Wealth Management

Markets in Review

Volatility returned to domestic equity markets during the first quarter of 2018, after remaining at historically low levels throughout 2017. The S&P 500 Index had a strong start to the year, up almost 6% in January, before volatility returned with a vengeance in early February, sparking a mass sell-off. Volatility persisted throughout the remainder of the quarter, with asset prices reacting to a series of crosscurrents, including worries about inflation, the threat of a trade war with China, and the prospect of new regulations on tech firms. These fears contributed to the S&P 500 Index finishing the quarter with a modest loss of 0.8%, just its second negative quarter in the last 6 years.

During the quarter, growth-oriented stocks once again outpaced their value-oriented counterparts. However, in contrast to 2017, small-cap stocks outperformed their large-cap counterparts, with the Russell 2000 Index losing just 0.1% during the quarter. The market sell-off was relatively broad based, with Technology and Consumer Discretionary the only two S&P sectors finishing positive for the quarter, returning 3.5% and 3.1%, respectively. Telecom and Consumer Staples were the worst performing sectors, down 7.5% and 7.1%, respectively.

International equity markets produced mixed results during the quarter. Emerging markets generally outperformed developed markets, with the MSCI EM Index returning 1.4% compared to a loss of 1.2% for the MSCI ACWI Ex USA Index. The United Kingdom and Pacific region had a particularly poor quarter, with the MSCI UK Index and MSCI Pacific Ex Japan Index losing 3.9% and 3.7%, respectively. The U.S. dollar continued to weaken, benefiting U.S. investors holding foreign currencies.

The Federal Open Market Committee (“FOMC”) increased the federal funds rate target by 25 basis points, to a range of 1.50% to 1.75%, during its March meeting. Current expectations are for two more rate increases during 2018, and three further increases during 2019. The Treasury yield curve continued its flattening trend, albeit at a much slower pace than the previous quarter, with the yield on the 2-year Treasury note rising 38 basis points to 2.27%, while the yield on the 10-year Treasury note increased 34 basis points to 2.74%.

The initial estimate of first quarter GDP, released April 27th, was 2.3% growth. Increases in business investment, consumer spending, exports and inventories all contributed to first quarter GDP growth, whilst an increase in imports detracted slightly. Macroeconomic indicators remained broadly positive, with U.S. business confidence reaching a multi-decade high in March.

The unemployment rate held steady at 4.1% during the quarter, while the participation rate improved slightly, from 62.7% to 62.9%. Job gains averaged 222,500 per month for nonfarm payrolls during the quarter. Manufacturing and professional & business services were highlights in the March report, up 22,000 and 33,000, respectively.

The year-over-year headline inflation rate increased from 2.1% to 2.4% during the quarter. This is the rates highest level over the last 12 months and is well above its average rate of 1.6% over the last 10 years. Core inflation (“CPI”), which excludes food and energy, increased from 1.8% to 2.1% during the quarter. The March report showed limited pressure on the CPI, with apparel, education and communications decreasing modestly.

Identity Theft—IRS Warns Taxpayers about New Twist on Phone Scam

In a recent News Release, the IRS warned taxpayers about a new twist on an old phone scam. Criminals are now claiming to be calling from local IRS Taxpayer Assistance Centers (TACs).  They accomplish this by programming their computers to display TAC phone numbers, which appear on the taxpayer’s Caller ID.  If the taxpayer questions the legitimacy of the call, the scam artist directs the taxpayer to IRS.gov to verify the local TAC office phone number.  Once this has been done, the scam artist demands money, generally on a debit card.  Fraudsters also have been spoofing local sheriff’s offices, state Department of Motor Vehicles, federal agencies, and others to convince taxpayers the call is legitimate.  The IRS reminds taxpayers that it typically initiates contact through regular mail delivered by the U.S. Postal Service.

Social Media Privacy Settings

As you have likely seen in the news, 87 million Facebook users had their data shared through a third-party developer (Cambridge Analytica).  We thought it would be useful to post some guides for social media privacy settings:

–Facebook: https://www.techlicious.com/tip/complete-guide-to-facebook-privacy-settings/

–Google: https://www.pcmag.com/article/360238/how-to-manage-your-google-privacy-settings

–LinkedIn: https://www.thebalance.com/displayed-public-linkedin-profile-1794577

–Instagram: https://help.instagram.com/196883487377501

New Medicare ID Cards

In April, the government will start sending out new Medicare cards.  The new cards remove each member’s Social Security number and replace it with a new, randomly generated, 11-digit “Medicare number” (some capital letters are included).  It will be used to verify eligibility for services and for billing purposes going forward.  Cards will be sent to people covered by Medicare on a rolling basis over a 12-month period ending in April 2019.  The new Medicare cards are free, and you don’t need to do anything to receive one.  There will be a transition period during which you can use either your new Medicare card or your old card at doctor’s offices and hospitals.  Both should work until 12/31/19.  If you have a Medicare Advantage plan or have prescription drug coverage through Medicare, keep those cards that your plan issued you.  These are not being replaced. 

If you think Social Security might not have your current address, call 800-772-1213 or check your online Social Security account at https://www.ssa.gov/myaccount/.  Watch out for fraud!  Medicare representatives will never contact you by phone or email about the new cards and certainly will “never ask for money or personal information or threaten to cancel your health benefits.”  If you suspect fraud, report it to the FTC, AARP’s fraud help line at 877-908-3360 or your local Senior Medicare Patrol program.

2017 Tax Filing Season to Begin January 29

The IRS announced that the 2017 tax filing season will begin on Monday, 1/29/18, which means that electronic and paper returns will be accepted beginning on that day. The IRS will begin processing paper returns in mid-February as its systems continue to update. Also, the IRS expects refunds on returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) to be available starting on 2/27/18 (if direct deposit is chosen and there are no other issues with the return).

Tax returns are due on April 17 because of a weekend and the Emancipation Day holiday.

(Source:  Thomson Reuters Checkpoint, “Five-Minute Tax Briefing”, 1/9/18)