THE WEEK ON WALL STREET
The stock market experienced solid gains last week, concluding the trading week on a positive note, thanks to robust corporate reports and favorable inflation news; this propelled the S&P 500 Index to achieve a new record high at the end of the week.
FACT OF THE WEEK
Future U.S. president Abraham Lincoln was born in Hodgenville, Kentucky, on February 12, 1809.
Lincoln, one of America’s most admired presidents, grew up a member of a poor family in Kentucky and Indiana. He attended school for only one year, but thereafter read on his own in a continual effort to improve his mind. As an adult, he lived in Illinois and performed a variety of jobs, including stints as a postmaster, surveyor, and shopkeeper, before entering politics. He served in the Illinois legislature from 1834 to 1842 and in Congress from 1847-1849, and then became an attorney. In 1842, Lincoln married Mary Todd; together, the pair raised four sons.
Lincoln was the tallest president at 6′ 4. As a young man, he impressed others with his sheer physical strength—he was a legendary wrestler in Illinois—and entertained friends and strangers alike with his dry, folksy wit, which was still in evidence years later. Exasperated by one Civil War military defeat after another, Lincoln wrote to a lethargic general if you are not using the army, I should like to borrow it for a while. An animal lover, Lincoln once declared, “I care not for a man’s religion whose dog and cat are not the better for it.” Fittingly, a variety of pets took up residence at the Lincoln White House, including a pet turkey named Jack and a goat called Nanko. Lincoln’s son Tad frequently hitched Nanko to a small wagon and drove around the White House grounds.
Lincoln’s sense of humor may have helped him to hide recurring bouts of depression. He admitted to friends and colleagues that he suffered from intense melancholia and hypochondria most of his adult life. Perhaps in order to cope with it, Lincoln engaged in self-effacing humor, even chiding himself about his famously homely looks. When an opponent in an 1858 Senate race debate called him two-faced, he replied, If I had another face, do you think I would wear this one?
Lincoln is remembered as The Great Emancipator. Although he waffled on the subject of slavery in the early years of his presidency, his greatest legacy was his work to preserve the Union and his signing of the Emancipation Proclamation.
MARKET MINUTE
S&P Tops 5,000
At the start of last week's trading, stocks faced downward pressure due to comments by Fed Chair Powell over the weekend, signaling that the Federal Reserve had no immediate plans to initiate interest rate cuts. Consequently, the yield on the two-year U.S. Treasury note, highly influenced by monetary policy, increased to its highest level in two months. By the end of trading on Monday, stocks had regained a significant portion of their previous losses. Influencing this market rally were positive corporate earnings reports. This trend continued throughout the week, contributing to the overall market momentum. By Friday, 67% of the companies listed in the S&P 500 had released their Q4 results, and an impressive 77% of those companies exceeded earnings expectations.
Investors expressed enthusiasm on Friday after a report indicating that December's inflation was lower than initially anticipated. This positive news revitalized buying activity, resulting in the S&P 500 surpassing 5,000 for the first time.
Economic Strength
The strength of the U.S. economy has come into the spotlight. An analysis conducted by The Wall Street Journal recently proposed that the economy's resilience could be attributed, at least in part, to the productivity driven by the technology sector.
What might rein in that productivity? One possible influence could be the increase in oil prices witnessed last week. Additionally, shipping companies have been imposing surcharges for several months to mitigate recent conflict, and these charges may contribute to global inflation this year, potentially dampening investor enthusiasm.
FINANCIAL STRATEGY OF THE WEEK
Managing the Risk of Outliving Your Money
“What is your greatest retirement fear?” If you ask some pre-retirees this question, “outliving my money” may be one of the top answers. In fact, 45% of workers say they fear outliving their savings and investments.
Retirees face greater “longevity risk” today. The Census Bureau says that Americans typically retire around age 62 for women and 65 for men. Social Security projects that today’s 63-year-olds will live into their mid-eighties, on average. This is a mean life expectancy, so while some of these seniors may pass away earlier, others may live past 90 or 100.
If your retirement lasts 20, 30, or even 40 years, how well do you think your retirement savings will hold up? What financial steps could you take in your retirement to try and prevent those savings from eroding? As you think ahead, consider the following possibilities and realities.
How will Social Security work in the future? For decades, Social Security took in more dollars per year than it paid out. That ongoing surplus – also known as the Social Security Trust Fund – may face funding challenges as early as 2034. Congress may act to address this financing issue before then, but the worry is that future retirees could get slightly less back from Social Security than they put in. It’s critical that pre-retirees estimate the amount of Social Security benefits they are expected to generate in the future.
Preparing for out-of-pocket health care costs. You can enroll in Medicare at age 65, but how do you handle the premiums for private health insurance if you retire before then? Striving to work until you are eligible for Medicare makes economic sense, and so does setting aside money to pay for health care costs. A healthy couple retiring at age 65 can expect to pay nearly $315,000 to cover health care expenses in retirement.
Luck is not a plan, and hope is not a strategy. Those who are retiring unaware of these factors may risk outliving their money. Creating a strategy may help you better prepare for retirement.