The Week on Wall Street
The stock market suffered through another volatile week as it wrestled with the health and economic fallout of the domestic spread of the coronavirus. Swift and decisive actions by the Federal Reserve and policy responses from the federal government did not keep stocks from recording losses for the week.
FACT OF THE WEEK
On the morning of March 18, 1990, two thieves dressed as police officers walked into the Isabella Stewart Gardner Museum in Boston and walked out with 13 pieces of art valued at half a billion dollars. Thirty years later, it remains the most infamous unsolved
Stocks Slide Further
The stock market continued its retreat amid fears of a darkening economic impact from the coronavirus pandemic. Despite a Sunday night announcement by the Federal Reserve that it was cutting its benchmark interest rate by 100 basis points to nearly zero and taking steps to increase market liquidity, stocks opened the week sharply lower, setting the stage for another difficult week for investors.
Progress was reported on coronavirus testing capacity and on the efforts to combat the infection. At the same time, Washington, D.C., advanced legislation to provide financial assistance to unemployed workers and affected businesses. Neither did much to help investor anxieties, however. Stocks slid in the closing hours of the trading week, leaving stock indices near their lows of the week.
Central Bankers Go Big
The response of global central bankers to mitigate the economic impact of the coronavirus has been broad-ranging. In addition to its 100 basis point cut in the federal funds rate, the Federal Reserve also took actions to provide additional credit access to banks, committed to buying at least $700 billion in Treasury and mortgage bonds, and set up a new lending facility to backstop money market funds.
The European Central Bank also announced an $800 billion-plus bond-buying program to support member economies. The Bank of England cut its benchmark lending rate to 0.1% and pledged to buy over $200 billion in government and investment-grade corporate bonds, while the Bank of Japan said that it would double its purchases of stocks and increase loans to businesses.
Investors are struggling with answers to two unknowns: the trajectory of the coronavirus spread and its economic cost. With coronavirus testing beginning to ramp up, these numbers may start drawing a firmer picture of the growth of coronavirus infections in the U.S. Economic indicators, such as jobless claims for unemployment insurance and the Index of Leading Economic Indicators, and may provide clues regarding the economy.
FINANCIAL STRATEGY OF THE WEEK
LESSER KNOWN PROVISIONS OF THE SECURE ACT
The SECURE Act passed into law in late 2019 and changed several aspects of retirement investing. While the new law provisions have made headline attention, several other smaller parts of the SECURE Act have gained the interest of individuals who are raising families and paying off student loan debt. Here's a look at a few.
For College Students
For those who have graduate funding, the SECURE Act allows students to use a portion of their income to start investing in retirement savings. The SECURE Act also contains a clause to include "aid in the pursuit of graduate or postdoctoral study." A grant or fellowship would be considered income that the student could invest in a retirement vehicle. One other provision of The SECURE Act: you can use your 529 Savings Plan to pay for up to $10,000 of student debt or to pay for costs associated with an apprenticeship.
Funds For A Growing Family
Are you having a baby or adopting? Under the SECURE Act, you can withdraw up to $5,000 per individual, tax-free from your IRA to help cover costs associated with a birth or adoption. However, there is the stipulation that requires plan withdrawals within the first year of this life change; otherwise, you may be open to the tax penalty.
Under the SECURE Act, adding an annuity to your Employer-sponsored investment portfolio has become a more straightforward process. The benefit is that annuities may provide retirees with guaranteed lifetime income. The downside, however, is that annuities are often the incorrect vehicle for investors just starting out or far from retirement age.
The best course is to make sure that you review any investment decisions or potential early retirement withdrawals with a financial advisor.
As always, please contact my office with any questions or financial concerns you may have.
Have a great week!