Market-Moving News[i]
Positive track
The S&P 500, the NASDAQ, and the Dow each climbed more than 1% for the week, failing to match the previous week’s big gains but nevertheless extending their comeback from a rough start to August. Stocks were choppy earlier in the week but ended on a positive note Friday following a speech by U.S. Federal Reserve Chair Jerome Powell.
Near recovery
After two strong weeks, the major U.S. stock indexes recovered almost all of the ground lost during a stretch of elevated volatility in late July and early August. At Friday's close, the S&P 500 was within 0.58% of the record high that it reached in mid-July, while the Dow was just 0.06% shy of the historic peak that it reached last month. The NASDAQ was 4.13% below its record.
Fed pivot approaches
U.S. Federal Reserve Chair Jerome Powell declared in a speech on Friday that “the time has come for policy to adjust,” reinforcing market expectations for an initial interest-rate cut at the Fed’s next meeting ending September 18. Speaking in Jackson Hole, Wyoming, Powell noted that the labor market has recently cooled while inflation has continued to ease downward closer to the Fed’s 2% target.
Yield decline
The growing likelihood of interest-rate cuts produced another volatile week for U.S. government bonds, as the yield of the 10-year U.S. Treasury on Wednesday fell to as low as 3.76%, slightly above a year-to-date low set a couple weeks earlier. The yield had been as high as 4.70% as recently as late April, when the possibility of rate cuts appeared more distant.
Jobs revision
The U.S. government’s annual process to revise initial estimates of jobs growth resulted in an unusually large downward adjustment, which indicated that the labor market wasn’t as strong as it had appeared. Employers added 818,000 fewer jobs than previously thought in the 12-month period that ended in March 2024, based on records collected from state unemployment offices relative to earlier estimates drawn from employer surveys.
Small-cap rally
The prospect of lower borrowing costs for smaller companies sparked a rally for small-cap stocks in the wake of Friday morning’s speech by U.S. Federal Reserve Chair Jerome Powell, who raised expectations for interest-rate cuts beginning next month. A small-cap benchmark, the Russell 2000 Index, jumped 3% for the day versus gains of around 1% for large-cap indexes.
Home sales uptick
A recent decline in U.S. mortgage rates helped lift sales of existing homes in July, snapping a four-month string of declines. Sales of previously owned homes rose 1.3% from the prior month, the National Association of Realtors reported on Thursday. Prices slipped relative to June but stayed near a record reached that month.
Oil slick
The price of U.S. crude oil on Wednesday briefly fell to its lowest level in more than six months, sinking to $71.46 per barrel. Although the price rebounded the following two days, oil fell overall for the week, trading below $75 on Friday afternoon versus around $77 a week earlier.
The Week Ahead: Aug 19-23
- Monday
- Durable goods orders, U.S. Census Bureau
- Tuesday
- S&P/Case-Shiller 20-City Composite Home Price Index
- Consumer Confidence Index, The Conference Board
- Wednesday
- No major reports scheduled
- Thursday
- Second-quarter GDP, second estimate, U.S. Bureau of Economic Analysis
- Weekly unemployment claims, U.S. Department of Labor
- Pending home sales, National Association of Realtors
- Friday
- Personal Consumption Expenditure Price Index, U.S. Bureau of Economic Analysis
- University of Michigan Index of Consumer Sentiment
Philosophy Quote of the Week[ii]
Seeking Out Shipwrecks
“I was shipwrecked before I even boarded…the journey showed me this – how much of what we have is unnecessary, and how easily we can decide to rid ourselves of these things whenever it’s necessary, never suffering the loss.”
Seneca, Mora Letters, 87.1
Tax Tips[iii]
10 Tax Facts if You Sell Your Home and Reverse Mortgages
10 Facts to Keep in Mind When Selling Your Home
- If you have a capital gain you may be able to exclude the gain from your tax. This rule applies if you owned and used the property as your primary residence for at least two of the five years prior to the date of sale. If you moved out and started renting your residence, you may have complicated rules to follow – talk to your tax professional!
- There are exceptions to the ownership and use rules. Some exceptions apply for disabled people, the military, and certain government and Peace Corps workers. See IRS Publication 523, Selling Your Home.
- The most gain you can exclude is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.
- If the gain is not taxable the sale must still be reported to the IRS on your tax return – even if there is no tax owed on the sale!
- You must report the sale on your tax return if you can’t exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions.
- Generally, you can exclude the gain from the sale of your main home only once every two years.
- If you own more than one home you may only exclude the gain of your main home. Your main home usually is the home you live in most of the time. See Publication 523.
- If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. See Publication 523.
- If you sell your main home at a loss you cannot deduct it.
- After you sell your home and move, don’t forget to update your address with your tax preparer and the IRS.
Reverse Mortgages
A reverse mortgage is a way for people to take advantage of the equity in their home and still live somewhat comfortably. It’s the opposite of a traditional mortgage.
Traditional mortgages are funded when you borrow money to purchase the home. With a reverse mortgage you receive loan proceeds as a lump-sum payout, an annuity, a line of credit, or a combination of the three. You make no payments if you reside in the property but are responsible for annual property taxes and homeowner’s insurance. The loan with any accrued interest comes due when you move out or pass away.
