The Week on Wall Street
Investor sentiment turned negative last week following the subdued economic forecast released from the Federal Reserve amid a growing number of COVID-19 cases in states executing reopening phases.
FACT OF THE WEEK
Honey bees are big money makers for U.S. agriculture, with pollination accounting for about $15 billion in added crop value every year. In the U.S., more than 100 crops rely heavily on honey bee pollination, accounting for one out of three bites of food we consume.
The Dow Jones Industrial Average dropped 5.55%, while the S&P 500 lost 4.78%. The Nasdaq Composite Index slipped 2.30% for the week. The MSCI EAFE Index, which tracks developed stock markets overseas, fell 3.10%.
The optimism driving stock price increases over the last several weeks lost momentum following reports of a recent jump in COVID-19 cases, sparking new worries of a second wave slowing the economic recovery. A sober forecast for the economy by the Federal Reserve further dampened investor sentiment.
The week started upbeat with "reopening" stocks, e.g., financials, transportation, retailers, travel and leisure, and industrials, leading the way higher. But the positive outlook was soon lost as stocks saw a mixed performance on Tuesday and Wednesday, continuing downward, with the S&P 500 losing 5.9% on Thursday.
Amid a volatile week, big technology companies resumed their market leadership, with the NASDAQ Composite closing above 10,000 for the first time. Stocks pared their losses on Friday, but it wasn't enough.
Fed Forecasts Economic Growth and Interest Rates
The Federal Reserve left rates unchanged on Wednesday and indicated that they will likely remain near zero while maintaining monthly purchases of Treasury bonds and mortgage-backed securities.
The Fed also issued its forecasts for 2020-2022, indicating that it saw its benchmark federal funds rate to continue at zero, with inflation at 0.8% for 2020, increasing to 1.6% in 2021, then to 1.7% in 2022.
Fed officials also expect the economy to shrink by 6.5% this year, with Gross Domestic Product growing 5% and 3.5% in 2021 and 2022, respectively. Their forecast for unemployment predicts a steady decline over the next 2½ years, from 9.3% by the end of 2020 to 5.5% in 2022.
FINANCIAL STRATEGY OF THE WEEK
WHAT'S NEW FOR SOCIAL SECURITY?
Whether you are currently receiving Social Security benefits or plan to apply for Social Security in the future, there are some important new changes to earnings limits, Medicare premiums, and other differences to keep in mind.
Cost-of-Living (COLA) Increase
Due to an increase in the Consumer Price Index (CPI-W), the Social Security Administration (SSA) has made a 2.8-percent COLA Adjustment.
Employees everywhere will be happy to hear that the cap on wages subject to Social Security withholdings has increased to $132,000.
Earning Limit Adjustments
As of 2019, the amount that Social Security beneficiaries can earn before receiving a reduction in their Social Security benefits is $17,740. Keep in mind that this limit applies only before reaching the full retirement age of 67, assuming you were born in 1960 or later.
Medicare Part B Premiums
Medicare premiums are prohibited by law from rising faster than Social Security benefits; most Social Security recipients will see a $1.50 increase in Part B premiums. However, first-time enrollees and Medicare beneficiaries who earn $200,000 or more in 2019 may pay a higher premium.
Earnings to Credits Equivalency
In 2019, you will need to earn $1,360 to make one "credit" toward Social Security and Medicare, up from $1,320 in 2018. What remains the same? You can only earn four credits each year, and you must earn at least 40 credits to qualify for benefits.
For many, Social Security may be an essential source of income. If you want to determine whether you are making the most of your benefits, a qualified financial professional will help you to reach your retirement strategy full potential.
As always, please contact my office with any questions or financial concerns you may have.