The Weekly Market Snapshot from Frazier Allen for the week of April 1st, 2012

April 1, 2012

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services

The week began with a speech by Fed Chairman Bernanke, where he noted that “further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.”Many interpreted this to mean that further asset purchases (QE3) were still on the table (if somewhat unlikely). Concerns about softer global growth seemed to weigh against equity market sentiment through the middle of the week. Quarter-end likely window-dressing added a bit to market volatility. Bond yields fell.

The economic data reports were mixed. The personal income and spending figures were probably the most important, but were not fully appreciated by the markets. [Read more]

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Keeping Track of Expiring and New Tax Provisions

March 18, 2012

F&M Investment Services - Raymond James Clarksville, TN – A number of significant federal income tax provisions expired at the end of 2011, a fact that might be easily overlooked with so much attention being focused on the “Bush tax cuts” that are still in effect, but scheduled to expire at the end of 2012. And new Medicare-related taxes, effective in 2013, have received surprisingly little coverage.

Of course, new legislation could always extend some or all of these provisions, but here’s a quick summary of how things stand.

Already expired

Alternative minimum tax (AMT)— A series of temporary legislative “patches” over the last several years has prevented a dramatic increase in the number of individuals subject to the AMT–essentially a parallel federal income tax system with its own rates and rules. The last such patch expired at the end of 2011. Unless new legislation is passed, your odds of being caught in the AMT net greatly increase in 2012, because AMT exemption amounts will be significantly lower, and you won’t be able to offset the AMT with most nonrefundable personal tax credits.
Qualified charitable distributions— This popular provision allowing individuals age 70½ or older to make qualified charitable distributions of up to $100,000 from an IRA directly to a qualified charity expired at the end of 2011. These charitable distributions were excluded from income and counted toward satisfying any required minimum distributions that you would have had to take from your IRA for the year.
Bonus depreciation and IRC Section 179 expense limits — If you’re a small business owner or self-employed individual, you were allowed a first-year depreciation deduction of 100% of the cost of qualifying property acquired and placed in service during 2011; this “bonus” depreciation drops to 50% for property acquired and placed in service during 2012, and disappears altogether in 2013. For 2011, the maximum amount that you could expense under IRC Section 179 was $500,000; in 2012, the maximum is $139,000; and in 2013, the maximum will be $25,000.
State and local sales tax— If you itemize your deductions, 2011 was the last tax year for which you could elect to deduct state and local general sales tax in lieu of state and local income tax.
Education deductions— The above-the-line deduction (maximum $4,000 deduction) for qualified higher education expenses and the above-the-line deduction for up to $250 of out-of-pocket classroom expenses paid by education professionals both expired at the end of 2011.

Expiring at the end of 2012

Federal income tax rates— After December 31st, 2012, we’re scheduled to go from six federal tax brackets (10%, 15%, 25%, 28%, 33%, and 35%) to five (15%, 28%, 31%, 36%, and 39.6%).
Long-term capital gains rate— Currently, long-term capital gain is generally taxed at a maximum rate of 15%. And, if you’re in the 10% or 15% marginal income tax bracket, a special 0% rate generally applies. Starting in 2013, however, the maximum rate on long-term capital gains will generally increase to 20%, with a 10% rate applying to those in the lowest (15%) tax bracket (though slightly lower rates might apply to qualifying property held for five or more years). And while the current lower long-term capital gain rates now apply to qualifying dividends, starting in 2013, dividends will be taxed at ordinary income tax rates.
2% payroll tax reduction— The recently extended 2% reduction in the Social Security portion of the Federal Insurance Contributions Act (FICA) payroll tax expires at the end of 2012.
Itemized deductions and personal exemptions— Beginning in 2013, itemized deductions and personal and dependency exemptions will once again be phased out for individuals with high adjusted gross incomes (AGIs).
Tax credits and deductions— The earned income tax credit, the child tax credit, and the American Opportunity (Hope) tax credit revert to old, lower limits and (less generous) rules of application. Also gone in 2013 is the ability to deduct interest on student loans after the first 60 months of repayment.
Marriage penalty relief— Tax changes that were originally made to address a perceived “marriage penalty” expire at the end of 2012. If you’re married and file a joint return with your spouse, you’ll see the effect in the form of a reduced 2013 standard deduction amount, as well as in lower 2013 tax bracket thresholds in the tax rate tables (i.e., couples move into higher rate brackets at lower levels of income).

