Essentials for Your Year-End Financial Checklist

The year-end deadline for many key financial decisions is approaching. Check your finances now to avoid unpleasant surprises.

December 31 marks the deadline for decisions that can significantly affect your wealth. Taking action now might enable you to reduce your taxes and increase your retirement savings. It’s also a great time to review your entire wealth plan with a professional financial advisor.

Take tax losses on your positions. Your investment portfolio probably has one or more poor performers. You may wish to sell losing positions to realize the losses and offset them against your capital gains. You can deduct up to $3,000 of excess capital losses against your ordinary income. Reevaluate and rebalance your holdings to achieve your desired asset allocations.

Fund your retirement accounts. Although you have until April 15 of next year to fund your retirement accounts, now is the time to determine your remaining contributions to your 401(k) plan and Individual Retirement Accounts (IRA). If your income exceeds Roth IRA limits, consider a partial conversion of traditional IRA assets to a Roth IRA*. Also, don’t forget to take any required minimum distributions if you’ve reached age 701/2.

Review your flexible spending accounts. It’s a good time to review your health insurance coverage with your financial advisor and insurance agent. Make sure you don’t let your flexible spending account (FSA) balance exceed $500, the maximum amount you can carry forward into the next year. Some employers offer a grace period until March 15 to use last year’s funds. However, you can only use one of these options. You should check with your employer to see what their policy is.1

Review your beneficiary designations. Circumstances might have changed during the year, prompting changes to the designated beneficiaries in your will, trusts, retirement plans, insurance policies, and charitable gift plans. Review your estate plan to evaluate moving assets to new or existing trusts. Finalize your gifting to family and friends based on the latest gift tax limits. Review your insurance policies to determine if the coverage is still appropriate.

Year-end financial reviews are essential. Contact me today to schedule a review session that will help you find opportunities to manage your tax burden, control your bequests, and start planning your financial goals for the new year.

* Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.



1 irs.gov, “Plan now to Use Health Flexible Spending Arrangements in 2018; Contribute up to $2,650; $500 Carryover Option Available to Many” 11/15/17

Your Money: Sharing Family Getaways Without Any Cottage Conflicts

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Picture it: 40 picturesque acres nestled in Wisconsin lake country.

That is the ideal getaway the grandfather of Chicago financial planner Tim Obendorf’s wife built around 50 years ago. Then the property passed to the next generation, with ownership shared by four people.

Now they are thinking about the next generation: 11 potential owners.

Without the right planning, that paradise could turn into hell.

As brothers, sisters, parents, aunts, uncles, cousins and grandparents gather this summer at family homes to go hiking, canoeing or swimming, there will also be arguments over schedules, property taxes or mortgage costs, and upkeep duties, along with the thousand other matters that come with shared homeownership.

“Whenever a number of families are under the same roof, conflicts are going to arise,” said Jill Shipley, managing director of family dynamics for Abbot Downing, a division of Wells Fargo that handles high-net-worth families and foundations.

That is why Obendorf’s family has already logged a couple of family meetings. “It’s never going to be perfect, but you have to decide you value the place, more than the hassles of working through family issues,” said Obendorf.

It is not surprising that vacation homes have become a point of contention. Many vacation homeowners are baby boomers: They possess the bulk of the nation’s assets and are projected to hold over 50 percent by 2020, according to a study by the Deloitte Center for Financial Services. They are now beginning to retire as they hit their 60s and 70s.

The potential problems are plentiful: Is the place big enough for everybody? Who gets it on July 4th weekend? Do they split costs equally? Who cleans up, handles repairs, or stocks the fridge?

And the big one: When the owners eventually pass on – who gets the place?

How can families get the most out of shared vacation properties this summer, without either going broke or killing each other? Some tips from the experts:

Draw Up a Calendar

Just like season tickets for a sports team, some dates will be in high demand. So if the property is not big enough to handle multiple families at once – or, let’s face it, you just do not get along – pick your spots. “Establish a rotating lottery each year, and allow each family member to pick their respective dates,” suggests Kevin Reardon, a financial planner in Pewaukee, Wisconsin.

Write Down a Policy

Everyone has different opinions of what a getaway should be, so hash it out and put it all down on paper. One key item: Whether ongoing costs like property taxes, homeowner’s association dues and repairs are split equally, or allocated based on usage.

Create an Opt-out

A sure way to guarantee family resentment: One member being forced into an arrangement they do not want. If a family cottage is being passed to the next generation, allow an escape hatch that permits one member’s share to be bought out by their siblings. After all, not everyone might be able to use the property to the same extent, especially if they have moved far away.

Bring in a Pro

Siblings, of course, do not always get along. In fact, 15 percent of adult siblings report arguing over money, according to a new survey from Ameriprise Financial. To make sure everyone is heard, bringing in a trained facilitator is probably your best bet, advises Shipley.

Have the Discussion Now

“I have been in many family meetings where the kids ask, ‘I wonder what mom and dad would have wanted?'” says Shipley. So if you are fortunate enough that the family matriarch and patriarch are still around, arrange a family meeting and find out what they envision for the property in the decades to come.

Maybe they want it to stay in the family, as a legacy for the grandkids. Or maybe, because of family circumstances like far-flung siblings, it would be wiser to just sell the property and split the proceeds.

Set up a Trust

One way to take future financial squabbles out of the equation altogether: If families have the resources, they should create a trust to “fund the maintenance and ongoing use of the property in perpetuity,” says Shipley. “That is one solution to reduce conflict, and keep the property in the family for generations.”

 

 

 

Written By: Chris Taylor
Source: Reuters

Market Update: May 22, 2017

MarketUpdate_header

Last Week’s Market Activity

  • After hitting a new record on Tuesday, the S&P 500 Index sold off -1.8% Wednesday on fears the growing controversies around the Trump Administration will cause a delay in the pro-growth policy agenda, including tax reform, deregulation and infrastructure spending.
  • Stocks stabilized on Thursday and Friday, recovering ~1.0%, but pared gains both days going into the close of trading.
  • For the week, major U.S. equity indexes fell ~-0.5% as investors’ focus switched from political headline risks to positive fundamentals supporting economic and profit growth.
  • Financials were the worst performing sector (-1.0%) on the week, followed by industrials (-0.3%); defensives and dividend paying sectors in favor, with real estate (+1.2%), consumer staples (+0.5%) and utilities (+0.5%) leading.
  • The yield on the 10-year Treasury held steady around 2.24%, while the U.S. dollar lost -1.6% for its worst week since July.
  • Despite expectations for a June rate hike, the market does not fear an aggressive stance by the Federal Reserve (Fed).
  • COMEX Gold was +2.0% on the week; copper also climbed 2.0% Friday.
  • WTI crude oil rose +2.0% to $50/barrel on Friday, +5.0% on the week in anticipation of further Organization of the Petroleum Exporting Countries (OPEC) production cuts at meeting in Vienna on 5/25.

