THE WEEK ON WALL STREET
Stocks tumbled last week as investors reconsidered their interest rate expectations after Fed Chair Powell’s Congressional testimony that rates may need to go higher. Stocks also were rattled when a west coast bank was placed into receivership on Friday following a run on deposits. The Dow Jones Industrial Average dropped 4.44%, while the S&P 500 lost 4.55%. The Nasdaq Composite index fell 4.71% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.37%.
FACT OF THE WEEK
The German-born English astronomer William Herschel discovers Uranus, the seventh planet from the sun on March 13, 1781. Herschel’s discovery of a new planet was the first to be made in modern times, and also the first to be made by use of a telescope, which allowed Herschel to distinguish Uranus as a planet, not a star, as previous astronomers believed.
Herschel, who was later knighted for his historic discovery, named the planet Georgium Sidus, or the “Georgian Planet,” in honor of King George III of England. However, German astronomer Johann Bode proposed the name “Uranus” for the celestial body in order to conform to the classical mythology-derived names of other known planets. Uranus, the ancient Greek deity of the heavens, was a predecessor of the Olympian gods. By the mid-19th century, it was also the generally accepted name of the seventh planet from the sun.
The planet Uranus is a gas giant like Jupiter and Saturn and is made up of hydrogen, helium, and methane. The third largest planet, Uranus orbits the sun once every 84 earth years and is the only planet to spin perpendicular to its solar orbital plane. In January 1986, the unmanned U.S. spacecraft Voyager 2 visited the planet, discovering 10 additional moons to the five already known, and a system of faint rings around the gas giant.
Rate Fears, Bank Scare
Congressional testimony on Tuesday by Fed Chair Jerome Powell that interest rates may require a higher increase faster than planned unnerved investors, dimming the hopes of any pause in rate hikes this summer. After stabilizing the following day, stocks trended lower as the financial sector came under pressure. The lower move was triggered by a specialty bank's liquidity issues, though regional and money center banks could not escape the selling.
Labor market strength in a Friday report exacerbated rate-hike anxieties, though cooling wage gains balanced an above-consensus new jobs number. Markets appeared to take the employment report in stride but fell on worries arising from the shutdown of a tech-centric bank.
Powell’s Congressional Testimony
Fed Chair Powell last week testified on Capitol Hill during which he acknowledged that the economy was running hotter than he had expected. He said that labor market strength and stubbornly elevated inflation may require the Fed to raise rates quicker than anticipated and above levels previously contemplated.
The market did not respond well to Powell’s change of tone. Many now see the potential of a 0.50% rate hike coming out of the Federal Open Market Committee’s (FOMC) March 21-22 meeting instead of the expected increase of 0.25%. Powell did say that the FOMC would consider the monthly employment report released last Friday and upcoming inflation reports before arriving at a decision.
FINANCIAL STRATEGY OF THE WEEK
How does Whole Life Insurance work? In exchange for fixed premiums, an insurance company promises to pay a set benefit when the policyholder dies, but also offers additional benefits as well. Whole life insurance policies can build up cash value — effectively a cash reserve that pays a modest rate of return, and the growth is tax-deferred. Guarantees are based on the claims-paying ability of the issuing company.
What are the added benefits? Most whole life insurance policies allow policyholders to borrow a portion of their policy’s cash value. Access to the cash value can allow you to pay for things like college expenses, a home down payment, or any other needs you may have. Interest payments on policy loans go directly back into the policy’s cash value.
When the policyholder dies, his or her beneficiaries receive the benefit from the policy. Depending on how the policy is structured, benefits may or may not be taxable.
Whether whole life insurance is the best choice for you may depend on a variety of factors, including your goals or circumstances.
A few more things you need to know. When you borrow against this cash value of your policy, there are some important points to consider. Accessing the cash value of the insurance policy through borrowing — or partial surrenders — has the potential to reduce the policy’s cash value and benefit. Accessing the cash value may also increase the chance that the policy will lapse and may result in a tax liability if the policy terminates before your death.
As with all types of life insurance, several factors will affect the cost and availability of whole life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder may also pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
As always, we’re here to answer any questions or help with anything you or your family needs.
Life insurance is not insured by the FDIC (Federal Deposit Insurance Corporation). It is not insured by any federal government agency or bank or savings association.