THE WEEK ON WALL STREET
Stocks were mixed last week as good inflation news was offset by mounting debt ceiling concerns and rekindled regional banking fears. The Dow Jones Industrial Average lost 1.11%, while the Standard & Poor’s 500 slipped 0.29%. The Nasdaq Composite index rose 0.40% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 0.67%.
FACT OF THE WEEK
On May 16, 1980, Los Angeles Lakers point guard Earvin “Magic” Johnson steps in for injured center Kareem Abdul-Jabbar and scores 42 points, leading the Lakers to a four games-to-two series win over the Philadelphia 76ers for their first championship since 1972.
In 1979, Magic had led Michigan State to the NCAA title over Larry Bird’s Indiana State in the most-watched college final ever. That fall, he was drafted by the Lakers as the first overall pick. In 1980, his rookie season, the Lakers went 60-22, a 13-game improvement from their 47-35 mark the year before. That year, Abdul-Jabbar averaged 24.8 points and 10.8 rebounds per game and was named Most Valuable Player of the regular season.
In the playoffs, the Lakers beat the Phoenix Suns four games to one to advance to the Western Conference finals against the defending champion Seattle Supersonics. After losing a close first game, the Lakers went up 3-1 in the series. At halftime of the deciding fifth game, the normally silent Abdul-Jabbar gave an angry pep talk, urging his team to pick up their play and finish off the Sonics. Abdul-Jabbar finished that game with 38 points, 11 rebounds and 7 blocked shots while Magic Johnson, playing with a 101-degree fever, racked up a triple-double. The 111-105 victory catapulted the Lakers into the NBA finals.
In the finals, the Lakers met the Philadelphia 76ers, led by forwards Julius “Dr. J” Erving and Darryl Dawkins, defensive specialist Bobby Jones and guards Maurice Cheeks and Doug Collins. Abdul-Jabbar dominated the first five games of the finals, averaging 31 points and 12 rebounds per game, as the Lakers went up 3-2 in the series. When he twisted an ankle in Game 5, even the Lakers front office assumed that the team would travel without their star center to Philadelphia and lose Game 6, a fact made evident by the team’s decision not to take their celebratory champagne with them to Philly.
No one expected that Magic, at 6 feet 9 inches the tallest point guard in league history, would so easily make the transition to center. Magic rang up 42 points, 15 rebounds and 7 assists to lead the Lakers to victory and was named Most Valuable Player of the finals, the first of three such awards in his career. The Lakers went on to dominate the NBA, winning a total of five championships in the 1980s.
Uncertainty Weighs On Stocks
The week got off to a quiet start as investors waited on April’s two key inflation reports scheduled for release on Wednesday and Thursday. When consumer prices rose less than forecasted, stocks broke out of their lethargy and moved higher. Stocks also got a boost on Wednesday afternoon from comments from the White House, hinting at an opening for negotiation on the debt ceiling. Despite a substantial cooling in producer price increases, stocks turned mixed on Thursday amid a disappointing earnings report from a Dow Industrial component and new data that reignited investor anxiety over regional banks’ financial health. Stocks ended the week the way they began, largely drifting in an otherwise directionless fashion.
Inflation Pressures Ease
Consumer prices rose 4.9% year-over-year, the tenth consecutive month that the headline inflation rate has declined. This was a slight improvement over March’s 12-month increase of 5.0%. April’s monthly inflation rate was 0.4 percent, above March’s 0.1 percent rise. April’s increase was driven by higher housing, gasoline, and used car costs. Inflation progress extended into wholesale prices, which rose 0.2% in April–below the consensus forecast of a 0.3% rise. For the last twelve months, producer prices increased 2.3%, an improvement from last month’s 2.7% year-over-year gain and the lowest recording since January 2021.
FINANCIAL STRATEGY OF THE WEEK
Most working adults with families should have some kind of life insurance in place. There are many different types of coverage, so what are they and how do you know what you need?
Term Life Insurance: This type of policy offers coverage for a specified period of time, or term (10 years, 20 years, etc.). At the end of the term, the policy expires, usually with an option to renew—but likely at a higher rate, as you’ll be older and therefore considered a higher risk. The upside of term coverage is that it’s usually the least expensive, so many clients use it when their insurance needs are higher but cashflow may be tighter (for example, families with young children, or those with a single income). The downside is that term insurance is basically like renting a policy: you have it as long as you pay for it, but unless you die during the term period the policy will expire without ever being used.
Permanent Life Insurance: Unlike term, this type of insurance can accumulate cash value and won’t expire as long as you pay your premiums. You can think of this type of policy as something you own, and it may eventually even be considered an asset. Some permanent policies allow you to borrow from the cash value, or trade the policy in altogether for cash back. For these reasons, it’s generally more expensive, although there are some options that can make permanent insurance more affordable.
At different points in our lives, different types of coverage make sense. Are you adequately covered for this stage of life? If you’re not sure, let’s connect.