The IRS expects self employed anybody to pay federal income tax throughout the year, and if you don’t pay estimated tax each quarter, Uncle Sam can charge you interest and impose nonpayment penalties.
You owe tax for that quarter, as long as you earn income in a given quarter. You must pay federal income tax, along with Social Security and Medicare taxes, known collectively as ‘selfemployment’ tax. The American stock market has reached new highs this summer for some unsettling reasons. Federal amount income tax you pay is based on your adjusted gross income.
While reverting to an upward trend that has prevailed since That wasn’t unexpected, since the sharp decline set off in late June by the British vote to leave the European Union, stocks have recovered smartly. This time, though, a lot of the factors that typically propel a rising market are absent. Corporate earnings aren’t strong, the economy isn’t booming, and stock prices aren’t cheap. Relief rallies often have occurred after market shocks.
It hasn’t mattered because the fuel that is making the stock market soar seems to be coming from outside the stock market entirely, none of those fundamental indicators have been auspicious.
In fact, it appears that we need to thank the bond and foreign exchange markets for providing the underpinnings for the stock rally.
Bonds have risen sharply in value, and their yields, which move in the opposite direction, have plummeted. That has helped make stocks rise, even though stock valuations aren’t particularly appealing after seven price years increases. That has made stock prices look cheap and dividends generous. The average dividend for the Standard Poor’s 500stock index is about 1 percent much higher than the yield on a ’10year’ Treasury note. Many investors have moved to stocks in search of a better deal.
Not relative to bonds, said David Rosenberg, chief economist and strategist at Gluskin Sheff in Toronto, on a historical basis, the overall stock market has become expensive.
Not all stock parts market are being affected in the same way. Another factor, the strong dollar, has made stock sectors that are fairly impervious to exchangerate shifts especially attractive. Basically, that’s story part. There’s more. Because the bond market has become so expensive and bond yields have gotten so low, people have been looking in the stock market for yield, in dividends form. Consequently, say, euros or pounds translate into fewer dollars, American stocks with predominantly domestic revenue streams usually benefit, when foreign earnings in.
That’s why many American utility and phone company stocks which both pay high dividends have been soaring. Moffett is skeptical about the prospects for the sector’s stocks. Most of them are overvalued, he says. These stocks have hit a sweet spot, said Craig Moffett, a senior analyst at MoffettNathanson, who focuses on telecom companies, including Verizon, ATT, ‘TMobile’ and Sprint. Let me tell you something. Telecom companies have far outpaced the market as a whole, even though Mr, as a group.
The 10year Treasury note, for example, has had an average yield of more than 6 percent since 1965 but has fallen to less than 5 percent today, and that counts as a solid yield in the current global market.
Still, among the world’s major economies, the United States is perhaps the strongest now, and the Federal Reserve signaled on Wednesday that it remained open to a rate increase this year. Central banks have held interest rates low to try to stimulate the economy, and with inflation at very low levels, bond investors have accepted minuscule or negative yields. Negative yields attest to severe global economic weakness. More than