THE WEEK ON WALL STREET
Stocks rose last week despite conflicting stories from economic reports. The Dow Jones Industrial Average inched up 0.29 percent while the S&P 500 Index powered ahead 1.31 percent. The Nasdaq Composite led, picking up 2.38 percent. The MSCI EAFE Index tracks developed overseas stock markets and rose 1.29 percent for the week through Thursday’s close.
FACT OF THE WEEK
Then 34-year-old director Steven Spielberg reportedly drew on his own experiences as an unusually imaginative, often lonely child of divorce for his science-fiction classic E.T. the Extra-Terrestrial, which was released on June 11, 1982.
For Spielberg, E.T. marked a return to territory he had first visited with the classic Close Encounters of the Third Kind (1977), in which Richard Dreyfuss plays a man who comes face to face with a fearsome alien force that eventually proves to be human-friendly. With E.T., Spielberg would create an even more appealing vision of alien life, in the form of a diminutive creature with wrinkled skin and a glowing belly. Spielberg worked closely with the screenwriter, Melissa Mathison (future wife of Harrison Ford, the star of Spielberg’s Indiana Jones films) to capture on film the story of the wise, kind and cuddly alien botanist who is stranded on Earth and needs the help of a sensitive little boy, Elliott (Henry Thomas) to get back home. Elliott and his siblings, played by Robert MacNaughton and a seven-year-old Drew Barrymore, hide E.T. (as the alien dubs himself) in a closet to keep him out of sight from prying adults, including their mother, who is distracted by her painful separation from her husband. Before long, a special link develops between E.T. and Elliott, who will eventually risk his own safety to return E.T. to his planet.
From the time that E.T. had its first showing, on closing night at the 1982 Cannes Film Festival, the film’s buzz was overwhelmingly positive. Richard Corliss raved in TIME magazine: “[E.T.] is a perfectly poised mixture of sweet comedy and ten-speed melodrama, of death and resurrection, of a friendship so pure and powerful it seems like an idealized love.” TIME also included the fictional alien in its list of candidates for Man of the Year–the first film character to receive that honor. Nominated in nine categories at the 1983 Academy Awards, including Best Picture and Best Director, the film won four Oscars, for Best Sound Effects Editing, Best Visual Effects, Best Original Score and Best Sound.
E.T. had stupendous success at the box office, eventually raking in some $435 million (it was re-released in 1985 and a special 20th-anniversary edition was issued in 2002).
MARKET MINUTE
All Eyes On The Jobs Report
Weak manufacturing data prompted declines early in the week, reflecting investor concerns over the economy's strength. However, stocks rallied in anticipation of the jobs report on Friday. The market reaction was mixed when the stronger-than-expected jobs report finally came. The S&P 500 touched a record high intraday before profit-taking late in the session.
The Catalyst That Wasn’t
The week closed with a jobs report that underscored the economy's resilience while highlighting the data's mixed nature. The 272,000 jobs added in May were higher than the 190,000 economists expected. At the same time, wages rose 4.1 percent from a year ago. The strong jobs report and surprise wage increase supported the narrative that the Fed may now wait longer before considering a move on interest rates. Although inflation now exceeds the central bank’s 2 percent target, the jobs report suggests that economic growth remains powerful despite higher short-term rates.
FINANCIAL STRATEGY OF THE WEEK
Starting a Roth IRA for a Teen
Want to give your child or grandchild a financial head start? A Roth IRA might be a choice to consider. Read on to learn more about how doing this may benefit both of you.
Rules for setting up a Roth IRA. If your teen has an earned income, you may be able to set up a Roth IRA for them. For example, if your 15-year-old has earned $7,000 at a summer job, you can set up an account for them up to $7,000 (the maximum annual Roth IRA contribution). The amount cannot exceed the teen’s income. Keep in mind that money that you contribute to the Roth IRA can count as a gift within your $18,000 yearly gift tax exclusion ($36,000 for a married couple).
Looking ahead to the future. If money is withdrawn from a Roth IRA before age 59½, a 10% federal tax penalty may apply. There is, however, a notable exception. Up to $10,000 of investment earnings can be taken out of a Roth IRA at any time if the money is used to buy a first home. In this instance, the IRS may waive the early withdrawal penalty. Should your teenager become a parent someday, a portion of those Roth IRA assets might also be utilized to pay college tuition costs for themself or their child.
Greater earning potential, thanks to the magic of compound interest. Setting up a Roth IRA for a teenager is a great way to introduce them to basic financial concepts, such as compound interest. Giving your teen a hands-on learning experience may help them understand the value of saving for the future. You may also be facilitating the development of your children’s or grandchildren’s financial habits.
There are a few things to consider when setting up a custodial Roth IRA. Setting up a Roth IRA for a minor is often referred to as a custodial IRA. Until the child is able to take it over, you act as the custodian of the account. Individual state laws determine when the minor child is able to take over management of the Roth IRA for themselves.
A tax professional can provide guidance that may help ensure that you and your minor child are following all federal and state regulations. This article is for informational purposes only. It's not a replacement for real-life advice, so make sure to consult your tax professional before modifying any Roth IRA strategy. Tax-free and penalty-free withdrawals also can be taken under circumstances other than first-home purchases, such as the owner's death. The original Roth IRA owner is not required to take minimum annual withdrawals. To qualify for the tax-free and penalty-free withdrawal of earnings, the teenager must meet a five-year holding requirement and occur after age 59½.
As a reminder: RFG will be transitioning to OSAIC Wealth next weekend (June 15-17, 2024). Please watch this video and contact my team with any questions.
In case you missed it, watch the Video regarding our transition from Securities America to OSAIC Wealth.