Week of November 25th, 2024

Key Points for the Week

• The stock market is having one of its best election years ever.
• Stocks historically have done well the first year of a re-elected president.
• Earnings and profits margins remain very strong.
• Strong productivity will be the key to keeping inflation in check.

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

Investors shook off concerns about interest rates and inflation, and U.S. stocks climbed higher last week. The Standard & Poor’s (S&P) 500 Index gained every day last week, and the rally was not limited to a few popular stocks: 425 of the companies in the Index finished the week higher, according to Jacob Sonenshine of Barron’s.

“Beneficiaries of the incoming administration’s looser regulation and business-friendly stance put forth strong showings this week. Stocks gained while [cryptocurrency] crushed doubters and the dollar extended gains into an eighth week, the currency’s longest run of the year. Blue chips and small caps led Friday’s equities advance as this year’s big tech winners struggled to gain ground.”

Cristin Flanagan, Bloomberg

It has been a great year to own U.S. stocks. The S&P 500 is up more than 25 percent so far this year, performing significantly better than major indexes in Europe, Asia, and emerging markets, reported Lewis Krauskopf of Reuters.3 The catch is that markets are trading at heady valuations.

“…The broadening market cannot hide just how expensive stocks have become. The S&P 500 trades at 22.1 times 12-month forward earnings…the highest since 2020, when it hit 22.9 times. To see multiples meaningfully higher than that, one has to go back to the dot-com era, when the index traded at more than 25 times earnings,”

↳Jacob Sonenshine, Barron’s

Not everyone had an appetite for risk last week. The price of gold, which many investors consider to be a safe haven when markets are volatile, rose amid escalating tensions in the Russia-Ukraine war, reported Yvonne Yue Li of Bloomberg.

Major U.S. stock indices finished the week higher. Treasury yields were mixed last week with the yield on the benchmark 10-year U.S. Treasury moving lower over the week lower and the yield on the two-year U.S. Treasury moving higher.

This Week in the Markets

The S&P 500 has had one of the strongest election years ever.

Looking at the previous 11 bull markets, we found the average bull lasted more than five years. In fact, going back 50 years, once a bull market made it into its third year there were multiple years left every time.

Year One (and two) of a Re-elected President Tends to Outperform

The S&P 500 has done quite well in Year One and Year Two under a re-elected president (and better than under a new president). The four years under President Biden played out almost exactly according to script for a new president in office. Historically, year one does well (which we saw in 2021). Then year two is weak (think 2022 and the bear market). Finally, the final two years are strong (exactly what we saw in 2023 and 2024).

What drives long-term stock gains? It is earnings, and when you have an economy that continues to surprise to the upside, you tend to have solid earnings.

Looking forward at 12-month S&P 500 earnings we once again see new highs, all the way up to $268, up from $225 in early 2023.

Profit margins expanding and earnings hitting all-time highs are great dual tailwinds for higher stock prices.

Inflation

Earlier this month the Fed cut interest rates with the S&P 500 near all-time highs. We found 20 other times (back to 1980) that the Fed cut with the S&P 500 within two percent of an all-time high and stocks were higher a year later all 20 times and up an average of nearly 14%. As much as the Fed was a headwind in 2022 when they aggressively hiked to slow inflation, it has been a tailwind since July 2023 when they stopped hiking. Now, as this easing cycle continues, the tailwind remains strong.

Some of the best years for the economy and stock market have been during periods of strong productivity, which makes sense since productivity growth is a key input to GDP. Last year for instance saw nominal Gross Domestic Product (GDP) up nearly 6% and we are now looking at back-to-back 20% years for the S&P 500. The last time we saw an extended period of strong productivity? The mid to late1990s, one of the best periods ever for investors.

When you have higher productivity, it allows for higher wages while putting a cap on inflation. It sounds like a perfect scenario, but we did see a similar situation in the mid-1990s when the Fed cut, supporting productivity, and wage growth stayed strong but inflation was not an issue. As long as productivity remains strong the path is there for the Fed to continue to cut interest rates without having to worry about inflation soaring back.

How to Have an Estate or Tag Sale

Estate and tag sales can be emotional experiences. Usually, these sales are scheduled around major life changes such as the need to:

• Relocate or downsize,
• Move to independent or assisted living, or
• Settle the estate of a loved one.

Organizing a sale is hard work, and parting with your belongings or those of a loved one is never easy, especially when they have sentimental value. That may be why many people opt to hire an estate planning company to manage these sales. The cost to do so is usually 30 percent to 40 percent of sale proceeds. However, estate sale companies “typically provide a gross sales minimum. This means that the total value of all the items to be sold must meet or exceed that value,” reported Doug Luftman of Trust & Will.

