Weekly Market Update, Week Ending October 25, 2024

Market-Moving News[i]

American consumer

In a year with growth, inflation, interest rate, fiscal and geopolitical uncertainty, there has been one thing to count on: the American consumer. Despite rising delinquencies and data that until recently showed a historically low saving rate, consumer spending has defied expectations of a slowdown. In September, the Bureau of Economic Analysis's (BEA) annual revisions to the national income and product accounts may explain why.

Personal savings rate

This week’s chart shows the average personal saving rate in the five years prior to the pandemic compared to 2024, both before and after the BEA’s annual revisions. Prior to revisions, the personal saving rate averaged a record low of 3.4%, leading many to believe that spending was set to stall as consumers re-built their depleted savings. After revisions, however, the average personal saving rate jumped to 5.2%. While still below the average in the five years before the pandemic, this implies that consumers are in better financial shape than initially anticipated.

Q3 GDP

Ahead of a first look at third-quarter GDP, investors can find some peace of mind knowing that, in aggregate, consumers look healthy. However, there is divergence beneath the surface. Rising wealth has supported strong spending in the higher income cohorts, while lower income households remain under pressure. Still, bolstered by 17 straight months of positive year-over-year real wage gains, consumers should continue spending at a healthy pace, allowing the U.S. economy to maintain a soft landing into next year.

More rate cuts?

Moving forward, resilient consumption should support earnings, allowing equities to grind higher, and a stable economy should allow the Federal Reserve to methodically ease policy.

The Week Ahead: Oct 28-Nov 1

• Jobs report
• 3Q GDP
• PCE
• Nonfarm payrolls 

Philosophy Quote of the Week[ii] 

We were made for each other

 “You’ll more quickly find an earthly thing kept from the earth than you will a person cut off from other human beings.”

 Marcus Aurelius, Meditations, 9.9.3

 Naturally, Marucs Aurelius and the rest of the Stoics were not familiar with Newtonian physics.  But they knew that what went up must come down.  That’s the analogy he’s using here:  our mutual interdependence with our fellow human beings is stronger than the law of gravity.

 Philosophy attracts introverts.  The study of human nature can make you aware of other people’s faults and can breed contempt for others.  So do struggle and difficulty – they isolate us from the world.

 But none of that changes what we are, as Aristotle put it, social animals.  We need each other.  We must be there for each other.  We must take care of each other (and to allow others to care for us in return). To pretend otherwise is to violate our nature, to be more or less than what it means to be a human being.

Tax Tips[iii]

Military Tax Benefits

You have sacrificed your youth, precious time, and the warmth of family to keep not only Americans, but at times citizens from across the world safe.  You deserve more than admiration and gratitude.  It’s that time of the year when we honor our veterans.  Since it’s almost Veteran’s Day let’s discuss some of the tax benefits for the U.S. military.  Some types of pay are not taxable, and special rules may apply to some deductions, credits and deadlines.

These rules apply to all branches of U.S. Armed Forces, whether they are National Guard, Reserves or Active Duty:

