THE OLD YEAR ENDS WITH GREAT NUMBERS AND THE NEW YEAR BEGINS: We had another holiday-shortened week which included portions of both 2019 and 2020. For the week, stocks were down a tad (the S&P 500 was down 0.2%). This was largely due to the dip in prices on Friday. That decrease was caused by a run up in oil prices that was in turn caused by U.S. targeted killing of Iranian General Qassem Seleimani in Iraq. This of course followed the storming of the U.S. embassy in Iraq. Geopolitics are always a wildcard in the markets, and this week the wildcard erased the gain from the first full trading day of the year.
For the year of 2019, I am waiting for the first pundit to claim he/she predicted this. The S&P 500 was up a whopping 31.49%. International markets were up over 20% on the whole as well. Bonds performed well too in the high single digits.
U.S. MANUFACTURING IS STRUGGLING: For December the ISM Manufacturing Index decreased to 47.2% from 48.1% in November. This indicates contraction in the manufacturing sector, and this is the fifth straight month with a contracting index.
CONSTRUCTION SPENDING PICKS UP IN NOVEMBER: In November of 2019, construction spending in the U.S. increased 0.6% from the prior month and 4.1% above spending in November of 2018. Both private and public construction spending increased. Private construction peaked in January of 2018, and then crashed. It has been rising since, dropped a bit in 2018, but has been rising again throughout most of 2019. It is still 21% below the January 2008 peak.
SOCIAL SECURITY: Social Security benefits will increase just 1.6% in 2020 after a 2.8% increase in 2019. The maximum taxable wage base increases from $132,900 to $137,000 (which means you stop having to contribute to Social Security after you surpass $137,000 for the year). The tax rate remains the same, 6.2% each for employers and employees (12.4% for unemployed).
NEW YEAR TAX LAWS: It is a new year and some tax laws have adjusted. Here are some of the key numbers:
- The standard deduction will increase a bit from $24,400 to $24,800.
- Capital gains and qualified dividends are taxed at 0% if your income is below $40,000 (single) or $80,000 (joint).
- Capital gains and qualified dividends are taxed at 15% if your income is between $40,000 and $441,450 (single) or $80,000 and $496,600 (joint).
- If you make more than the above-referenced amounts, your capital gains rate will be 20%.
- The deduction for state and local taxes is limited to $10,000 per year.
- The estate tax exemption increases from $11,400,000 to $11,580,000.
- Maximum contribution to an IRA remains $6,000 ($7,000 for those over 50).
- Maximum contribution to a 401(k) by an employer remains $19,500 ($26,000 for those over 50).
- The maximum contribution to an HSA is $3,550 for individuals and $7,100 for family plans ($1,000 additional for those 55 and older).
NEW YEAR TAX LAWS: IRS
SOCIAL SECURITY: Social Security Administration
CONSTRUCTION SPENDING PICKS UP IN NOVEMBER: https://www.calculatedriskblog.com/2020/01/construction-spending-increased-in.html
U.S. MANUFACTURING IS STRUGGLING:https://www.calculatedriskblog.com/2020/01/ism-manufacturing-index-decreased-to.html; https://www.instituteforsupplymanagement.org/ismreport/mfgrob.cfm?SSO=1