THE WEEK ON WALL STREET
Stocks ended the week with a strong gain as traders continued to focus on tariff talks while appearing to overlook upbeat news on inflation. The S&P 500 Index rose 5.70 percent, while the Nasdaq Composite Index gained 7.29 percent. The Dow Jones Industrial Average picked up 4.95 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, increased by 0.72 percent.
FACT OF THE WEEK
Fun facts about Taxes
April 15 is usually marked each year as the traditional deadline for filing taxes, so it’s not exactly celebrated as a holiday. But how did April 15 become the big day--and how did we get the IRS in the first place?
How did the Internal Revenue Service come about?
The IRS has its roots in the Civil War when a revenue bureau was set up to collect taxes levied to support the war effort in the North. That tax expired in 1872, but the Commissioner of Internal Revenue and its successor have remained in business since.
Was there really a national income tax before the one we have now?
Aside from the Civil War tax on the Union states, Congress passed a national income tax in 1894, which was ruled unconstitutional the following year by the U.S. Supreme Court in Pollock v. Farmers’ Loan & Trust Company. The Court said it was a direct tax not apportioned according to the population of each state, in violation of Article I, Section 9, of the Constitution.
So why is April 15 usually the big Tax Day?
Tax Day hasn’t always been on April 15. The first Tax Day was on March 1, which was a little over a year after the 16th Amendment was ratified. Just before Prohibition started, Tax Day was moved to the Ides of March, aka March 15. In 1955, the deadline was pushed back to April 15, so the IRS could spread out the work involved with processing all the forms. The date of Tax Day changes if it is on a weekend or conflicts with a holiday in the District of Columbia.
How long was the first tax form?
It was four pages long, including instructions. Check out what the first 1040 form ever looked like here (PDF). At the time, the average annual income was $800.
Is it really that hard to do your own taxes?
It depends on your skill level, but the income tax seems to have befuddled Albert Einstein. According to a website called The Quote Investigator, there may be some truth to a quote allegedly uttered by Einstein: “The hardest thing in the world to understand is income taxes.” The site tracked down the saying to Einstein’s personal accountant.
What was the highest tax rate ever?
During World War II, the highest tax bracket was taxed at 91 percent and the lowest tax bracket was 23 percent.
MARKET MINUTE
Stocks Rebound
Stocks rallied on Monday after a report surfaced that the administration was considering a 90-day pause on tariffs. But when the White House clarified its position, sellers stepped in. On Tuesday, prices jumped at the next opening bell after the Treasury Secretary said the U.S. was open to tariff negotiations with trading partners. The rally stalled and reversed on news the administration was adjusting tariffs on Chinese imports.
After the White House announced a 90-day pause on specific tariffs on Wednesday, markets pushed higher. The S&P 500 gained 9.5 percent, its largest one-day increase in 17 years. Stocks fell again Thursday morning, appearing to overlook an upbeat Consumer Price Index report showing that core inflation (excluding food and energy) rose at a 2.8 percent annual rate–the best number in more than four years. Stocks finished the week with a powerful rally, capping a volatile trading week.
Watching the Bond Market
The yield on the 10-year Treasury rose more than 50 basis points for the week, marking one of the most significant moves on record. (When bond yields increase, bond prices tend to move lower.) The week’s action was unexpected. In the past, investors have turned to U.S. bonds during market turbulence. However, the ongoing tariff talks have, at least temporarily, influenced how some overseas investors view U.S. bonds. The bond market activity influenced the mortgage market, where the average rate on the popular 30-year fixed mortgage closed Friday at 7.1 percent, its highest level in two months.
FINANCIAL STRATEGY OF THE WEEK
Eight Mistakes That Can Upend Your Retirement
Pursuing your retirement dreams is challenging enough without making some common, and very avoidable, mistakes. Here are eight big mistakes to steer clear of, if possible.
No Strategy: Yes, the biggest mistake is having no strategy at all. Without a strategy, you may have no goals, leaving you no way of knowing how you’ll get there—and if you’ve even arrived. Creating a strategy may increase your potential for success, both before and after retirement.
Frequent Trading: Chasing “hot” investments often leads to despair. Create an asset allocation strategy that is properly diversified to reflect your objectives, risk tolerance, and time horizon; then make adjustments based on changes in your personal situation, not due to market ups and downs.
Not Maximizing Tax-Deferred Savings: Workers have tax-advantaged ways to save for retirement. Not participating in your employer’s 401(k) may be a mistake, especially when you’re passing up free money in the form of employer-matching contributions.
Prioritizing College Funding over Retirement: Your kids’ college education is important, but you may not want to sacrifice your retirement for it. Remember, you can get loans and grants for college, but you can’t for your retirement.
Overlooking Healthcare Costs: Extended care may be an expense that can undermine your financial strategy for retirement if you don’t prepare for it.
Not Adjusting Your Investment Approach Well Before Retirement: The last thing your retirement portfolio can afford is a sharp fall in stock prices and a sustained bear market at the moment you’re ready to stop working. Consider adjusting your asset allocation in advance of tapping your savings so you’re not selling stocks when prices are depressed.
Retiring with Too Much Debt: If too much debt is bad when you’re making money, it can be deadly when you’re living in retirement. Consider managing or reducing your debt level before you retire.
It’s Not Only About Money: Above all, a rewarding retirement requires good health, so maintain a healthy diet, exercise regularly, stay socially involved, and remain intellectually active.