THE WEEK ON WALL STREET
Investor enthusiasm for stocks remained strong last week, buoyed by declining bond yields in a holiday-abbreviated trading week. The Dow Jones Industrial Average picked up 1.27%, while the S&P 500 gained 1.00%. The Nasdaq Composite index rose 0.89% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, was flat (+0.03%).
FACT OF THE WEEK
On November 26, 1862, Oxford mathematician Charles Lutwidge Dodgson sent a handwritten manuscript called Alice’s Adventures Under Ground to 10-year-old Alice Liddell.
The 30-year-old Dodgson, better known by his nom de plume Lewis Carroll, made up the story one day on a picnic with young Alice and her two sisters, the children of one of Dodgson’s colleagues. Dodgson, the son of a country parson, had been brilliant at both mathematics and wordplay since childhood when he enjoyed making up games. However, he suffered from a severe stammer, except when he spoke with children. He had many young friends who enjoyed his fantastic stories: The Liddell children thought his tale of a girl who falls down a rabbit hole was one of his best efforts, and Alice insisted he write it down.
During a visit to the Liddells, English novelist Henry Kingsley happened to notice the manuscript. After reading it, he suggested to Mrs. Liddell that it be published. Dodgson published the book at his own expense, under the name Lewis Carroll, in 1865. The story is one of the earliest children’s books written simply to amuse children, not to teach them. The book’s sequel, Through the Looking Glass, was published in 1871. Dodgson’s other works, including a poetry collection called Phantasmagoria and Other Poems, and another children’s book, Sylvia and Bruno, did not gain the same enduring popularity as the Alice books. Dodgson died in 1898.
Falling Yields Lift Stocks
The stock market continued to look toward the bond market for direction, responding positively to bond yields that fell steadily for much of the week. A successful 20-year Treasury notes auction on Monday triggered a decline in bond yields. The release of the minutes from the Fed’s last meeting buoyed investor optimism that the potential for further rate hikes was diminishing. Investor sentiment was also lifted by the earnings results from a leading mega-cap, AI-enable chipmaker that topped analysts’ expectations, bolstering the narrative of AI’s potential to help corporate profits. Despite a higher turn in bond yields on the final half-day of trading, stocks retained the week’s gains.
Minutes from the October 31–November 1 meeting of the Federal Open Market Committee were released last week, providing insight into its decision not to raise rates and its thinking on the future direction of interest rates. The minutes reflected concerns by committee members that inflation remained stubborn and may move higher. The minutes also reaffirmed the messaging of many Fed officials, including Fed Chair Powell, that monetary policy must remain restrictive until they are convinced inflation will be on track for the Fed’s two percent target. They further said that future rate decisions will be based on fresh economic data, offering no indication that a rate cut was forthcoming, as many analysts are increasingly anticipating for 2024.
FINANCIAL STRATEGY OF THE WEEK
What to Look for in an Extended-Care Policy
Extended-care coverage can be complex. Here's a list of questions to ask that may help you better understand the costs and benefits of these policies.
What types of facilities are covered? Extended-care policies can cover nursing home care, home health care, respite care, hospice care, personal care in your home, assisted living facilities, adult daycare centers, and other community facilities. Many policies cover some combination of these. Ask what facilities are included when you're considering a policy.
What is the daily, weekly, or monthly benefit amount? Policies normally pay benefits by the day, week, or month. You may want to evaluate how (and how much) eldercare facilities in your area charge for their services before committing to a policy.
What is the maximum benefit amount? Many policies limit the total benefit they'll pay over the life of the contract. Some state this limit in years, others in total dollar amount. Be sure to address this question.
What is the elimination period? Extended-care policy benefits don't necessarily start when you enter a nursing home. Most policies have an elimination period – a timeframe during which the insured is wholly responsible for the cost of care. In many policies, elimination periods will be either 30, 60, or 90 days after nursing home entry or disability.
Does the policy offer inflation protection? Adding inflation protection to a policy may increase its cost, but it could be very important as the price of extended care may increase significantly over time.
When are benefits triggered? Insurers set some criteria for this. Commonly, extended-care policies pay out benefits when the insured person cannot perform 2 to 3 out of six activities of daily living (ADLs) without assistance. The six activities, cited by most insurance companies, include bathing, caring for incontinence, dressing, eating, toileting, and transferring. A medical evaluation of Alzheimer's disease or other forms of dementia may also make the insured eligible for benefits.
Is the policy tax qualified? In such a case, the policyholder may be eligible for a federal or state tax break. Under federal law and some state laws, premiums paid on a tax-qualified extended-care policy are considered tax-deductible medical expenses once certain thresholds are met. The older you are, the more you may be able to deduct under federal law. You must itemize deductions to qualify for such a tax break, of course.
How strong is the insurance company? There are several firms that analyze the financial strength of insurance companies. Their ratings can give you some perspective.
There are many factors to consider when reviewing extended-care policies. The best policy for you may depend on a variety of factors, including your own unique circumstances and financial goals.