Last week closed out one of stocks’ top January performances in years. In fact, both the S&P 500 and Dow posted their best January results in at least 3 decades.[1] For the week, major domestic indexes were also up. The S&P 500 gained 1.57%, the Dow added 1.32%, and the NASDAQ increased 1.38%.[2] The Dow’s performance marked its 6th week of gains in a row.[3] Internationally, MSCI EAFE stocks also posted growth, rising 0.91%.[4]
What drove stock results last week?
As discussed in our previous market update, last week provided a number of details for investors to focus on. Here are some key items that contributed to market performance:
- Federal Reserve Meeting: The Fed chose not to increase interest rates above its current 2.25% – 2.50% target. When releasing this update, the central bank noted that it would be “patient” when deciding about any future increases.[5]
Market Impact?
The Fed’s signal that additional rate hikes may not be imminent helped improve market confidence.[6] - Corporate Earnings: By Friday, nearly half of S&P 500 companies had released earnings data for the 4th quarter of 2018. Of them, 70% had higher earnings-per-share than expected and 62% beat revenue projections. Right now, the S&P 500 is poised to have its 5th quarter in a row of double-digit earnings growth. However, the currently projected growth of 12.4% is lower than it has been since 2017.[7]
Market Impact?
With worries of disappointing results calmed, some investors are feeling relieved by earnings season so far.[8]
- January Labor Report: The latest Employment Situation release from the Bureau of Labor Statistics showed that the economy added 304,000 new jobs in January. At the same time, the unemployment rate increased slightly, as the count included furloughed federal workers. The latest data also indicated that December job growth was lower than initially reported.[9]
Market Impact?
The January job growth was much higher than investors expected and implied the partial government shutdown minimally affected the U.S. economy. These perspectives helped drive stock gains on Friday.[10]
This week, we will continue to monitor corporate earnings season and will follow any developments in the U.S.–China trade negotiations. We will also watch for new data releases, especially those previously delayed by the government shutdown. If you have any questions, we’re here for you.
ECONOMIC CALENDAR*
Monday: Motor Vehicle Sales, Factory Orders
Tuesday: PMI Services Index, ISM Non-Mfg Index
Wednesday: Jerome Powell Speaks
Thursday: Jobless Claims
*The federal government shutdown may delay some data releases.
| DATA AS OF 2/1/2019 | 1 WEEK | SINCE 1/1/19 | 1 YEAR | 5 YEAR | 10 YEAR |
| STANDARD & POOR’S 500 | 1.57% | 7.97% | -4.09% | 8.71% | 12.60% |
| DOW | 1.32% | 7.44% | -4.29% | 9.81% | 12.10% |
| NASDAQ | 1.38% | 9.47% | -1.65% | 12.10% | 17.27% |
| INTERNATIONAL | 0.91% | 6.41% | -15.05% | -0.08% | 5.08% |
| DATA AS OF 2/1/2019 | 1 MONTH | 6 MONTHS | 1 YEAR | 5 YEAR | 10 YEAR |
| TREASURY YIELDS (CMT) | 2.41% | 2.46% | 2.56% | 2.51% | 2.70% |
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Home Office Deduction
If your home is your principal place of work and you dedicate an office or portion of your home to work, then you may be able to deduct expenses. This applies to homeowners and renters alike. Here are some requirements to consider for this deduction:
You use your home office regularly and exclusively, and your home is your principal place of business.
- Whether you have an office, studio, or portion of your home for work, you’ll need to figure out the percentage of your home that is dedicated to business. You can still deduct expenses even if you carry on your business in another location as well.
- If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.
If you are an employee and you use a portion of your home for business, you may qualify for a deduction for its business use. Added requirements:
- Your business use must be for the convenience of your employer.
- You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.
* 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.
Tip adapted from IRS.gov[11]
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The 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 stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
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.
These are the views of Platinum Advisor Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
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[1] https://www.cbsnews.com/news/stocks-today-sp-500-posts-best-january-since-1987/
[2] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
https://www.reuters.com/article/us-usa-stocks/wall-street-advances-on-washington-temporary-shutdown-deal-idUSKCN1PJ1GK
[3] https://www.cnbc.com/2019/02/01/stock-market-payrolls-data-earnings-in-focus-.html
[4] https://www.msci.com/end-of-day-data-search
[5] https://www.federalreserve.gov/newsevents/pressreleases/monetary20190130a.htm
[6] https://www.bostonglobe.com/business/2019/01/31/delivers-biggest-monthly-gain-since/BKTzYZj4uz4D2ApeKaLhWM/story.html
[7] https://www.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_020119.pdf
[8] https://www.cnbc.com/2019/02/01/stock-market-payrolls-data-earnings-in-focus-.html
[9] https://www.bls.gov/news.release/empsit.nr0.htm
[10] https://www.marketwatch.com/story/stock-futures-steady-ahead-of-january-jobs-report-2019-02-01?dist=markets
[11] https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction
