cyclical energy sector helped the ten largest companies represent a dominating 25% of the S&P 500. Today’s large tech companies also happen to be some of the most profitable, with Apple, Google, Facebook and Microsoft alone accounting for about 10% of the S&P 500’s total profits. As such, technology’s place at the top of the market is not unwarranted. Moreover, the roughly 23% of the S&P 500 that technology represents today is nothing compared to the 34% it comprised back in March 2000 at the peak of the dot-com bubble. Considering American corporate profits (as a percentage of GDP) are higher than they have been any time since 1929, elevated valuations in the stock market are warranted and investors don’t appear overly concerned.

Consumers have also benefited in a big way, with techno­logical innovation throughout history helping to bring down costs and prices, while making lives more convenient and requiring less manual labor. Per The Economist, tech com­panies provide Americans and Europeans with an estimated $280 billion-worth of “free” services per year, such as search results or directions. Even the stuff cus­tomers purchase provides tremendous bang for each respective buck. In their book Abundance, authors Peter Diamandis and Steven Kotler estimate that modern smart­phones contain roughly $900,000 worth of applications based on each piece of technology’s original manufactur­er’s suggested retail price in 2011 dollars (video conferencing, GPS, video camera, etc.), which illustrates the value being created by tech’s game-changing compa­nies. It’s no wonder these disrupting forces are raking in the profits and the cash.

How are the big companies using all that cash?

The success of the mega-cap stocks has not only pro­duced extraordinary profits, but it has also left the big tech companies with unprecedented levels of cash. As of June 2017, Apple, Alphabet, Microsoft, Amazon and Facebook together held $330 billion in cash (net of debt), and the S&P 500’s corporate cash as a percentage of current assets has basically doubled since 2000. Naturally, companies have had to find effective ways to use this cash; there has been a clear uptick in dividends, share buybacks, merger & acquisi­tions activity, and capital expenditures over the last several years. The share buyback policies have come under some criticism since they can help artificially boost earnings and sales per share numbers. However, buying back stock has been shown to help shareholders, and that is not the only way companies have been able to grow their businesses. The five aforementioned tech firms alone spent $100 billion last year on research and development (three times more than half a decade ago). These firms are definitely investing in the future. Finally, there is an estimated $2.4 trillion in cash held by U.S. companies overseas that is just sitting there not contributing much. Should tax reform occur next year and overseas cash comes home, Raymond James esti­mates share buybacks and the repatriated cash could improve S&P 500 earnings by an additional 1% - 2.5%.

https://www.raymondjames.com/branches/library/features/investment_strategy/investment_strategy.pdf

https://www.raymondjames.com/branches/library/features/investment_strategy/investment_strategy.pdf

The companies engaged in the technology industry are subject to fierce competition and their products and services may be subject to rapid obsolescence. Dividends are not guaranteed and will fluctuate. Past performance may not be indicative of future results. Investing involves risk including the possible loss of capital

Savvy Steps to Stay Cyber-Safe

 

Defend yourself with simple, everyday practices that can help protect your identity, your accounts and your devices.

October 20, 2017

Americans lose tens of billions of dollars each year to financial fraud. In the digital frontier, many crimes – including identity theft, tax fraud and elder abuse – are committed by online outlaws, making cybersecurity all the more important. As cybercrime becomes more prevalent, learn how to defend yourself with simple, everyday practices that can help protect your identity, your accounts and your devices.

Fighting Fraud

Familiarize yourself with common scams to help protect your assets and your identity. Often, identity thieves pretend to be someone they’re not, whether they’re claiming to be from a legitimate organization, acting as though they are in love or purporting to be someone you trust. The effort is an attempt to induce you to reveal personal information, such as passwords or credit card numbers. Crimes such as these fall under the umbrella of phishing, a popular fraudulent activity.

Never click on the unknown. If you receive an email from a reputable company, go directly to their website. If you receive an unexpected email from someone you know, call them before opening it. Additionally, never reveal your passwords and only use credit card numbers on sites you’re confident are secure. If you have any doubt, refrain from revealing personal information.

Tax season is a notable time to take extra precaution as email compromise and mail theft tend to crop up each year and more than 237,750 tax fraud victims are reported to the IRS annually. Remember that the IRS will never request personal or financial information by email, phone, text message or social media, nor will they threaten you with lawsuits, imprisonment or other enforcement action if you have done nothing wrong. Elect to receive your tax forms online rather than in your mailbox, where they may be at risk of physical theft, and file as soon as possible to decrease the likelihood that someone will maliciously file on your behalf.

Prudent Prevention

By taking small steps toward a safer online presence, you and your loved ones will be less likely to experience a loss of personal information and privacy. There are a number of everyday practices everyone should follow.