New taxes effective in 2013

Two new Medicare-related taxes created by the health-care reform legislation passed in 2010 take effect in 2013:

Additional Medicare payroll tax— The hospital insurance (HI) portion of the payroll tax–commonly referred to as the Medicare portion–increases by 0.9% (from 1.45% to 2.35%) for those with wages exceeding $200,000 ($250,000 for married couples filing jointly, and $125,000 for married individuals filing separately). The rate for self-employed individuals increases from 2.9% to 3.8% on any self-employment income that exceeds the dollar thresholds above.
Medicare contribution tax on unearned income— A new 3.8% Medicare contribution tax is imposed on the unearned income of high-income individuals. The tax generally applies to the net investment income of individuals with modified adjusted gross income that exceeds $200,000 ($250,000 for married couples filing jointly, and $125,000 for married individuals filing separately).

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The Weekly Market Snapshot from Frazier Allen for the week of March 11th, 2012

March 11, 2012

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services

Worries about the Greek debt swap agreement weighed against global stock markets earlier in the week, but confidence returned as the Greek deal looked like it would succeed. The February job market figures were strong, a positive for equities and a negative for bonds, but most of that news was already factored in.

Nonfarm payrolls rose by 227,000 in February, while the two previous months were revised a net 61,000 higher (leaving the three-month average at 245,000). The unemployment rate held steady at 8.3%, but that was despite an increase in labor force participation (which rose from 63.7% to 63.9%). The employment-to-population ratio edged up to 58.6%, vs. 58.5% in January and 58.4% in December. It’s likely that the unusually mild winter had a significant impact on payrolls, hours, and labor force participation. [Read more]

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The Weekly Market Snapshot from Frazier Allen for the week of March 4th, 2012

March 4, 2012

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services

The economic data reports were mixed. Real GDP rose at a 3.0% annual rate in the 2nd estimate for 4Q11 (vs. +2.8% in the advance estimate), with slight upward revisions to consumer spending and business fixed investment. The details of the report showed a significant upward revision to estimates of personal income for both 3Q11 and 4Q11 (that news, suggesting that the trend in income wasn’t especially strong, but a lot less weak than previously estimated, went largely unnoticed by the markets).

Consumer spending was softer than expected in February, held down partly by a weather-related decrease in energy consumption (ex-energy, spending rose 0.4%). Still, adjusted for inflation, consumer spending was flat for the third consecutive month in January. Since consumer spending accounts for 70% of overall GDP, these data suggest that first quarter growth may be a lot weaker than was hoped for earlier.

Unit auto sales jumped to a 15.0 million seasonally adjusted annual rate in February, up from 14.1 million in January and 13.0 million a year ago. The February ISM Manufacturing Index fell. Consumer confidence improved, but the survey missed much of the recent increase in gasoline prices.

In his semi-annual testimony on monetary policy, Fed Chairman Bernanke said that recent information “is consistent with growth proceeding, in coming quarters, at a pace close to or somewhat above the pace that was registered during the second half of last year (about 2¼%).” Bernanke noted that “continued improvement in the job market is likely to require stronger growth in final demand and production” and added that “strains in global financial markets pose significant downside risks to the economic outlook.” However, the markets focused on what he didn’t say – that is, there was no hint of further asset purchases in the near term.

