Table of Contents

Market Insights: Rising Inflation Concerns

SFG News & Events

Food for Thought

Tax Tip

Healthy Living Tip

Weekly Riddle

Photo of the week

Rising bond yields dampened investor enthusiasm for high-multiple growth companies last week, sending market averages mostly lower in a holiday-shortened week of trading.

The Dow Jones Industrial Average gained 0.11% for the week. But the Standard & Poor’s 500 fell 0.71% and the Nasdaq Composite index slid 1.57%. The MSCI EAFE index, which tracks developed overseas stock markets, declined 0.26%.1,2,3

 

 

 

Mixed Signals

The 10-year Treasury Note yield hit its highest level in a year last week on worries of a pick-up in inflation, while the 30-year Treasury Bond yield ticked over 2.0%. Rising yields weighed on the high-valuation growth stocks, most specifically the big tech names, in addition to dragging down interest rate sensitive sectors, like utilities and real estate investment trusts (REITs).4

Economic data painted a mixed picture of the economy. Jobless claims reflected a still-struggling labor market while a strong retail sales number and an above-consensus PPI (Producer Price Index) reflected strong consumer spending and building inflationary pressures.5,6,7

Stocks were flat as the week came to a close, as traders wrestled with the crosscurrents of positive economic data and a further rise in yields.

Inflation Worries

After a long period of low inflation, concerns are growing that higher consumer prices may return as a result of an accommodative Federal Reserve monetary policy and fiscal spending in response to the pandemic. Tensions heightened last week with the release of January’s PPI report, which saw a jump of 1.7%, the biggest monthly increase since 2009.8

While the Fed believes that any price increases will be fleeting, the market appears to view inflation a bit differently. The prospect of further stimulus and more reopenings are adding to investors’ unease, which may revive an old Wall Street practice—inflation watching.

This Week: Key Economic Data

Monday: Index of Leading Economic Indicators.
Tuesday: Consumer Confidence.
Wednesday: New Home Sales.
Thursday: Jobless Claims. Durable Goods Orders. GDP (Gross Domestic Product).
Friday: Consumer Sentiment.


Source: Econoday, February 19, 2021
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

This Week: Companies Reporting Earnings

Monday: Palo Alto Networks (PANW).
Tuesday: Home Depot (HD), Intuit, Inc. (INTU), Ingersoll Rand, Inc. (IR).
Wednesday: Nvidia (NVDA), Etsy, Inc. (ETSY), Lowe’s Companies (LOW), TJX Companies (TJX), Teledoc Health, Inc. (TDOC).
Thursday: Salesforce.com (CRM), Best Buy (BBY), Workday, Inc. (WDAY), Dell Technologies (DELL), VMware (VMW), American Tower Corp. (AMT).
Friday: Draftkings, Inc. (DKNG).

Source: Zacks, February 19, 2021
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

Important Information Regarding Qualified Charitable Distributions for 2021

If you are age 72 or older, IRS rules require you to take required minimum distributions (RMDs) each year from your tax-deferred retirement accounts.

Many of our clients have inquired about satisfying their RMDs through a Qualified Charitable Distribution, so we have provided some insights and instructions below.

A Qualified Charitable Distribution is a direct transfer of funds from your IRA, payable directly to a qualified charity (as described in the QCD provision in the Internal Revenue Code). Amounts distributed as a QCD can be counted towards satisfying your RMD for the year, up to $100,000, and the QCD is excluded from your taxable income. This is not the case with a regular withdrawal from an IRA, even if you use the funds to make a charitable contribution later on.

To eliminate or reduce the impact of RMD income, charitably inclined investors may want to consider making a qualified charitable distribution.

