THE WEEK ON WALL STREET
Stocks climbed last week as reassuring inflation data boosted investor hopes that the rate-hike cycle was nearing an end amid fresh economic data pointing to continued economic resilience. The Dow Jones Industrial Average rose 1.25%, while the S&P 500 picked up 2.58%. The Nasdaq Composite index gained 3.25% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 2.42%.
FACT OF THE WEEK
Carole King began her career in music as a young newlywed and college graduate, working a 9-to-5 shift alongside her then-husband, Gerry Goffin, in Don Kirshner’s songwriting factory, Aldon Music. It was there, working in a cubicle with a piano, staff paper and tape recorder that she co-wrote her first hit song (the Shirelles’ “Will You Love Me Tomorrow,” 1960), her second and third hit songs (the Drifters’ “Some Kind Of Wonderful” and Bobby Vee’s “Take Good Care Of My Baby,” both 1961), her 14th and 17th hit songs (the Chiffons’ “One Fine Day,” 1963, and Herman’s Hermits’ “Something Tells Me I’m Into Something Good,” 1964) and so on and so forth. It was not until 10 years after her songwriting breakthrough, however, that Carole King finally fulfilled her long-held dream of having her own hit record as both singer and songwriter. On June 19, 1971, she earned her first #1 single as a performer with the double-sided hit “It’s Too Late/I Feel The Earth Move.”
King’s hit single came from one of the best and most popular albums of the singer-songwriter era—an era that Carole King helped usher in. Tapestry was a milestone not only for Carole King, but for women in rock and roll in general. As the critic Robert Christgau put it: “King has done for the female voice what countless singer-composers achieved years ago for the male: liberated it from technical decorum. She insists on being heard as she is…with all the cracks and imperfections that implies.” On the heels of Tapestry‘s success, up-and-coming solo female performers like Carly Simon and Rickie Lee Jones found an easier path to popularity, and the great Joni Mitchell entered the period of her greatest commercial success.
The success of Tapestry and Carole King’s first #1 single launched her career as a solo performer, but a look around the pop charts of 1971 reveals just how big a force she remained behind the scenes. Among the artists who earned #1 pop hits that year, Tony Orlando and Dawn, Rod Stewart, Isaac Hayes, George Harrison, and Paul McCartney all recorded a Carole King song at one point in their careers, and Donny Osmond and James Taylor owe their only chart-topping 1971 hits (“Go Away Little Girl” and “You’ve Got A Friend,” respectively) to her songwriting talents.
MARKET MINUTE
Stocks Rally
Stock market momentum gathered steam last week, blowing past the 4,300 and 4,400 thresholds in the S&P 500–a remarkable feat considering the time it took to break the 4,200 resistance level. Optimism was high to begin the week, with expectations that fresh evidence of cooling inflation would provide the Fed room to pause on further rate hikes. The data cooperated as consumer prices rose 4.0% year-over-year (the lowest 12-month number in two years), and producer prices increased 1.1% from a year ago. The Fed’s “hawkish pause” briefly unsettled investors, but after some reassessment and aided by healthy economic data, stocks rallied before slipping on Friday as the market digested the week’s gains.
More Rate Hikes To Come?
Federal Reserve officials kept rates steady at last week’s Federal Open Market Committee (FOMC) meeting. However, a majority of committee members indicated at least two more quarter-point rate hikes were likely before year-end. Fed Chair Jerome Powell commented that he saw progress in fighting inflation and that no decision was made regarding any future rate increase, saying that members will assess the economic impact of the cumulative rate hikes before the July 25-26 FOMC meeting. The Fed raised its 2023 economic growth forecast to 1%, up from its March forecast of 0.4%. The Fed also lowered its unemployment projection to 4.1% from its earlier estimate of 4.5%.
FINANCIAL STRATEGY OF THE WEEK
While looking ahead to a leisurely retirement is natural, it’s prudent to prepare for expenses that catch many retirees by surprise. In a recent survey, nearly one-third of retirees reported they faced at least four unforeseen expenditures during retirement. Some of the most common include:
Inflation: Inflation rates have been on a roller coaster lately, and even subtle increases can add up over time. For example, the $100 you spent in 2013 now requires $130 in 2023. So unless that $100 was invested, it effectively lost 30 percent of its value in just 10 years. There is certainly no guarantee inflation will be low in the future. So investing in assets that can compound through multiple market environments is essential to protect your purchasing power.
Home Expenses: If the value of your home dramatically increases, so will your property taxes. On the flip side, if the value of your house declines dramatically, you may not be able to sell it without a loss. And there are repairs and maintenance to consider. Some financial professionals suggest setting aside 10 percent of your monthly payment, property taxes, and homeowner’s insurance for repairs and maintenance. Paying off your mortgage or downsizing can reduce monthly expenses and allow you to hold on to your home until reduced prices rebound.
Social Security and Other Taxes: If you’re like most recipients, you’ll pay income tax on your Social Security benefits. Individuals with a total gross income (including benefits) of $25,000 may pay taxes on up to 50 percent of their Social Security benefits. Up to 85 percent of benefits are taxable for individuals with a combined gross income of more than $34,000.
As a reminder, distributions from a 401(k) or traditional IRA are taxed at your ordinary income tax rate. Therefore, consider withdrawing funds from tax-advantaged vehicles first, such as a Roth IRA, to potentially delay your tax liability. Retirement is something most of us look forward to. Make sure you're on the right track and prevent your plans from being derailed by these unexpected expenses (and others). Contact our office for a review of your financial situation and an evaluation of your goals.