To qualify for reverse mortgages you must be at least 62 years old and own the home outright or have a balance that can be paid off with the loan proceeds. How much you can borrow depends on many factors, including age, the home’s market value, and interest rates.
There are downsides to reverse mortgages. Closing costs can be as much as 5% of the home’s value. Borrowers may have to purchase mortgage insurance and must pay the property taxes and homeowner’s insurance each year.
Federal truth in lending laws require lenders to provide information about interest rates, payment terms and other costs in writing to anyone who agrees to or enquires about a reverse mortgage.
The federal government also requires interested homeowners to take a class conducted by Housing and Urban Development (HUD) to learn all the rules of reverse mortgages. Your mortgage lender can give you more information on the class.
Shop for a reverse mortgage just as you would for any other loan. Ensure the basic terms of the competing loans are comparable and go with the lowest price by comparing interest rates, upfront fees and other charges.
People get into trouble with reverse mortgages when they forget they are responsible for the annual homeowners insurance and property taxes! The reverse mortgage company WILL NOT provide an escrow account to pay those!
Mortgage interest is only deductible if you are paying it with a reverse mortgage. Unless you pay the interest there is no deduction for interest accumulated.
Key Points to Remember
- Selling your personal residence is usually tax-free
- Exemption amounts vary with marital status, work conditions and medical status
- Military and government workers have preferential rules for gain exemption
- Gain exempted can be up to $500,000 for married and $250,000 for single taxpayers, as often as every two years
- Reverse mortgages are a way to get income from your home’s equity
- You must be at least 62 years old and own the home to qualify
- You must take a 1-day class prior to getting the reverse mortgage
- No payments are made until you move out or pass away
- Costs can be steep: upfront fees can be up to 5%; mortgage insurance may apply; interest may have to be paid; and DON’T FORGET you are responsible for property taxes and insurance
- Shop reverse mortgages like other loans
- Remember that you (the homeowner) are responsible for paying insurance and property taxes! The mortgage provider will not do this for you!
- Mortgage interest isn’t deductible unless you are paying it. Accumulating interest is not deductible.
Health Tip of the Week[iv]
Wrinkle creams: Your guide to younger looking skin
Do nonprescription wrinkle creams really reduce the appearance of fine lines and wrinkles? It depends.
People buy nonprescription wrinkle creams and lotions with the hope that these products can reduce wrinkles and prevent or reverse damage caused by the sun. Do they work? That often depends on what’s in the product and how long you use it. Because these types of wrinkle creams aren't classified as medicine, they aren't required to undergo scientific research to prove their effectiveness.
If you're looking for a face-lift in a bottle, you probably won't find it in nonprescription wrinkle creams. The benefits of these products are usually only slight.
Common ingredients in anti-wrinkle creams
Moisturizing alone can improve the appearance of your skin. It temporarily plumps the skin, making lines and wrinkles less visible. Moisturizers are lotions, creams, gels and serums made of water, oils and other ingredients, such as proteins, waxes, glycerin, lactate and urea.
Wrinkle creams often are moisturizers with active ingredients that offer additional benefits. These added ingredients are intended to improve skin tone, texture, fine lines and wrinkles. How well these products work depends in part on your skin type and the active ingredient. Many of them are available in stronger formulations with a prescription from your doctor.
Here are common ingredients of moisturizing serums and creams that might improve the look of your skin. Whatever products you choose, read the label instructions.
- This is a product made from vitamin A compounds. It is weaker than a retinoid, which is in many products that require a prescription. Examples are The Ordinary Retinol 0.5% in Squalane and CeraVe Resurfacing Retinol Serum. Retinols and retinoids are not safe to use while pregnant.
- Vitamin C (ascorbic acid). Vitamin C doesn't help much on its own but when added to a wrinkle serum and used regularly, it reduces damage from the sun and pollution and reduces skin discoloration. Vitamin C helps your skin produce collagen too.
Examples of vitamin C serums are CeraVe Vitamin C Face Serum and La Roche-Posay Vitamin C Anti-Aging Serum. Look for the ingredient L-ascorbic acid. Store your vitamin C product away from air and sunlight to make it last longer.
- Niacinamide (NYE-a-sin-a-mide). This substance is related to vitamin B-3 (niacin). It's used in serums, masks, moisturizers and wrinkle creams. It may reduce signs of aging and skin discoloration. And it can have a calming effect on the skin, making your skin more able to benefit from other ingredients in your cream. Apply it two times a day.
- Bakuchiol (buh-KOO-chee-all). This substance is gentler than retinol and is safe to use while pregnant. It's used in serums and moisturizers. It reduces signs of aging and skin discoloration. Bakuchiol is from the ayurveda medicine tradition. Apply it two times a day.
- Tranexamic (TRAN-ex-AM-ik) acid. This substance is derived from the amino acid lysine. It brightens the skin and reduces discoloration and melasma. Apply it two times a day, with a sunscreen. Examples are La Roche-Posay Glycolic B5 10% Pure Glycolic Acid Serum and Paula's Choice Clinic Discoloration Repair Serum.