Overnight & This Morning

  • Stocks in Asia were mostly positive as MSCI EMG had biggest climb (+0.90%) in two weeks, led by commodity producers.
  • North Korea fired another missile, yet Korean won moved higher on naming of new finance minister.
  • Japanese shares were boosted by weaker yen and exports rose for a 5th consecutive month in April, up 7.5% year over year.
  • Hong Kong’s Hang Seng closed at its highest level since July 2015.
  • Australian stocks rose despite S&P reducing credit ratings for many of their banks on concerns over property prices and potential rise in credit losses.
  • In Europe, shares were up ~0.2% with gains in real estate, energy and mining shares.
  • German bunds slipped to 0.38% on the 10-year and euro held around $1.11.
  • European Union ministers are meeting in Brussels to discuss Greek bailout and refine plans for Brexit negotiations.
  • In UK election, the Tory lead over Labour has narrowed considerably, from almost 20 points last month to just 10 points this morning.
  • Commodities – WTI crude oil +0.9% to $51.10/barrel; COMEX gold slipped to $1254/oz. while copper is higher by 0.20%.
  • Major U.S. indexes up slightly along with Treasury yields as investors judge recent selloff on political turmoil may have been excessive.

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Key Insights

  • U.S. fiscal policy needs to become primary growth driver for 2018. President Trump releases his administration’s budget plans Tuesday, including economic projections and spending plans for federal agencies and entitlement programs. Congressional Republicans must first agree on a budget if they want to achieve tax reform this year; intraparty fighting must cease if Republicans want to maintain majority after next year’s midterms. History is littered with examples of “wave” elections after one party assumes power. However, if Republicans see an expiration date on their majority; similar to Democrats in 2010 and Republicans in 2006, these developments may result in more legislation passing. We are likely to see an infrastructure plan in the coming weeks and the Senate appears to have progressed on tax reform plan, which doesn’t include BAT or removal of corporate interest deduction.
  • Despite paring losses Thursday and Friday, risk-off vibe still apparent with dollar weakness, yield curve flattening, VIX higher, and bank, small cap and transport stocks all underperforming. However, there is little stress evident in U.S. credit markets with credit default swaps, investment grade and high yield spreads all contained. The economy continues to benefit from pent up demand in capital expenditures, housing and an inventory rebuild from a Q1 drawdown.

Macro Notes

  • Unofficial last week of an excellent earnings season. With just 28 S&P 500 companies left to report results, S&P 500 earnings growth for the first quarter is tracking to a very strong +15.2% year-over-year increase, 5% above prior (4/1/17) estimates (thanks to a 75% beat rate), and +11.1% excluding energy. Technology jumped ahead of financials and materials last week into second place in the earnings growth rankings (energy is first), while industrials, energy and materials have produced the most upside to prior estimates. This week 19 S&P 500 companies are slated to report.

052217_earningsdashboard-01.png

  • Guidance may be the most impressive part of earnings season. We were very impressed that company outlooks were positive enough to keep estimates for the balance of 2017 firm, amidst heightened policy uncertainty and the slowdown in economic growth in the first quarter. Consumer discretionary, industrials, technology, financials and healthcare sectors have all seen consensus estimates for 2017 and 2018 rise, as has the S&P 500, over the past month; and consensus estimates reflect a solid 9% increase in earnings over the next four quarters versus the prior four.
  • This week, we try to help investors stay focused on fundamentals. Market participants became increasingly worried that the Trump administration’s agenda was in danger last week following the latest news surrounding the investigation into the Trump campaign’s ties to Russia. After its biggest one-day drop in nearly a year on Wednesday, the S&P 500 recovered nicely Thursday and Friday to end the week less than 1% off its all-time closing high. We don’t know what will happen with the Russia investigation, but we think we have a pretty good handle on the basic fundamentals of the economy and corporate profits, which look good right now, tend to drive stocks over time, and are where we think investors should be focused.
  • This week, we also take a look at inflation. With the unemployment rate unlikely to go much lower, Fed watchers are becoming increasingly focused on the other half of the Federal Reserve’s dual mandate, low and stable inflation. Despite disappointing gross domestic product (GDP) growth in the first quarter, consensus forecasts indicate expectations of better growth over the rest of the year, which would likely be accompanied by an uptick in inflation above the Fed’s 2% target. However, there are still many factors that limit the possibility of runaway inflation. Better growth would likely give us enough inflation for the Fed to follow through on raising rates twice more in 2017, but we don’t expect inflation to reach a level that would push the Fed to move faster.
  • What does the large drop on Wednesday mean? The S&P 500 Index fell 1.8% on Wednesday and has bounced back the past two days. Nonetheless, Wednesday was the worst one-day drop since September and given it happened within 0.5% of all-time highs, the question is: What does a large drop near all-time highs mean?

MonitoringWeek_header

  • This week’s domestic economic calendar includes data on preliminary purchasing manager surveys (manufacturing and services) from Markit, housing, trade, durable goods, and revised first quarter gross domestic product (GDP). The Fed will remain in focus with minutes from the May 3 Federal Open Market Committee (FOMC) meeting due out Wednesday (May 24) and several Fed speakers on the docket-a roughly even balance of hawks and doves. We believe the market is correctly pricing in a June 14 rate hike. Overseas economic calendars are busy with a series of data in Europe, including first quarter German and U.K. GDP, German business confidence, and Eurozone purchasing manager surveys; and in Japan (trade, manufacturing and inflation data). Political troubles in Brazil may continue to weigh on emerging market indexes.

 Monday

  • Chicago Fed National Activity Index (Apr)

 Tuesday

  • New Home Sales (Apr)
  • Richmond Fed Report (May)
  • Germany: GDP (Q1)
  • Germany: Ifo (May)
  • France: Mfg. Confidence (May)
  • BOJ: Kuroda
  • Japan: All Industry Activity Index (Mar)
  • Japan: Machine Tool Orders (Apr)
  • Japan: Nikkei Japan Mfg. PMI (May)

 Wednesday

  • Markit Mfg. PMI (May)
  • Markit Services PMI (May)
  • Existing Home Sales (Apr)
  • FOMC Meeting Minutes (May 3)
  • France: Markit Mfg. & Services PMI (May)
  • Germany: Markit Mfg. & Services PMI (May)
  • Eurozone: Markit Mfg. & Services PMI (May)
  • Canada: BOC Rate Decision (May 24)

 Thursday

  • Advance Goods Trade Balance (Apr)
  • Wholesale Inventories (Apr)
  • Initial Jobless Claims (May 20)
  • UK: GDP (Q1)
  • Italy: Industrial Orders & Sales (Mar)
  • Japan: CPI (Apr)
  • Japan: Tokyo CPI (May)

 Friday

  • GDP (Q1)
  • Personal Consumption (Q1)
  • Durable Goods Orders (Apr)
  • Capital Goods Shipments & Orders (Apr)
  • Italy: Business Confidence in the Mfg. Sector (May)
  • Italy: G7 Leaders Meet in Sicily

Saturday

  • BOJ: Kuroda

 

 

 

 

 

 

Disclosures: Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.

