THE WEEK ON WALL STREET
Stocks pushed higher last week as investors cheered mega-cap tech corporate reports and a better-than-expected employment report.
FACT OF THE WEEK
On February 5, 146 BCE, the Roman Republic finally triumphed over its nemesis, Carthage, after over a century of fighting. The victory and subsequent destruction of the city of Carthage marked the end of the Punic Wars and represented Rome's replacement of Carthage as the dominant power of the Western Mediterranean, a position it would hold for the next several centuries.
The Punic Wars began as Rome expanded West toward what is now Spain, East into Greece and South to Sicily, which brought it into conflict with Carthage. Though Rome won both the First and Second Punic Wars, Carthage at times came close to victory. During the Second Punic War, the Carthaginian general Hannibal famously led his army, including three dozen elephants, across the Alps and into the Italian peninsula, terrorizing the countryside and coming close to sacking Rome. By 149 BCE, however, Rome had in many ways subjugated Carthage. Victory in the Second War had allowed Rome to impose a costly indemnity on its rival, and Carthage had to seek the Roman senate's permission to wage war. Even after the indemnity was paid, Rome was wary of Carthage's continued existence. One senator, Cato the Elder, reportedly ended all of his speeches for several years, regardless of topic, with "Also, I believe that Carthage must be destroyed."
Combined with the simultaneous victories and Greece and the pacification of Hispania, the end of the Third Punic War left Rome the dominant military, naval, economic and political power of the Western Mediterranean. Between 146 BCE and the sack of Rome by the Vandals in 476 CE, Rome would use its regional wealth and power to establish one of the largest and most powerful empires of all time, eventually stretching from the British Isles to the Near East. North Africa being an important part of this empire, a new Roman city was established on the site of Carthage roughly a hundred years after the original city's destruction.
Stocks At New Highs
At the beginning of the week, stocks surged, anticipating fourth-quarter corporate updates from tech companies and the Federal Reserve's two-day policy meeting; this led to the S&P 500 Index reaching a new record high on Monday. The market remained relatively stable for the rest of the week until Wednesday when the Federal Reserve announced its decision to maintain interest rates within the 5.25-5.50 percent target range. The Federal Open Market Committee's (FOMC) news unsettled investors, who anticipated that rates would remain unchanged but expected more specific guidance on the Fed's plan to lower interest rates. On Friday, the job report for January revealed the addition of 353,000 new jobs, surpassing the forecast of 185,000. This strong report did not negatively impact the markets. Instead, investors interpreted it as confirmation of a robust economy.
Fed’s Mixed Signals
The Fed's decision to keep rates steady left some investors disappointed, as they had been hoping for indications of rate cuts in the coming months; this led to a decline in stock prices on Wednesday, with increased selling towards the end of the trading day. The Wall Street Journal’s headline after the FOMC meeting on Wednesday suggested that rate cuts were possible but not expected immediately. The FOMC's policy language, released after the meeting, indicated a subtle shift from considering rate cuts to proposing they could be possible unless inflation became a concern.
FINANCIAL STRATEGY OF THE WEEK
Keep Your Umbrella Handy
In 2021, the U.S. had a record 24.5 million millionaires, up from 20.2 million in the previous year. An increase in personal wealth may bring greater financial flexibility; it may also bring greater liability. Individuals with high net worth, or those who are perceived to have high net worth, may be more likely to be sued. And personal injury claims can cost millions.
Umbrella liability insurance is designed to put an extra layer of protection between your assets and a potential lawsuit. It provides coverage over and above existing automobile and homeowners insurance limits.
For example, imagine your teenage son borrows your car and gets in an accident, seriously injuring the other driver. The accident results in a lawsuit and a $1 million judgment against you. If your car insurance policy has a liability limit of $500,000, that much should be covered. If you have additional umbrella liability coverage, your policy can be designed to kick in and cover the rest. Without umbrella coverage, you may be responsible for paying out of pocket for the other $500,000, which could mean liquidating assets, losing the equity in your home, or even having your wages garnished.
Umbrella liability insurance is usually sold in increments of $1 million and generally costs just a few hundred dollars a year. It typically covers a broad range of scenarios, including bodily injuries, property damage caused by you or a member of your household, and even libel, slander, false arrest, and defamation of character.
Deciding whether liability coverage is right for you may be a question of lifestyle. You might consider buying a policy if you:
- Entertain frequently and serve your guests alcohol
- Operate a business out of your home
- Give interviews that may be published
- Drive a lot of miles or have teenage drivers
- Live in a manner that gives the appearance of wealth
- Have a dog, especially if the breed is known to be aggressive
- Own jet skis, a boat, motorcycles, or snowmobiles
Even if you don’t yet have a tent in the millionaire camp, you may want to consider the benefits of liability insurance. You don’t have to be a millionaire to be sued for a million dollars. Anyone who is carefully building a financial portfolio may want to limit their exposure to risk. Umbrella liability can be a fairly inexpensive way to help shelter current assets and future income from the unexpected.