| CAPITAL GAINS TAXES HAVE REALLY BAD TIMING: If you have a diversified portfolio of stocks purchased over the years (either held directly or in funds) in a non-retirement account, then chances are most of those investment positions are worth more now than when you purchased them. If you are wise and rebalance, or if you are in mutual funds that buy and sell every year, you likely experience some level of capital gains each year. Every time you sell a position that is worth more than when you bought it, the gain is usually taxable. In a year like 2021, most of your assets were worth more than when you purchased, sometimes substantially more. Thus, having some level of capital gains, and probably more than usual, for 2021, is likely. BUT, when that larger-than-normal gain tax liability is discovered in March and April of a year (i.e., 2022) when the market has decreased in the first quarter, paying that capital gains tax stings. The timing is not good this year. While you may be looking at negative numbers on your investment account statement, you are getting news from your accountant or tax software that you have a “surprise” capital gains tax liability. Keep in mind that it is only payable because your assets actually made you money, even though the timing is bad. |
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| WINNING STREAK SNAPPED: The S&P 500 was riding a three week winning streak before this week. It did not continue as all major U.S. stock indices ended the week in the red. Meanwhile bonds continue to decline in value. Whenever you read headlines that say “bond yields rise,” that’s a bad thing. Yields rise because the amount of money investors are willing to spend on the bonds is decreasing. This is largely the case because with interest rates rising, investors anticipate that any newly-issued bonds will pay higher interest. During the week, minutes from the Federal Reserve’s March meetings were released. Investors reacted to discussions among the Fed officials indicating that it might be considering moving faster in raising interest rates and otherwise tightening monetary policy. News from the Ukraine war front and continued focus on inflation also influenced this week’s trading. |
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NEW UNEMPLOYMENT CLAIMS FALL AGAIN: For the week ending April 2, 166,000 Americans filed new unemployment claims. This is the lowest number reported by the Department of Labor since 1968. The four week moving average decreased to 170,000.
(Source: dol.gov/ui/data.pdf) |
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| INFLATION HITS PEOPLE DIFFERENTLY: While we focus on the overall inflation rate, it affects people much differently. If you own a home and have a fixed-rate mortgage and don’t plan on moving, you are insulated from housing cost inflation. Renters are in a different boat, and it varies wildly from place to place. Atlanta’s renters are paying 10.6% more than a year ago. People who drive a lot for work are much worse off than those who work remotely or have a simple commute. As far as income goes, the average American worker is making 12-13% more than pre-pandemic. If you are a teacher, your pay has not gone up as much (4-5%). If you are an hourly worker at fast-food restaurants, delivery services or nursing homes, pay is up between 17-21%. Consumer spending, adjusting for inflation, is 4.6% higher than pre-pandemic, but there has been no growth since October. Meanwhile, American consumers have accumulated about $2.4 trillion in savings compared to pre-pandemic. Consumers still have plenty of ability to chase supply-chain-challenged goods, potentially continuing to fuel inflation, at least in certain segments, for some time to come. |
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SEC: BEWARE OF CRYPTO PLATFORM BANKRUPTCIES: The U.S. Securities and Exchange Commission has issued a new guidance this month. It warns that cryptocurrency investors may be at a risk of a total and complete loss of their crypto assets if the trading platform they use files for bankruptcy. Platforms such as Coinbase, FTX and Kraken have become the most common way to access the cryptocurrency market. But the SEC is now saying that if the trading platform goes bankrupt, the cryptocurrency will be counted as “liabilities” or borrowed money, and not private assets of the investor. Of course, you do not need one of these platforms to own cryptocurrency, but if that is how you hold it, you now need to stay aware of the credit rating of the platform on which the cryptocurrency is held. With other assets, such as your mutual funds, stocks, etc., the platform (Schwab, Fidelity, etc.) is allowed to leave the value of client assets (i.e., your assets) off their own balance sheets, and in the event of a bankruptcy of the platform, the assets belong to the clients, and not the platform’s creditors.
(Sources: wsj.com/articles/sec-tells-exchanges-to-treat-customer-crypto-holdings-as-liabilities-11648743902 AND inspireinvesting.com/post/crypto-investors-risk-total-wipeout-from-platform-bankruptcy-suggests-sec) |
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CONTINUING TO WATCH THE DATA: The number of people dying in the U.S. and in the world who are COVID positive continues to plunge. (World data on bottom graph below).
(Source: worldometers.info/coronavirus) |
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| HOSPITALIZATIONS AND GLOBAL INFECTIONS: The number of patients in U.S. hospitals who are COVID positive dropped another 15% last week and remains at the lowest levels since CDC and Johns Hopkins began compiling records. Infection data continues to plunge as the data in general is likely less reliable as home tests and people not testing seems to be proliferating. (Sources: covid.cdc.gov/covid-data-tracker AND worldometers.info/coronavirus/ AND coronavirus.jhu.edu/data/hospitalization-7-day-trend). |
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| DISCIPLINE IN THE MIDST OF DISTRACTION: It has become way, way too easy to jump over to a particular website and watch live sports. That’s usually not a problem as most sporting events are nights and weekends, but c’mon! March madness followed by Tiger Woods in the Masters and baseball’s opening day between the Yankees and the Red Sox (or the Phillies if you prefer)! I have been inspired by seeing Tiger Woods make the cut and (so far at least) being able to walk four rounds after what he went through. Use that grit as inspiration to get you through the hardest parts of this coming week. |
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| WOOD-FIRED COOKING: The carrots are done and it is time to throw on the salmon. We threw a grill on our stainless steel firepit and it worked well. |
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Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.
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Douglas R. MacGray, J.D., C.F.P. ®
President
Stonecrop Wealth Advisors, LLC
225 Wilmington-West Chester Pike; Suite 200
Chadds Ford, PA 19317
Direct | Cell | Fax
(610) 628 4545
dmacgray@stonecropadvisors.com |
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| “Whatever I do with music, I try to make it align deeply with the values and principles of who I am and what I believe the purpose of my life is.” Jon Batiste, winner of five Grammys last week
“The prudent sees danger and hides himself, but the simple go on and suffer for it.” Proverbs 22:3 |
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SOURCES:
INFLATION HITS PEOPLE DIFFERENTLY: theovershoot.co/p/last-looks-at-the-pre-war-world-4?s=rTAX PICTURE: Photo by Jon Tyson on Unsplash
CRYPTOCURRENCY PICTURE: Photo by Jeremy Bezanger on Unsplash |
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| (c) 2022 Douglas R. MacGray, All Rights Reserved |
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*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.
*Bloomberg Barclays U.S. Aggregate: This is a measure of the U.S. bond markets. |
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