THE WEEK ON WALL STREET
Stocks took a breather last week as investors digested the previous week’s surge and the month-to-date solid gains. The Dow Jones Industrial Average lost 1.67%, while the S&P 500 fell 1.39%. The Nasdaq Composite index dropped 1.44% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, tumbled 2.00%.
FACT OF THE WEEK
On June 26, 1956, the U.S. Congress approves the Federal Highway Act, which allocates more than $30 billion for the construction of some 41,000 miles of interstate highways; it will be the largest public construction project in U.S. history to that date.
President Dwight D. Eisenhower had first realized the value of a national system of roads after participating in the U.S. Army’s first transcontinental motor convoy in 1919; during World War II, he had admired Germany’s autobahn network. In January 1956, Eisenhower called in his State of the Union address (as he had in 1954) for a “modern, interstate highway system.” Later that month, Fallon introduced a revised version of his bill as the Federal Highway Act of 1956. It provided for a 65,000-km national system of interstate and defense highways to be built over 13 years, with the federal government paying for 90 percent, or $24.8 billion. To raise funds for the project, Congress would increase the gas tax from two to three cents per gallon and impose a series of other highway user tax changes. On June 26, 1956, the Senate approved the final version of the bill by a vote of 89 to 1; Senator Russell Long, who opposed the gas tax increase, cast the single “no” vote. That same day, the House approved the bill by a voice vote, and three days later, Eisenhower signed it into law.
Highway construction began almost immediately, employing tens of thousands of workers and billions of tons of gravel and asphalt. The system fueled a surge in the interstate trucking industry, which soon pushed aside the railroads to gain the lion’s share of the domestic shipping market. Interstate highway construction also fostered the growth of roadside businesses such as restaurants (often fast-food chains), hotels, and amusement parks. By the 1960s, an estimated one in seven Americans was employed directly or indirectly by the automobile industry, and America had become a nation of drivers.
MARKET MINUTE
Rally Stalls
The stock market drifted lower last week as the tug-of-war between bulls and bears played out in a week that was light on market-moving news. After falling in the first days of a holiday-shortened trading week, stocks rebounded on Thursday to recover some of the week’s losses. Stocks looked past Congressional testimony by Fed Chair Powell, who said two more rate hikes are likely in the wake of interest rate hikes by central bankers in the U.K., Switzerland, Norway, and Turkey. The retreat continued into Friday, fueled by global growth fears from new economic data indicating more robust economic slowdowns in the eurozone, Japan, and Australia.
Housing Sentiment Improves
Home builders' confidence edged into positive territory for the first time in 11 months, aided by strong demand, low inventory, and a recovering supply chain. May’s new home sales, which rose 21.7%–the most significant percentage gain since October 2016, validated this confidence. The number of new home starts in May (1.63 million) hit a 13-month high, with both single- and multi-family homes up substantially. Sales of existing homes in May rose 0.2% month-over-month while declining 20.4% from a year ago. The existing home market continues to suffer from low inventory and still-high prices. The median price of a home sold in May declined 3.1% year-over-year to $396,100.
FINANCIAL STRATEGY OF THE WEEK
We know, at times, that retirement decisions can be confusing, and there is substantial information surrounding the investment vehicles that can be utilized to reach your retirement goals. Therefore, we thought we’d send along some information outlining the differences between 401(k)s and IRAs. While both vehicles share some similarities, such as tax-deferred retirement savings, IRA accounts have some benefits that 401(k) do not. Here are a few:
Combine your RMDs. If you have multiple 401(k) accounts when you are 73 or older and no longer working, you must take your RMDs from each 401(k). However, you can combine the RMDs and take them from any single IRA account if you have multiple IRAs.
Take an early distribution. While it’s best to avoid using retirement savings for other purposes, when the unexpected occurs, being able to access them can give you options – even if you must pay income tax and a penalty for an early withdrawal. This option is guaranteed under the law with IRAs; whether you have this same ability with your 401(k) depends on your plan’s rules.
Use funds for qualified expenses. Although early withdrawals from pretax retirement accounts generally incur a penalty, there are legal exceptions for IRAs, including using funds for higher education expenses, paying medical premiums in the event of job loss, or using up to $10,000 toward a first home purchase.
Make a qualified charitable distribution (QCD). If you are 70 ½ or older, you may contribute up to $100,000 directly from your IRA account to a charity. Because the QCD is not counted as income, it may lower your tax bill more than if you take a distribution and make a separate donation. Plus, the QCD can offset part or all of your RMD. However, IRA owners must reduce intended QCDs by any IRA contribution amounts made after age 70½.
More investment choices. Commonly, 401(k) plan sponsors limit investors to a few select investment options, some of which may be accompanied by high fees. In contrast, except for prohibited investments, such as life insurance or collectibles, choices are nearly limitless in an IRA.
If you have retirement funds sitting elsewhere and need help deciding whether to roll a 401(k) into an IRA or to consolidate retirement accounts, call us to discuss the best option for you. We’re more than happy to answer any questions.