The Truth About Present-Day Retirement

Times have changed and so has retirement! Nowadays, retirement is no longer what people once expected. If you’re preparing to retire, the way your parents did, you might be stuck in the past and need to face present-day reality. So, what has changed in the last 10 years? Well, the factors below will shift your perspective about how you should be preparing for retirement!

First, with all the advancements of medicine and technology that we’ve had in this last decade, it’s no surprise that people are living longer. In the past, living 30 years after retirement, was actually outside the norm of an adult’s lifespan. Therefore, the 4% safe withdrawal rate that many financial planners followed was a valid rule of thumb. This guideline told retirees that if they took out only 4% of their assets and adjusted to inflation in their retirement portfolio, the risk of running out of money 30 years after they retired was very low.

But it’s no longer the case! If you’re saving conservatively for an amount that would last you around 30 years, disregard the 4% rule. People are now living past the age of 95 and a good amount of them are even retiring early. The average portfolio return for the standard investor has also decreased and is subject to more risk from the impacts of market volatility. The chances of outliving your nest egg is a lot higher these days.

Not only are people starting to live longer, the divorce rate is also significantly higher. You can no longer assume that you’ll still be married once you retire! How is that an issue, you ask? Well, a divorce could be a serious stumbling block for your retirement plan since your income might be cut in half during your golden years. Not to mention, your retirement assets might be split among you and your ex-spouse. Because of a divorce, you’ll most likely have to change your retirement strategy and lifestyle.

Have you noticed that everything costs a lot more than it used to? Some of this increase can be a result of natural inflation in prices. But, according to our government, inflation is very tame and under control. Yet, the cost of everyday goods is a lot higher and will keep outpacing inflation throughout your retirement. And it is not just everyday expenses that you’ll need to factor into your budget, there’s the added healthcare costs as well. Given the fact that there’s a good chance you’ll live longer, there are more medical issues you’ll be susceptible to. Not to mention the fact that your chances of getting injured or breaking something will dramatically increase. This means a lot more medical bills and trips to the doctor’s office! On top of that, the fact that a third of us will require some sort of assistance or nursing care, and you can see how retirement costs can skyrocket! Basically, retirement is not as cheap as it used to be.

Finally, if you think about your assets, it’s safe to assume that your home is your most valuable one. You may be able to sell it at a profit, assuming that the value has increased over the years. However, that might be a misconception! In order to determine whether or not you’ll actually get a return on your investment, you’ll need to adjust for inflation and taxes. Also, if we experience any major volatility in the housing market like we did in the past, you might not be able to get as much money for your property as you expected. Like all markets, the real estate market can be unpredictable.

So, with all of these changes, how can one successfully save for retirement? Well, my biggest recommendation for every pre-retiree that I talk to is, BE PREPARED! It’s always better to set your retirement savings goal beyond your expected amount, than below it. With the unpredictability of divorce, age, and the financial markets, it’s better to be safe than sorry. If you aim higher and save more, then your risk of running out of money during retirement will be a lot lower. Part of being prepared is to work closely with a financial planner that can guide your through your Golden Years. This ‘financial coach’ should be able to point out pitfalls that you might not have even thought of. It’s their job to make sure that you’re on track and don’t fall victim to your own wrongdoings. As well as to create a retirement game plan and an investment road-map that takes taxes and your risk tolerance into consideration.

Being prepared for retirement can be a daunting task. Especially given all the unknowns out there. But with proper preparation and guidance from a financial professional, you can glide into retirement knowing full well that you’re ready for the challenge!

Market Update: May 1, 2017

MarketUpdate_header

  • Stocks head higher to begin week. U.S. stocks are modestly higher in early trading, following news that Congress reached an agreement late Sunday to fund the government through September 30; pending approval by Friday, the deal will avoid a government shutdown. The major averages all closed lower on Friday, though the S&P 500 still managed a 1.5% gain for the week. Earnings dominated last week’s headlines, as the S&P’s advance was led by more than 2% weekly gains in the technology, healthcare and consumer discretionary sectors. Overnight, nearly all major markets in Asia and Europe were closed for holidays; Japan’s Nikkei was the exception, closing up 0.6% after Purchasing Mangers’ Index (PMI) data came in near expectations. Meanwhile, the yield on the 10-year Treasury is up slightly to 2.30%, COMEX gold ($12669/oz.) is flat, and WTI crude oil is dropping more than 1% to below $49/barrel.

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  • Another busy week of earnings on tap. A very strong earnings season continues this week with 127 more S&P 500 companies slated to report results. With about two-thirds of companies having reported, S&P 500 earnings for the first quarter of 2017 are now tracking to a 13.6% year-over-year increase, well above the 10.2% increase reflected in consensus estimates as of April 1. The upside surprise has been about more than just easy comparisons in energy, with broad-based strength across several key sectors, including financials, healthcare, industrials, and technology. The 77% earnings beat rate thus far, should it hold, would be the best since 2010.

earnings-dashboard-5-1-17.jpg

  • Company guidance has been more upbeat than usual. Forward estimates for the S&P 500 have only fallen 0.2% since earnings season begin, reflecting generally optimistic guidance from corporate America (average earnings season declines are 2-3%). We see little potential for policy upside in calendar 2017 (though there is a fair amount in 2018), suggesting most of the resilience in earnings estimates reflects recent firming in the business environment.
  • Employment report highlights a busy week. The first week of the month always includes some key economic data, highlighted by Friday’s Employment Situation report. Usually, any Federal Reserve (Fed) policy meeting would be the week’s highlight, but this week’s meeting, concluding Wednesday, will not receive as much attention, with expectations near zero for a rate hike and no new projections accompanying the release of the policy statement. We’ll also get a read on U.S. business activity, with April manufacturing and non-manufacturing PMI from the Institute for Supply Management released on Monday and Wednesday, respectively. Internationally, we’ll get March Eurozone unemployment on Tuesday, Eurozone first quarter 2017 gross domestic product (GDP) on Wednesday, and preliminary Eurozone PMI data on Thursday.
  • Congress reaches deal to fund the government. As expected, after an initial one-week extension, House and Senate negotiators reached a deal to fund the government through September. A vote is expected later this week, possibly as early as Wednesday. Although few saw material risk of a shutdown, clearing this hurdle does help pave the way for other initiatives. Tax reform is the top priority but Republican policymakers continue to try to craft an agreement to repeal and replace ObamaCare, where the path to compromise remains extremely difficult.
  • Almost all markets in Europe and Asia are closed today for the May 1 holiday. Japan is the major exception to the general state. One data point was released, Chinese manufacturing PMI was 51.2, lower than the March figure of 51.8 and also lower than expectations. Lower prices for commodities is largely the culprit, not a drop in demand. Still, it does highlight the sensitivity of the Chinese economy to “Old Industrial China.” After generally good economic reports in Q1 2017, the Chinese government has announced a series of crackdowns on excessive leverage in the real estate and financial markets.
  • Reflecting on Nasdaq 6000. The Nasdaq Composite hit 6000 last week, more than 17 years (or 6250-plus days) after first reaching 5000 back in March of 2000. During the dotcom boom in the late 1990s, moves from 3000 to 4000 and 4000 to 5000 were quick at 56 and 71 days, before the long and winding road to 6000 over the course of nearly two decades. Although this milestone has sparked more bubble talk in the media, we believe stocks are far from bubble territory, and the Nasdaq stands on a much stronger foundation today than it did in the days leading up to the dotcom crash.
  • Welcome to May. May is a busy month with multiple events that could move global markets. From the Fed meeting, to Presidential election in France, to the kickoff of what has historically been the worst six months of the year for equities; this is a big month.

