Market-Moving News[i]
Baby steps
The major U.S. stock indexes alternated between small daily gains and losses before mounting a modest rally on Friday to end with fractional gains for the week overall. It was enough to push the S&P 500 and the Dow just above the record highs they set the previous week; the NASDAQ ended up 2.7% below the record high that it set three months ago.
Jobs surprise
The U.S. economy generated 254,000 new jobs in September, exceeding economists’ consensus forecast for around 140,000 and delivering the strongest result in six months. Moreover, the initially reported jobs growth figures for July and August were revised upward by a total of 72,000 and the unemployment rate slipped to 4.1% from 4.2% the previous month.
Higher 2-year yield
Friday’s stronger-than-expected jobs report appeared to rein in investors’ short-term expectations for aggressive interest-rate cutting by the U.S. Federal Reserve, as the yield of the 2-year Treasury note increased. The yield jumped from 3.70% at Thursday’s close to 3.92% on Friday; at the end of the previous week, the yield was 3.56%.
Oil rises
The price of U.S. crude oil jumped about 9% for the week to nearly $75 per barrel on Friday afternoon amid escalating geopolitical tensions in the Middle East. Friday’s price was the highest since late August, but it remained well below a recent high of around $83 in early July.
Energy Jolt
Tensions in the Middle East and rising oil prices lifted energy stocks, and energy posted the biggest weekly gain among the 11 S&P 500 sectors. As of Friday afternoon, energy sector stocks were up an average 7% for the week.
September snapshot
The U.S. stock market’s return profile for September closely resembled that of August’s result, as stocks fell sharply in the opening week but recovered to finish positive overall. The S&P 500 finished September at a record high and posted an overall total return of 2.1%—the index’s tenth positive month out of the past eleven.
Earnings outlook
As major U.S. banks prepare to open quarterly earnings season on Friday, October 11, analysts expect that third-quarter earnings per share for companies in the S&P 500 rose by an average of 4.2%, according to FactSet. Such an outcome would mark the fifth consecutive quarter of year-over-year earnings growth.
Inflation report ahead
On the heels of the U.S. Federal Reserve’s recent interest-rate cut, a Consumer Price Index report scheduled for release on Thursday will show whether the recent cooling trend for inflation extended into September. The most recent CPI report covering August showed an annual rate of 2.5%, down from July’s 2.9% figure and the lowest since February 2021.
The Week Ahead: Oct 7-11
- Monday
- Consumer credit, U.S. Federal Reserve
- Tuesday
- Small Business Optimism Index, National Federation of Independent Business
- Trade balance, U.S. Census Bureau
- Wednesday
- Release of minutes from the September 17-18 meeting of the U.S. Federal Reserve
- Wholesale inventories, U.S. Census Bureau
- Thursday
- Consumer Price Index, U.S. Bureau of Labor Statistics
- Weekly unemployment claims, U.S. Department of Labor
- Federal Budget, U.S. Department of the Treasury
- Friday
- Producer Price Index, U.S. Bureau of Labor Statistics
- University of Michigan Index of Consumer Sentiment, preliminary result
Philosophy Quote of the Week[ii]
All For One, One For All
“That which isn’t good for the hive isn’t good for the bee.”
Marcus Aurelius, Meditations, 6.54
Inherent in the Stoic concept of sympatheia is the notion of an interconnected cosmos in which everything in the universe is part of a larger whole. Marcus Aurelius was one of the first writers to articulate the notion of cosmopolitanism – saying that he was a citizen of the world, not just Rome.
The idea that you’re a bee in the hive is a reminder of this perspective. Marcus even states the reverse of that idea later in his Meditations, just so he doesn’t forget, “That which doesn’t harm the community can’t harm the individual.”
Just because something is bad for you doesn’t mean it’s bad for everyone. Just because something is good for you definitely doesn’t mean it’s good for everyone. Think of the hedge fund managers who bet massively against the economy – they profited by rooting for essentially everyone and everything else to fail. Is that who you want to be? A good Stoic understands that proper impulses, and the right actions that arise from them, naturally carry the good of the whole, which is the wise person’s only good. Conversely, good and wise actions by the whole are what’s good for the individual.
Tax Tips[iii]
Tips for U.S. Taxpayers with Foreign Income
It’s not like “out of sight, out of mind.” You can’t ignore taxes you owe to your country of residence or origin. While you work abroad for a foreign company (or an American company with a foreign headquarters), you might be eligible for some tax advantages when you live and work abroad.
Even if you live or work abroad or receive income from foreign sources during the year, being a U.S. citizen or resident you must report all income sources – from the U.S. and from outside the U.S. The rules for filing income tax returns are generally the same, whether you’re living in the U.S. or overseas.
Here are six tips from the IRS that U.S. taxpayers with foreign income should know:
- Report worldwide income
By law, U.S. citizens and resident aliens must report their worldwide income. This includes income from foreign trusts, banks and securities accounts.
- File required tax forms
You may need to file Schedule B, Interest and Ordinary Dividends, with your U.S. tax return. You may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, you may need to file FinCEN Form 114, Report of Foreign Banka and Financial Accounts. See your tax advisor for more information.
- Consider the automatic extension
If you’re living abroad and can’t file your return by the April 15 deadline, you probably qualify for an automatic extension until June 15. This is available to taxpayers who are living outside the U.S. This creates additional time to file your U.S. tax return.