The other option is to organize and hold the sale yourself. If you choose that route, here are three tips that can help make an estate sale successful.

1. Hire an appraiser. As the Antiques Roadshow demonstrates, it is difficult to know the value of some items. Undervaluation applies to antiques and everyday items. For instance, the portable ultrasound your uncle bought when he was recovering from surgery, which has been gathering dust on the shelf ever since, may be worth a whole lot more than you think it is. An appraiser can help ensure you do not undervalue sales items, reported Heidi Mitchell in AARP Magazine.
2. Promote the sale. Posting a hand-written sign near your sale site is unlikely to attract the number of buyers you need. Luftman recommended advertising your estate sale on social media sites and online marketplaces, as well as local newspapers. Mitchell suggested that the advertisements include hashtags for applicable key words. These may include #high-end, #designer, #one-of-a-kind, and #collectors.
3. Choose payment options carefully. Some estate sale shoppers will have cash, others will want to pay digitally. Think carefully about what types of payment you will accept and the tools you will need to accept them, reported Patrick Villanova and Arturo Conde in Smart Asset. For instance, you will need to have change and a lock box on hand for cash transactions, and an app on a phone or tablet for digital transactions.

Organizing an estate sale on your own saves on cost, but requires planning and coordination, as well as a team to oversee the sale. Outsourcing the sale has a higher cost, but requires less time, effort, and emotional stress. Everyone needs to decide which approach is the best one for their situation.

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)

How To Avoid Tax Scams

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.

The Social Security Lock

The Social Security Lock (also known as the "Social Security Number (SSN) Lock") is a feature provided by the Social Security Administration (SSA) that allows individuals to block electronic and automated access to their Social Security records. This is primarily a security measure to prevent unauthorized or fraudulent use of your Social Security Number (SSN), particularly to help prevent identity theft.

How the Social Security Lock Works:

• Blocking Access: When you activate the lock on your SSN, it prevents others (and yourself) from accessing your Social Security records through electronic means, such as through automated phone systems or online services.
• Protecting Your Information: This feature is especially helpful if you are concerned about identity theft or if your SSN has been compromised. It reduces the likelihood that someone can fraudulently open accounts, apply for credit, or access benefits using your SSN.
• Unlocking for Legitimate Use: If you need to use your SSN for legitimate reasons, such as applying for benefits, you can temporarily unlock or remove the SSN Lock by contacting the SSA. You can also re-lock it after your transaction is completed. __ How to Enable or Disable the Social Security Lock:__
• Visit the SSA Website: Go to the Social Security Administration’s website and sign into your mySocialSecurity account (you will need to create an account if you do not have one).
• Enable SSN Lock: Look for the option to lock your SSN and follow the prompts to activate the lock.
• Disable SSN Lock: If you need to unlock your SSN for any reason, you can do so temporarily by following the same process.

Important Notes:

• The SSN Lock applies to automated access to your records. It does not stop manual processing of benefits or in-person requests for information.
• The lock is a good idea if you are not currently using your SSN often, but you should keep in mind that it requires proactive management, especially if you need to access benefits or financial services in the future.

This tool provides an extra layer of protection but does not replace the need for vigilance regarding the use of your Social Security Number in other situations, like sharing it with third parties or financial institutions.

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

November 25, 1914: New York Stock Exchange Resumes Bond Trading

On November 28, 1914, the New York Stock Exchange (NYSE) reopened for bond trading after nearly four months, the longest stoppage in the exchange’s history. The outbreak of World War I in Europe forced the NYSE to shut its doors on July 31, 1914, after large numbers of foreign investors began selling their holdings in hopes of raising money for the war effort. All the world’s financial markets followed suit and closed their doors by August 1.

By the end of November, however, American officials had decided to reopen the NYSE because it was thought that bond trading, albeit with a set of restrictions designed to safeguard the American economy, could help prevent the financial ruin of the belligerent countries by raising money for the war effort. Trading of stocks did not resume until December 12, 1914, when the Dow Jones Industrial Average (DJIA)—the most important of various stock indices used to gauge market performance—suffered its worst percentage drop (24.39 percent) since it was first published in 1896. This precipitous fall underlined the risky nature of business during the first months of the war, when nobody knew exactly how long the conflict would last or exactly what role the then-neutral U.S. would eventually end up playing.

Although the stock market would remain volatile–including a 40-percent drop in the DJIA from late 1916 to early 1917–World War I was a clear turning point in the realm of international finance. In its wake, New York would replace London as the top investment capital.

Weekly Focus

Example is not the main thing in influencing others. It is the only thing.

Albert Schweitzer, German-French Theologian

Whether you think you can or you can’t, you’re right.

Henry Ford, American Industrialist and Business Magnate