MonitoringWeek_header

Monday

  • Personal Consumption Expediture Core & Deflator (Mar)
  • ISM Mfg. PMI (Apr)
  • BOJ: Minutes of March 15-16 Meeting
  • China: Caixin Mfg. PMI (Apr)

Tuesday

  • Eurozone: Unemployment Rate (Mar)

Wednesday

  • ISM Non-Mfg. PMI (Apr)
  • FOMC Rate Decision (May 3)
  • Eurozone: GDP (Q1)

Thursday

  • Eurozone: Markit PMI (Apr)
  • Eurozone: Retail Sales (Mar)

Friday

  • Change in Nonfarm, Private & Mfg. Payrolls (Apr)
  • Unemployment Rate (Apr)
  • Labor Force Participation & Underemployment Rates (Apr)

 

 

 

 

Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.

Market Update: April 24, 2017

MarketUpdate_header

  • U.S. up, Europe surging in wake of French vote. U.S. equities are tracking global markets higher this morning following yesterday’s first round of the French presidential elections in which Emmanuel Macron and Marine Le Pen finished in the top spots, triggering a run-off vote set for May 7. Friday’s session concluded with the major indexes posting modest losses ahead of the vote, as the S&P 500 (-0.3%) was led lower by the telecom (-1.6%) and financials (-0.9%) sectors, with only utilities (+0.5%) and industrials (+0.1%) finishing positive. Overseas, Asian indexes reacted positively to the French election as the Nikkei (+1.4%) and Hang Seng (+0.4%) gapped higher; the notable exception was the Shanghai Composite (-1.4%), which fell amidst a government crackdown on leverage. European indexes are spiking as the STOXX 600 (+1.8%) benefits from investors betting on the pro-E.U. candidate Macron; Frances’s CAC is up more than 4% to its highest level in nine years. Finally, the yield on the 10-year Treasury has jumped to 2.30%, WTI crude oil (-0.5%) is just below $50/barrel, and COMEX gold ($1271/oz.) has dropped 1.4%.

MacroView_header

  • Solid start to Q1 earnings season. With 95 S&P 500 companies having reported, Thomson-tracked S&P 500 earnings for first quarter 2017 point to an 11.2% year-over-year increase, compared with consensus estimates of +10.2% as of quarter end on April 1, 2017. The early upside has been driven largely by financials, which are tracking to a 19.0% year-over-year increase, more than 4% above quarter-end estimates. Industrials have also surprised to the upside thus far. Conversely, since earnings season began, first quarter earnings estimates have been cut for the consumer discretionary, energy, and telecom sectors, though it is probably too early to call any of these sectors “earnings season losers.” This week (4/24/17-4/28/17) is the busiest week of earnings season with 194 S&P 500 companies slated to report. All of the widely-held sectors are well represented on the earnings calendar, led by industrials.

4-24-17-earnings-dashboard

  • Leading indicators rise for seventh consecutive month. The Conference Board’s Leading Economic Index (LEI) pushed 0.4% higher in March, ahead of expectations but decelerating from a downwardly revised 0.5% increase in February. Eight of 10 indicators increased in March, led by contributions from the yield curve and strong new manufacturing orders survey data. The LEI has climbed 3.5% year over year, a rate that has historically been associated with low odds of a recession occurring within the next year.
  • The latest Beige Book suggests a steady economy with modest wage pressure. The Federal Reserve (Fed) released its April Beige Book last week ahead of the May 2-3, 2017 Federal Open Market Committee (FOMC) meeting. Our Beige Book Barometer (strong words minus weak words) rose to +77 in April, its highest level since +84 in January 2016, indicating continued steady economic growth in early 2017 with some signs of potential acceleration. Words related to wage pressure have held steady over the last six months at levels above the 2015-2016 average, indicating the appearance of modest but still manageable wage pressure.
  • Important period for European markets. This week, we examine the importance of European market earnings, particularly in important sectors like energy and banking. Expectations remain high for earnings growth throughout 2017, which has kept us cautious on investing in European markets. Political risks also remain, but seem to be abating as we get past the first round of French Presidential elections.

MonitoringWeek_header

Monday

  • Germany: Ifo (Apr)

Tuesday

  • New Home Sales (Mar)

Wednesday

  • BOJ Outlook Report & Monetary Policy Statement
  • BOJ Interest Rate Decision

Thursday

  • Durable Goods Orders (Mar)
  • Eurozone: Consumer Confidence (Apr)
  • ECB Interest Rate Decision
  • Japan: CPI (Mar)

Friday

  • GDP (Q1)
  • UK: GDP (Q1)
  • Eurozone: CPI (Apr)

Saturday

  • EU Leaders Summit
  • China: Mfg. & Non-Mfg. PMI (Apr)

 

 

 

 

 

 

Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.

29 Biggest Tax Problems For Married Couples

Preparing your annual income tax return is a chore. It’s even more complex when you’re married. You might have two sets of income, assets, debts and deductions. Further, if you were separated, widowed or divorced during the year, you might have a thorny tax situation.

A qualified accountant can advise you on the basic tax problems that married couples face. For a brief introduction, read through to see 29 of the most significant tax problems married people might encounter. Understanding these challenges can help you get more tax breaks this year.

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1. YOU’RE NOT SURE OF THE YOUR MARITAL STATUS FOR THE TAX YEAR

When preparing taxes, you first need to determine your marital status. It might seem like a straightforward task. However, life is not always so simple.

