We just finished the busiest week of 1st quarter earnings season, and although many companies shared positive results, stock indexes experienced modest declines. The S&P 500 lost 0.01%, the Dow dropped 0.62%, and the NASDAQ gave back 0.37%. International stocks in the MSCI EAFE decreased by 0.39%. Last week provided a variety of information for investors to take in. On Friday, we received the initial reading of 1st-quarter Gross Domestic Product (GDP). The data came in more positive than analysts expected, with the economy experiencing 2.3% growth. The latest employment readings also showed costs for benefits and pay rising at the fastest pace in a decade. On the geopolitical front, the leaders of North and South Korea met for historic talks that could result in denuclearizing the Korean peninsula. As we continue to watch these developments, we want to explore what’s behind our current corporate earnings season. A Deeper Analysis of Corporate Earnings So far, this earnings season is the best on record. Of the S&P 500 companies with published data, 79.4% of them beat expectations. The outperformance is significant, too. On average, companies are 7.95% higher than projected. Despite these positive results, stock prices did not rise in reaction. Companies that beat expectations have only experienced an average of a 0.3% equity increase in the first day after their report. The disconnect between high earnings and low stock increases may be surprising. But when you look closer, lingering questions about corporate health are weighing on many investors’ minds: Will higher costs – including wages and materials – decrease their profits moving forward? Could increasing treasury yields raise the cost of their debt? Will they continue to benefit from the new U.S. tax law, or is this earnings season an anomaly? No one can say for sure what is on the horizon for corporate performance. On one hand, concerns about growing costs and inflation could erode investor confidence and hamper the markets’ ability to regain previous highs. On the other, consumer sentiment remains high – and experts predict that each year until at least 2020, S&P 500 companies will have double-digit growth. Looking ahead, we will monitor many different details to gain more insight into what the future may hold, including bond yields, wage costs, and inflation. For now, please contact us anytime if you have questions about current market conditions or your plans for the future. ECONOMIC CALENDAR Monday: Pending Home Sales Index Tuesday: PMI Manufacturing Index, ISM Mfg Index, Construction Spending Wednesday: ADP Employment Report Thursday: Jobless Claims, Factory Orders, PMI Services Index, ISM Non-Mfg Index Friday: Employment Situation Quote Of The Week Fountain Pen “For every reason it’s not possible, there are hundreds of people who have faced the same circumstances and succeeded.” – Jack Canfield Recipe Of The Week Spinach and Cheese Breakfast Pockets Yields 8 Ingredients: 2 large eggs, divided 1 cup ricotta cheese 1 cup baby spinach, roughly chopped 1 cup basil, chopped ¼ cup sun-dried tomatoes (about 9), finely chopped ¼ teaspoon red pepper flakes Kosher salt 2 refrigerated rolled pie crusts (from 15-ounce box) Sesame seeds, for sprinkling Directions: Preheat oven to 400°F. Overlay large, rimmed baking sheet with parchment paper. Mix 1 egg and 1 tablespoon water in a small bowl; set aside. Put ricotta, spinach, basil, tomatoes, red pepper, the other egg, and ¼ teaspoon kosher salt into a medium bowl. Combine together. After unrolling pie crusts, cut each into 4 wedges. Put the ricotta mixture on 1 side of each of the wedges, about 3 tablespoons each. Fold the wedges over the filling; press the edges with a fork to seal. Put the wedges on the prepared baking sheet. Brush the tops of the wedges with the egg mixture. Sprinkle with sesame seeds (if desired). Bake until the wedges are golden brown, 16-20 minutes. Recipe adapted from Good Housekeeping Tax Tips You Have the Right to Challenge the IRS* The Internal Revenue Service, part of the U.S. Department of Treasury, has nearly 80,000 employees and an $11.4 billion budget. Nevertheless, the IRS grants taxpayers certain inalienable rights; one of those is the right to challenge the agency and to be heard. Taxpayers have the right to: Raise objections to agency rulings. Introduce additional documentation in response to IRS decisions. Expect the agency to consider their objections timely. Expect