The Week on Wall Street
Stocks advanced for a second straight week. The S&P 500 benchmark rose 0.47%; the Nasdaq Composite, 0.70%; the Dow Jones Industrial Average, 0.41%. Overseas shares, as tracked by the MSCI EAFE developed markets index, added 0.20%.
FACT OF THE WEEK
On this day in 1837, Charles Goodyear, a bankrupt hardware merchant from Philadelphia obtained his first rubber patent followed by the vulcanization of rubber patent two years later.
His great discovery often cited as one of the most celebrated accidents, occurred after his gum landed on a potbellied stove, creating a virtually new substance, waterproof rubber.
The market seemed to put its recent preoccupation with trade issues aside, with attention shifting to this week’s Federal Reserve monetary policy meeting. Traders in futures markets now believe the Fed will make a rate cut in July, so its June policy statement will be of great interest.
Oil Prices Rollercoaster
Attacks on vessels in the Strait of Hormuz, the busy oil shipping channel, helped to push the price of West Texas Intermediate crude 2.2% higher Thursday, just a day after a 4% fall. Even so, WTI crude lost 2.7% in five days, closing Friday at $52.51 on the New York Mercantile Exchange.
Investors wondered at mid-week if tensions in the Persian Gulf region would soon impact oil output and transport. Looking beyond the short term, however, the International Energy Agency reduced its 2020 projection for global oil demand.
Households Bought More in May
Retail sales rose 0.5% last month, according to the Department of Commerce. Across the year ending in May, they advanced 3.2%. The previously announced 0.2% April retreat was revised into a 0.3% gain.
These numbers affirm strong household spending this spring. Consumer spending accounts for roughly two-thirds of the nation’s gross domestic product.
In terms of news, Wednesday offers what may prove to be the biggest economic event of the week: a Federal Reserve policy statement and press conference.
FINANCIAL STRATEGY OF THE WEEK
Use a Defined Benefit Plan
A defined benefit plan looks a lot like a traditional pension plan where a team of investing professionals do all the work for you. Employers contribute to the plan and employees have no input in the investing choices. It can potentially be a great choice if you’re a small business owner looking to put away a significant amount of money for retirement. Here are some pros and cons of defined benefit plans:
Pros of a Defined Benefit Plan:
- Very high contribution limits. How much you can contribute depends on several factors, but you could potentially put away more than $100,000 per year for retirement.
- Can be combined with other plans. You can contribute to a defined benefit plan while simultaneously contributing to a 401(k) or SEP IRA.
- Lower taxes. Contributions can be written off as business expenses, thereby reducing your taxable income.
- Tax deferral. Growth of contributions is tax-deferred.
Cons of a Defined Benefit Plan:
- Expensive. Defined benefit plans are complicated to set up and somewhat costly to run compared to 401(k) Plans.
- Little wiggle room. You commit to funding the plan at a certain level, and you are stuck with that even in a year when money is tight.
- The employer takes 100% of investment risk.
As always, please contact my office with any questions or financial concerns you may have.
Have a great week!