Another week, another round of record highs. Despite concerns about how France’s upcoming presidential election could affect the European Union’s stability, U.S. stocks ended the week up yet again.[1] The S&P 500 gained 1.51%, the Dow added 1.75%, and the NASDAQ increased 1.82%—growth that represents record highs for all three indexes.[2] International equities in the MSCI EAFE also posted positive returns, with 0.78% growth for the week.[3]
A number of data reports also came out last week, and they tell a mostly encouraging story about the economy right now.
JANUARY INCREASES
Consumer Price Index Up by 0.6%
The Consumer Price Index (CPI), which measures the average prices of specific consumer goods and services, beat expectations and experienced its largest month-over-month jump since 2013.[4] The index is now 2.5% higher than a year ago, a sign that inflation could be picking up.[5]
Producer Price Index Up by 0.6%
Whereas the CPI evaluates price changes from a consumer’s perspective, the Producer Price Index (PPI), measures changes from the seller’s perspective.[6] For January, the PPI also beat expectations, with energy experiencing a 4.7% increase.[7]
Retail Sales Up by 0.4%
The monthly Retail Sales report shows growth or contraction in consumer demand for goods and can help indicate whether the economy is expanding.[8] In addition to January’s 0.4% growth, the latest report included upward revisions for November and December 2016.[9] Overall, Retail Sales are up 5.6% over January 2016.[10]
Small Business Optimism Index Up by 0.1 points
Each month, the National Federation of Independent Business (NFIB) releases the results of its Small Business Optimism Index, which shows results from its member surveys.[11] This report measures the mood of small business owners—the largest employers in the U.S.—and January’s results are the highest reading since December 2004.[12] Last month’s growth comes on the back of December’s 7.4 point jump, the survey’s largest ever increase.[13] In other words, small business owners are interested in hiring and expanding, good news for American workers and the economy.[14]
JANUARY DECREASES
Industrial Production Down by 0.3%
Last month, industrial firms, such as factories and mines, produced a lower volume of raw goods. If you dig deeper, however, the data is likely less concerning than what it may seem at first. For example, warmer-than-normal temperatures in the contiguous U.S.—a factor that does not have to do with the economy—contributed to utility output’s 5.7% decrease, the largest drop since 2006.[15]
Housing Starts Down by 2.6%
The number of new houses beginning construction fell in January, but future construction permits increased by 4.6%—higher than any time since November 2015.[16] Housing Starts are also up 10.5% over January 2016.[17] While the most recent report shows a monthly dip, the data indicates that housing has grown over the past year and will continue to grow in the future.
As you can gather from the balance between data increases and decreases, the January reports we received last week indicate an economy that is growing. We will continue to monitor the pace of growth and stay on top of political developments as we strive to determine what changes or opportunities may be on the horizon.
ECONOMIC CALENDAR
Monday: U.S. Markets Closed for Presidents Day Holiday
Wednesday: Existing Home Sales
Friday: New Home Sales, Consumer Sentiment
| Data as of 2/17/2017 | 1-Week | Since 1/1/17 | 1-Year | 5-Year | 10-Year |
| Standard & Poor’s 500 | 1.51% | 5.02% | 22.02% | 14.54% | 6.15% |
| DOW | 1.75% | 4.36% | 25.34% | 11.85% | 6.15% |
| NASDAQ | 1.82% | 8.46% | 28.77% | 19.56% | 13.39% |
| US Corporate Bond Index | 0.10% | 0.65% | 5.50% | 3.61% | 5.10% |
| International | 0.78% | 4.21% | 12.54% | 2.54% | -2.06% |
| Data as of 2/17/2017 | 1 mo. | 6 mo. | 1 yr. | 5 yr. | 10 yr. |
| Treasury Yields (CMT) | 0.50% | 0.66% | 0.82% | 1.92% | 2.42% |
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the SPUSCIG. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Will You Have to Pay Taxes on Your Social Security Benefits?
