The Week on Wall Street
Traders assumed that the week’s biggest news event would be Federal Reserve Chairman Jerome Powell’s speech at the annual Jackson Hole banking conference. Instead, China seized the headlines by announcing new tariffs on U.S. goods.
Domestic stocks ended up lower for the week. The Nasdaq Composite fell 1.83%; the S&P 500, 1.44%; the Dow Jones Industrial Average, 0.99%. International stocks posted a weekly gain: the MSCI EAFE benchmark rose 0.96%.
FACT OF THE WEEK
On this day in 1939, the first pro baseball game ever to be aired on television covered the Cincinnati Reds doubleheader against the Brooklyn Dodgers at Ebbets Field.
The longest game on record was between the Chicago White Sox and the visiting Milwaukee Brewers on May 9, 1984. The game lasted 8 hours 6 minutes and went 25 innings.
MARKET MINUTE
Beijing Plans New Tariffs
Friday morning, China’s finance ministry stated it would levy import taxes of 5-10% on an additional $75 billion of American imports. One set of tariffs is slated to start September 1, targeting U.S. crops, meats, and seafood. A second set, effective December 15, will put tariffs on U.S.-made cars and car parts. In total, these taxes are scheduled for more than 5,000 American products.
Friday evening, the White House announced two rounds of 5% increases on existing U.S. tariffs on Chinese goods, to be successively implemented on September 1 and October 1. ,
Powell Reflects at Jackson Hole
Friday, Jerome Powell delivered an address on monetary policy at the Kansas City Fed’s annual Jackson Hole symposium. He noted that the global economy currently presented a “complex, turbulent picture,” and added that the Fed was “carefully watching developments” and would “act as appropriate.”
Investors wonder if the central bank will consider another rate cut at its September meeting. Comments from other Fed officials at Jackson Hole did not indicate a consensus on that matter.
Leading Indicators Rise
The Conference Board, the business research group known for its monthly Consumer Confidence Index, also publishes a monthly Leading Economic Indicator (LEI) Index. The Conference Board LEI provides a forward-looking analysis of the health of the business cycle, looking at ten factors ranging from consumer expectations to stock prices to construction activity.
In July, the LEI rose 0.5%, following 0.1% descents in May and June. This sudden increase offers optimism at a time when investors are wondering about the momentum of the economy.
Final Thought
Bond prices have risen around the world, leading to lower bond yields. In some instances, yields have turned negative. While the yield on the 10-year Treasury has also declined, it is still above 1.5%, notably exceeding the yields of similar-duration bonds in France, Germany, Spain, and the United Kingdom.
FINANCIAL STRATEGY OF THE WEEK
THE HEALTH SAVINGS ACCOUNT FOR MEDICAL EXPENSES
A Health Savings Account is a tax-advantaged savings account that is specifically for medical expenses. It is available to those who are enrolled in a high deductible health insurance plan.
The contributions made to the HSA are tax deductible and withdrawals are tax free if used for qualified medical expenses. The accumulation in HSAs is similar to that of an IRA and can be invested. Along with the tax deductible contributions and tax free withdrawals, the investment earnings in the account grow completely tax free.
The main goal of the HSA is to provide financial incentive to save for bigger future healthcare expenses and provide flexibility for qualified medical expenses not covered by a traditional plan.
There is one more advantage to Health Savings Accounts. If there are excess funds in the account, it will roll over year after year unlike a Flexible Spending Account (FSA). If the funds are not used for medical expenses then they can be withdrawn as a supplemental income source during retirement. However, doing so will trigger a taxable event and you will need to pay income tax on all HSA plan withdrawals. Please consult with your Financial Advisor to see if an HSA may be suitable for you.