The IRS considers you to be married if you were lawfully wed on the last day of the tax year. For example, if you tied the knot at any time in the past and were still married on Dec. 31, 2016, you were married to your spouse for the entire year in the eyes of the IRS. The laws of the state where you live determine whether you were married or legally separated for the tax year.

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2. YOU’RE NOT SURE OF YOUR MARITAL STATUS IN A SAME-SEX RELATIONSHIP

Married, same-sex couples are treated the same as married, heterosexual couples for federal tax purposes. However, same-sex couples in a registered domestic partnership or civil union cannot choose to file as married couples, as state law doesn’t consider those types of couples to be married.

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3. YOU DON’T KNOW WHICH FILING STATUS TO CHOOSE

If you weren’t married on Dec. 31 of the tax year, the IRS considers you to be single, head of household or a qualified widow(er) for that year.

If you were married, there are three filing possibilities:

  • Married filing jointly
  • Married filing separately
  • Head of household

If more than one category might apply to you, the IRS permits you to pick the one that lets you pay the least amount in taxes.

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4. YOU CAN’T DECIDE WHETHER TO FILE JOINTLY OR SEPARATELY

If you’re married and don’t qualify to file as head of household, you typically have two choices: filing jointly or separately. It’s best to choose the one that allows you to pay the least amount in taxes, which all comes down to your particular circumstances.

Sometimes it makes sense to file separately, said Josh Zimmelman, owner of Westwood Tax & Consulting, a New York-based accounting firm. “A joint return means that your finances are linked, so you’re both liable for each other’s debts, penalties and liabilities,” he said. “So if either of you has some financial issues or baggage, then filing separately will better protect your spouse from your bad record, or vice versa.”

If you file jointly, you can’t later uncouple yourselves to file married filing separately. “On the other hand, if you file separate returns and then realize you should have filed jointly, you can amend your returns to file jointly, within three years,” Zimmelman said.

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5. YOU ASSUME MARRIED FILING JOINTLY IS ALWAYS THE BEST OPTION

Even if married filing jointly has been your best choice in the past, don’t assume it will always be that way. Do the calculations each year to determine whether filing singly or jointly will give you the best tax result.

Changes in your personal circumstances or new tax laws might make a new filing status more desirable. What was once a marriage tax break might turn into a reason to file separately, or vice versa.

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6. YOU’RE NOT CLEAR ABOUT HEALTHCARE REQUIREMENTS

The Patient Protection and Affordable Care Act — more commonly known as “Obamacare” — requires that you and your dependents have qualifying health care coverage throughout the year, unless you qualify for an exemption or make a shared responsibility payment.

Even if you lose your health insurance coverage because of divorce, you still need continued coverage for you and your dependents during the entire tax year.

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7. YOU CHANGED YOUR LAST NAME

If you want to change your last name after a marriage or divorce, you must officially inform the federal government. Your first stop is the Social Security Administration. Your name on your tax return must match your name in the SSA records. Otherwise, your tax refund might be delayed due to the mismatched records. Also, don’t forget to update the changed names of any dependents.

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8. YOUR SPOUSE DIED DURING THE TAX YEAR

If your spouse died during the year, you’ll need to figure out your filing status. If you didn’t marry someone else the same year, you may file with your deceased spouse as married filing jointly.

If you did remarry during that tax year, you and your new spouse may file jointly. However, in that case, you and your deceased spouse must file separately for the last tax year of the spouse’s life.

In addition, if you didn’t remarry during the tax year of your spouse’s death, you might be able to file as qualifying widow(er) with dependent child for the following two years if you meet certain conditions. This entitles you to use joint return tax rates and the highest standard deduction amount.

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9. YOU FILE JOINTLY AND YOU’RE BOTH LIABLE

If you use the status married filing jointly, each spouse is jointly and severally liable for all the tax on your combined income, said Gail Rosen, a Martinsville, N.J.-based certified public accountant. “This means that the IRS can come after either one of you to collect the full amount of the tax,” she said.

“If you are worried about your spouse and being responsible for their share of their taxes — including interest and penalties — then you might consider filing separately,’ she said.

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10. YOU FILE SEPARATELY AND LOSE TAX BENEFITS

Although filing separately might protect you from joint and several liabilities for your spouse’s mistakes, it does have some disadvantages.

For example, people who choose the married filing separately status might lose their ability to deduct student loan interest entirely. In addition, they’re not eligible to claim the Earned Income Tax Credit and they might also lose the ability to claim the Child and Dependent Care Credit or Adoption Tax Credit, said Eric Nisall, an accountant and founder of AccountLancer, which provides accounting services to freelancers.

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11. YOU DON’T MEET THE MEDICAL EXPENSE DEDUCTION THRESHOLD

To include non-reimbursed medical and dental expenses in itemized deductions, the expenses must meet a threshold of exceeding 10 percent of your adjusted gross income. However, when you file jointly — and thus report a larger combined income — it can make it more difficult for you to qualify.

A temporary exception to the 10 percent threshold for filers ages 65 or older ran through Dec. 31, 2016. Under this rule, individuals only need to exceed a lower 7.5 percent threshold before they are eligible for the deduction. The exception applies to married couples even if only one person in the marriage is 65 or older.

Starting Jan. 1, 2017, all filers must meet the 10 percent threshold for itemizing medical deductions, regardless of age.

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12. YOU DON’T TAKE ADVANTAGE OF THE MARRIAGE BONUS

Many people complain about the marriage tax penalty. “Married filing jointly may result in a higher tax bill for the couple versus when each spouse was filing single, especially if both spouses make roughly the same amount of income,” said Andrew Oswalt, a certified public accountant and tax analyst for TaxAct, a tax-preparation software company.

However, you might have an opportunity to pay less total tax — a marriage tax break — if one spouse earns significantly less. “When couples file jointly with largely differing income levels, this may result in a ‘marriage tax benefit,’ potentially resulting in less tax owed than when the spouses filed with a single filing status,” Oswalt said.

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13. YOU’RE DIVORCED BUT STILL NEED TO FILE A FINAL MARRIED RETURN

If your divorce became official during the tax year, you need to agree with your ex-spouse on your filing status for the prior year when you were still married. As to whether you should file your final return jointly or separately, there is no single correct answer. It partially depends on your relationship with your ex-spouse and whether you can agree on such potentially major financial decisions.

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14. YOU HAVE TO DETERMINE THE STATUS OF DEPENDENTS AFTER A DIVORCE

Tax laws about who qualifies as a dependent are quite complex. Divorcing parents might need to determine which parent gets to claim the exemption for dependent children.

Normally, the custodial parent takes the deduction, Zimmelman said. “So if your child lives with you more than half the year and you’re paying at least 50 percent of their support, then you should claim them as your dependent,” he said.

