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  • Writer's pictureAlex A Tapia, AIF

The Weekly Flyer: Tuesday, May 28th, 2024





The Markets 


Perception versus reality.


A recent Harris poll, conducted on behalf of The Guardian newspaper, found that there is some confusion about the state of the American economy and U.S. stock market performance. A significant proportion of the Americans who participated think the economy and the stock market are in rough shape. Here are a few of the misperceptions uncovered by the poll: 


  • Misperception No. 1: The United States is in a recession, according to 56 percent of poll respondents.


Reality: The U.S. is not in a recession. The economy has been expanding, not shrinking. Here are the statistics for recent U.S. economic growth (after adjusting for inflation):


2020: - 3.5 percent (pandemic year)

2021: + 5.8 percent 

2022 + 1.9 percent 

2023 + 2.5 percent 

2024: + 1.6 percent (first quarter 2024) 


  • Misperception No. 2: The Standard & Poor’s (S&P) 500 Index is down for the year, according to 49 percent of poll respondents.


Reality: The S&P 500 was up 11.2 percent, year to date, through the end of last week. In 2024, the Index has charted 24 all-time highs, reported Jan-Patrick Barnert, Alexandra Semenova, Geoffrey Morgan and Michael Msika of Bloomberg.  


  • Misperception No. 3: Inflation has been rising, according to 72 percent of poll respondents.


Reality: Inflation has been trending lower. In April, inflation was 3.4 percent over the previous 12 months. While that rate is higher than the Fed’s target rate, it is far lower than inflation in June 2022 when it peaked at 9.1 percent. 


The confusion may be related to the fact that prices remain higher than they once were. There was some positive news on that front, last week. Several major retailers announced they are lowering prices on groceries and other items, reported Jaclyn Peiser of The Washington Post


  • Misperception No. 4: U.S. unemployment is near a 50-year high, according to 49 percent of poll respondents.


Reality: Unemployment is near a 50-year low. The average U.S. unemployment rate from 1947 through 2023 was 5.7 percent. In recent years, the unemployment rate has been:


2020: 8.1 percent (Pandemic year)

2021: 5.3 percent

2022: 3.6 percent

2023: 3.6 percent

2024: 3.9 percent (April 2024, year over year)


Major U.S. stock indices finished the week mixed. The Nasdaq Composite Index finished the week higher, while the S&P 500 Index was flat for the week, and the Dow Jones Industrial Average lost ground. Yields on most maturities of U.S. Treasuries rose over the week.


Data as of 5/24/24

1-Week

YTD

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 Index

0.03%

11.2%

29%

8.4%

13.2%

10.7%

Dow Jones Global ex-U.S. Index

-1.1

5.2

12.8

-1.8

4.3

1.8

10-year Treasury Note (yield only)

4.5

N/A

3.7

1.6

2.3

2.5

Gold (per ounce)

-2.5

12.7

20.3

7.6

12.8

6.3

Bloomberg Commodity Index

-0.7

6.5

4.4

4.7

5.9

-2.5

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 

Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.


LOOKING FOR A GRADUATION GIFT? Graduation season is well underway. If you’re looking for a gift for a high school or college graduate, consider giving one or more shares of appreciated stock. This is usually done by transferring shares from your account to the recipient’s account. 


There can be significant benefits to gifting an appreciated asset, including:


  • Realizing a tax advantage. When people gift shares of appreciated stock, they may realize a tax advantage. Typically, when shares that have increased in value are gifted to another person, the gift giver does not owe capital gains tax on the shares. 


  • Allowing the asset to grow over time. The gift recipient may owe tax when they sell the shares, depending on the sale price and the recipient’s tax bracket. If the shares remain invested, though, they have an opportunity to grow over time. 


  • Creating a teaching opportunity. When gifting shares, share the story of the stock with the recipient. Why did you buy it? How much has it appreciated? Do you think the recipient should keep it or sell it? Gifting shares creates an opportunity to share knowledge and increase financial literacy. 


The government limits the amount of money that can be gifted to an individual without paying a gift tax. The annual gift tax exclusion is $18,000 per recipient in 2024. In general, a person can give up to $18,000 per recipient without having to pay a tax on the gift. Appreciated shares can also make great birthday and holiday gifts. 


There can be complexities when gifting an appreciated asset. If you would like to explore the idea, give us a call.


Weekly Focus – Think About It  


Instructions for living a life:

Pay attention.

Be astonished.

Tell about it.

―From Sometimes by Mary Oliver



Sources:







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