• Filing tax returns late:  Service members have up to the later of 180 days after returning from a combat zone deployment, or combat-related hospital stay, to file tax returns without late penalties or interest.  Military members have until June 15^th to file returns if they are overseas and not in a combat zone.
• Combat pay exclusion:  If you serve in a combat zone certain combat pay is not taxable.  You won’t need to show the pay on your tax return because combat pay isn’t included in the wages reported on your W-2.  Service in support of a combat zone may qualify for this deduction.
• Qualified reservist distributions and repayments:  Reservists who are called into active service may be able to take distributions from retirement accounts without penalty and may also repay any distributions taken, even if the repayment exceeds the annual IRA contribution limit.  This is like borrowing from a 401(k) and paying it back.  Certain conditions apply, so ask us or your tax professional.
• Selling a home for tax purposes and getting the capital gain exclusion:  Time deployed counts for the five-year living at the same address rule, to help sell the home and avoid capital gains.   You must live in your home 2 of 5 years to get the Capital Gains Exclusion.
• Overnight travel expenses for National guard and Reserve members living more than 100 miles from duty station:  This deduction is on the front of the tax return and does not require itemization.  This allows you to write off travel, lodging and meal expenses.
• Deductions for uniforms, equipment and laundry:  You can write off uniforms you purchase or repairs made to them, as well as the cost of laundering the, plus any military equipment you purchase for your use.  There are special rules that allow military personal to even deduct the cost for laundry and haircuts, if away from home for less than one year on active duty.
• Some states offer little or no state tax on military members and spouse’s earnings:  Many states have no tax on military pay and no tax on the spouse’s earnings, either.  You can claim residence in any state if you are on active duty in the military.  For instance, you can be stationed at Ft. Huachuca, Arizona and still claim a Texas residency.  This means you would not have to prepare an Arizona tax return if you are active military.  This would allow you to not pay state taxes to the State of Arizona even while you are stationed and living in Arizona.  This also qualifies for vehicle registration tax.  Be sure to check on the laws of the state you are living in for your situation with your tax professional.
• Military allowances are tax-free:  Some examples of allowances are Clothing Allowance, Family Separation Allowance, Base Housing Allowance, Per Diem Allowance, and Temporary Duty Allowance.  These monies are given to you in addition to your regular payroll that is not subject to tax.
• Forgiveness of tax upon death:  Current year, previous year, and unpaid taxes and forgiven and/or refunded when military members die while serving on active duty during a terrorist event, in a combat zone or in support of a military combat action.
• Earned Income Tax Credit (EITC):  If you get nontaxable combat pay, you may choose to include it to figure your EITC.  You will make this choice only if it increases your credit.  Combat pay remains nontaxable if you choose to do so.
• Signing joint returns:  Both spouses normally sign a joint income tax return.  If your spouse is absent due to certain military duty or conditions, you may be able to sign for your spouse, by attaching a copy of the military combat orders.  In other cases when your spouse is absent, you may need an IRS power of attorney to file a joint return.
• Moving expenses:  Members of the military still get to take a deduction for the out-of-pocket costs of moving household goods and family members (including pets!) for any costs not already paid for or reimbursed by the military.

Remember – always contact your tax professional for help!That’s what you pay them for!

Financial Planning Month[iv]

Living Wills, Health Care Proxies, & Advance Health Care Directives

Introduction

With the increasing ability of medical science to sustain our lives, people are living much longer than ever before. Unfortunately, as we grow older, or if we experience health challenges, we may find ourselves in a position in which decisions need to be made as to how we wish to be treated in a variety of medical situations. This is especially true at the end of our lives, but can be true at any time as a result of the impact of an accident, injury, or illness. If we are in a condition such that we no longer can express our preferences about treatment, decisions will be made for us by others if we have not planned for our own treatment in advance. Advance health care directives allow us to deal with these situations. Without such directives, our families may find it necessary to obtain court orders to deal with our medical situations.

State laws vary concerning the appropriate documents to cover these situations. All fifty states permit you to express your wishes as to medical treatment in terminal illness or injury situations, and to appoint someone to communicate for you in the event you cannot communicate for yourself. Depending on the state, these documents are known as "living wills," "medical directives," "health care proxies," or "advance health care directives." Some states have a standardized or statutory form, while other states allow you to draft your own document.  But even if you use a standard or statutory form, you should review it to be sure that it comports with your personal wishes. Never sign a document presented to you as standard unless you have read and understood it and confirmed that it does in fact reflect your desires.