- Review the foreign earned income exclusion
If you live and work abroad, you may be able to claim the foreign earned income exclusion. If you qualify, you won’t pay tax on wages earned outside the US and other foreign earned income. Each year the Foreign Income Exclusion amount changes. See your tax advisor for the current exclusion amount. For even more information, see instructions on Form 2555, Foreign Earned Income.
- Don’t overlook credits and deductions
You may be able to take a tax credit or a deduction (but not both) for income taxes you paid to a foreign country. These benefits can reduce the amount of taxes you must pay if both countries tax the same income.
- Get tax help outside the US
The IRS has offices in Frankfurt, London, Paris and Bejing. IRS staff at these offices can help you with tax filing issues and answer your tax questions.
Remember – always contact your tax professional for help! That’s what you pay them for!
Financial Planning Month[iv]
TOP 10 WAYS TO PREPARE FOR RETIREMENT
Financial security in retirement doesn’t just happen. It takes planning and commitment and, yes, money.
Facts
- Only about half of Americans have calculated how much they need to save for retirement.
- In 2022, more than a quarter of private industry workers with access to a defined contribution plan (such as a 401(k) plan) did not participate.
- The average American spends roughly 20 years in retirement.
Putting money away for retirement is a habit we can all live with.
Remember…Saving Matters!
Start saving, keep saving, and stick to your goals
If you are already saving, whether for retirement or another goal, keep going! You know that saving is a rewarding habit. If you’re not saving, it’s time to get started. Start small if you have to and try to increase the amount you save each month. The sooner you start saving, the more time your money has to grow (see the chart). Make saving for retirement a priority. Devise a plan, stick to it, and set goals. Remember, it’s never too early or too late to start saving.
Know Your Retirement Needs
Retirement is expensive. Experts estimate that you will need 70 to 90 percent of your preretirement income to maintain your standard of living when you stop working. Take charge of your financial future. The key to a secure retirement is to plan ahead. Start by requesting Savings Fitness: A Guide to Your Money and Your Financial Future and, for those near retirement, Taking the Mystery Out of Retirement Planning.
Contribute to Your Employer’s Retirement Savings Plan
If your employer offers a retirement savings plan, such as a 401(k) plan, sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate. Find out about your plan. For example, how much would you need to contribute to get the full employer contribution and how long would you need to stay in the plan to get that money.
Learn About Your Employer’s Pension Plan
If your employer has a traditional pension plan, check to see if you are covered by the plan and understand how it works. Ask for an individual benefit statement to see what your benefit is worth. Before you change jobs, find out what will happen to your pension benefit. Learn what benefits you may have from a previous employer. Find out if you will be entitled to benefits from your spouse’s plan. For more information, request What You Should Know about Your Retirement Plan. (See back panel for more information.)
Consider Basic Investment Principles
How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you’ll have saved at retirement. Know how your savings or pension plan is invested. Learn about your plan’s investment options and ask questions. Put your savings in different types of investments. By diversifying this way, you are more likely to reduce risk and improve return. Your investment mix may change over time depending on a number of factors such as your age, goals, and financial circumstances. Financial security and knowledge go hand in hand.
Don’t Touch Your Retirement Savings
If you withdraw your retirement savings now, you’ll lose principal and interest and you may lose tax benefits or have to pay withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA or your new employer’s plan.
Ask Your Employer to Start a Plan
If your employer doesn’t offer a retirement plan, suggest that it start one. There are a number of retirement saving plan options available. Your employer may be able to set up a simplified plan that can help both you and your employer. For more information, request a copy of Choosing a Retirement Solution for Your Small Business. (See back panel for more information.)
Put Money Into an Individual Retirement Account
You can put up to $6,500 a year into an Individual Retirement Account (IRA); you can contribute even more if you are 50 or older. You can also start with much less. IRAs also provide tax advantages. When you open an IRA, you have two options – a traditional IRA or a Roth IRA. The tax treatment of your contributions and withdrawals will depend on which option you select. Also, the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose. IRAs can provide an easy way to save. You can set it up so that an amount is automatically deducted from your checking or savings account and deposited in the IRA.
Find Out About Your Social Security Benefits
On average, Social Security retirement benefits replace 40 percent of pre-retirement income for retirement beneficiaries. The amount of your wages that Social Security retirement benefits replace varies depending on your earnings and the age you choose to start receiving benefits. You may be able to estimate your benefit by using the retirement estimator on the Social Security Administration’s website. For more information, visit their website or call 1-800-772-1213.
Ask Questions
While these tips are meant to point you in the right direction, you’ll need more information. Read our publications listed on the back panel. Talk to your employer, your bank, your union, or a financial adviser. Ask questions and make sure you understand the answers. Get practical advice and act now.
[i]https://www.jhinvestments.com/weekly-market-recap#market-moving-news, accessed 10.08.2024.
[ii] Holiday, Ryan. The Daily Stoic: 366 Meditations on Wisdom, Perseverance, and the Art of Living. Kindle edition, page 297. Accessed 10.08.2024.
[iii] Hockensmith, Robert F. 52 Ways to Outsmart the IRS, Weekly Tax Tips to Save You Money. Kindle edition, page 179-780, accessed 10.08.2024.
[iv]https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/dol-top-10-ways-to-prepare-for-retirement-booklet-2023.pdf, accessed 10.08.2024.