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Weekly Market Recap[i]
The Week in Review
- Real GDP grew 2.3% q/q in 4Q24
- Core PCE rose 0.16%m/min December
- The FOMC held the federal funds rate at 4.25% to 4.50%
The Week Ahead
- JOLTs
- Jobs report
- ISM PMIs
Thought of the Week
With 32% in the Magnificent 7 and another 19% in the rest of the technology sector, the S&P 500 is becoming a concentrated bet. Monday was a painful wakeup call when the release of DeepSeek’s new LLM sent semiconductors and tech tumbling 7.8% and 5.6%, respectively. Even though 70% of constituents ended the day up, the S&P 500 followed tech down 1.5%. While we don’t think the AI investment thesis has fundamentally changed, increased caution is warranted. DeepSeek's efficiencies could reduce costs, but compute requirements probably won’t go down. As technological advancements make AI more efficient, its cost decreases, demand for the products increases and compute requirements tick back up. However, with U.S. tech companies sporting winner-takes-all price tags, new competitors are a good reminder disruption is a feature, not a bug, of technological development.
Yet valuations leave little room for uncertainty. This week’s chart shows investors have become increasingly underwhelmed by Mag 7 earnings growth despite the impressive results. During reports this week, a slight miss on sky-high expectations for AI growth were enough to trigger negative price action. As capital expenditures increasingly weigh on free cash flow, there will be even less room for imperfection. In short, Monday’s sell-off was the right thing but for the wrong reasons. While investors shouldn’t be worried about U.S. tech losing its AI advantage anytime soon, they should be worried about crowding, concentration and elevated valuations. There are a lot of reasons for enthusiasm, but it should be caveated with caution, especially amid the unpredictability of technological revolution.
For market performance charts and important disclosures, click HERE.
Philosophy Quote of the Week[ii]
The Source of Your Anxiety
“When I see an anxious person, I ask myself, what do they want? For if a person wasn’t wanting something outside of their own control, why would they be stricken by anxiety?”
- Epictetus, Discourses, 2.13.1
The anxious father, worried about his children. What does he want? A world that is always safe. A frenzied traveler – what does she want? For the weather to hold and for traffic to part so she can make her flight. A nervous investor? That the market will turn around and an investment will pay off.
All of these scenarios hold the same thing in common. As Epixtetus says, it’s wanting something outside our control. Getting worked up, getting excited, nervously pacing – these intense, pained and anxious moments show us at our most futile and servile. Staring at the cloak, at the ticker, at the next checkout lane over, at the sky – it’s as if we all belong to a religious cult that believes the gods of fate will only give us what we want if we sacrifice our peace of mind.
Today, when you find yourself getting anxious, ask yourself: Why are my insides twisted into knots? Am I in control here or is my anxiety? And most important: Is my anxiety doing me any good?
Tax Tips[iii]
Little Trick to Write Off Miscellaneous Expenses
When we include our tax deductions, we must always remember the big four: mortgage interest, state income taxes, real estate taxes and charitable contributions. You should have this in mind and be aware that 2017 was the last year to be able to write off miscellaneous expenses on Schedule A, until 2026, when they will revert to 2017 rules.
The Tax Cut and Jobs Act (TCJA) suspends Miscellaneous Expense deductions until 2026, but there is still a potential for getting these tax deductions.
If you free-lance, earn side-work (or have a “side hustle” – today’s annoying term), or have your own business you can still write off many items that are currently lost for employees. Having your own business allows you to write off any expense that is used for the business. Try to earn non-employee (self-employed) income from free-lance or side work and you can write off many, if not all, of the expenses listed below.
Some Business Deductions:
- Tax preparation, consultation, investment or planning fees for business
- Advertising, marketing, website creation and maintenance fees
- Auto expenses (if you use the vehicle for both business and personal be sure to keep a logbook) – no logbook, no deduction
- Banke fees and credit card processing fees
- Communication expenses (phones, internet, data plans)
- Dues, professional organizations and groups
- Education to improve your existing knowledge in a business (not allowed if it prepares you for a new career, job or a new professional license)
- Equipment purchased, repaired and maintained
- Health insurance premiums, including Medicare
- Home office expenses (you can have more than one office)
- Legal, accounting or other professional fees to manage or defend your income (professional athletes get to deduct fines they pay to their leagues for misconduct)
- License fees and renewals
- Office equipment and supplies
- Payroll and sub-contractor expenses
- Printing, postage and shipping costs
- Travel, transportation and lodging expenses (many expenses here that you wouldn’t think of)
- Uniforms and laundry expenses
- Qualified Business Income (QBI) deduction
- Check with your tax advisor for more!!!!
Financial Fitness Checkup[iv]
2025 Financial Fitness Checkup: Preparing for Life’s Changes
Last week we introduced you to our2025 Financial Fitness Checkup, this week we’ll delve how it can help when you are going through family changes.