to receive a response if the agency disagrees with the taxpayer’s position. The IRS sometimes notifies taxpayers that their returns have mathematical or clerical errors. Here are taxpayers’ rights in those cases: Taxpayers have 60 days to inform the IRS they disagree. They should provide copies of records to help correct the errors. They may call the number on the notice for help. They can expect the agency to make necessary adjustments and send corrections if the IRS upholds the taxpayer’s position. If the agency doesn’t agree with the taxpayer’s position, here is what happens next: The IRS will send a tax-adjustment notice by mail. The taxpayer has the right to challenge the adjustment by filing a challenge in U.S. Tax Court. The petition must be filed within 90 days of the IRS notice. Understanding your rights as a taxpayer makes tax filing easier, more equitable, and less stressful. * This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. Tip adapted from IRS.gov Golf Tip The Driver: Setting Up for Power and Accuracy Sending the ball exactly where you want it to go requires proper positioning before the strike. Here are some tips for smooth sailing on the golf course: Place the ball in front of you so it’s just inside the front heel, which enables you to turn behind the ball during the swing. Keep your shoulders parallel to the target line. This allows you to play the ball up and helps prevent you from shifting your shoulders open. Following the windup, begin the downswing from the ground up. Move your knees and hips toward the target. Keep your back shoulder down and in on the downswing. The secret to a successful strike is developing a strong upswing hit. Tip adapted from Golf Digest Healthy Lifestyle How to Look and Feel Younger OK. You’ve hit the big 6-0. Or the big 7-0. How about 8-0? Maybe even 9-0. But who’s counting anymore? After you’ve reached a certain age, it’s not the number of birthdays that matter. It’s how you look and feel. Here are 5 tips to keep you looking and feeling your absolute youngest: Hang out with your buddies. Socializing may be the top contributor to looking and feeling youthful. Go artsy. Getting creative makes you feel happy and think more clearly. It could be singing, painting, or drawing. Get moving. Everyone knows exercise is good for you. But you don’t have to go gung-ho to reap its benefits. Shoot for 2½ hours of activity a week. It could be gardening or a brisk stroll around the block. Apply sunscreen. Suntan lotion will not make you look younger. But it will protect you from the sun’s damaging ultraviolet rays. Something new. Learn a new skill or develop a new habit. The change will help keep your brain fresh and energized. It could be dancing or learning another language. Short of a dip in Ponce de Leon’s fountain of youth, a few lifestyle changes can make a big difference in turning back the clock. Tips adapted from WebMD Green Living How Can You Waste Less Food and Become Environmentally Responsible? It’s one of those obvious but mostly ignored facts of everyday life: wasted food. However, the statistics might surprise you. About ⅓ of the world’s food intended for human consumption is lost or wasted. Sure, it might be easy to forget about those unfortunate leftovers, conveniently tossed in the trash. But all that wasted food is impacting this big, blue planet in a very bad way. Wasted food generates billions of tons of greenhouse gases. Food production, processing, and transportation to grocery stores create nearly 3.3 billion tons of emissions – and that’s from wasted foods alone. Decomposing organic waste in landfills produces methane, a greenhouse gas that holds 23 times more heat in the atmosphere than carbon dioxide. Nearly 25% of fresh, potable water in the United States is related to wasted food. Experts say global water consumption could be reduced by more than ⅓ by eliminating food waste. Here are 4 tips to curtailing food waste in your corner of the world: Plan your meals before you go shopping. Go through your refrigerator and your pantry before making your shopping list. Make reasonable serving sizes for your prepared meals. Freeze or reuse leftovers. Preserve produce with canning, freezing, pickling, or drying. Tip adapted from Conservation International Share the Wealth of Knowledge! Please share this market update with family, friends, or colleagues. We love being introduced!
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