• Improve your passwords: Use complex and unique passwords that are different for each account. Include numbers, capital and lowercase letters, and symbols.
• Take it one step further: Turn on two-step authentication for your accounts – a security process in which the user provides two means of identification rather than one.
• Opt for biometric identification: On top of your standard password, consider adding a photo of your face, the sound of your voice or an image of your fingerprint to your protective arsenal.
• Keep an eye on apps: Before you download an app, review the privacy policy and what data (such as location) the app can access.
• Clean up your mess: Keep your electronics free from malware and viruses. Apply updates and patches on computers and mobile devices as soon as possible, and wipe computers and mobile devices of data before selling or disposing of them.
• Use public wireless networks with caution: Avoid visiting sensitive websites or conducting financial transactions on an unsecure network.
• Post prudently: Be mindful of what you’re posting to social media platforms, and avoid sharing personally identifiable information. Check privacy settings to ensure that you are not sharing your profile with people you don’t know.
• Be alert to risks online: Never open attachments or links in suspicious emails or from senders you don’t recognize.
• Secure your information: Keep software up to date and install an antivirus product. Shred sensitive material or store securely in a digital or physical vault.

Post-Theft Protection

The Federal Trade Commission reports that 11.7 million people are victims of identity theft each year. Should your information be compromised, these are the actions you should take.

• Contact the Federal Trade Commission: Call to report the issue or access the online complaint form. Visit the FTC’s identity theft website for more information.
• Report the incident: File a police report, and retain a copy as proof.
• Contact creditors’ fraud departments: Close affected accounts and speak with someone in the security or fraud department. Notify credit card companies and banks in writing. Follow up with a letter for affidavit as well as copies of any supporting documents. Order new debit and credit cards.
• Alert credit bureaus: Report the breach to one of the three major credit bureaus and ask for credit monitoring, fraud alerts, credit freezes and copies of your credit reports.
• Keep good records: Notify businesses and agencies by phone and in writing. Log dates, times and the names of people you spoke with as well as what they tell you. Keep copies of any correspondence, and use certified mail, return receipt requested.
• Reset your passwords: Consider using password manager software if needed. Experts blame weak or stolen usernames and passwords for 76% of data breaches.
• Check for additional fraudulent activity: Watch your monthly statements, emails and regular mail, sign into Investor Access, and call your advisor to report suspicious activity.
• Other steps: Contact the Social Security Administration, the Postal Inspection Service or your issuing driver’s license office if your Social Security card, mail or driver’s license has been stolen.

For more information on how to protect your self, please click on the link below:

https://www.raymondjames.com/pointofview/national_cyber_security_awareness_month

Talk to your advisor about these and other ways you can protect yourself and your accounts. Together, you can explore options like secure file sharing, fraud and consumer preference text alerts, and two-factor authentication.

"No Kids" Shouldn't Mean "No Estate Plan"

Estate planning can feel overwhelming for individuals without children or close family members. Here are a few steps you should take, even in the face of uncertainty.

September 12, 2017

Estate planning can sometimes feel overwhelming for individuals without children or close family members. You may not know who should receive your estate, who should be the executor of your will, or whom you should trust with important decisions should you become incapacitated.

Not knowing the “perfect” way to craft an estate plan may lead you to do nothing at all – but this is a huge mistake, regardless of the size of your estate. Remember, if you pass away intestate, or without a will in place, your assets and property may fall to the direction of state statutes and the probate courts.

While estate planning can raise difficult questions – even for people with family ties and close friends – there are a few key decisions you should make right away, even in the face of uncertainty:

Choose an executor for your estate. Options exist beyond family members and friends, including lawyers, banks and other planning professionals. While making this choice can be difficult, your advisor can help with the decision, and he or she can also contact a Raymond James Trust consultant for additional support.

Create a living will. The document states your wishes should you be placed on life support or suffer from a terminal condition. Having it in place ensures that your physicians are aware of the action you want taken in the face of difficult end-of-life decisions. 

Name a healthcare proxy or power of attorney. He or she will be tasked with making decisions about your health in scenarios not covered by your living will. As with your executor, you have the ability to ask a non-relative, such as a third-party professional or clergyperson, if they're willing to accept the responsibility. Note that your advisor can also help in selecting someone to act on your behalf if you become unable to tend to your finances.

Select beneficiaries for your 401(k) plans and life insurance policies. These won’t pass through your will, so you need to be clear about where you want your assets to go. Having trouble deciding who should receive your legacy? Think about your passions in life and consider tying your assets to charities for those causes. Your advisor can help you consider your options.

Having these decisions in place is an important first step to ensuring your estate is left the way you intend, regardless of familial ties – and be sure to review your selections regularly in case your circumstances change.

Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.

