THE WEEK ON WALL STREET
Stocks posted their best week of the year, sparked by news that the dovish Fed decided to keep rates steady and signaled three rate cuts were still possible this year.
FACT OF THE WEEK
In one of the most memorable moments of red carpet fashion risk-taking, Icelandic pop singer Björk appears at the 73rd annual Academy Awards on March 25, 2001 infamous “swan dress.”
On Oscar night, the Icelandic singer turned heads by showing up on the red carpet in an outfit resembling a dead swan. Over a nude body stocking and above a large white tutu-like skirt, the swan’s neck was draped around Björk's shoulders like a shawl, with its head lying on her chest. Björk took the stage to perform her nominated song, “I’ve Seen It All,” which lost in its category to Bob Dylan’s “Things Have Changed” from Wonder Boys.
MARKET MINUTE
Stocks Bounce Back
As widely expected, the Fed left rates unchanged at the conclusion of its two-day meeting. But somewhat less expected, the Fed signaled its inclination to cut interest rates three times this year—each time by a quarter percentage point. That was a positive surprise for some, who worried that recent hot inflation reports would cause the Fed to reconsider its stance. Markets pushed higher Wednesday following the news, with all three averages closing at record highs. The rally continued through Thursday, boosted further by news that existing home sales rose 9.5 percent in February.
The week’s rally was broad-based overall, with 10 of the 11 S&P 500 sectors posting gains (healthcare dropped slightly). At one point late in the week, nearly one in four S&P 500 stocks were trading at 52-week highs. That was the highest proportion in three years, which supports the idea that the rally was broadening out from mega-cap tech stocks.
Turning Point
The Federal Open Market Committee’s decision marks a turning point as the Fed signaled that its target range of 5.25 to 5.50 percent has topped out. That target range, in place since late last year, is the highest level in 23 years. “We believe that our policy rate is likely at its peak for this type of cycle,” said Fed Chair Powell at the post-meeting press conference. He added that if the economy keeps on its current course, that the FOMC would likely “begin dialing back policy restraint at some point this year.” If the FOMC votes to ease it at its June meeting, it would be the first cut in four years.
FINANCIAL STRATEGY OF THE WEEK
Making a Charitable Contribution
Why sell shares when you can gift them? If you have appreciated stocks in your portfolio, you might want to consider donating those shares to charity rather than selling them.
Donating appreciated securities to a tax-qualified charity may allow you to manage your taxes and benefit the charity. If you have held the stock for more than a year, you may be able to deduct from your taxes the fair market value of the stock in the year that you donate. If the charity is tax-exempt, it may not face capital gains tax on the stock if it sells it in the future.
Keep in mind this article is for informational purposes only. It's not a replacement for real-life advice. Make sure to consult your tax and legal professionals before modifying your gift-giving strategy.
There are several reasons to consider donating highly appreciated stock to a tax-exempt charity. For example, you may own company stock and have the opportunity to donate some shares. There also are potential tax benefits to consider if you donate appreciated securities that you have owned for at least one year.
If you sell shares of appreciated stock from a taxable account and subsequently donate the proceeds from the sale to charity, you may face capital gains tax on any gain you realize, which effectively trims the benefit of cash donation.
When is donating cash a choice to consider? If you provide the charity with a cash gift, there may be some limitations. Cash gifts are generally deductible up to 50% of adjusted gross income. As an example, if a donor in the top 37% federal tax bracket gives a 501(c)(3) non-profit organization a gift of $5,000, the net may be $3,150 with $1,850 realized in tax savings. A donor should also need to consider state taxes in addition to federal.
If you donate shares of depreciated stock from a taxable account to a charity, you can only deduct their current value, not the value they had when you originally bought them.
Remember the tax rules for charitable donations. If you donate appreciated stock to a charity, you may want to review IRS Publication 526, Charitable Contributions. Double-check to see that the charity has non-profit status under federal tax law, and be sure to record the deduction on a Schedule A that you attach to your 1040.
If your contribution totals $250 or more, the donation must be recorded – that is, the charity needs to give you a written statement describing the donation and its value and whether it is providing you with goods or services in exchange for it.
If your total deduction for all non-cash contributions in a tax year exceeds $500, then complete and attach Form 8283 (Noncash Charitable Contributions) to your 1040 when filing. If you donate more than $5,000 of property to a charity, you will need to provide a letter from a qualified appraiser to the charity (and, by extension, the IRS) stating the monetary value of the gift(s).
Gifting cash or other assets to an organization is a wonderful opportunity. But keep in mind that tax rules are constantly being adjusted, and there’s a possibility that the current rules may change. Make certain to consult your tax and legal professionals before starting a new gifting strategy.
Have a great week!