After several weekly losses, the major domestic indexes all ended in positive territory on Friday, August 25. The S&P 500 gained 0.72%, the Dow was up 0.64%, and the NASDAQ added 0.79% for the week. International stocks in the MSCI EAFE also increased by 0.58%.
Last week provided a number of economic updates, and a report from Fed Chair Janet Yellen helped push the markets higher. Rather than providing a rundown of every report, we want to focus on two in particular that give key information on economic health - and a reminder to look beyond the headlines.
Beyond the Headlines in Housing and Manufacturing
1. Housing Drops
The headlines: Sales of both new and existing homes fell in July.
The deeper story: Relatively few existing houses are available for purchase. In addition, builders are focusing on more lavish new homes rather than the modest ones that many buyers seek. As a result, the median price of a new home hit its highest July level ever, climbing to $313,700 - 6% higher than this time last year. Existing home prices are also 6.2% above where they were in July 2016.
The takeaway: High prices may be excluding first-time homebuyers from the market - especially for new houses.
2. Manufacturing Declines
The headlines: Durable goods orders plunged by 6.8%.
The deeper story: The headline's stated monthly decline is largely due to a sharp drop-off in orders for transportation equipment, in particular for civilian aircraft. However, if you dig deeper, you will see that July's civilian aircraft decrease follows a massive 129.3% increase in June, calming any concerns about the aircraft industry. Overall, orders for core goods beat expectations and could help drive a higher reading for second quarter GDP.
The takeaway: Orders and shipments for many key goods increased in July, which points to positive sentiment among businesses - and good news for the economy.
On the Horizon
This week, we will receive the second reading of second quarter GDP, as well as both Consumer Confidence and Consumer Sentiment updates. Furthermore, according to President Trump's Chief Economic Advisor, an announcement on tax reforms will occur on August 30. Together, these reports could affect market behavior and indicate both where the economy has been and what may be on the horizon.
As always, while we pay attention to today's headlines and updates, our focus remains solidly on how to move you toward the future you desire. Should you have any questions, we are here to help.
Quote of the Week
"I believe every human has a finite number of heartbeats. I don't intend to waste any of mine."
Golf Tip of the Week
Unleash Your Inner Lag
Just what is "lag," anyway? Lag comes from proper sequencing on the downswing, not from trying to artificially hold onto the angle. Proper force generation and sequencing comes from the ground up and winds "out" into the club. Try the following drill to see if you can get the feel for the proper downswing sequence.
- Set up to the ground, no ball, with a 6 or 7-iron. Bend both arms and place the shaft on the outer part of your right upper arm. You may have to let go slightly with your right hand.
- Turn your shoulders 90 degrees as if you had made a backswing, but keep the club shaft against your right arm.
- Make your downswing and see how long you can keep the shaft touching your right arm - at least until your hands get even with your right leg.
Feel the delayed release and then whipping of the clubhead through impact. You should feel your forearms and club turn over naturally.
Result: Delaying the club release through proper sequencing will help you maximize your distance.
Tip courtesy of Stan Moore | Golf Tips Magazine
Financial Question of the Week
What Makes a Gift Taxable?
When you give gifts of property or money to people, you may need to pay a gift tax to the IRS. Here are some points to consider.
Are all gifts taxable?
Generally, no. While you should keep in mind that the gift tax could apply to you, most gifts that you give do not trigger the gift tax. Here are nontaxable gifts:
- Gifts that are worth less than the annual exclusion amount for the applicable tax year
- Tuition or medical payments you made on behalf of another person to an education system or medical facility
- Gifts to your spouse
- Gifts to political organizations
- Gifts to charities
What is the annual exclusion amount?
The annual exclusion amount for 2017 is $14,000. You typically won't have a gift tax for any gift you give another person that is under this amount. If you are married, you and your spouse can each gift $14,000 to the same individual for a total of $28,000.
Does the person who receives a gift pay a gift tax?
Typically, no; they aren't responsible for paying a tax on the gift.
If you gave a taxable gift, you must file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. Other details may apply, and you can find more information on the IRS website.