Week of December 2, 2024

Key Points for the Week

• Historically, December is the most likely month of the year to be higher, but it has previously done even better when stocks are already up a lot when December starts.
• Stocks are looking at back-to-back years of strong gains.

Current Trends & News is a weekly financial recap curated by SPC Financial®’s team of wealth management and tax-integrated advisors.* We monitor and explore the intricacies of the financial world and share insights into market developments.

Economic Update

It is possible 2024 will end up in Wall Street’s bull market hall of fame, wrote Jan-Patrick Barnert of Bloomberg, because the year-to-date return of the S&P 500 ranks among its best performances of this century.

“Not many expected another blistering rally fueled by a handful of tech titans and market sentiment so bullish that one risk event after another got cleared without a scratch… Market swings were benign, with only one big valley of tears: a summer pullback that culminated in a small selloff around early August. The drop lasted for just less than a month and failed to cross the threshold of 10 [percent], typically seen as a correction.”

Jan-Patrick Barnert, Bloomberg

On a relative basis, U.S. stock markets have significantly outperformed stock markets elsewhere. Consider the performance of a few non-U.S. indexes through Thanksgiving.

Index name Year-to-date return (thru Nov. 28, 2024) MSCI Europe 0.98 percent MSCI Europe, Australia and the Far East (EAFE) 2.95 percent MSCI Emerging Markets (EM) 5.46 percent MSCI Japan 6.14 percent MSCI China 12.91 percent MSCI India 13.54 percent

Over the year, the number of U.S. stocks participating in the rally rose.

“The rally is broadening out…more stocks are advancing than declining. Typically, that phenomenon bodes well for the entire stock market. It is a sign of better market breadth, meaning that the major indexes are not being led by just a small handful of stocks. Although, given how long it has been since Wall Street has faced any significant obstacle, it is not entirely clear what might happen if market or economic conditions suddenly head south.”

Paul R. La Monica, Barron’s

Last week, stocks jolted up and down as investors responded to data about political appointments, tariffs, and inflation data. By the end of the week, major U.S. indices were higher. Treasury bonds gained, too, as yields moved lower after president-elect Donald Trump nominated hedge-fund billionaire Scott Bessent to be U.S. Treasury Secretary. Many believe Bessent could be a moderating influence when it comes to taxes, tariffs, and the deficit, reported Mitchell Hartman of Marketplace.

This Week in the Markets

The final month of 2024 is here, and this week we wanted to show why the chance of another strong month to end this record-breaking year is may occur. Here are four things to know about December.

First, December is the S&P 500’s second best month of the year in an election year, with only November better. Given stocks have soared so far in November, this one is playing out again so far. Also note, December is higher 83.3% of the time, making it the most likely month in an election year to be higher.

Second, since 1950, December has been the third best month on average (only April and November are better). In the past decade it has been only the 10th best month, thanks in part to a 6% drop in 2022 and a 9% crash in 2018.

Third, no month has been more likely to be higher overall, with the S&P 500 up in December nearly 75% of the time. The next closest has been April, up more than 71% of the time.

Lastly, what about if stocks are up a lot going into the final month? History says a chase into year-end is quite possible. We found the past 10 times the S&P 500 was up at least 20% going into December, that final month gained nine times and was up a solid 2.4% on average.

There Are a Lot of Questions About Tariffs

Last week, president-elect Donald Trump took to social media, promising to increase tariffs on China, Mexico, and Canada. One result was that internet searches related to the term “tariffs” increased sharply. These searches included:

• How do tariffs work? • What is Trump’s tariff plan? • Things to buy before tariffs • Tariffs for dummies

Here are a few answers to common questions about tariffs:

What are tariffs? Tariffs are a form of tax that one country assesses on materials, parts, and products imported from another country.

What do tariffs do? In theory, raising prices on foreign goods will protect U.S. companies and jobs by encouraging Americans to buy goods that are produced in the United States. It does not always work that way because the country the U.S. imposes tariffs on is likely to respond in kind, adding tariffs to U.S. materials, parts, and products.

Who pays for tariffs? The cost of a tariff is paid by U.S. businesses and U.S. consumers.

“The importer who brings the product into the country—be it a car or an avocado—is responsible for the tariff at the port of entry. Customs officials collect the tax and the money goes to the U.S. Treasury. The importer can pass the cost of the tariff along in the form of higher prices to the consumer. Or, in some cases, the manufacturer or importer may choose to absorb some or all the cost, taking a hit to the bottom line.”

Tim Smart, U.S. News & World Report

How much will tariffs raise prices?

“A 10 [percent] tariff could raise the cost of a new car in the U.S. by 4 [percent] or 5 [percent] without any adjustments from auto makers. That was based [on] imports and where parts and cars are manufactured in North America. A 25 [percent] tariff on Canada and Mexico implies the price jump would be closer to 8 [percent].”

Al Root, Barron’s

When other countries fight by raising their tariffs, it is called a trade war.

A Reminder About Scams

Scams usually start with a phone call, email, text, or another form of communication. The person typically claims to be from an agency or organization you know – or one that sounds like it might benefit you, such as the National Sweepstakes Bureau or a lottery.

