Blog Post

Markets React to Good Data

Stocks rose this week on good economic data.  Despite the impeachment, congress completed several important pieces of legislation.

Spending bills were passed to fund the government through September of 2020.  Congressional leaders agreed to extend a number of tax breaks including for biodiesel.  They also agreed to revive a more generous medical expense deduction.  Notably absent from the extensions were tax breaks for renewable energy and electric cars.  Negotiators also agreed on repeals of three taxes from the Affordable care Act.  These were the medical device tax, a tax on health insurers and the so-called Cadillac tax on high-cost employer health insurance.  They also eliminated a tax increase created in hat has hurt survivors of deceased military members.

The House passed the USMCA (U.S., Mexico, Canada) trade agreement with bi-partisan support and the Senate is expected to approve it early next year.

The Secure Act passed the Senate and is expected to be signed into law.  The Secure act:

  • Raises the age for retirement account required minimum distributions from age 70.5 to age 72.
  • Allows small companies to join other small companies to offer a 401k plan therefore reducing the administrative cost burden to small businesses.
  • Requires 401k plans to offer guaranteed income payments at retirement, similar to pensions.  Only 8% of plans do so today.
  • Allows employers to automatically enroll employees in 401k plans with savings rates up to 15%, up from the 10% limit today.
  • Allows withdrawals from 529 accounts of up to $10,000 to pay off student debt.
  • Allows parents to withdraw up to $5000 penalty free from retirement accounts the year of the birth or adoption of a child.
  • Makes more part time workers eligible to participate in 401k plans.
  • Requires people inheriting a tax advantaged retirement account beginning in 2020 to withdraw an pay taxes over a 10 year period rather than over their life expectancy.

The 10-year Treasury yield rose to 1.919%.  Crude oil rose to $60.36 a barrel.  The U.S. dollar rose against a basket of currencies and gold prices rose to $1481.80 an ounce.

In economic numbers this week:

  • China reported:
    • Value-added industrial output rose 6.2% in November from a year ago up from 4.7% in October.
    • Retail sales were up 8% in November.
    • Fixed asset investment grew 5.2%YTD in November, unchanged from October YYD.
  • The Federal Reserve reported industrial production increased a seasonally adjusted 1.1% in November.
    • Excluding motor vehicles and parts, which rose due to the end of the General Motors strike, industrial production rose 0.5%.
    • Motor vehicles and parts production rose 12.4%.
    • Information processing equipment, foods and tobacco and primary metals all gained while home electronics, clothing and chemicals, mining and
  • The Commerce Department reported
    • Housing starts rose 3.2% in November and residential permits also rose 14% as low mortgage rates have fueled a rebound in housing construction.
    • Personal-consumption expenditures rose a seasonally adjusted 0.4% in November and 2.4% above the previous year.  The strongest spending in November was on vehicles which rose 1.0%.
    • The price index for personal-consumption expenditures rose 1.5% in November from a year earlier.  Excluding volatile food and energy prices rose 1.6% below the FED Target of 2.0%.
    • Personal Income rose 0.5% in November.
    • U.S. gross domestic product was unchanged at the previously adjusted 2.1% rate in the third quarter.
    • U.S. Corporations have repatriated over $1TN in assets since the new tax law went into effect in 2018.
  • The National Association of Realtors reported that existing home sales fell 1.7% in the month of November but are up 2.7% from a year ago.  A lack of inventory for existing homes was attributed to the November decline.
  • The Labor Department reported first time claims for unemployment fell 18,000 to a seasonally adjusted 234,000.  The four week moving average of claims rose 1500 to 225,500.
  • The EIA weekly oil report is here: wpsrsummary (10).  Also, the EIA reported in the past week:
    • Field production of crude oil was unchanged at 12.8MM barrels per day.
    • Natural gas storage fell by 107BN cubic feet and is at the five year average at this time of year.
  • Baker Hughes reported the number of active oil rigs rose 18 to 685 and the number of active gas rigs fell 4 to 125.

Please call us if you have any questions.

Best Regards,

Loren C. Rex, CFP®, AIF®, MA                                                       Erik A Smith

President                                                                                               Managing Partner

Generations Financial Planning & Wealth Management            269-441-4143

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Battle Creek, MI  49017

Tel 269-441-4090

Carrie Fuce, Assistant 269-441-4091

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Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.  Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  The Indices mentioned are unmanaged and cannot be invested into directly.


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