THE WEEK ON WALL STREET
Stocks fluctuated last week, jostled by fitful bond yields and headline news, before ending strongly following Fed Chair Powell’s comments on the monetary outlook. The Dow Jones Industrial Average slipped 0.45%, while the S&P 500 gained 0.82%. The Nasdaq Composite index rose 2.26% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 0.78%.
FACT OF THE WEEK
On August 27, 1955, the first edition of “The Guinness Book of Records” is published in Great Britain; it quickly proves to be a hit. Now known as the “Guinness World Records” book, the annual publication features a wide range of feats related to humans and animals.
The inspiration for the record book can be traced to November 1951, when Sir Hugh Beaver, managing director of the Guinness Brewery (founded in Dublin in 1759), was on a hunting trip in Ireland. After failing to shoot a golden plover, Beaver and the members of his hunting party debated whether the creature was Europe’s fastest game bird but were unable to locate a book with the answer.
Thinking that patrons of Britain’s pubs would enjoy a record book that could be used to settle friendly disagreements, Beaver decided to have one produced. He hired twin brothers Norris and Ross McWhirter, the founders of a London-based agency that provided facts and statistics to newspapers and advertisers. The book was intended to be given away for free in pubs to promote the Guinness brand; however, it turned out to be so popular the company started selling it that fall and it became a best-seller. An American edition debuted in 1956 and was soon followed by editions in a number of other countries. The McWhirters traveled the globe to research and verify records. Ross McWhirter was involved in compiling the book until his death in 1975 at the hands of Irish Republican Army gunmen; his brother Norris continued to serve as the book’s editor until 1986.
MARKET MINUTE
Stocks Manage Gains
Stocks rallied on Monday on upbeat sentiment over the earnings release from a mega-cap semiconductor company scheduled for mid-week, only to see that momentum fizzle the following day on weak retail earnings and a credit downgrade of a handful of banks.
Stocks resumed their rally on weak economic data, which fueled hopes for future Fed dovishness. They also rose on expectations that earnings from a leading AI chipmaker would validate the AI narrative that propelled markets in the second quarter. Despite a blowout earnings report, stocks turned lower as investor attention quickly switched to Fed Chair Powell’s presentation scheduled for Friday. After some initial jitteriness, Investors responded well to Powell’s comments, posting gains to close the week.
Powell Stands Firm
Powell spoke on Friday at the Fed’s annual economic symposium in Jackson Hole, asserting that, despite considerable progress, inflation remained too high and additional rate hikes may be in the offing. He acknowledged that previous rate increases had not yet thoroughly worked their way through the system, so caution about further hikes was needed. Investors reacted to Powell’s comments far better than in August 2022, when a hawkish presentation sent stocks lower. Powell also addressed a growing feeling among investors that the Fed may eventually raise its inflation target to 2.5-3.0%. Powell rejected this idea unambiguously, stating that the two percent target would remain the Fed’s inflation goal.
FINANCIAL STRATEGY OF THE WEEK
Do Your Kids Know The Value of a Silver Spoon?
You taught them how to read and how to ride a bike, but have you taught your children how to manage money?
One study of households with student loan debt showed that the average amount owed was $47,671.1, And more than 20% of recipients with outstanding loans will either default or be delinquent in repaying those loans.
For current college kids, it may be too late to avoid learning about debt the hard way. But if you still have children at home, save them (and yourself) some heartache by teaching them the basics of smart money management.
Have the conversation. Many everyday transactions can lead to discussions about money. At the grocery store, talk with your kids about comparing prices and staying within a budget. At the bank, teach them that the automated teller machine doesn’t just give you money for the asking. Show your kids a credit card statement to help them understand how “swiping the card” actually takes money out of your pocket.
Let them live it. An allowance program, where payments are tied to chores or household responsibilities, can help teach children the relationship between work and money. Your program might even include incentives or bonuses for exceptional work. Aside from allowances, you could create a budget for clothing or other items you provide. Let your kids decide how and when to spend the allotted money. This may help them learn to balance their wants and needs at a young age when the stakes are not too high.
Teach kids about saving, investing, and even retirement planning. To encourage teenagers to save, you might offer a match program, say 25 cents for every dollar they put in a savings account. Once they have saved $1,000, consider helping them open a custodial investment account, then teach them how to research performance and ratings online. You might even think about opening an individual retirement account (IRA). Some parents offer to fund an IRA for their children as long as their children are earning a paycheck.
As you teach your children about money, don’t get discouraged if they don’t take your advice. Mistakes made at this stage in life can leave a lasting impression. Also, resist the temptation to bail them out. We all learn better when we reap the natural consequences of our actions. Your children probably won’t be stellar money managers at first, but what they learn now could pay them back later in life – when it really matters.