Stock Market Commentary
For the week of December 15, 2008
The Market
In another sign that the markets may have the worst-case scenario already factored into pricing, Wall Street shook off news Friday that the Senate had failed to pass a $14 billion bailout package for U.S. automakers. Just last week, the markets managed a Friday advance despite the Labor Department report showing the nation lost 533,000 jobs in November. Since its Nov. 20 low, the Dow has gained 14.3 percent, the S&P is up 16.9 percent and the NASDAQ has recovered 17.1 percent. This week, the Federal Reserve holds its December meeting, where it is expected to lower the federal funds rate by half a percentage point to 0.5 percent. For the week, the Dow lost 0.01 percent to end at 8,629.68, the S&P gained 0.48 percent to close the week at 879.73, and the NASDAQ rose 2.08 percent to finish the week at 1,540.72.
Historic High – The highest individual income tax rate in U.S. history was in 1944 and 1945 when the top rate on a single filer was 94 percent, according to the Tax Foundation.
Work More to Make More – One out of every four workers (24 percent) at least age 45 who were surveyed in September 2008 had increased the number of hours they were working to make up for the decline in their investment portfolio due to the downturn in the U.S. economy (Source: AARP, BTN Research).
Stop Working – Thirty-seven percent of American workers do not retire on their own timetable but rather are forced into retirement due to layoffs, illnesses or injuries (Source: Urban Institute, BTN Research).
Less In Stocks – The average American worker who is participating in his/her employer’s pre-tax 401k plan has 54 percent of retirement assets invested in the stock market. One year ago, the average balance in equities was 68 percent (Source: Hewitt Associates, BTN Research).
Sweeteners – In order to win Congressional support of the Troubled Asset Relief Program (TARP) bill, $150 billion of tax incentives were added to the legislation, including changes to the Alternative Minimum Tax law (Source: Wall Street Journal, BTN Research).
WEEKLY FOCUS – The Ghost of Good Intentions Past
With just two weeks left in 2008, we pause to reflect on everything we have accomplished this year – along with the things we planned to accomplish but didn’t. When it comes to the details of our finances – from budgets to bank statements, credit reports to receipts – many of us have procrastinated on getting our house in order. If economic uncertainty has left you overwhelmed by what you cannot control – Congress, Wall Street and the impending tax season – focus these last two weeks on those things you can control and enjoy a sense of
year-end accomplishment. We offer a few suggestions to get you started:
1. Close inactive accounts. If you have a bank or credit card account that you have not used recently, consider whether you should close it. You may be incurring fees for holding the account or it may be impacting your credit rating. In addition, closing an inactive account prevents it from being targeted for identity theft. Here’s a look at preventing identity theft.
2. Set your accounts up for online bill pay. Save the environment and a little money by eliminating the need for paper envelopes, checks and postage stamps.
3. Review your beneficiaries on all accounts to ensure they have been updated, particularly if you have married, been divorced or had a child this year.
4. Request your credit report. You are entitled to one free credit report each year.
5. Take the next step in organizing your paperwork for tax preparation. If you’ve got one big box of statements and receipts, you could start by labeling a large manila envelope or folder for each month and doing a quick sort by date, without worrying about what you need or don’t need. Or ask your tax preparer for a list of what you’ll need to prepare your tax return and get started on assembling those items.
6. Don’t forget to turn in your receipts for health care or day care expenses covered by flex spending plans. If you expect to have money left in your flex account, see if you can get in one more dental cleaning or another box of contact lenses. If you don’t use that money, you lose it!
Taking even a few small actions like these can help you end the year feeling more in control of your finances during a turbulent time for our nation’s economy. If you have recent or coming changes of your own – a marriage, divorce, new child or grandchild, or change in employment – please call our office to schedule an appointment to review what bigger actions may be needed to adjust your investment and risk plans.
* 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. Written by Securities America. SAI# 291193