If this sounds like a strategy that could work for you, here are some things that you need to know:

  • Each individual may donate the full amount of his or her RMD, up to $100,000 annually.
  • Funds must be transferred directly from your IRA at Fidelity to the qualified charity. This is accomplished by reaching out to your SFG Service Team and requesting a check to be issued payable to the charity.
  • Not every organization or cause qualifies for a QCD. Certain charities are not eligible to receive QCDs, including donor-advised funds, private foundations, and supporting organizations. You are not allowed to receive any benefit in return for your charitable donation. For example, if your donation covers your cost of playing in a charitable golf tournament, your gift would not qualify as a QCD. The charity must be a 501(c)(3) organization, and you should check directly with the charity to confirm.
  • A QCD is reported by Fidelity as a normal distribution on IRS Form 1099-R. You need to keep an acknowledgement of the donation from the charity for your tax records. Please be sure to inform your tax preparer that you have completed a QCD and that it is correctly listed on your tax return.
  • For a QCD to count towards your minimum annual RMD, it must meet the same deadline as a normal distribution.

In order for us to have sufficient time to process your QCD request, you must verify that your charity qualifies for a QCD, and give us the following information 60 days before your scheduled RMD distribution date

  1. Name of charity & Tax ID Number
  2. Address of charity
  3. Dollar amount to be contributed to charity

If you have any questions or would like to discuss this in further detail, please reach out to us.

“The fire is winter’s fruit.” 

Arabian Proverb

Do You Know the Difference Between Taxable and Nontaxable Income?

All income you receive is taxable unless the rules explicitly state that it isn’t. According to the IRS, taxable income includes earned income like wages as well as any income earned by bartering or the exchange of property or services. Rental income is taxable as are other forms of unearned income like interest and dividends or Social Security.

Some income is not taxable unless certain conditions are met. For example, life insurance proceeds are usually not taxable to the beneficiary unless you redeem a life insurance policy for cash. Any amount you receive above the cost of the policy is taxable. State and local income tax refunds may be taxable and should be reported on your federal taxes.

There are also some forms of income that are usually not taxable, like:

  • Gifts and inheritances.

  • Child support payments.

  • Welfare benefits.

  • Damage awards for physical injury or sickness. 

  • Cash rebates from a dealer or manufacturer for an item you buy. 

  • Reimbursements for qualified adoption expenses.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional. 

**Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Tip adapted from IRS.gov9

 

Choose to Make Your Plate “MyPlate”

Ah, the Food Pyramid. It had a lot of flaws, but we’re not going to address them all right now. Its major weaknesses were that it generalized recommended servings per day and poorly defined portion sizes. So, in 2008, the U.S. Department of Agriculture implemented a user-friendly redesign: the pyramid was transformed into a plate.

The concept behind the MyPlate design was somehow both revolutionary and seemingly obvious. After all, we eat off a plate, not a pyramid. Portions are easier to see. Make half the plate fruits and vegetables; the other half, grains and protein. A serving of dairy (or non-dairy alternative) on the side. Easy, right?

Take advantage of this method the next time you sit down for a meal and see what adjustments you can make to make your plate even healthier.

Tip adapted from ChooseMyPlate.gov10

What appears once in a minute, twice in a moment, but never in a decade?

Last week’s riddle: Two fathers and two sons went truffle hunting. Each found a truffle yet they found only three in all. Why?  Answer: The truffle-hunting party was made up three people – a man, his son and his grandson.

Happy snowy owl on Jones Beach, Long Island, New York.

Share the Wealth of Knowledge. We love being introduced!

Sources:

1. The Wall Street Journal, February 19, 2021

2. The Wall Street Journal, February 19, 2021

3. The Wall Street Journal, February 19, 2021

4. CNBC, February 16, 2021

5. The Wall Street Journal, February 18, 2021

6. FoxBusiness.com, February 17, 2021

7. CNBC.com, February 17, 2021

8. CNBC, February 17, 2021

9. IRS.gov, September 19, 202010. 

10. ChooseMyPlate.gov, 2020

Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.

The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with Stuart Financial Group, J.W. Cole Advisors, Inc., nor state or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Copyright 2021 FMG Suite.