Domestic markets fell last week due to negative trade news and declining tech stocks, with the S&P 500 and Dow both breaking their multi-week winning streaks. Meanwhile, the NASDAQ posted losses for 4 days in a row for the first time since April and experienced its worst September start since 2008. Overall, the S&P 500 lost 1.03%, the Dow dropped 0.19%, and the NASDAQ gave back 2.55% for the week. International stocks in the MSCI EAFE also declined, losing 2.89%.
FACT OF THE WEEK
There are more chickens in the world than there are people! In fact there are enough chickens in the world that every person can have at least six.
The Cboe Volatility Index (VIX), which can help gauge market fears, increased 15.8% last week. This increase matches what often occurs during September, when volatility returns after waning during the summer months. In fact, since 2007, volatility has been above average in September.
Of course, the change from one month or season to another isn't enough to trigger market losses and rising volatility. Let's analyze what drove these experiences last week.
1. Trade tension escalated between the U.S. and China.
The U.S. is getting closer to resolving trade issues with Mexico, Canada, and the European Union - and the countries may unite against China's trade approach. As a result, the likelihood of calming the trade dispute between the U.S. and China is fading. Last week, President Trump said he was prepared to add tariffs to another $267 billion in Chinese goods. These tariffs would be in addition to the $200 billion that may launch soon, which one expert said could reduce the S&P 500 by 5%.
2. Tech stocks dropped.
Last week, the technology sector declined by 2.9%. Tech has performed better than any other sector this year and has been a market leader for 3 years. But concerns about increasing regulation - with a focus on social media companies - weighed on investors' minds last week.
3. Wage growth increased.
The latest jobs report surpassed expectations, with the economy adding 201,000 jobs in August. Year-over-year wage growth also rose more than expected and hit its fastest pace since 2009. This wage increase contributed to stock losses, because it could mean that 2018 will have 2 additional interest rate increases - with more on the horizon for 2019.
Last week certainly provided data and headlines for investors to digest. But the job market, economic fundamentals, and market remain strong. For the moment, we'll continue to review the data we receive and seek new ways to help you prepare for what lies ahead.
WAYS TO SAVE MONEY ON YOUR FOOD BILL
Have you noticed your food budget getting a little pricey? Here are 5 ways to save money on your food bill:
- Skip organic if you peel it. Experts say you want organic fruits or veggies when you're eating the whole thing. But skip it for bananas and other foods that you typically peel. Save $1 on the price of an avocado.
- Max out couponing. Use more than one grocery store app per item. One user combined Ibotta, Checkout 51 and Shopmium and saved $500 a year.
- Go small. Research shows that when the size of your shopping cart is doubled, you buy a whopping 40 percent more. Grab a small cart and save up to $233 a month for two.
- Be a ninja shopper. Here's how cunning grocery shoppers save $10 or more a week on produce costs: They plan specific needs, rather than just randomly selecting. They show up to the farmers market late, when sellers slash prices. They buy overstocked produce at a discount. They use a grocery store loyalty card to get the best prices.
- Drink office coffee. If you spend $4 a day at Starbucks on a couple of tall coffees, that's $1,000 a year just for workdays. Many offices have free coffee. If not, a pound of $4.99 coffee from the supermarket produces 25 tall (12-ounce) cups. Net savings a year: up to $1,000.
FINANCIAL STRATEGY OF THE WEEK
COLLEGE FUNDING USING A 529 PLAN
One of the most popular ways to save for children's college education is the 529 College Savings Plan. It has been a great vehicle for those saving for a loved one's college because of the nice tax benefits a 529 Plan has to offer.
The 529 College Savings Plans are funded with aftertax contributions (you can't deduct them from your federal income tax), but contributions may receive a state tax break (either a deduction or a credit). Money compounds on a tax-free basis and withdrawals to pay for qualified college expenses are tax-free, too. Each person (a parent, a grandparent, etc.) can contribute up to $15,000 annual gift-tax exclusion, or $30,000 per married couple.
The downsides: Limited investment options. Research is required: Fees can be high, and asset allocations and glide paths vary by administrator.
Impact of this funding source on financial aid: 529 accounts are considered a parent asset on the FAFSA and are counted at 5.64%. Qualified 529 plan distributions are not counted as income on the FAFSA. If you are thinking about starting a 529 College Savings Plan, please contact us to see if it is right for you.