Stock Market Commentary
For the week of September 28, 2009
A drop in durable manufactured goods and an August new home sales report that fell below analysts’ expectations left investors uncertain about the strength of the economic recovery. Last week marked a pause in a six-month rally that has brought the S&P back nearly 60 percent over the 12-year low reached in March. The Dow ended the week down 1.58 percent to close at 9,665.19. The S&P dropped 2.22 percent to finish the week at 1,044.38, while the NASDAQ fell 1.97 percent to end the week at 2,090.92.
Insurance – The “Troubled Asset Relief Program” (TARP) signed into law by President Bush on Oct. 3, 2008, included legislation to raise the FDIC deposit insurance levels from $100,000 per depositor per insured institution to $250,000 through Dec. 31, 2009. In May 2009, Congress extended the $250,000 level to Dec. 31, 2013 (Source: FDIC, BTN Research).
Getting Better – Nearly half of Americans surveyed (46 percent) believe the U.S. economy is going to improve in the upcoming 12 months, nearly double the percentage (22 percent) that believe the economy will get worse (Source: Harris Poll, BTN Research).
Moving On Up – Since 2005, China has moved from the world’s seventh largest economy to the third largest today. China passed Italy, then France, then the U.K., and most recently Germany. Only the economies of Japan and the U.S. are larger (Source: The Economist, BTN Research).
Saving For The Future – The Treasury Department released a proposal on Saturday, Sept. 5, 2009, that would allow a terminating employee that is due pay to him/her for unused vacation time to deposit those funds into the employee’s pre-tax 401(k) retirement plan (Source: Treasury Department, BTN Research).
WEEKLY FOCUS – Should You Co-Sign A Credit Card For Your Student?
Between 2004 and 2008, the median debt owed by college students with at least one credit card grew 74 percent, according to How Undergraduate Students Use Credit Cards, a 2009 study by student-loan provider Sallie Mae. Eighty-four percent of college students have a credit card, and of those, 82 percent are carrying a balance, the study said. Unfortunately, college students often lack the financial skills to manage their credit wisely, and many leave college with large amounts of debt and damaged credit reports.
In May, Congress passed the Credit Card Accountability, Responsibility and Disclosure (CARD) Act to stem the flood of easy credit and help prevent students from drowning themselves in debt. The law takes effect Feb. 22, and one of the biggest provisions is the requirement that a person under 21 supply financial documentation confirming his or her ability to repay their debts or have a co-signer.
Should you co-sign on a credit card for your high school or college student? On the downside, you become responsible for the balance on the card, and any skipped or late payments will negatively impact your credit score ranges along with the student’s. On the upside, helping your student establish good credit can help him or her in securing a job (many employers now do a credit check on potential hires) or renting an apartment after graduation.
If co-signing makes you uneasy, you might consider options like authorizing your student as a user on your credit card, which can help them build a good credit score history, or helping your student get a secured credit card, which requires a deposit and limits the available credit to that amount. Should you decide to co-sign, set expectations and educate your student on how to use the card wisely. You should also establish online access and alerts so you can check balance and payment history and get an email or text warning when your student is in danger of missing a payment or exceeding the limit.
You and your student can get more information on credit card debt and other college financial issues at Sallie Mae’s website. We also welcome the opportunity to help you and your family with the financial issues related to life’s milestones, whether it’s a student going off to college, planning your retirement when the nest is empty or talking to aging parents about their finances. Please feel free to call us anytime.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment grade bond, fixed rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America. SAI# 300417