An open-ended commitment by the Federal Reserve to support American businesses and capital markets, along with the passage of a $2 trillion aid package, improved investor sentiment, and drove a strong rally in stock prices.
FACT OF THE WEEK
On March 30, 1984, Robert Cunningham, a thirty-year New York police veteran and a regular diner at Sal's pizzeria, offered his favorite waitress an odd tip: a half-interest in
a lottery ticket. Each picking three of the six numbers before purchasing a $1 ticket that became the world's most valuable tip the next night when the detective walked into Sal's Pizzeria after work with the winning ticket triumphantly clutched in his hand.
MARKET MINUTE
The Dow Jones Industrial Average jumped 12.84%, while the S&P 500 gained 10.26%. The Nasdaq Composite index rose 9.05% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, increased by 12.03%.
Stocks Rebound
A stunning string of Federal Reserve initiatives and the passage of a $2 trillion aid bill buoyed stocks this week, with the Dow Jones Industrial Average jumping by over 11%
on Tuesday, its best day since 1933. Stocks continued to strengthen the following day, registering their first back-to-back gains since February.
Despite a record 3.28 million jobless claims, stocks added to their gains for a third straight day. Stocks gave back some gains on the final day of trading to end an otherwise welcomed week of affirmative price action.
A Shift in the Conversation
The conversation around the domestic spread of the coronavirus focus has been on “flattening the curve,” with closures of local businesses and schools, a shift to working from home, and appeals for social distancing.
Hitting the pause button on the U.S. economy, however, has had its consequences, including massive job losses, sharp declines in business revenues, and disarray in the capital markets. The conversation shifts this week, moving on to how to restart the economy amid a pre-peak pandemic.
Final Thought
On a strictly definitional basis, the three-day surge in stock indices this week signaled a new bull market (when stocks rise 20% after having fallen 20% or more). But it’s hard for even professional investors to make sense of a market that enters a bear market and a bull market in the same month. This volatility certainly speaks to the health and economic uncertainties that exist.
FINANCIAL STRATEGY OF THE WEEK
Pursuing your retirement dreams is challenging enough without making some common and very avoidable mistakes. Here are eight big mistakes to steer clear of, if possible.
- No Strategy: Yes, the biggest mistake is having no strategy at all. Without a strategy plan, you may have no goals, leaving you no way of knowing how you’ll get there—and if you’ve even arrived. Creating a strategy may increase your potential for success, both before and after retirement
- Frequent Trading: Chasing “hot” investments often leads to despair. Create an asset allocation strategy that is appropriately diversified to reflect your objectives, risk tolerance, and time horizon; then make adjustments based on changes in your situation, not due to market ups and downs.
- Not Maximizing Tax-Deferred Savings: Workers have tax-advantaged ways to save for retirement. Not participating in your employer’s 401(k) may be a mistake, especially when you’re passing up free money in the form of employer-matching contributions.
- Prioritizing College Funding over Retirement: Your kids’ college education is important, but you may not want to sacrifice your retirement for it. Remember, you can get loans and grants for college, but you can’t for your retirement.
- Overlooking Healthcare Costs: Extended care may be an expense that can undermine your financial strategy for retirement if you don’t prepare for it.
- Not Adjusting Your Investment Approach Well Before Retirement: The last thing your retirement portfolio can afford is a sharp fall in stock prices and a sustained bear market at the moment you’re ready to stop working. Consider adjusting your asset allocation in advance of tapping your savings, so you’re not selling stocks when prices are depressed.
- Retiring with Too Much Debt: If too much debt is bad when you’re making money, it can be deadly when you’re living in retirement. Consider managing or reducing your debt level before you retire.
- It’s Not Only About Money: Above all, a rewarding retirement requires good health, so maintain a healthy diet, exercise regularly, stay socially involved, and remain intellectually active.