Ironwood Recap – Week of December 9th, 2019

Ironwood Market Recap

This week ended slightly up for the both the Dow and the S+P. The Dow rose about one half of a percent and the S+P rose almost three quarters of a percent. The yield on the 10-year Treasury dropped to 1.82%. The major impetus for the stock market was an announcement that the China trade deal had a preliminary agreement to terms and further tariffs that were going to go into effect mid-December would not be implemented.

On the economic front, we saw lower than expected unit labor costs for Q3 and the produced price index coming in at zero growth for November which was also lower than expected. Both of these indicators show that inflation is still not a big concern, even at the producer level. Retail sales for November were a bit lower than expected, but that is likely because of the late Black Friday and Cyber Monday.

Next week we get more consumer spending numbers as well several metrics of the health of the housing market.

~ Alex

Ironwood Recap – Week of December 2nd, 2019

Ironwood Market Recap

This week saw mixed markets with the S+P slightly up and the Dow slightly down by about 1/10 of a percent. Earlier this week, the China trade talks took the stage and pushed markets downward. At the end of the week, Holiday shopping and unemployment reports saved the week by pushing the market up slightly. The 10 year treasury edged lower with yields rising to 1.84%.

Economically, the US keeps on chugging along nicely. The trade deficit shrank somewhat which could be because of trade policy, or the GM strike. Nonfarm payrolls blew expectations out of the water, coming in at 266,000 as compared to last month’s 156,000. This lowered the already stellar unemployment rate to 3.5%. The all important Holiday sales numbers showed growth over last year, and for a first time Black Friday online sales were higher than in-store sales this year.

Next week, we have the CPI for November and the Fed announcement as well as the PPI (producer price index.) These numbers are my number one concern, as the market continues to be buoyed by the Fed’s easy money policy. Hopefully we won’t get any significant signs of inflation.

~ Alex Parrs

Ironwood Recap – Week of November 25th

Ironwood Market Recap

Thanksgiving week was a short week in the markets, and slightly positive.  The S+P gained almost a percent and the Dow gained about ½ of a percent.  The 10 year treasury was almost unchanged at 1.77%.

Economically, there were few surprises.  Consumer confidence dipped a little, pending home sales did likewise.  On a positive note, care inflation was practically flat, and consumer spending was just slightly above expectations.

Next week’s data will be particularly telling as we see how consumers acted over the Black Friday, Cyber Monday weekend.  Additionally, the beginning of November’s data will come in, including unemployment numbers for that month.

~ Alex

Ironwood Recap – Week of November 18th, 2019

Ironwood Market Recap

This was the first down week in several weeks, with both the S+P and the Dow Jones losing about one half of one percent.  The ten year treasury gained a bit of value with its yield dropping to 1.77%.

The economic news was really in line with expectations with a bit of a positive surprise for housing starts and building permits in October.  Once again the market benefitted late week by hopes of a positive trade deal.

Next week, we have a short week due to the holiday, and the big question is how will retail sales come in over Black Friday and the Thanksgiving weekend.  There are some inflation numbers due out as well as consumer spending.

~ Alex

Ironwood Recap – Week of November 11th, 2019

Ironwood Market Recap

This was another positive week in the markets with the S+P gaining just under one percent and the Dow Jones gaining just over one percent. The ten year treasury bond gained price and the yield lowered to 1.83%. Hope for a China trade deal raised investors’ optimism.

Economically, the news wasn’t too shocking, but there was slightly higher than expected October inflation in both the consumer and the producer price index. This could be a problem if it continues, handcuffing the Fed’s ability to lower rates. Retail sales were a bit stronger than expected, and they are a strong driver of the economy.

Next week we get several indicators of the health of the housing market and will see if there is any further action on the China trade deal. Additionally, we will hear from the Fed on Wednesday and see if they have any growing concerns.

~ Alex

Ironwood Recap – Week of November 4th, 2019

Ironwood Market Recap

The broad markets rose again this week with the S+P gaining about 0.85% and the Dow gaining a bit over 1%.  The 10 year treasury yield grew to 1.93%, the highest it has been since August.

Economically, we had a mixed bag, with factory orders disappointing, but nonmanufacturing and the trade deficit coming in better than expected.  Third quarter productivity was below expectations and over the same period, unit labor costs rose more than expected.  That could be concerning if it leads to inflation.  We did get some good rumors on a possible China trade deal, with China supposedly backing off on their tariffs.  Corporate earnings this week seemed more of a wash with some companies beating and some missing.

Most companies have reported earnings, so next week we are mostly focused on economic data and China.  A couple of measures of October inflation come out next week and they will hopefully remain low, while retail sales grow.

~ Alex

Should you consider a mini-roth conversion?

As we get to the end of the year, and you have a better idea of your taxable income for 2019, remember to consider a mini-Roth conversion. What I mean by this is to look at making sure you are taking advantage of the whole 12% bracket. This is much more likely to be useful for married taxpayers since they can have taxable income after deductions of $78,950. If you add in the standard deduction of $24,400, you can have taxable income of just over $103,000 and still be in the 12% bracket! For single taxpayers, using the standard deduction, you can have taxable income of just over $51,000 at the top of the 12% bracket.

That rate is very generous and I don’t know how long it will last. If your income isn’t over those numbers, you should look at topping it off by converting part of your traditional or rollover IRA’s into a Roth IRA. For example, a married couple with $70,000 of taxable income before deductions could convert about $30,000 into a Roth and still stay in the 12% bracket. Later, if rates are higher, they would have tax free money they could pull out, having already paid taxes at that low rate of 12%, essentially locking it in.

Of course there are caveats, and the normal Roth IRA rules about withdrawals do apply. Additionally, there is the 5 year waiting period after a conversion before you can pull out your principal without penalty. This waiting period is waived if you are over 59.5 years of age. For younger investors looking to spend retirement money earlier than 59.5, this does create an interesting opportunity.

Let’s take the example of someone who is 40 years old and is looking to retire at 50. If they have accumulated significant traditional IRA savings, touching that money before 59.5 without penalty is a nuisance. If we continue our example of the couple who has $70,000 of taxable income before deductions, they could start converting $30,000 per year into a Roth IRA from the age of 40 to 50. By the time they got to age 50, they would have $300,000 of principal in their Roth. Of that, about half of it would be accessible without taxes or penalty, and another $30,000 would come available each year until they got to 59.5, where the remaining balance would be accessible tax free. They would be bypassing the 10% penalty rule in essence, and that money would have only been taxed at 12%, a pretty sweet deal!

As always, make sure to consult with your tax professional before starting this, but the deadline is December 31st for this tax year to start that 5 year rule ticking, so it’s time to start thinking about it. It’s also probably a good idea to get it done by December 15th to make sure there’s time for paperwork etc.

Ironwood Recap – Week of October 21st, 2019

Ironwood Market Recap

It was a solid week in the markets this week with the S+P gaining almost a percent and a quarter. The Dow Jones gained just under three quarters of a percent and the 10 year treasury note fell in price to a yield of 1.8%.

Interestingly enough, many of the economic indicators that came out this week missed estimates, with home sales, durable goods orders, core capex orders, and the consumer sentiment index all coming in below expectations. That didn’t seem to upset the market though, since earnings results were very positive across the board with a few exceptions like Boeing and Amazon. The guidance Amazon put out pointed to a slower than expected holiday shopping season which upset investors.

Next week we are looking forward to the Case-Shiller home price change, pending home sales, Q3 GDP and a slew of other data on the economic front. Additionally it’s a huge week for earnings with roughly 1,000 companies reporting.

~ Alex