globe_money_500The political world has presented many topics of conversation lately. But one discussion has been relatively quiet: tax reform. Last week, however, the president announced that a “phenomenal” tax plan is forthcoming, and domestic markets responded by reaching record highs.[i] In fact, we saw positive market performance even before the announcement, as the S&P 500 and Dow posted new records two days in a row, while the NASDAQ reached record highs every day except Monday.[ii] By Friday, the Dow was up 0.99%, the NASDAQ added 1.19%, and the S&P 500 capped its fourth consecutive week of gains to increase by 0.81%.[iii] On the other hand, the MSCI EAFE languished this week, posting a 0.03% loss.[iv]

In today’s highly politicized market environment, we understand that you seek insight on how changes could affect your financial life. While we could focus on potential policy or tax adjustments, many of these details are still unclear. Rather than addressing speculation, we prefer to analyze and share key data that we do have details on from last week: the trade deficit.

What happened? The most recent trade deficit numbers came in last week, showing that in December 2016 the following occurred:

  • The trade deficit fell to $44.3 billion.[v]
  • Trade volume grew more than it has in over a year and a [vi]
  • The trade deficit was higher than in December 2015.[vii]

Why should you care? As we discussed a few weeks ago, trade is integral to our economy—and we saw a decrease in net exports slow GDP growth in the fourth quarter of 2016.[viii] Essentially, when the U.S. imports more goods than we export, the economy may not perform as well.

However, analyzing the trade deficit is not a simple “lower is better, higher is worse” circumstance. In a healthy economy, the trade deficit can increase, as Americans’ incomes grow and they buy more imported goods.[ix] Understanding what signs are positive and which are negative can help you better know where we stand.

What can we learn from this week’s findings? The trade deficit is larger than a year ago, but the increases are less dramatic than what some headlines may imply. For instance, a MarketWatch article shared that “U.S. trade deficit hits highest level in four years.”

Ultimately, while the balance between imports and exports is meaningful, the volume of trade matters greatly as well. December’s increasing trade volume—both imports and exports—can show us that both U.S. and global economies are improving.[xi

Looking ahead, changes to trade deals and corporate tax rates could have significant effects on the trade balance and volume. We will continue to evaluate this monthly metric to look for insight into our economy’s fundamental strength. As always, we will work to keep you informed so you know what is happening and how we are pursuing your goals in an evolving world.

ECONOMIC CALENDAR:

Wednesday: Consumer Price Index, Retail Sales, Industrial Production, Housing Market Index

Thursday: Housing Starts

Friday: E-Commerce Retail Sales

Data as of 2/10/2017

1-Week Since 1/1/17 1-Year 5-Year 10-Year
Standard & Poor’s 500 0.81% 3.45% 25.07% 14.50% 6.11%
DOW 0.99% 2.56% 27.36% 11.67% 6.11%
NASDAQ 1.19% 6.52% 33.86% 19.49% 13.31%
U.S. Corporate Bond Index 0.00% 0.16% 4.43% 3.80% 6.70%
International -0.03% 3.40% 15.14% 2.69% -1.97%
Data as of 2/10/2017 1 mo. 6 mo. 1 yr. 5 yr. 10 yr.
Treasury Yields (CMT) 0.50% 0.62% 0.81% 1.94% 2.47%

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the SPUSCIG. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

baked-brussel-sprouts-8Golden-Crusted Brussels Sprouts

A tasty side dish that’s easy to make.

Serves 4

Ingredients:

  • 24 small Brussels sprouts
  • 2 – 3 tablespoons of extra-virgin olive oil
  • Sea salt, finely ground
  • Black pepper, freshly ground
  • ¼ cup of your favorite grated cheese

Directions:

  1. Cut off the end of each sprout, slice in half lengthwise, and trim any ragged or brown outer leaves.
  2. Rub each half with olive oil.
  3. Pour 1 tablespoon of oil in a large skillet and heat on medium.
  4. Place a single layer of Brussels sprouts in the pan cut side down.
  5. Sprinkle the sprouts with salt and cover.
  6. Cook for approximately five minutes, until the cut sides are just beginning to brown and the sprouts are tender all the way through.
  7. Remove the cover and turn up the heat.
  8. Allow the cut sides to turn a deep, caramelized color, and then toss the whole pan a few times to brown the round sides.
  9. Remove from heat and sprinkle with salt and pepper to taste.
  10. Add grated cheese. Parmesan, Gruyere, and Gouda all work well.
  11. Serve immediately.

Recipe adapted from 101 Cookbooks[xii]

 Know the Rules for a Child Tax CreditChild-Tax-Credit-Refund-300x200

Having a minor in your home can save you up to $1000 per child on your taxes. Before you take the credit this year, make sure you understand these three details.

Qualifications

To qualify for the Child Tax Credit, each child must meet a number of restrictions, including:

  • Age: Your child must be under age 17 as of December 31, 2016.
  • Relationship: The child’s relationship with the taxpayer must be through family, such as a son, daughter, foster child, grandchild, niece, or nephew. See a full list
  • Dependent: Only children that the taxpayer claims as a dependent on their federal tax return qualify.
  • Support: The child must have provided less than half of their own support during 2016.
  • Joint Return: The child cannot file a joint return unless they are doing so to claim a refund.
  • Citizenship: Only children that are a U.S. citizen, national, or resident alien qualify.
  • Residence: Generally, the child should live the majority of their time with the taxpayer—which means more than half the year in 2016.

[i] http://www.cnbc.com/2017/02/10/us-markets.html

[ii] http://www.reuters.com/article/us-usa-stocks-idUSKBN15P1GJ

[iii] http://finance.yahoo.com/quote/^DJI/history?period1=1486098000&period2=1486702800&interval=1d&filter=history&frequency=1d

http://finance.yahoo.com/quote/^IXIC/history?period1=1486098000&period2=1486702800&interval=1d&filter=history&frequency=1d

http://finance.yahoo.com/quote/%5EGSPC/history?period1=1486098000&period2=1486702800&interval=1d&filter=history&frequency=1d

http://www.reuters.com/article/us-usa-stocks-idUSKBN15P1GJ

[iv] https://www.msci.com/end-of-day-data-search

[v] https://www.bea.gov/newsreleases/international/trade/tradnewsrelease.htm

[vi] http://www.ftportfolios.com/Commentary/EconomicResearch/2017/2/7/the-trade-deficit-in-goods-and-services-came-in-at-44.3-billion-in-december

[vii] http://www.ftportfolios.com/Commentary/EconomicResearch/2017/2/7/the-trade-deficit-in-goods-and-services-came-in-at-44.3-billion-in-december

[viii] https://www.bloomberg.com/news/articles/2017-01-27/u-s-economic-momentum-faces-wild-card-in-trump-s-trade-policy

[ix] http://www.ftportfolios.com/Commentary/EconomicResearch/2017/2/7/the-trade-deficit-in-goods-and-services-came-in-at-44.3-billion-in-december

[x] http://www.marketwatch.com/story/us-trade-deficit-hits-highest-level-in-four-years-2017-02-07

[xi] http://www.ftportfolios.com/Commentary/EconomicResearch/2017/2/7/the-trade-deficit-in-goods-and-services-came-in-at-44.3-billion-in-december

[xii] http://www.101cookbooks.com/archives/goldencrusted-brussels-sprouts-recipe.html

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