How to Combat Compassion Fatigue

Caregivers must perform a delicate balancing act — caring for their loved one and other family members, while also caring for themselves.

“These challenges often lead to emotional and physical stress as caregivers try to find a way to balance all of their caregiving duties and other life responsibilities,” says Amy Goyer, a caregiving expert for AARP.

America’s caregivers spend an average of almost 25 hours a week providing care for their loved ones, with almost one-quarter of those surveyed devoting at least 41 hours, a study by AARP and the National Alliance for Caregiving found. That can include helping loved ones perform daily activities, such as bathing, or they may provide medical care, such as giving injections or dressing wounds. What’s more: many caregivers do so without having received any training to help them handle those responsibilities, the study found.

As a result of those demands, “caregivers don’t care for themselves (and) their health really starts to suffer,” says Gail Hunt, president of the National Alliance for Caregiving, a nonprofit coalition of organizations working to improve the lives of caregivers.

In fact, 22% of the caregivers surveyed said their own health had declined since they began their caregiving duties, and 38% said their caregiving situation was “highly stressful.”

The demands of daily life often mean caregivers let their social life slide. “That means a lack of connections and a shrinking support system,” Goyer says. “We become isolated, which puts us at risk in all sorts of ways, including in terms of our health.”

Stress and exhaustion can also have a major impact. “We may become short-tempered, less patient, scattered and discouraged,” she says. “It’s hard to keep up a positive attitude and encourage those we are caring for when we are so depleted.”

Finding Strength in Support

With more than 43 million Americans providing care for a loved one1, caregivers should know they don’t need to soldier on alone, as resources are available to make their physical, emotional and financial lives easier.

Goyer recommends that caregivers take part in a support group, either online or in person, so they can draw on the knowledge and insights of others. While organizations like AARP offer a wide range of caregiver resources from self-care to legal and financial help, caregivers can find this kind of peer-to-peer support from Facebook groups that allow users to share experiences and insights to better equip them with assisting loved ones with specific illnesses, such as dementia.

Another important resource is the Eldercare Locator, provided by the U.S. Administration on Aging, which allows caregivers to find services that are available in their area.

For caregivers who work, or who want their loved one to have contact with others, adult day care may be an option, Hunt says, and fees are usually based on a sliding scale.

Caregivers also might be able to find respite care for their loved ones, so they are able to take a break, or can seek homemaker assistance, meal delivery and other services that can make caregivers’ lives easier, Goyer says.

One law designed to empower caregivers is the CARE (Caregiver Advise, Record, Enable) Act. Already adopted by 32 states and the District of Columbia, the measure is designed to help caregivers stay informed when a loved one is in the hospital, and to help them be better prepared to care for that person once he or she returns home.

Among other things, the act requires a hospital or rehabilitation facility to record the name of the caregiver when a loved one is admitted, and then notify the person when the patient is to be discharged. It also requires hospitals and rehabilitation facilities to provide information and instruction on medical tasks the caregiver will need to perform.

The Costs of Care

Along with the emotional and physical challenges, caregiving can also place heavy demands on a caregiver’s financial life, says Frank McAleer, vice president of financial planning and retirement solutions at Raymond James.

Those who leave the workforce to be a caregiver lose an average of $325,000 in wages1 and benefits, McAleer says. They also spend about $11,000 out of pocket each year to help care for their loved one.2

Even those who continue to work might have to cut back on their hours or skip a promotion in order to provide care, Goyer says.

The survey by the National Alliance for Caregiving and AARP found nearly one in five caregivers experienced financial strain.

That means it’s incumbent that individuals plan for the possible financial impact of caregiving. That planning typically needs to begin when clients are in their 50s, McAleer says.

But many people don’t want to admit their concerns, or know where to begin. To address that, McAleer educates Raymond James’ financial advisors on questions they can ask clients regarding any potential caregiving needs that could affect their financial plans.

The company has also made available guides to help clients navigate healthcare, caregiving, transportation and housing needs, both for loved ones now and for themselves in the future.

“One common theme is money,” McAleer says. “Caregivers often have to navigate financial topics with their loved ones, while also managing their own money.”

By proactively preparing a financial roadmap for such costs, caregivers are thus better positioned to combat any compounding stress that may contribute to their emotional and physical well-being.

1“Caregiving in the U.S.,” AARP, 2015
2“Study of Caregiver Costs to Caregivers,” Metlife, 2011

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

Stocks Mixed as Summer Fades

Domestic equity indexes ended August mostly flat, a contrast to the last several months of momentum. The end of the month saw geopolitical concerns arise between North Korea and Japan, and Brexit negotiations have not made notable progress. Yields on the 10-year U.S. Treasury slid, as investors sought safety Treasuries and gold.

