Inside Financial Connections Newsletter
- 2020 IN THE REARVIEW MIRROR
- BEST SELLING BOOKS AND BOOK SERIES
- WHAT ABOUT INFLATION?
- STATE TAXES AND HOW THEY DIFFER
- MAKING LEMONADE FROM LEMONS
January 11, 2021
The stock market and economy seemed disconnected in 2020. It also reflected the fastest bear market on record. In 33 days, starting February 19th, the S&P 500 lost 33% only to rebound the rest of the year.
In a year that is taking a toll on individuals and families, the stock market ignored the pandemic looking instead past the pandemic. Below are some of the reasons that may be in play.
Many of the jobs lost are low-paying service jobs. While it increases the unemployment rate, it has a lessor effect on payroll. Add the money received from fiscal stimulus and the numbers are skewed. Income, in aggregate, was down .5% even while employers reported a 6% decline of employees on their payroll.
Spending, while increasing in areas such as computers, streaming services, etc. doesn’t offset what would have been spent on restaurants, vacations, hotels, cruises, sports events, etc.
With the additional income and lower spending, the money went into savings. From March – November, savings rose 173% over the same period in 2019. Some of that money also was put into the stock market.
The Fed played a major role in stabilizing the stock markets by reducing interest rates to almost zero as well as purchasing bonds to put more money into the economy and keep bond markets stable.
If you would like to discuss your portfolio, please don’t hesitate to contact us. Here’s to a better 2021!
With many of us staying at home, the opportunity to take the time to read increased. Did you end up reading some of the all-time best sellers? Below are the top five best sellers in each category.
There have been predictions of inflation rates rising going back to those of the Great Recession. One of the starting points to look for higher inflation is the increase in money supply. This can occur when the Fed:
The Fed is doing all three of the above strategies. It has increased the money supply. With this increase, classical economic theory says we should incur inflation. Have we? Not so far. Inquiring minds ask why?
So far, what we’ve learned is:
Until the money actually makes its way into the economy as part of spending by consumers and companies alike, it is possible inflation remains subdued even though theoretically, with the increase in money supply we should have inflation but don’t – yet.
When you think of expensive states to live in, California income tax (13.6% on high income earners) is usually at the top of the list followed by Hawaii (11.0%), New Jersey (10.8%), Oregon (9.9%) and New York (8.8%).
Yet every state needs to pay for services for their citizens. So how are other states collecting taxes to pay their bills?
Many people move to Texas. While it is true, they don’t have state income tax, they do have the highest property taxes in the country (median 1.81%).
Louisiana has a state sales tax of 10.02% on purchases – the highest in the country. Tennessee, Arkansas, Washington and New York follow Louisiana in leading the country on sales tax on purchases. The lowest? Oregon, Montana and New Hampshire have no sales tax. This does not include local sales tax added to the state rate.
WalletHub attempted to equalize what they call the tax burden among the various states by looking at property taxes, individual income taxes, and sales and excise taxes as a share of personal income. They found:
|Total Tax Burden
California is 13th with 9.27% tax burden.
We all know people who are furloughed or lost their jobs because of COVID. Some workers have taken this opportunity to become self-employed. While it is difficult to measure on what scale new self-employment is taking place, there are some signs.
According to the Census Bureau, some of those becoming self-employed apply for tax identification numbers. Their data shows a 32% increase the first nine months of 2020 compared to 2019. Looking at only July – September, the increase was a startling 77% compared to the same period a year early.
In some ways it is easier than ever before. With Social Media and such platforms as Etsy Inc., individual businesses can thrive. Jill has bought numerous times off of Etsy and found the service and attention to detail top notch.
Some examples of the new entrepreneurs are:
However, being self-employed also presents issues an employee may not have had previously. No sick leave or employer health coverage, additional taxes that need to be paid for unemployment insurance, Social Security tax, etc.
If you plan to start a business, we suggest you speak with your tax professional so you don’t have any surprises at tax time.
Financial Connections makes its staff available to journalists to share knowledge.READ MORE
No Hidden Costs. No Referral Fees. No Commissions.
As a fiduciary, we put our clients' interests first. Our compensation comes exclusively from you. If we don't directly provide a particular service, we can serve as a resource for referrals to other professionals.Download the fee schedule Download Disclosure Form ADV Parts 2 & 3