As life evolves, so do our financial priorities and responsibilities. Whether you’re getting married, starting a family, supporting aging parents, or adjusting to a new stage in life, these changes impact your financial and tax planning considerations.The 2025 Financial Fitness Checkupis designed to help you assess how these shifts affect your financial future and ensure that you have a well-prepared strategy in place.
Marriage and Cohabitation: Combining Finances and Tax Strategies
Getting married or moving in with a partner introduces shared financial responsibilities and tax implications. Couples need to decide how to manage joint expenses, whether to merge finances, and how to handle debt. Updating beneficiary designations on insurance policies and retirement accounts, revising estate plans, and considering tax-efficient filing strategies are essential steps.The 2025 Financial Fitness Checkupincludes key questions to help evaluate your financial preparedness for marriage or cohabitation, ensuring you maximize tax benefits and protect your assets.
Divorce and Separation: Navigating Financial and Tax Adjustments
Separation or divorce can bring financial uncertainty, requiring adjustments to tax planning, asset division, and estate planning. It’s crucial to reassess your financial plan, update estate documents, and ensure adequate insurance coverage. Tax considerations, such as filing status changes and alimony taxation, should also be factored in.The 2025 Financial Fitness Checkuphelps identify financial vulnerabilities and areas that require immediate attention to maintain stability during this transition.
Growing Your Family: Planning for Expenses and Tax Credits
Welcoming a new child—through birth or adoption—impacts financial and tax planning. From medical expenses and childcare to college savings, proactive planning is key. Reviewing life insurance policies, updating estate plans, and increasing emergency savings are crucial. Additionally, families should explore tax benefits like the Child Tax Credit and Dependent Care Credit.The 2025 Financial Fitness Checkupprovides guidance on preparing for these expenses while maximizing available tax advantages.
Supporting Adult Children or Elderly Parents: Balancing Financial Responsibilities
Families supporting both adult children and aging parents face unique financial pressures. Covering college tuition, helping children transition to financial independence, or managing healthcare expenses for elderly parents can strain resources. Establishing tax-efficient gifting strategies, utilizing trusts, and optimizing deductions for dependent care expenses can help manage these costs.The 2025 Financial Fitness Checkuphelps identify these responsibilities and offers a framework for financial planning and tax optimization.
Retirement and Estate Planning: Ensuring Financial Security
Changing family dynamics necessitate adjustments in retirement and estate planning. Whether it’s updating wills, ensuring proper beneficiary designations, or reassessing retirement account withdrawals, it’s important to adapt to evolving needs. Understanding tax implications of Required Minimum Distributions (RMDs) and estate transfers can prevent unnecessary tax burdens.The 2025 Financial Fitness Checkuphighlights key considerations for securing your financial future and ensuring a smooth transition for your heirs.
Join Mission Financial Planners’ Webinar to Learn More
Navigating these family changes can be complex, but you don’t have to do it alone. Join Mission Financial Planners on February 11 for an insightful webinar on how family changes impact financial and tax planning.
Speakers:
- Kenneth Hamilton, CFP®, RICP®, CSSCS®, CDFA® – Retirement and post-divorce financial planning
- Jason Duffaut, CFP®, CAP®, CPFA®, CEXP® – Business succession and estate planning
- Matt Donaghue, CFP®, CLU, CLTC, AIF®, AIFA®, PPC®, NSSA®, RICP® – Retirement income and tax-efficient planning
Register here: https://www.missionfinancialplanners.com/events
For personalized financial guidance, contact:
- Kenneth Hamilton: khamilton@mfplanners.com, 726-727-6582
- Jason Duffaut: jduffaut@mfplanners.com, 726-727-6583
- Matt Donaghue: mdonaghue@mfplanners.com, 726-727-6581
Taking proactive steps today can secure your financial future and help you confidently navigate life’s inevitable changes. Use the2025 Financial Fitness Checkupas a starting point to evaluate where you stand and identify areas that need attention.
[i]https://am.jpmorgan.com/content/dam/jpm-am-aem/americas/us/en/insights/market-insights/wmr/weekly_market_recap.pdf. Accessed 02.03.2025. See page 2 for important disclosures.
[ii] Holiday, Ryan. The Daily Stoic: 366 Meditations on Wisdom, Perseverance, and the Art of Living. Kindle edition, page 43. Accessed 02.01.2025.
[iii] Hockensmith, Robert F. 52 Ways to Outsmart the IRS, Weekly Tax Tips to Save You Money. Kindle edition, pages 29-30. Accessed 02.01.2025.
[iv]https://www.horsesmouth.com/shop/download.aspx?i=hzyqhKwku0I%3d&f=5GQCgyHBsIE%3d, accessed 01.20.2025