The Week on Wall Street
Stocks retreated last week. Traders worried that the formal impeachment inquiry of President Donald Trump might distract White House officials from their pursuit of a trade deal with China, and shift the focus of Congress away from consideration of the United States-Mexico-Canada Agreement (USMCA). Also, news broke Friday that the White House was considering restricting levels of U.S. investment in Chinese firms.
FACT OF THE WEEK
Halloween is the second highest grossing commercial holiday after Christmas. According to the National Retail Federation, of the 68% surveyed plan for Halloween celebrations, 37% with plans to start shopping before the month of October. Consumers are expected to spend close to $8.8 Billion on trending spooky goods.
The Dow Jones Industrial Average lost less than the Nasdaq Composite and S&P 500. Blue chips declined 0.43% week-over-week, while the S&P fell 1.01% and the Nasdaq dipped 2.19%. The MSCI EAFE index, tracking developed overseas stock markets, lost 0.89%.
Incomes Grow, Spending Slows
Data released Friday by the Bureau of Economic Analysis showed household incomes rising 0.4% in August. Consumer spending improved just 0.1%, however; that was the smallest personal spending advance in six months.
Another BEA report noted that “real” consumer spending (that is, consumer spending adjusted for inflation) rose 4.6% during the second quarter.
A Slip in Consumer Confidence
The Conference Board’s Consumer Confidence Index fell to 125.1 for September. That compares to a reading of 134.2 in August. Lynn Franco, the CB’s director of economic indicators, wrote that “the escalation in trade and tariff tensions in late August appears to have rattled consumers. However, this pattern of uncertainty and volatility has persisted for much of the year and it appears confidence is plateauing.”
In contrast, the University of Michigan’s Consumer Sentiment Index ended September at 93.2, an improvement from a final August mark of 89.8.
On October 10, the Social Security Administration is scheduled to announce the 2020 cost of living adjustment (COLA) for Social Security retirement benefits. Earlier this month, Bureau of Labor Statistics yearly inflation data pointed to a possible 2020 COLA in the range of 1.6%-1.7%.
FINANCIAL STRATEGY OF THE WEEK
Should I Report Income Earned from a Hobby?
Across the country, millions of people have passions they pursue on the side, earning money from their hobbies and interests. Even if you haven't officially formed your hobby as a business, you still must claim the income you make through these efforts. Here are some tips to help you report your income.
1. Identify whether you have a hobby or a business
• Hobby: You earn income but do not do so to make a profit, rather for your pastime recreation
• Business: You purposefully work to make a profit.
You can explore the 9 factors the IRS lists to help clarify if you have a hobby or business.
2. Manage your hobby's allowable expense deductions
When claiming hobby-earned income, you can typically deduct your expenses, but only if they are ordinary and necessary.
• Ordinary expense: Considered common and acceptable for the hobby you engage in.
• Necessary expense: Considered appropriate for participating in your hobby.
3. Report expenses up to the allowable limit
You can report hobby expenses, but the limit is the amount of income you make from it. If your expenses exceed your income, then you have a loss. However, the IRS doesn't allow you to deduct hobby-income losses.
Other details may apply, and you can find more information on the IRS website.
As always, please contact my office with any questions or financial concerns you may have.