In better news, recent data showed property values and home prices had gained ground, in part because of a shortage of inventory, a strong job market helping to increase demand and still-low mortgage rates. Consumer confidence also rose to its second-highest level since 2000, which bodes well for gains in consumer spending going forward, the largest part of the U.S. economy.

Market observers are also watching how Washington will deal with the looming showdown over the fiscal 2018 budget and the federal debt ceiling. While lawmakers are working toward a deal by the end of September, they can easily kick the can down the road, allowing more time to reach an agreement.

The major U.S. stock indices ended August largely mixed, with the S&P 500 and Dow essentially flat from the month before, the Russell 2000 down 1.39% and the Nasdaq up slightly at 1.27%. However, all are well into positive territory year-to-date.

Here’s a look at what else is happening in the economy and capital markets, as well as key factors we are watching: 

Economy

• Real GDP rose at a 2.1% annual rate in the first half of 2017, roughly the same pace as in the last couple of years, said Chief Economist Scott Brown, Ph.D., “with moderate strength in consumer spending and business fixed investment.”
• As expected, consumer spending rebounded in the second quarter, but with some signs of slowing as we headed into July.
• Wage growth has remained moderate with average hourly earnings trending 2.5% higher than a year ago, despite the continued tightening in labor market conditions.
• Business optimism surged following the presidential election and has remained elevated in recent months. That enthusiasm has likely contributed to the increase in business fixed investment in the first half of the year, but the recovery in energy exploration also has played a part.
• Following the failure to repeal and replace the Affordable Care Act, attention in Washington will turn to tax reform, which will be difficult to achieve.

Equities

• The U.S. Department of Energy recently released a grid reliability study that offered a broad-based perspective on U.S. power generation, including insights on wind/solar, natural gas, coal and nuclear power. Most interestingly, the report took a balanced approach that didn’t declare any “winners” or “losers,” but described three key factors for retirements of coal and nuclear power plants. The number-one reason was cited as low-cost natural gas, followed by declining demand for electricity and improving economics of wind and solar, explained Pavel Molchanov, Senior Vice President and Energy Analyst.

 International

• European policymakers were largely on holiday during the last month, but demand for the euro was strong, pushing the currency to new 2017 highs against the dollar and multiyear highs against the British pound, said Raymond James European Strategist* Chris Bailey.
• The strong euro began to impact the local European markets as the shares of exporters and dollar earners started to wilt. However, the potential for earnings growth for more domestic-centered European corporations is promising, with the focus on economic reform measures from countries like France likely to be high in September, Bailey said.  
• As the U.K. government discusses arrangements to slow down and possibly stop a full Brexit, there is also some hope for out-of-favor U.K. domestic shares for the balance of the year and into 2018.
• With the Korean Peninsula crisis dominating headlines, typical safe havens like the yen have been pushed up and Japanese bonds down.
• Despite China’s geographic proximity and deep economic links to Japan, Chinese shares pushed to levels not seen since late 2015 following continued strong economic growth rates.
• In emerging markets, the Brazilian market traded with near decade-high levels in local currency terms thanks to firming resource prices and continued inflow resurgence, said Bailey.

Fixed Income

• The 10-year Treasury gave up 2 basis points in yield over the last week of the month.
• CD rates were mixed when compared to prior weeks. The short end of the curve (one-year and less) was flat, while intermediate CDs, two-, three- and five-years, were all 5 basis points higher for the week.
• Changes in municipal yields corresponded closely to changes in the Treasury markets, leading to little change in muni-Treasury ratios. Yields were flat to lower over the course of last week. The short end of the curve (one to five years) was flat, while a majority of the intermediate to long end of the curve was 3 basis points lower.
• As we head toward a three-day weekend, investment-grade new issuance is expected to be light, with 80% of Bloomberg survey respondents expecting less than $15 billion to be brought to market in the coming week.

Bottom line

• We remain cautiously optimistic and encourage investors to measure the success of their financial plans based on steady progress toward their goals, not the short-term returns of the markets.

Please let us know if you have any questions about recent market events or how to position your long-term financial plan for the months ahead. We look forward to speaking with you.

Raymond James Financial Services does not accept orders and/or instructions regarding your account by email, voice mail, fax or any alternate method. Transactional details do not supersede normal trade confirmations or statements. Email sent through the Internet is not secure or confidential. Raymond James Financial Services reserves the right to monitor all email. Any information provided in this email has been prepared from sources believed to be reliable, but is not guaranteed by Raymond James Financial Services and is not a complete summary or statement of all available data necessary for making an investment decision. Any information provided is for informational purposes only and does not constitute a recommendation. Raymond James Financial Services and its employees may own options, rights or warrants to purchase any of the securities mentioned in this email. This email is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this message in error, please contact the sender immediately and delete the material from your computer.