What’s on Tap: Walls of Investor Worry, or Not



  • Retail Sales Weak but Jobs, Consumer Confidence Remain Strong

  • Financial Planning Friday: Getting Organized for Tax Season

  • Looking Ahead to Fed Minutes and Manufacturing, Service Data

As investors climbed walls of worry this past week, the conflict between funding President Trump’s border wall versus shutting down the government for the second time this year seemed to come to a resolution.

Heading into the long Presidents Day weekend (U.S. stock markets will be closed on Monday), a second government shutdown was averted on Friday, and signs of progress in U.S.-China trade negotiations topped the news. Investors appeared to have priced in a shutdown resolution and trade-talk headway, lending an upbeat performance note to the overall week. Risks remain, of course. Trade discussions could reverse their current optimistic course and backlash against the president’s declaration of a national emergency over immigration is guaranteed.

We’ll be keeping our eye on events as they play out over the next few weeks to see the extent to which the rate and pace of economic growth can persist, as well as how much of a drag China’s decelerating economic growth and Europe’s struggling slow-to-no-growth economies will be on demand at home and abroad.

Speaking of “abroad,” we are approaching the extended deadline for a deal between the U.K. and the E.U. While no one knows what the outcome of Brexit (especially a no-deal Brexit) will in fact mean to those economies and markets, let alone the global ones, we wouldn’t be surprised to see heightened investor uncertainty playing a more prominent market role the closer we get to March 29. If volatility does return, our models are designed to pick up on those signals and react tactically to the changing trends.

On the fixed-income side, after a flat 2018, bonds have notched small gains so far in 2019 as the Federal Reserve’s hold on interest-rate increases has lifted investor spirits. High-yield bonds have continued to rally after stumbling in the fourth quarter.

For the year through Thursday, the Dow Jones Industrial Average has gained 9.5% while the S&P 500 is up 9.8%. The MSCI EAFE index, a measure of developed international stock markets, is up 6.5%. As of Thursday, the yield on the Bloomberg Barclays U.S. Aggregate Bond index has dipped to 3.18% from 3.28% at 2018’s end. On a total return basis, the U.S. bond market has gained 1.1% for the year.

Retail Sales Weak but Jobs, Consumer Confidence Remain Strong

When the U.S. stock market’s four-day streak of positive gains was broken on Thursday, many media outlets attributed the dip to a downbeat December retail sales report. Released yesterday after a government-shutdown-induced delay, the data showed sales declining 1.2%. That’s the biggest monthly drop since September 2009, and analysts didn’t see it coming.

But a closer look at the market’s moves yesterday suggests the retail report might not have been what made stock prices wobble. The report was released at 8:30 a.m. EST, an hour before the opening bell on the New York Stock Exchange. But rather than falling at the open—a typical response when negative news breaks outside of trading hours—the Dow and S&P 500 trended upward during the morning and surged to new highs in the afternoon before falling back just before the close.


Note: Chart shows the Dow Jones Industrial Average’s intra-day moves on 2/14/19. 

Source: Bloomberg.

Moreover, a closer look at the numbers reveals that retail sales were more than 2% above where they were in December 2017. Car sales, deep-pocket purchases that are an important indicator of consumer confidence, actually rose 1% in December. 

It may be that last December’s nerve-wracking stock market swoops and swoons gave the jitters to last-minute shoppers. Or the report might simply be an anomaly. Recent reports on jobs and consumer confidence have been strong, so it’s far too early to bet against the U.S. consumer. But we’ll be monitoring carefully for more signals of slowing growth.

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 Financial Planning Friday

Getting Organized for Tax Season

Along with the greater wisdom of age, we often find that our finances become more complex as well. That means a more complicated tax return. As the torrent of W-2s, 1099s, 8960s, 5498s, K-1s and other fine-print forms begin to arrive, it’s no wonder if you come to dread opening the mailbox. Tempting as it may be to stuff these documents in a drawer until April, getting organized early will reduce your stress at tax time.

Here are five tips we’ve found can help make the April 15 deadline less daunting:

1. Designate a special folder for your tax documents. This folder should include everything you get in the mail that says “important tax document,” as well as your old tax returns. We recommend keeping these documents for a minimum of three years.

2. Collect your receipts. If you own a business or plan on itemizing your taxes, it is critical that your expenses be tracked and organized. Top priorities should include receipts for medical expenses, childcare expenses, unreimbursed work-related expenses and self-employment expenses such as phone and internet service, travel, vehicle use, meals and insurance, among others.

3. Track your charitable contributions. If you plan to deduct charitable gifts on your taxes, you’ll need a bank record or note from the charity acknowledging your contribution. To stay organized in this area, it’s a good idea to make a list of your individual donations so that you can follow up with an organization to obtain proof of a gift if you haven’t already received it.

4. Determine if you’ll need a qualified tax preparer. Are you feeling overwhelmed by the stack of tax documents you’ve assembled? If this year’s return will be more complicated than in the past, or you’re uncertain about how the tax law changed in 2018 and what benefits, credits and deductions you’re eligible for, you may be more comfortable working with a qualified tax preparer. We recommend you make an appointment with a certified public accountant (CPA) or tax professional now—many stop accepting new clients as filing deadlines near.

5. Schedule a time to prepare your taxes. We live by the mantra that if it doesn’t get scheduled, it doesn’t get done. Whether you plan on enlisting a professional or filing your taxes yourself, the most important step is to set aside time on your calendar to begin the process. We can’t promise it’ll be pleasant, but with all your documents at the ready, you’ll have a head-start on meeting that April deadline.

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Looking Ahead to Fed Minutes and Manufacturing, Service Data

Markets and the Braver Capital Management offices will be closed on Monday, February 18, to observe Presidents Day.

The short week will be light on reports, though we will be reviewing Federal Open Market Committee minutes, manufacturing and service sector reads as well as leading indicators. Reports on the housing market are also on the docket; the National Association of Home Builders’ index and existing home sales data are due. However, numbers on permits and starts may be delayed due to the government shutdown.

If you’d like to learn more about our tactical or fundamental investment strategies, please contact Steve Johnson at 844-587-7393 or info@bravercapital.com.

Please note: This update was prepared on Friday, February 15, 2019, prior to the market’s close.

This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations or personal investment advice, or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. 

Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. 

Companies mentioned in this article are not necessarily held in client portfolios and our references to them should not be seen as a recommendation to buy, sell or hold any of them.

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