Financial insights for the week ending January 3, 2025
For the week ending January 3rd, the S&P 500 fell by 0.48%, the NASDAQ was down 0.51%, and the Dow Jones Industrial Average decreased by 0.60%.
This week was negative for most stock market indices and marked by heightened volatility. The market adjusted to the start of the 2025 trading year, a period often characterized by selling and repositioning for tax reasons. In geopolitical news, countries are seemingly bracing for the incoming Trump administration. China announced export controls on 26 U.S. entities on Thursday, including defense giants like General Dynamics, Boeing, and Lockheed Martin. While many of these companies do limited direct trade with China, the move is widely seen as a symbolic warning shot to the incoming administration, who have threatened increased tariffs of their own (source: https://www.globaltimes.cn/page/202501/1326152.shtml). Across the Atlantic, Ukraine halted natural gas transfers from Russia to the European Union on Wednesday after a 5-year transit agreement expired. While this move was expected, it underscores the steady deterioration of diplomacy between the two nations. Ukraine is likely positioning itself for leverage in anticipated armistice negotiations, while Russia’s potential "win" in those talks could be hollow. Recent U.S. estimates from July 2024 indicate Russian military casualties—killed and injured—are nearing 50% of their pre-war standing forces, making any future-announced victory decidedly pyrrhic (source: https://archive.is/mffkH).
Next week promises to be an eventful one, as key employment data for the previous month is set to be released. On Tuesday, the Job Openings and Labor Turnover Survey (JOLTS) will be released, followed by the U.S. Employment Report and unemployment rate on Friday—both of which are likely to draw significant attention from investors. Additionally, the Federal Reserve will release the Minutes from its December FOMC meeting on Wednesday, providing deeper insight into the reasoning behind its decision to cut rates by 0.25% on December 18, 2024. The Fed also signaled that future rate cuts in 2025 are expected to be limited, which will be first tested at their next meeting on January 28th.
For this week's financial planning tip, let’s take a stroll down the tax planning road—specifically, the importance of hiring an accountant and understanding their role. Tax preparation and tax planning are not the same. When you hire an accountant to do your taxes, their primary focus is typically on reporting and filing your taxes accurately and on time—not necessarily on helping you reduce your tax liability now or in the future. This may seem counterintuitive, but with tight deadlines, their goal is to complete your return and move on to the next client. If you want your accountant to assist with tax planning, we recommend scheduling a separate appointment with them (after April 15th, of course) to discuss strategies for reducing your taxes and planning for the years ahead. While paying taxes is a civic duty that keeps the economic lights on, if the rules allow you to save, it’s important to take full advantage of all legal strategies to minimize your tax burden.
Enjoy your day! Come back next Saturday for our latest commentary. We are here to answer any of your financial questions.