The Week on Wall Street
Stocks dropped amid rising long-term bond yields, with sharp declines in high-valuation growth stocks leading the overall market lower.
The Dow Jones Industrial Average slipped 1.78%, while the S&P 500 declined 2.45%. The Nasdaq Composite index, home to many high-valuation growth plays, fell 4.92% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, edged up 0.37%.
FACT OF THE WEEK
On March 5, more than a century ago, the Yankees traveled abroad to begin spring training in Bermuda, becoming the first in baseball history to do so.
The Yankees/Highlanders/Chances were looking for a change after an atrocious 102-loss season in 1912. The team was without much sense of promise, and also without a name. The “Highlanders” name was proving too long for headlines, and by the time spring training rolled around, the franchise was still a nameless team. They didn’t even have a real home, as they had decided to move out of their original home of Hilltop Park and share the Polo Grounds with the New York Giants.
Of course, the team would eventually settle on the name “Yankees” prior to Opening Day in 1913, capitalizing on the press’s common nickname for them. Before that would occur, new manager Frank Chance looked for a spark that could ignite a stronger performance out of a club that underperformed (to say the least) in 1912. Chance had built a winning pedigree in Chicago with the Cubs in the form of four league pennants, and was prepared to do the same in New York.
Rising Rates Derail Stocks
The 10-year Treasury yield climbed last week, from 1.34% to 1.42%, sending shudders through the stock market. While investors generally understand that economic strength may lead to higher bond yields, it was the speed at which bond yields rose that proved unsettling. Generally, when yields rise, bond prices tend to fall.
Rising yields also drove sector rotation, with economic reopening stocks (e.g., energy, financials, and industrials) outperforming stay-at-home stocks, especially many of the big technology names.
The trend of higher yields was mitigated by testimony on Tuesday and Wednesday by Fed Chair Jerome Powell. He provided some assurances that the Fed remained committed to its current easy money policy stance.
A surge in yields on Thursday, however, sparked a new wave of anxiety and a broad retreat that left market averages lower for the week.
Powell Testimony Calms Investors
Concerns over rising long-term bond yields and inflationary pressures were eased by two days of testimony by Fed Chair Powell. Powell reiterated the Fed’s intention to stick with its near-zero short-term interest rate policy and monthly bond purchase program until the labor market fully recovers and its inflation goals are met.
Powell dismissed market fears of accelerating inflation, noting that he did not see inflation reaching any troubling levels, declaring that any increase would be modest and transitory. He added that the Fed would likely allow inflation to spend some time above its 2% target rate. Inflation for the past eight years straight has been below that target.
FINANCIAL STRATEGY OF THE WEEK
While it may be hard to think of now, it’s likely that you’ll need some type of healthcare or daily living assistance as you age. People often think that Medicare covers long-term care, either at home or in a nursing facility, but unfortunately, that’s not the case. Medicare doesn’t cover assisted living, skilled nursing, or long-term care.
Paying for this type of care out-of-pocket is tremendously expensive and can deplete a lifetime of savings in a flash. As an alternative to draining your nest egg, Medicare and Long-Term Care Insurance can work together to ensure you have the necessary resources and services available when you need them most. Here’s how:
Medicare offers some care services, so when possible, it’s best to take advantage of those benefits first. After a three-day hospital stay, Medicare will pay for the total cost of Skilled Nursing Care (SNC) for the first 20 days in a skilled nursing facility, after that you pay around $200 co-insurance per day. After 100 days, Medicare assistance stops. If you’re unable to leave your house for medical or therapeutic care, Medicare will pay for home health care services. Importantly, Medicare will not cover 24-hour care.
Long-Term Care Insurance
Long-term Care (LTC) Insurance is designed to cover long-term services and support not covered by traditional medical insurance or Medicare. It can include a variety of benefits for individuals who need constant medical attention and/or custodial care with daily activities like eating, bathing, or mobility in facilities from assisted living to full-time, in- home custodial care to a private room in a nursing facility. Policies like this reimburse long-term care beneficiaries a daily amount for services.
The cost of a long-term care policy is based on age, desired benefit amount and any additional benefits you choose to include. That’s why it’s important to determine your long-term care needs and level of protection before it becomes an emergency.
Considering long-term care is a cornerstone in any financial plan, and there are many options to choose from based on your financial situation and needs. Let’s discuss starting preparations for, or reviewing, your potential long-term care needs. It’s better to be overprepared and covered, than underprepared and financially devastated.
As always, please let us know if there is anything we can help with along the way or any financial concerns you may have.