In cases of shared custody and support, you have a few options. “You might consider alternating every other year who gets to claim them,” said Zimmelman. Or if you have two children, each parent can decide to claim one child, he said.

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15. YOU DEDUCT VOLUNTARY ALIMONY PAYMENTS

If you want to deduct alimony payments you made to a former spouse, it must be in accordance with a legal divorce or separation decree. You can’t deduct payments you made on a voluntary basis.

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16. YOU DEDUCT CHILD SUPPORT PAYMENTS

Even if you don’t take the standard deduction and instead itemize your deductions, you can’t claim child support payments you paid to a custodial parent.

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17. YOU CLAIM CHILD SUPPORT PAYMENTS AS INCOME

Do not report court-ordered child support payments as part of your taxable income. You don’t need to report it anywhere on your tax return. On the other hand, you must report alimony you receive as income on line 11 of your Form 1040.

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18. YOU DON’T CLAIM ALIMONY YOU PAID AS A DEDUCTION

Unlike child support that isn’t tax deductible, you are permitted to deduct court-ordered alimony you paid to a former spouse. It’s a deduction you can take even if you don’t itemize your deductions.

Make sure you include your ex-spouse’s Social Security number or individual taxpayer identification number on line 31b of your own Form 1040. Otherwise, you might have to pay a $50 penalty and your deduction might be disallowed.

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19. YOUR SPOUSE DOESN’T WORK AND MISSES TAX SAVINGS

Saving for retirement is important. Contribute to a 401k plan and you will both save money for your golden years and lower your taxable income now. If your employer offers a 401k plan, you can contribute money on a pretax basis, subject to certain limits.

However, nonworking spouses can’t contribute to a 401k because they don’t have wages from an employer.

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20. YOU MISS QUARTERLY TAX PAYMENTS

Single or married, you might have to pay quarterly tax payments to the IRS, especially if you are self-employed. Make sure you know how to calculate estimated taxes. If you are required to make such payments but do not do so, you might have to pay an underpayment penalty, Rosen said.

All taxpayers must pay in taxes during the year equal to the lower of 90 percent of the tax owed for the current year, or 100 percent — 110 percent for higher-income taxpayers — of the tax shown on your tax return for the prior year, Rosen said. “The problem for married couples is that often they do not realize they owe more taxes due to the combining of the two incomes,” she said.

You should be proactive each year. “To avoid owing the underpayment penalty, make sure to do a projection of your potential tax for 2017 when you finish preparing your 2016 taxes,” she said, adding that you should make sure to comply with the payment rules outlined above.

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21. YOU PHASE OUT OF PASSIVE LOSSES

Crystal Stranger — a Los Angeles-based enrolled agent, president of 1st Tax and author of “The Small Business Tax Guide” — said she sees a lot of married couples who have issues with passive loss limitation rules.

“With these rules, if you have a passive loss from rental real estate or other investments, you are allowed to take up to $25,000 of passive losses against your other income,” she said. “But this amount phases out starting at $100,000 (of) adjusted gross income, and is fully lost by $150,000 (of) adjusted gross income.”

Married filers lose out, as the phaseout amount is the same for a single taxpayer as for a married couple. “This is a big marriage penalty existing in the tax code,” Stranger said. “It gets even worse if a married couple files separately. The phaseout then starts at $12,500, meaning almost no (married filing separately) filers will qualify.”

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22. YOU CLAIM A CHILD AS A DEPENDENT, BUT YOUR INCOME IS HIGH

You are not obligated to claim your kids as dependents on your own tax return. In fact, it might be beneficial not to claim them.

“High earners lose the personal exemption after crossing certain income thresholds,” said Nisall. So in some cases, it might make more sense to let working children claim the exemption for themselves on their own return, he said.

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23. YOU MISS OUT ON THE CHILD TAX CREDIT

Married couples might be able to claim the Child Tax Credit up to a limit of $1,000 for each qualifying child.

“The Child Tax Credit phases out starting at $55,000 for couples electing to use the married filing separately filing status, and (at) $110,000 for those choosing the married filing jointly status,” said Oswalt. “But married couples receive twice the standard deduction that individuals receive, so the phaseout limitations may not negatively impact a married couple’s return if they choose to file jointly.”

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24. YOU NEGLECT THE TAX BREAK FROM A HOME SALE

The IRS provides a tax break when you sell your home, subject to certain conditions. Generally, you must meet a minimum residency period by owning and living in the house for two of the five years previous to the sale.

A single person who owns a home that has increased in value can qualify to exclude up to $250,000 in gains from income, said Oswalt. However, married people can exclude up to $500,000 in gains. This rule can become tricky if one person in the couple purchased the house prior to marriage.

“If you are married when you sell the house, only one of you needs to meet the ownership test for the $250,000 exclusion,” Oswalt said. “You both must meet the residency period to exclude up to the full $500,000 of gain from your income, however.”

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25. YOU DON’T CLAIM THE CHILD AND DEPENDENT CARE CREDIT

Married tax filers might be eligible for the Child and Dependent Care Credit if they paid expenses for the care of a qualifying individual so that they could work or look for work. The rules for who can be a dependent and who can be a care provider are strict. This credit is not available if you file separately.

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26. YOU CAN’T DEDUCT STUDENT LOAN INTEREST

If you’re paying back student loans, you might be looking forward to taking the student loan interest deduction. However, if you’re married, it might not be so easy to do that.

“For a single filer, the deduction begins to phase out when the taxpayer’s adjusted gross income is greater than $65,000,” said Oswalt. “This amount is doubled to $130,000 when filing jointly.”

“So if both spouses are making $65,000 or less, then their deduction will not be affected by the phaseout,” he explained. “However, if one is making $60,000 and the other $75,000, the deduction begins to phase out, which will ultimately result in a larger tax bill.”

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27. YOU INCORRECTLY ACCOUNT FOR GAMBLING WINS AND LOSSES

Imagine a married couple where both spouses like to gamble in Las Vegas. He’s not so lucky and has losses, while she has winnings. If they file a joint return, they might have to report the gambling winnings as taxable income. Meanwhile, the losses might be deductible if the couple itemizes their deductions instead of taking the standard deduction.

However, they can’t take the amount of gambling winnings, subtract the losses and claim the net amount as winnings. Instead, they must report the entire amount of gambling winnings as income, whereas the losses are reported as an itemized deduction up to the amount of the winnings. The IRS requires you to keep accurate records of your winnings and losses.

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28. YOU BECAME A VICTIM OF TAX IDENTITY THEFT

Identify theft is a financial nightmare, no matter how it happens. Tax identity theft happens when someone files a tax return using one or both of the spouse’s Social Security numbers in hopes of scooping up your legitimate refund. If this happens to you, “contact the IRS immediately and fill out an identity-theft affidavit,” said Zimmelman. “You should also file a complaint with the Federal Trade Commission, contact your banks and credit card companies, and put a fraud alert on your and your spouse’s credit reports.”

