Dow Posts its Fourth Consecutive Winning Week

Our winning streak continued as the Dow Jones Industrial Average set three all-time record highs this week alone. The record setting run was fueled by positive announcements from Dow components Boeing and Disney. Boeing flew higher this week on news that its grounded 737 Max will resume U.S. commercial service in January 2020. Meanwhile, investors cheered the House of Mouse throwing its hat into the streaming wars ring on Tuesday with the launch of its new streaming service, Disney+. The service appears to have captured strong early momentum with 10 million+ sign-ups since its launch. Turning to economic news, the data was relatively light this week with retail sales and inflation figures being the highlights of the week. With news from the White House on Friday that the U.S. and China continue to inch closer towards a trade deal, the Dow posted a 1.17% gain for the week to finish at a new all-time high of 28,004.89.

Retail Sales Rebound

Coming off a weak August and September, traders cheered October retail sales figures. For the month, retail sales rose 0.30% to $526.5 billion. Core retail sales, which exclude automobiles, gasoline, building materials and food services, rose 0.30%. Leading retail sales higher for the month was a 0.90% increase in online shopping, a 0.50% increase in auto sales, and a similar 0.50% increase for food and beverage stores. The report suggests the consumer remains strong despite tariffs as we head into the busy holiday shopping season. The National Retail Federation is forecasting a strong holiday season for retailers with sales expected to rise between 3.80% and 4.20% from 2018. That range is above the 3.70% averaged over the previous five years.

Prices Hold Steady

Despite new tariffs on imports, consumer prices have held relatively steady. For the 12 months ending in October, consumer prices rose 1.80%. That’s relatively in line with the 1.70% year-over-year (yoy) increase in September. Core prices, which exclude volatile food and energy prices, rose 2.30% from the year ago period, near the Federal Reserve’s 2.00% target level. Overall, consumers have remained relatively insulated from trade levies as businesses have hesitated to pass along those costs and run the risk of hurting demand. Aside from tariffs, businesses have not experienced much in the way of price inflation to push them to raise prices on consumers. For the 12 months ending in October, producer prices rose 1.10%, their smallest increase since October 2016. That’s down from the 1.40% yoy increase in September. Core producer prices, which excluded volatile food, energy, and trade services, were up 1.50% in October. That was down from the 1.70% yoy increase the prior month. Overall, inflation appears to be modest, keeping the Fed on the sidelines for now.

With economic data showing the economy continues to expand at a modest pace and positive announcements from major Dow components Boeing and Disney, the Dow Jones Industrial Average managed to post another set of record highs this week. Retail sales in particular were encouraging as they show the consumer remains confident to continue spending despite the continued uncertainty surrounding a U.S.-China trade deal. A strong consumer is crucial as we head into the busy holiday shopping season.

The Week Ahead

U.S. economic news is relatively light in the week before the Thanksgiving holiday. Housing starts and existing home sales figures will be on tap. In overseas action, the Eurozone releases manufacturing numbers.

What You Need to Know about RMDs

Tyler Ozanne shares advice and guidance for avoiding year-end tax pitfalls

Tyler Ozanne, Certified Financial Planner®

It is that time of year again — no, we are not talking about the fast approaching holiday season, though, it is also that time of year again — it is Required Minimum Distribution (RMD) time. For those who are unaware of RMDs, individuals who are age 70 ½ and above are required by tax law to distribute a minimum amount annually from their qualified savings accounts, such as IRAs, 401ks, 403bs, SEP IRAs, and SIMPLE IRAs. There are a few exceptions to this rule, but in general, the minimum distributions must start by April 15th following the year in which you turn 70 ½ and then continue every year thereafter (by December 31st) until the qualified savings are exhausted. It is an important rule to understand and follow due to its potential tax consequences. A taxpayer who fails to take their RMD before the annual deadline is subject to a 50% tax penalty on the undistributed amount in addition to ordinary income tax.

An individual’s RMD is calculated based on one of three life expectancy tables according to the IRS (IRS Publication 590-B).

1. Uniform Lifetime Table – most common table used for original IRA owners

2. Joint Life Expectancy Table – used by an original IRA owner whose spousal beneficiary is more than 10 years younger

3. Single Life Expectancy Table – used primarily by non-spouse beneficiaries

 

Under current IRS regulations, the first year’s RMD equates to roughly 3.65% of a person’s aggregate qualified savings (again, with a few exceptions). There is a proposed regulation currently being vetted by the United States Treasury and IRS that would lower this starting distribution amount to 3.44% in consideration of longer life expectancies. While there is no guarantee the new regulations will go into effect, it is believed they will, which should be good news for retirement savers.

Some people distribute enough from qualified savings throughout the year to satisfy — or more than satisfy — their RMD well before the year-end deadline. However, many investors either delay taking their distributions or simply forget that they are required to distribute anything until the end of the year. Probity Advisors monitors our clients’ RMDs, and, around this time each year, we begin reaching out to clients who have yet to meet their requirements. There are several important considerations we address with our clients when discussing RMDs. Some of these include:

Tax Withholding: Since distributions — including the required ones- from qualified savings accounts result in ordinary income taxation on distributed amounts, many clients prefer Federal and State Income taxes to be withheld from the distributions and to receive the net amount. Withholding is optional.

Charitable Intent: The IRS allows individuals to donate any or all of their required minimum distributions directly to charity (up to a $100,000 annual limit) and avoid the taxation on the donated amount. We encourage our clients to satisfy their charitable intent with their required distributions to the extent possible.

Method of Distribution: Clients have several options for receiving their required distributions. These include (a) receiving distributions via a check or direct deposit to your bank account, (b) reinvesting the distributions in a non-qualified investment account for continued growth, (c) gifting distributions to charity, or (d) choosing a combination of options.

RMDs can be complicated — especially those who have multiple and different qualified savings accounts. We are here to help. If we can be of assistance, please do not hesitate to reach out to us at (214) 891-8131.

 
 
 
 

 

 

 

Important Disclosure: The information contained in this presentation is for informational purposes only. The content may contain statements or opinions related to financial matters but is not intended to constitute individualized investment advice as contemplated by the Investment Advisors Act of 1940, unless a written advisory agreement has been executed with the recipient. This information should not be regarded as an offer to sell or as a solicitation of an offer to buy any securities, futures, options, loans, investment products, or other financial products or services. The information contained in this presentation is based on data gathered from a variety of sources which we believe to be reliable. It is not guaranteed as to its accuracy, does not purport to be complete, and is not intended to be the sole basis for any investment decisions. All references made to investment or portfolio performance are based on historical data. Past performance may or may not accurately reflect future realized performance. Securities discussed in this report are not FDIC Insured, may lose value, and do not constitute a bank guarantee. Investors should carefully consider their personal financial picture, in consultation with their investment advisor, prior to engaging in any investment action discussed in this report. This report may be used in one on one discussions between clients (or potential clients) and their investment advisor representative, but it is not intended for third-party or unauthorized redistribution. The research and opinions expressed herein are time sensitive in nature and may change without additional notice.