Market News – January 14, 2019 - Compass Ion Advisors

2019’S GOOD START: All major U.S. stock indices had a strong week, continuing what has been three weeks of solid and steady growth since the December swoon. Next week, major companies will begin to report their fourth-quarter earnings, and most analysts have downgraded their forecasts due to trade uncertainty. We will see how actual results compare with the cloudy forecasts, and how that, and the continued shutdown, affects markets.

2019 TAX LAW UPDATES: Every year, certain parts of our tax laws automatically update. Here are some of those changes that might affect you:

Standard Deduction: For married filing jointly the standard deduction increases $400 to $24,400. For single filiers, it increases by $200 to $12,200.
Personal Exemptions: Remember the personal exemptions were eliminated by the new tax law.
Capital Gains Tax: The rates stay the same. If capital gains increase a single taxpayer’s income above $39,375, the rate will be 15%, and if it pushes income above $434,500, the rate is 20%. For joint filers, 15% applies for income over $78,750, and 20% for income over $488,850.
Retirement Plans: Maximum contribution limits rise to $19,000, and $25,000 if you are 50 or older. For IRA, the maximum is $6,000 plus an additional $1,000 of you are 50 or older.

PREDICTIONS: I am often asked where I think the market is going in the near future. I am happy to prognosticate when asked, but always with the caveat that brilliant people disagree with me every time I give an opinion about the future. That said, I still find it helpful to at least peruse what others predict, and why. What follows are two sets of predictions I have read. The following are market predictions of Goldman Sachs:

There is a 55% probability that U.S. stocks will rise 7-11%.
There is a 25% probability that U.S. stocks will rise 18%.
There is a 20% probability that U.S. stocks will decline 18%.
I also reviewed the 2019 predictions of Bob Doll, chief equity strategies for Nuveen:
Growth will continue, but slow, so no recession.
Unemployment rate will reach a new low.
Stocks will bounce back and achieve modest growth for the year, but not regain the high reached in September, so about 5-6% up.
Foreign stocks outperform U.S. stocks.
Federal deficit will approach $1 trillion.
Geopolitics will keep markets volatile.

SHUTDOWN COULD END THE STREAK: The U.S. economy has added jobs every month since October of 2010, a record streak of 99 months. It is unclear how the nearly 400,000 furloughed federal workers will be classified. Monthly payroll growth has averaged 215,000 during the last five years. Another 420,000 are working without pay, but will likely be compensated later for their work. They will not be counted as unemployed.

ZERO: That is the number of FDIC-insured banks that failed in 2018. Eight failed in 2017. This is the third time since the FDIC was founded in 1933 that there have been no bank failures in a year.

REFERENCES:

ZERO: https://www.calculatedriskblog.com/2019/01/no-bank-failures-in-2018-first-time.html; https://www.cnbc.com/2019/01/09/for-the-first-time-since-2006-not-a-single-us-bank-failed-last-year.html
2019’S GOOD START: https://www.wsj.com/articles/stocks-on-track-for-weekly-gains-as-growth-fears-ease-11547196401
PREDICTIONS: https://www.wealthmanagement.com/equities/bob-doll-s-predictions-2019/gallery?slide=11; American Preeminence in a Rattled World, Investment Management Division Goldman Sachs, page 18.
SHUTDOWN COULD END THE STREAK: https://www.wsj.com/articles/government-shutdown-could-end-99-month-job-growth-streak-11547208000
2019 TAX LAW UPDATES: https://www.horsesmouth.com/key-financial-data-for-2019