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29. YOU CAN’T GET YOUR 2015 RETURN

The IRS and state tax agencies work to develop safeguards to avoid identity theft related to tax returns. In 2017, they will be particularly concerned about the implications of taxpayers who file using tax software.

The IRS has alerted taxpayers that they might need to have their 2015 adjusted gross income handy if they are changing software products this year. This number might be required to submit your return electronically.

Getting your 2015 adjusted gross income might be difficult if you are a member of a divorced couple that is not on positive terms, or that hasn’t even been in contact the past few years.

However, you still have options. You might be able to get the information if you go to the IRS website and use the Get Transcript service.

 

 

Written By: Valerie Rind
Source: GOBankingRates

Market Update: April 17, 2017

MarketUpdate_header

  • Stocks tick higher to begin week. U.S. equities are slightly higher this morning as earnings season ramps up this week with 63 S&P 500 components set to report. Markets moved lower the final three sessions of the last week’s shortened trading week, concluding with a 0.7% loss for the S&P 500 on Thursday which was led lower by energy (-1.9%) and financials (-1.7%). Asian indexes closed mixed overnight, with the Nikkei gaining 0.1%, while China’s Shanghai Composite slipped 0.7% as a request from the country’s top securities regulator to tighten controls overshadowed an upside surprise to Gross Domestic Product (GDP); European markets are closed for Easter Monday. Meanwhile COMEX gold ($1291/oz.) is near flat, WTI crude oil ($53.03/barrel) is dropping 0.3%, and the yield on the 10-year Note little changed at 2.23%.

MacroView_header

  • First big earnings week on tap. This week 16% of the S&P 500’s market cap will report first quarter 2017 results, highlighted by the financials and industrials sectors. Banks got the season off to a good start late last week, pushing the financials earnings growth rate to near 18% from an estimated 15.6% over the past week. Overall, Thomson-tracked consensus for S&P 500 earnings is calling for a 10.4% year-over-year increase in the quarter; a strong 76% earnings beat rate thus far has lifted overall earnings growth by 0.2% (though just 6% of the S&P 500’s market cap reported last week). Look for our earnings dashboard here on April 24.
  • Consumer prices fell in March. The consumer price index (CPI) fell 0.3% month over month in March, below consensus expectations for a flat reading. Core prices, excluding food and energy, slipped 0.1% month over month, the first sequential decline since January of 2010 and well below consensus estimates of +0.2%. The drop pushed the year-over-year changes in headline and core prices to 2.4% (down from 2.7% in February) and 2.0% (down from 2.2% in February), respectively. The drop in prices was broad based, driven by a combination of wireless phone services, apparel, autos, and housing. We continue to expect two more rate hikes from the Federal Reserve (Fed) in 2017, but the soft data in March may cause markets to at least partially discount the probability of a June hike, which is currently about a coin flip based on fed funds futures markets.
  • Retail sales fell for the second straight month. Following a downward revision to February, retail sales fell for the second straight month in March, slipping 0.2% (vs. consensus of -0.1%), though sales increased by a respectable 5.2% on a year-over-year basis. Core retail sales (excluding autos, gasoline, building materials and food services), rose 0.5% month over month, above expectations, after a downwardly revised 0.2% decline in February. Consumer spending clearly slowed in the first quarter after a strong finish to 2016, but weather, delayed tax refunds, and seasonal quirks in first quarter data in recent years suggest a rebound in the second quarter is likely. Still, first quarter gross domestic product, based on available data to date, is tracking to only about 1%.
  • Upside surprise to Chinese GDP. The Chinese government released its official Q1 GDP report overnight, up 6.9%, better than expectations which generally were in the 6.5%-6.7% range. Economic indicators were up across the board, including growth in Fixed Asset Investment (infrastructure and real estate spending), which is often heavily influenced by government policy, and retail sales. Consumer spending is key to the Chinese government, as it is trying to manage its economy away from infrastructure and heavy industry and toward consumer spending and the service sector.
  • Though many are skeptical regarding Chinese GDP growth figures, what may matter most is how China responds to them. Because the government is signaling that the economic situation is strong, it gives it room to be more aggressive on important issues, primarily the debt problem. Chinese shares were down slightly despite the positive data. Why? Perhaps because of the government’s signal that policy will shift away from supporting the economy (which officially no longer needs the support) and toward dealing with these longer term imbalances.
  • Checking in on technicals, sentiment, and uncertainty. This week we will take a look at market technicals, sentiment, and the ever increasing uncertainty. The good news is market breadth remains strong and globally we are seeing many major markets in uptrends as well. Still, sentiment is a mixed picture and the level of uncertainty remains high. All of this, coupled with the historically low level of market volatility during the first-quarter, makes the potential for higher volatility very likely.

MonitoringWeek_header

Monday

  • BOJ: Kuroda Speaks to Trust Companies Association

Wednesday

  • Beige Book
  • Eurozone: Trade Balance (Feb)
  • Eurozone: CPI (Mar)

Thursday

  • Initial Jobless Claims (Apr 15)
  • Conference Board US Leading Index (Mar)
  • Eurozone: Consumer Confidence (Apr)

Friday

  • Existing Home Sales (Mar)
  • Eurozone: Markit Mfg. & Services PMI (Apr)
  • CAD: CPI (Mar)
  • ECB: Current Account (Feb)

 

 

 

 

 

 

Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.

Market Update: March 27, 2017

MarketUpdate_header

  • Equities slip after healthcare reform shelved. U.S. indexes are tracking global stocks lower this morning after Congress was unable to push through the American Health Care Act, casting some uncertainty over prospects for tax reform as well. On Friday, the S&P 500 (-0.1%) closed modestly lower, dragged down by materials (-0.9%) and energy (-0.5%); utilities (+0.4%) was the best performing sector. Overnight, Asian markets were led lower by Japan’s Nikkei (-1.4%) on yen strength; Hong Kong’s Hang Seng (-0.7%) and China’s Shanghai Composite (-0.1%) fared better. Stocks are also lower across the board in Europe, notably in Germany’s DAX (-0.9%) and Italy’s MIB (-0.9%). Elsewhere, the recent weakness in WTI crude oil ($47.21/barrel) continues, while the risk-off sentiment is boosting COMEX gold ($1262/oz.) and Treasuries, lowering the yield on the 10-year Note by five basis points (0.05%) to 2.35%.