The person may know your name and address. They may give you their official title or an identification number. No matter how official they seem, you can be confident it is a scam if the person contacting you:

• Indicates there is a problem with your benefits. • Asks you to pay to receive a prize. • Suggests that paying will increase the chance of winning. • Requests financial information, such as a bank account or credit card number. • Pressures you to act immediately. • Tells you to pay using a specific method, such as a gift card or cryptocurrency.

If this happens, remember that the Social Security Administration, the Internal Revenue Service, Medicare, and your bank do not call, email, or text to ask for money or personal information. They do not demand that you pay immediately, and they do not accept payment by gift card, prepaid debit card, cryptocurrency, or another untraceable form of money transfer.

When you suspect a scam:

• Hang up or close the message. Do not respond in any way. • Remain calm.
• Think back over the call. Write down any personal information you may have inadvertently shared. • Report the scam. Contact the Federal Trade Commission at ReportFraud.ftc.gov. You may also want to report the incident to your state’s attorney general or your local consumer protection agency. • Share your knowledge. Talk with family, friends, and neighbors about your experience so they know what to look out for.

When you receive a digital message, no matter how official it seems, do not click on any links. Do not give or confirm any personal information, including your name, birth date, phone number, address, email address, place of birth, driver’s license, passport, or Social Security numbers, bank or other account numbers, and PIN numbers.

Being skeptical can keep you safe. Remove yourself from the situation. Do not share information. If you feel anxious and need to confirm that it was a scam, contact the organization using a method provided on their official website.

Glass Ceiling Rising

The number of female CEOs at Fortune 500 companies continues to climb, rising to 55 this year versus just 24 in 2018. That number should continue to climb as eight business schools reached gender parity in 2024 among full-time MBA students, up from just one in 2020. (Source: Fortune)

Tax Bracket Adjustments

According to the IRS’ inflation adjusted tax brackets for 2025, the top tax bracket of 37% will apply to annual income above $751,601 for married couples filing jointly, a roughly $20,000 increase from 2024 levels. The standard deduction for married couples will also rise to $30,000 from $29,200 in 2024. (Source: IRS, WSJ)

How To Avoid Tax Scams

Below is a link to a video provided by the IRS to help avoid tax scams: https://www.youtube.com/@irsvideos

If you have any questions, please contact us.

Corporate Transparency Act

The Corporate Transparency Act was enacted in 2021 and was passed to enhance transparency in entity structures to combat money laundering, tax fraud, and other illicit activities.

Beginning January 1, 2024, certain business entities created or registered to do business in the United States will be required to report identifying information about the beneficial owners to FinCen, the Financial Crimes Enforcement Network. Per FinCen rules, a beneficial owner is an individual or group of individuals who, directly or indirectly, owns or controls the company. Reporting companies typically include:

• Domestic reporting companies: Corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.

• Foreign reporting companies: Entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with the secretary of state or any similar office.

FinCen has updated their FAQs that includes new information about the reporting process, reporting companies, reporting requirements and much more, with the expectation that further guidance will be provided in the future. The updated FAQs can be found here.

Did you Know? This Week in History

December 3, 1992: First SMS Text Message is Sent

On December 3, 1992, the first SMS text message in history was sent: Neil Papworth, a 22-year-old engineer, used a personal computer to send the text message “Merry Christmas” via the Vodafone network to the phone of a colleague.

Papworth, while working for the now-defunct Anglo-French IT services company Sema Group Telecoms, was part of a team developing a “Short Message Service Centre” (SMSC) for the British telecommunications company Vodafone UK. At the time, Sema Group hoped to use these short messages as a paging service. After Papworth installed the system at a site west of London, he sat at a computer terminal and sent the simple message to the mobile phone of Richard Jarvis, director of Vodafone, who was attending a holiday party.

Shortly after, Papworth received a call from the Christmas party, letting him know that the outgoing message was a success, although cellphones themselves could not actually send messages in return yet.

One year later, Nokia released the first cellphone with an SMS feature, but messages (limited to 160 characters due to bandwidth constraints) could only be sent within the same mobile network—phone networks would finally allow users to SMS across rival companies in 1999. Texting as a means of casual communication blossomed with the introduction of the Tegic (T9) system of predictive texting and pre-paid phone plans, which originally did not charge for texts and appealed to young people. Because of the 160-character constraint, as well as the cumbersome nature of typing with a numeric keypad, an entire “language” of abbreviations and slang emerged through SMS and spread across internet-based messaging.

In the United Kingdom, the birthplace of texting, SMS messaging exploded in popularity—by February 2001, about one billion texts were being sent every month, and users were being charged 10 pence a text, generating about £100 million a month in corporate profits. By 2010, the International Telecommunications Union reported that 200,000 text messages were being sent every minute, but by 2012, texting across the world began to see a steady decline, with messages from instant-messaging apps concurrently spiking.

Weekly Focus

It is difficult to make predictions, especially about the future.

Karl Kristian Steincke, Danish Politician

Mistakes are the portals of discovery.

James Joyce, Irish Novelist and Poet