Living Wills

A living will is your written expression of how you want to be treated in certain medical circumstances. Depending on state law, this document may permit you to express whether you wish to be given life-sustaining treatments in the event you are terminally ill or injured, to decide in advance whether you wish to be provided food and water via intravenous devices ("tube feeding"), and to give other medical directions that impact your care, including the end of life. "Life-sustaining treatment" means the use of available medical machinery and techniques, such as heart-lung machines, ventilators, and other medical equipment and techniques that may sustain and possibly extend your life, but which may not by themselves cure your condition. Be very careful signing any such document without reviewing the implications to you. For example, some of the commonly used clauses in living wills may forbid the provision of assisted breathing, including devices you presently may be using if, for example, you are living with COPD.  Most important, many of the provisions of such a document have profound religious and philosophical implications. Be certain that whatever you sign is consistent with your beliefs and wishes. In addition to terminal illness or injury situations, most states also permit you to express your preferences as to treatment using life-sustaining equipment or tube feeding for medical conditions that leave you permanently unconscious and without detectable brain activity.

A living will applies in situations in which the decision to use such treatments may prolong your life for a limited period of time and not obtaining such treatment would result in your death.  Having a living will does not mean that medical professionals would deny you pain medications and other treatments that would relieve pain or otherwise make you more comfortable. Living wills do not determine your medical treatment in situations that do not affect your continued life, such as routine medical treatment and non life-threatening medical conditions. Most states permit you to include other medical directions that you wish your physicians to be aware of regarding the types of treatment you do or do not wish to receive.  In all states the determination as to whether you are in such a medical condition is determined by medical professionals, usually your attending physician and at least one other medical doctor who has examined you or reviewed your medical situation.

Health Care Proxy

A "health care proxy," sometimes called a "health care surrogate" or "durable medical power of attorney," is a durable power of attorney specifically designed to cover medical treatment.  You appoint a person and grant to him or her the authority to make medical decisions for you in the event you are unable to express your preferences about medical treatment. Most commonly, this situation occurs either because you are unconscious or because your mental state is such that you do not have the legal capacity to make your own decisions. As with living wills, depending on your state of residence, the health care proxy may be a standard or statutory form or it may be may be drafted specifically for you by your lawyer.  Normally, one person (not multiple persons to act at one time) is appointed as your health care proxy.  It is quite common, however, for you to appoint one or more alternate persons (successors) in the event your first choice proxy is unavailable. You should confirm prior to appointing someone as your proxy that he or she will in fact be willing and able to carry out your wishes. If your preferred proxy  has, for example, a religious view that prevents him or her from carrying out your wishes, you should name someone else.  As in the case of a living will, medical professionals will make the initial determination as to whether you have the capacity to make your own medical treatment decisions.

Why Have Health Directives?

Regardless of the name your state gives to these documents, their purpose is to allow you to express your preferences concerning medical treatment in an extreme medical situation when you cannot communicate, including at the end of your life. By expressing such preferences in a written legal document, you are ensuring that your preferences are made known. Physicians prefer these documents because they provide a written expression from you as to your medical care and designate for the physician the person he or she should consult concerning unanswered medical questions. Rather than the physician having to obtain a consensus answer from your family as to your treatment, the physician knows your preferences and knows who you want to provide decisions when you cannot do so.  Also, providing such information and designating a health care proxy means that the physician knows whose direction is to be followed in the event your family disagrees as to what medical treatment you would want.

In addition to helping your physician, these documents express your wishes to your family so that they do not have to guess about what you would want.  Making your wishes known in advance prevents family members from making hard choices at what likely will be one of the most stressful times in their lives.

Obtaining and Maintaining Living Wills and Health Care Proxies

Your lawyer can provide you with these documents. Generally, these documents require at least two witnesses, who must be adults as defined under your state law. It is the policy of some hospitals and other medical institutions not to permit their employees to witness the signing of such documents. Most states have other restrictions as to who may witness such documents. Generally, the persons who act as witnesses are not permitted to be individuals entitled to any inheritance as a result of your death, either by will or by state law.  Often, state law does not permit persons to witness such documents if they are related to you by blood or by marriage or if they are responsible for payment of your medical bills.  Some lawyers recommend that these documents be notarized as well as witnessed.