Taking Social Security benefits is an essential income strategy for many retirees. If you are receiving these benefits, you may have to pay federal income tax on some of your payments. Follow these tips and reminders to help understand and uphold your tax responsibilities.
- Receive Form SSA-1099: To start, you should receive Form SSA-1099, Social Security Benefit Statement, if you took any Social Security benefits in 2016. This form shows your benefit amounts.
- Identify income sources: If your only income in 2016 came from Social Security, you may have a couple of filing benefits: 1) Your Social Security income may not be taxable, and 2) you also may not have to file a federal income tax return. If you have other sources of income, however, you may need to pay taxes on some of your Social Security distributions.
- Use easy tax formula: You can quickly identify if you have to pay taxes on any Social Security income with the following equation:
- Identify the full amount of your income, including tax-exempt interest, that does not include Social Security.
- Calculate half of the total amount you received in Social Security.
- Add one half of your Social Security income to your other income.
- Compare that total to the base amount of your filing status.
If the total you calculate in Step 4 is more than your base amount, you may have to pay taxes on some of your Social Security benefits.
- Know your base amounts: To help your calculations, you need to know the base amount for your filing status:
| Amount | Taxpayer Filing Status |
| $25,000 | Single, head of household, qualifying widow or widower with a dependent child, or married filing separately and having lived apart from your spouse throughout 2016 |
| $32,000 | Married filing jointly |
| $0 | Married filing separately and lived with spouse in 2016 for any duration of time |
Tip courtesy of IRS.gov[18]
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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 S&P U.S. Investment Grade Corporate Bond Index contains U.S.- and foreign-issued investment-grade corporate bonds denominated in U.S. dollars.
The SPUSCIG launched on April 09, 2013. All information for an index prior to its Launch Date is back-tested, based on the methodology that was in effect on the Launch Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
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 Marketing 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] http://www.cnbc.com/2017/02/17/us-markets.html
[2] http://finance.yahoo.com/quote/%5EGSPC/history?period1=1486702800&period2=1487307600&interval=1d&filter=history&frequency=1d
http://finance.yahoo.com/quote/%5EDJI/history?period1=1486702800&period2=1487307600&interval=1d&filter=history&frequency=1d
http://finance.yahoo.com/quote/%5EIXIC/history?period1=1486702800&period2=1487307600&interval=1d&filter=history&frequency=1d
http://www.cnbc.com/2017/02/17/us-markets.html
[3] https://www.msci.com/end-of-day-data-search
[4] http://www.ftportfolios.com/Commentary/EconomicResearch/2017/2/15/the-consumer-price-index-increased-0.6percent-in-january
https://www.bls.gov/news.release/cpi.nr0.htm
[5] http://www.ftportfolios.com/Commentary/EconomicResearch/2017/2/15/the-consumer-price-index-increased-0.6percent-in-january
[6] http://www.investopedia.com/terms/p/ppi.asp
[7] http://www.ftportfolios.com/Commentary/EconomicResearch/2017/2/14/the-producer-price-index-rose-0.6percent-in-january
https://www.bls.gov/news.release/ppi.nr0.htm
[8] http://www.investopedia.com/terms/r/retail-sales.asp
[9] https://www.census.gov/retail/marts/www/marts_current.pdf
[10] https://www.census.gov/retail/marts/www/marts_current.pdf
[11] http://www.nfib.com/surveys/small-business-economic-trends/
[12] https://www.zacks.com/investment-newsletter.php?arc=20170215
[13] https://www.zacks.com/investment-newsletter.php?arc=20170215
[14] http://www.nfib.com/surveys/small-business-economic-trends/
[15] http://www.ftportfolios.com/Commentary/EconomicResearch/2017/2/15/industrial-production-declined-0.3percent-in-january
[16] http://www.cnbc.com/2017/02/16/us-housing-starts-jan-2017.html
[17] http://www.cnbc.com/2017/02/16/us-housing-starts-jan-2017.html
[18] https://www.irs.gov/uac/are-social-security-benefits-taxable
