3 Tax Tips And A New Stock Market High
/Hi everyone,
As a follow-up to our recent recommendation to start planning your 2019 taxes, Josh Baird wrote a useful blog post highlighting 3 tax tips for 2019, which you can READ HERE. I encourage you to read it in light of the recent tax law changes.
The U.S. stock market closed last week at a new all-time high of 2,940 for the S&P 500 (not including dividends). Let’s dive right into that and more.
In The Market...
The S&P 500 gained +1.2% last week. Let's look under the hood:
(price data via stockcharts.com)
I have said it time and time again. New record highs are bullish, not bearish. The S&P 500 did just that last week. The more separation the S&P index gets from it previous highs set back in 2018, the less likely stock prices will flatten out for a few weeks as I had expected and the more likely it is that a bigger rally will ensue. Take a look:
(chart created via stockcharts.com)
There is not a whole lot to nitpick right now. A number of factors support the continuation of this rally:
When looking at the price trend of the S&P index, both short-term and long-term timeframes appear bullish.
Relative Strength (RSI) reflects that there is a tailwind of momentum behind the rally. This is the smaller of the two charts above.
There still seems to be a decent dose of pessimism among investors. Pessimism usually leads to gains.
There is good breadth among the 10 sectors that comprise the market. This means that, for the most part, the sectors are rising in unison rather than a few sectors doing all the heavy lifting to push the S&P higher.
There is one thing worth remembering, however. The last time the market was in a similar position back in Sept. 2018, it appeared as if stocks were primed to really zoom higher. In that instance, the index only ended up eclipsing the previous record high (set in Jan. 2018) by roughly +3% before the bottom fell out in early October. So the thing to remember here is that while a sell-off may not be likely, if it does happen it could be swift and sharp.
In Our Portfolios...
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I want to remind everyone that our new financial planning software is readily available if you would like us to map out your plan. Let us know — it might be worthwhile if you have wanted to gain better clarity or instill better discipline around your long-term financial plan.
Have a great week!
Brian E Betz, CFP®
Principal