While all states recognize these types of documents, the law varies as to whether a state will recognize a document prepared in another state. It is not necessary to prepare additional documents in case you might vacation in another state. If you spend a considerable amount of time living in more than one state, however, you should consider having such documents prepared in each of the states in which you spend significant periods of time.

Should you change your mind about your health care treatment or end of life decisions or your choice of health care proxy, you can simply destroy the documents you have and create new ones. Once you have a living will, health care proxy, or advance health care directive, you should keep it among your important papers. Make sure a responsible adult, such as the named health care proxy, knows where you keep these documents. If you have a regular physician who keeps your medical records, you should provide a copy of the document to him or her for your medical records. In the event you are admitted to a hospital, you should take this document with you at the time you are admitted and permit the hospital to place a copy of it into your medical file.  It is also a good idea to discuss the decisions you have made in your document with family members so that they may better know and understand your wishes concerning these matters.

Organ and Tissue Donation

In many states you can include in your advance directive your preference to become an organ or tissue donor at the time of death. State law varies, and you should check with your attorney. Even if your state is one in which your driver's license contains an organ or tissue donor statement, you need to let your health care proxy, your family, and your physician know your desire to become a donor. In some states you also need to be registered as an organ and tissue donor. Given the long list of people who die each year waiting for organ donations, donating your organs and tissue can be a tremendous help to those in need.  Be certain to consider religious and other issues that may impact your decision to become a donor. 

Communication is the Key

Many people prefer to keep their legal documents private. With end of life issues, however, communicating your wishes is essential. An advance health care directive is the first step in this process. But you also need to discuss your preferences with others. Take the time to discuss these issues with the person you appoint as your health care proxy. Talk to your physician. Make sure your family knows how you feel about end of life issues. The more these individuals know, the easier it will be for them to fulfill your wishes. While the conversations are no doubt difficult, they will relieve those you appoint of tremendous emotional burdens by your having personally explained your desires.

• [i]https://am.jpmorgan.com/content/dam/jpm-am-aem/americas/us/en/insights/market-insights/wmr/weekly_market_recap.pdf, accessed 10.28.2024.  Chart of the Week: Source: BEA, FactSet, J.P. Morgan Asset Management.*2024 figures reflect the average personal savings rate for the first 7 months of the year for the pre-revision data and the first 8 months of the year for the post-revision data. Thought of the week: Source: BEA, FactSet, J.P. Morgan Asset Management. Abbreviations: Cons. Sent.: University of Michigan Consumer Sentiment Index; CPI: Consumer Price Index; EIA: Energy Information Agency; FHFA HPI: - Federal Housing Finance Authority House Price Index; FOMC: Federal Open Market Committee; GDP: gross domestic product; HPI: Home Price Index; HMI: Housing Market Index; ISM Mfg. Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally Adjusted Annual Rate Equity Price Levels and Returns: All returns represent total return for stated period. Index: S&P 500; provided by: Standard & Poor’s. Index: Dow Jones Industrial 30 (The Dow Jones is a price-weighted index composing of 30 widely-traded blue chip stocks.) ; provided by: S&P Dow Jones Indices LLC. Index: Russell 2000; provided by: Russell Investments. Index: Russell 1000 Growth; provided by: Russell Investments. Index: Russell 1000 Value; provided by: Russell Investments. Index: MSCI – EAFE; provided by: MSCI – gross official pricing. Index: MSCI – EM; provided by: MSCI – gross official pricing. Index: Nasdaq Composite; provided by: NASDAQ OMX Group. MSCI EAFE is a Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East. Bond Returns: All returns represent total return. Index: Bloomberg US Aggregate; provided by: Bloomberg Capital. Index: Bloomberg Investment Grade Credit; provided by: Bloomberg Capital. Index: Bloomberg Municipal Bond 10 Yr; provided by: Blomberg Capital. Index: Bloomberg Capital High Yield Index; provided by: Bloomberg Capital. Key Interest Rates: 2 Year Treasury, FactSet; 10 Year Treasury, FactSet; 30 Year Treasury, FactSet; 10 Year German Bund, FactSet. 3 Month LIBOR, British Bankers’ Association; 3 Month EURIBOR, European Banking Federation; 6 Month CD, Federal Reserve; 30 Year Mortgage, Mortgage Bankers Association (MBA); Prime Rate: Federal Reserve. Commodities: Gold, FactSet; Crude Oil (WTI), FactSet; Gasoline, FactSet; Natural Gas, FactSet; Silver, FactSet; Copper, FactSet; Corn, FactSet. Bloomberg Commodity Index (BBG Idx), Bloomberg Finance L.P. Currency: Dollar per Pound, FactSet; Dollar per Euro, FactSet; Yen per Dollar, FactSet. S&P Index Characteristics: Dividend yield provided by FactSet Pricing database. Fwd. P/E is a bottom-up weighted harmonic average using First Call Mean estimates for the "Next 12 Months" (NTM) period. Market cap is a bottom-up weighted average based on share information from Compustat and price information from FactSet's Pricing database as provided by Standard & Poor's. MSCI Index Characteristics: Dividend yield provided by FactSet Pricing database. Fwd. P/E is a bottom-up weighted harmonic average for the "Next 12 Months" (NTM) period. Market cap is a bottomup weighted average based on share information from MSCI and Price information from FactSet's Pricing database as provided by MSCI. Russell 1000 Value Index, Russell 1000 Growth Index, and Russell 2000 Index Characteristics: Trailing P/E is provided directly by Russell. Fwd. P/E is a bottom-up weighted harmonic average using First Call Mean estimates for the "Next 12 Months" (NTM) period. Market cap is a bottom-up weighted average based on share information from Compustat and price information from FactSet's Pricing database as provided by Russell. Sector Returns: Sectors are based on the GICS methodology. Return data are calculated by FactSet using constituents and weights as provided by Standard & Poor’s. Returns are cumulative total return for stated period, including reinvestment of dividends. Style Returns: Style box returns based on Russell Indexes with the exception of the Large-Cap Blend box, which reflects the S&P 500 Index. All values are cumulative total return for stated period including the reinvestment of dividends. The Index used from L to R, top to bottom are: Russell 1000 Value Index (Measures the performance of those Russell 1000 companies with lower price-tobook ratios and lower forecasted growth values), S&P 500 Index (Index represents the 500 Large Cap portion of the stock market, and is comprised of 500 stocks as selected by the S&P Index Committee), Russell 1000 Growth Index (Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values), Russell Mid Cap Value Index (Measures the performance of those Russell Mid Cap companies with lower price-to-book ratios and lower forecasted growth values), Russell Mid Cap Index (The Russell Midcap Index includes the smallest 800 securities in the Russell 1000), Russell Mid Cap Growth Index (Measures the performance of those Russell Mid Cap companies with higher price-to-book ratios and higher forecasted growth values), Russell 2000 Value Index (Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values), Russell 2000 Index (The Russell 2000 includes the smallest 2000 securities in the Russell 3000), Russell 2000 Growth Index (Measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values). 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Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. Telephone calls and electronic communications may be monitored and/or recorded. 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Copyright 2024 JPMorgan Chase & Co. All rights reserved. ©JPMorgan Chase & Co., October 2024. Unless otherwise stated, all data is as of October 28, 2024 or as of most recently available. 0903c02a81dbac80

[ii] Holiday, Ryan.  The Daily Stoic:  366 Meditations on Wisdom, Perseverance, and the Art of Living.  Kindle edition, page 321.  Accessed 10.28.2024.

[iii] Hockensmith, Robert F.  52 Ways to Outsmart the IRS, Weekly Tax Tips to Save You Money.  Kindle edition, page 191-194, accessed 10.28.2024.

[iv]https://www.americanbar.org/groups/real_property_trust_estate/resources/estate-planning/living-wills-health-care-proxies-advance-directives/, accessed 10.28.2024.