Daily Commentary

MarketMinder’s View: This takes a bit of a political slant, so we remind you we are politically agnostic, preferring no politician nor any party and assessing developments for their economic and market implications only. While this article targets a readership that might be questioning the validity of the Employment Situation Report and other data produced by the Bureau of Labor Statistics (BLS) under the incoming head, should the Senate confirm him, the points are valid and also address the opposite concerns—that data were politicized before the termination. Regardless of where you fall on that debate, consider the simple reality. “Even a commissioner with ill intentions would not be able to meddle with the data, at least not in the short run and not without anyone’s noticing. The monthly jobs report is produced on a tight schedule using a highly automated and decentralized process. Most of the data that underlies the monthly payroll figure is reported directly by companies through an electronic system that is subject to strict access limitations. The commissioner, who is the agency’s only political appointee, does not have access to the numbers until they have been made final.” Yes, big data revisions have sparked concerns, but the article rightly points out that this is due primarily to declining survey response rates. Keep that in mind when the benchmark revisions come out next month, as everyone expects larger revisions than usual. Lastly, while the article implies a politically motivated commissioner could interfere with data quality, that is more about reputation and creating perceptions of problems than actual problems. So we don’t think investors need to suddenly worry about data quality, especially when the data in question are sooooooooo backward-looking—and can be easily cross-checked against private-sector data.

MarketMinder’s View: The mystery is solved! Two weeks after the initial release date, UK July retail sales are out, as is the Office for National Statistics’ (ONS’s) explanation for the delay. As we surmised throughout the year, the agency’s seasonal adjustment factors were off, leading it to overstate retail sales’ volatility all year. Huge monthly swings are now gone from the revised figures, giving a clearer view of the trends. We now know sales’ inflation-adjusted decline lasted through January, followed by a sizable rebound in February and March, then a briefer pullback in April and May as households took stock amid widespread warnings that April’s employer tax hike would fuel hotter inflation. They started growing again in June, and July’s 0.6% m/m (which topped analysts’ expectations) extends the rebound. Next up, these revised data will feed into GDP revisions at the end of the month, so buckle up. And note the important market takeaways. One, data quality issues aren’t unique to the US and aren’t political. Two, forward-looking markets already lived through and pre-priced whatever revised data show. And UK stocks are having a pretty stonking great year, continuing to clock new highs as summer winds down.

MarketMinder’s View: Good news! If you don’t need your entire required minimum distribution (RMD) for living expenses, the recent tax bill broadens the benefits of qualified charitable distributions (QCDs). As the name implies, those are charitable donations made directly from your Individual Retirement Account (IRA). In addition to being tax free, these donations can help lower your taxable income if you are taking RMDs, broadening your access to a number of breaks. “Here’s how. Say a saver has $40,000 in required IRA withdrawals, and she first donates $10,000 of these to charities via QCDs. In this case, the taxable portion of the distribution drops to $30,000. As a result, QCDs reduce an IRA owner’s adjusted gross income, or AGI. In many cases Congress imposes extra taxes or shrinks tax breaks based on AGI or [modified adjusted gross income] MAGI. The latter, which comes in different flavors, is a modification of AGI. By contrast, itemized deductions for charity, state taxes, mortgage interest and others don’t reduce this income. More than a dozen key provisions are tied to AGI or MAGI, including the extra Medicare premiums known as Irmaa and the 3.8% surtax on certain investment income. In [President Donald] Trump’s megabill, the deductions for state and local taxes, seniors, tips, overtime and car-loan interest are all tied to MAGI.” The rest of the article has the administrative details, including a reminder to make the QCD before withdrawing any funds you will use for yourself, since “the first dollars out of an IRA count as the required minimum withdrawal.”