Next week, the focus is expected to be on Friday’s job market report. Seasonal adjustment will remain an important factor in February, adding, along with the weather, considerable uncertainty to the payroll estimate. However, it’s unclear whether mild weather has pulled forward gains that normally would have occurred in March and April (as is often the case). More troublesome, high gasoline prices, if sustained, are likely to dampen the pace of hiring for smaller firms.

Indices

	Last	Last Week	YTD return %
DJIA	12980.30	12984.69	6.24%
NASDAQ	2988.97	2956.98	14.73%
S&P 500	1374.09	1363.46	9.26%
MSCI EAFE	1570.58	1559.01	11.19%
Russell 2000	815.22	829.23	10.03%

Consumer Money Rates

	Last	1-year ago
Prime Rate	3.25	3.25
Fed Funds	0.12	0.16
30-year mortgage	3.93	4.83

Currencies

	Last	1-year ago
Dollars per British Pound	1.595	1.628
Dollars per Euro	1.332	1.381
Japanese Yen per Dollar	81.140	81.860
Canadian Dollars per Dollar	0.985	0.974
Mexican Peso per Dollar	12.739	12.094

Commodities

	Last	1-year ago
Crude Oil	108.84	99.63
Gold	1717.68	1428.55

Bond Rates

	Last	1-month ago
2-year treasury	0.27	0.23
10-year treasury	1.98	1.93
10-year municipal (TEY)	2.93	2.66

Treasury Yield Curve – 3/02/2012

S&P Sector Performance (YTD) – 3/02/2012

Economic Calendar

March 5th	—	ISM Non-Manufacturing Index (February)
March 7th	—	ADP Payroll Estimate (February)
March 8th	—	Jobless Claims (week ending March 3rd)
March 9th	—	Employment Report (February)
March 13th	—	Retail Sales (February) FOMC Policy Decision (no press briefing)
March 16th	—	Consumer Price Index (February)
April 6th	—	Good Friday (stock market closed, bonds open half a day) Employment Report (March)
April 25th	—	FOMC Policy Decision Bernanke Press Briefing

Important Disclosures

Past performance is not a guarantee of future results. There are special risks involved with global investing related to market and currency fluctuations, economic and political instability, and different financial accounting standards. The above material has been obtained from sources considered reliable, but we do not guarantee that it is accurate or complete. There is no assurance that any trends mentioned will continue in the future. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Investing involves risk and investors may incur a profit or a loss.

US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.

Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.

Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.

Material prepared by Raymond James for use by its financial advisors.

The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business March 1st, 2012.

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The Weekly Market Snapshot from Frazier Allen for the week of February 27th, 2012

February 27, 2012

Weekly Market Snapshot

Market Commentary by Scott J. Brown, Ph.D., Chief Economist

Scott J. Brown Ph.D., Chief Economist Raymond James Investment Services

A deal was reached in the €130 billion bailout package for Greece. However, investors almost immediately began to doubt Greece’s ability to stick to the plan (especially given the unrealistic assumptions about Greece’s growth prospects). Meanwhile, oil and gasoline prices continued to rise, posing a more significant threat to the U.S. growth outlook.

The economic calendar was relatively thin. Home sales figures were mixed, but January housing data aren’t all that critical. Jobless claims continued to trend at a relatively low level. Consumer sentiment rebounded from a dip in the middle of the month, apparently as job market optimism offset worries about higher gasoline prices.

Next week, the calendar heats up again.

The Fed Chairman’s semi-annual monetary policy testimony to Congress (to the House Financial Services Committee on Wednesday and to the Senate Banking Committee on Thursday) is often a big deal for the markets, but we’re unlikely to learn much this week. That is, Bernanke should present a moderate, but uncertain economic outlook.

Monetary policy changes (more QE) would depend on a loss of momentum in growth or expectations that inflation will be below target. The estimate of 4Q11 GDP growth is expected to be little changed from the advance estimate (+2.8%). The Beige Book will provide anecdotal evidence of what’s going on with the economy (expected to be a bit brighter than the previous assessment).