- Azelaic (a-zeh-LAY-ik) acid. This is a gentle substance that works well when combined with other ingredients in your wrinkle serum or moisturizer. And it's safe to use while pregnant. Azelaic acid is an antibacterial and skin-lightening agent. Apply it up to two times a day. Examples include The Ordinary Azelaic Acid Serum and The Inkey List Azelaic Acid Serum.
No guarantees: Assessing safety and effectiveness
The Food and Drug Administration (FDA) classifies creams and lotions as cosmetics, which are defined as having no medical value. So the FDA regulates them less strictly than it does prescription medicines. And cosmetic products don't get the tests for safety and effectiveness that prescription medicines applied to the skin do. You might hear some of these products called cosmeceutical agents — a term used to capture the idea that these products are part cosmetic and part medicine.
Because the FDA doesn't evaluate cosmetic products or cosmeceuticals for effectiveness, there's no guarantee that any nonprescription product will reduce your wrinkles.
Consider these points when judging the merits of using a wrinkle cream:
- Cost has no relationship to effectiveness. A wrinkle cream that's more costly may not be more effective than a less costly product.
- Lower doses. Skin products that you can buy without a prescription contain lower concentrations of active ingredients than do prescription creams. So you might not see results, and any change you do see might be short-lived.
- Daily use. You'll likely need to use the wrinkle cream once or twice a day for many weeks before noticing any change in your skin. And once you discontinue using the product, your skin is likely to return to the way it looked before.
- Side effects. Some products may cause skin irritation, rashes, burning or inflammation. And some products cannot be used while pregnant. Be sure to read and follow the product instructions to limit side effects. It may help to select products that don't cause allergic reactions and acne. You might see these labeled hypoallergenic and noncomedogenic. Choose products that offer a consumer help line in case you have questions.
- Individual differences. Just because your friend swears by a product doesn't mean it will work for you. People have different skin types. No one product works the same for everyone.
Your anti-wrinkle skin care routine
Anti-wrinkle serums and creams may make tiny wrinkles less noticeable. Your results may depend on how often you use a product, the type and amount of active ingredient in it, and the type of wrinkles you want to treat.
But if you want to take the guesswork out of your skin care routine, try these more reliable ways to care for your skin:
- Protect your skin from the sun. Exposure to UV light speeds up the natural aging process of your skin, causing wrinkles and rough, blotchy skin. In fact, sun exposure is the No. 1 reason for signs of aging in the skin, including uneven pigmentation. Protect your skin by limiting the time you spend in the sun and always wearing protective clothing and a hat. Also, use sunscreen on exposed skin year-round when outdoors.
Even sunlight that shines through windows can increase signs of skin aging such as wrinkles. So it's also helpful to get in the habit of using daily a product containing sunscreen, even if you aren't planning to be outside on any given day. At least use the product on your face, the V of your chest and your hands.
- Choose products with built-in sunscreen. Use a broad-spectrum sunscreen with an SPF of at least 30, even on cloudy days. Many moisturizers and makeup products have sunscreen built in. So try to pick a morning moisturizer or foundation that already includes sunscreen SPF 30 or higher. And get in the habit of using it every day. Especially when you're outside, apply sunscreen generously. Reapply every two hours, or more often if you're swimming or sweating.
Products that contain physical blockers such as zinc oxide and titanium oxide provide the most effective protection for sensitive skin. Examples include Eucerin SPF 50, La Roche-Posay SPF 50 and Tizo AM Replenish. Apply it over any other products you're wearing — except insect repellent. Insect repellent goes on last.
- Use moisturizers. Moisturizers can't prevent wrinkles, but they trap water in the skin, temporarily masking tiny lines and creases.
- Don't smoke. Smoking causes narrowing of the blood vessels in the outer layers of the skin. It also damages collagen and elastin. These fibers give your skin its strength and elasticity. As a result, skin begins to sag and wrinkle prematurely. You can improve your skin tone and texture and prevent more wrinkles by quitting smoking.
A dermatologist can help you create a personalized skin care plan by assessing your skin type, evaluating your skin's condition and recommending products likely to be effective.
If you're looking for more dramatic results, a dermatologist can recommend medical treatments for wrinkles. These include prescription creams and serums; injections of medicine such as Botox, Jeuveau, Xeomin, Daxxify, Sculptra, Radiesse; chemical peels; microneedling; and laser treatments.
[i]https://www.jhinvestments.com/weekly-market-recap#market-moving-news, accessed 08.28.2024.
[ii] Holiday, Ryan. The Daily Stoic: 366 Meditations on Wisdom, Perseverance, and the Art of Living. Kindle edition, page 255. Accessed 08.28.2024.
[iii] Hockensmith, Robert F. 52 Ways to Outsmart the IRS, Weekly Tax Tips to Save You Money. Kindle edition, page 157-160, accessed 08.28.2024.
[iv]https://www.mayoclinic.org/diseases-conditions/wrinkles/in-depth/wrinkle-creams/art-20047463, accessed 08.28.2024.