MacroView_header

  • Our Final Four factors in today’s Weekly Market Commentary. With college basketball’s Final Four set, this week we share our “Final Four factors” for the stock market in 2017. We expect a hard-fought battle between these factors and market risks. But when the “tournament” is over on December 31, depending on the path of policy out of Washington, D.C., we expect the S&P 500 to be at or above current levels.
    1. Economic Growth – We continue to expect a modest pickup in economic growth in 2017 to near 2.5%, based on gross domestic product (GDP), supported by increasing business investment, steady consumer spending gains, and, later in the year, pro-growth fiscal policy to be enacted.
    2. Earnings – We expect high-single-digit S&P 500 earnings growth in 2017[1], supported by better U.S. economic growth, rebounding energy sector profits, a stable U.S. dollar, and resilient profit margins.
    3. Corporate Tax Reform – Corporate tax reform, which remains the centerpiece of the Trump economic agenda, is still likely to get done in the next year despite the failure to get the healthcare bill through the House last week. The Trump administration will immediately pivot to tax reform, though a comprehensive overhaul will be difficult to achieve.
    4. The Fed – We expect the Federal Reserve (Fed) to hike interest rates twice more in 2017 following the Federal Open Market Committee’s (FOMC) rate hike on March 15. We are encouraged by the Fed’s acknowledgement of the improved economic outlook and its stated plan to hike rates gradually.
  • Down seven in a row. The Dow closed lower on Friday for the seventh consecutive session. The last seven-day losing streak was ahead of the U.S. election, and it hasn’t been down eight in a row since August 2011. The S&P 500 meanwhile has closed lower six of the past seven days. Taking a closer look at the Dow’s seven-day losing streak, it has been green at some point each day. Also, the total loss during the streak is only 1.7%. To put this in perspective, since 1980, there have now been 20 seven-day losing streaks. The average drop during the previous 19 was 7.3% and the current drop of 1.74% ranks as the second smallest loss.

MonitoringWeek_header

 Monday

  • Evans (Dove)
  • Eurozone: M3 Money Supply (Feb)
  • China: PBOC’s Zhou Speech

Wednesday

  • Evans (Dove)

 Thursday

  • GDP (Revision) (Q4)
  • Eurozone: Industrial, Services & Consumer Confidence (Mar)
  • China: Mfg. & Non-Mfg. PMI (Mar)

 Friday

  • Personal Income (Feb)
  • Kashkari (Dove)

 

 

 

 

[1] We expect S&P 500 gains to be driven by: 1) a pickup in U.S. economic growth partially due to fiscal stimulus; 2) mid- to high-single-digit earnings gains as corporate America emerges from its year-long earnings recession; 3) an expansion in bank lending; and 4) a stable price-to-earnings ratio (PE) of 18 – 19.

 

Important Disclosures: Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.

Market Update: March 20, 2017

MarketUpdate_header

  • Stocks little changed following G20. Major indexes are near flat this morning as stocks search for direction amid little economic data and traders assess the impact of the weekend’s G20 summit, which ended with a whimper. This follows a quiet session on Friday in which the heavily-weighted financials (-1.1%) sector kept the S&P 500 (-0.1%) underwater. Overseas, Asian markets were mixed overnight with the Shanghai Composite (+0.4%) and Hang Seng (+0.8%) moving higher while stocks in India and South Korea finished lower; the Nikkei was closed for a holiday. Europe is mostly lower midday with the STOXX 600 down 0.2%, though off session lows. Elsewhere, WTI crude oil is retracing Friday’s gains, COMEX gold is ticking higher as the dollar continues to weaken, and 10-year Treasury yields are unchanged at 2.50%.

MacroView_header

  • Housing data, Fed speakers highlight the week ahead. This week, we get some key data points on housing, with existing home sales on Wednesday and new home sales on Friday. We also get data on manufacturing with both durable goods orders and Markit’s Manufacturing Purchasing Managers’ Index (PMI) on Friday. Nine Fed members, including four voting members (Yellen, Dudley, Evans, and Kashkari) are lined up to speak this week, providing an opportunity for further insight on last week’s rate hike.
  • Industrial production flat, but manufacturing improving. Industrial production was flat in February, missing expectations of 0.2% growth, although a 0.2% upward revision to January provided an offset. Utility production held the overall industrial production number down after another warm month, but manufacturing production rose 0.5%, topping expectations of 0.4%, a meaningful beat given it came on top of a 0.3% upward revision to January’s data. The gains provide further evidence of a strengthening rebound in manufacturing already being signaled by the Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) and several regional manufacturing indexes.
  • Leading indicators remain strong. The Conference Board’s Leading Economic Index (LEI) rose 0.6% in February, topping consensus expectations and matching similarly strong gains in December and January. The largest positive contributor for the month was the ISM new orders index, reflecting recent gains in manufacturing. The index accelerated to a 3.1% gain year over year, its highest growth rate since August 2015. The LEI continues to point to a low chance of a recession in the next year.
  • In the spirit of March Madness, we have compiled our “Sweet 16” for the stock market. Specifically, we have identified 16 keys-many of them policy related-for stocks for the rest of 2017 and assessed their implications for the stock market. While the path for several policy-related areas is uncertain, we still expect a solid year for stocks in 2017-potentially even slightly above our S&P 500 target of mid-single-digit gains[1] depending on the exact policy path. Look for a deeper dive into four of these 16 keys to the market in our “Final Four” next week.
  • Big bounce for small caps. The Russell 2000 (RUT) was up 1.9% last week, which was the largest weekly gain of the year for small caps and the best weekly bounce since early December. This is a nice change, as small caps have lagged most of 2017 after an 8.4% gain during the fourth quarter of last year. In fact, year to date, the RUT is up only 2.5% versus 6.2% for the S&P 500. Many have blamed the recent underperformance on investor skepticism on how quickly tax cuts and infrastructure spending will be implemented. At the same time, some weakness after the huge fourth quarter rally is perfectly normal.

 

MonitoringWeek_header

Monday

  • Evans (Dove)

Tuesday

  • Dudley (Dove)

Wednesday

  • Existing Homes Sales (Feb)

Thursday

  • New Home Sales (Feb)
  • Yellen (Dove)
  • Kashkari (Dove)
  • Kaplan (Hawk)
  • Eurozone: Consumer Confidence (Mar)
  • Japan: Nikkei Mfg. PMI (Mar)

Friday

  • Durable Goods Orders and Shipments (Feb)
  • Markit Mfg. PMI (Mar)
  • Eurozone: Markit PMI (Mar)

Saturday

  • China: PBOC’s Zhou Speech

 

 

 

[1] We expect mid-single-digit returns for the S&P 500 in 2017 consistent with historical mid-to-late economic cycle performance. We expect S&P 500 gains to be driven by: 1) a pickup in U.S. economic growth partially due to fiscal stimulus; 2) mid- to high-single-digit earnings gains as corporate America emerges from its year-long earnings recession; 3) an expansion in bank lending; and 4) a stable price-to-earnings ratio (PE) of 18 – 19.

Important Disclosures: Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.