THE WEEK ON WALL STREET
Stocks notched a solid gain last week, rallying behind upbeat earnings, a dovish Fed, and mixed economic data.
FACT OF THE WEEK
In Oxford, England, 25-year-old medical student Roger Bannister cracks track and field’s most notorious barrier: the four-minute mile. Bannister, who was running for the Amateur Athletic Association against his alma mater, Oxford University, won the mile race with a time of 3 minutes and 59.4 seconds.
For years, so many athletes had tried and failed to run a mile in less than four minutes that people made it out to be a physical impossibility. The world record for a mile was 4 minutes and 1.3 seconds, set by Gunder Hagg of Sweden in 1945. Despite, or perhaps because of, the psychological mystique surrounding the four-minute barrier, several runners in the early 1950s dedicated themselves to being the first to cross into the three-minute zone.
MARKET MINUTE
Stocks Pop, Drop, Then Rally
Markets began the week with an upward bump as positive news from some mega-cap tech companies outweighed disappointing updates from other tech names. The tone quickly changed on Tuesday as higher-than-expected Q1 wage growth triggered inflation and interest-rate anxiety—just as the Federal Open Market Committee kicked off its third meeting of the year. Each of the three major averages dropped more than 1.5 percent on the last trading day of April.
When the Fed announced it was holding rates steady on Wednesday, stocks initially rallied on the news, but sellers got the upper hand late in the trading session, and prices ended the day slightly down.
On Thursday, stocks trended higher as more companies reported upbeat Q1 results. Then, on Friday, stocks pushed higher after the April jobs report indicated that unemployment ticked up and the economy slowed. The 175,000 jobs created in April represented slower growth than the over 300,000 added in March and less than the 240,000 economists expected. Some Fed watchers believe that the news bolstered chances that the Fed may adjust rates sooner rather than later.
Uncertain Hurtin’
Markets hate uncertainty, so Fed Chair Jerome Powell attempted to clarify the Fed’s stance on the outlook for interest rates at the close of its two-day meeting. Determining what’s next for interest rates in the context of stubborn inflation is no simple task. But Powell was as straightforward as possible at the press conference. “I think it’s unlikely that the next policy rate move will be a hike,” he said. “I’d say it’s unlikely.”
FINANCIAL STRATEGY OF THE WEEK
Social Security Benefits: How Much Will I Receive
Next to “When should I claim Social Security benefits?” one of the more common questions people have is “How much will I receive?”
Calculating your potential Social Security benefit is a three-step process:
1. Calculate Your Average Indexed Monthly Earnings (AIME): The highest 35 years of indexed earnings is added together. It is then divided by the number of months in 35 years to arrive at your AIME. (“Indexed earnings” is an adjustment made to historical earnings so that they reflect a current standard of living.)
2. Determine Your Primary Insurance Amount (PIA): AIME is subjected to a formula based on the year of first eligibility (age 62).
3. Application Age: The final calculation will be based on the age you apply for Social Security retirement benefits. For instance, if you apply at full retirement age, you will receive 100% of your PIA. If you apply for early benefits, your benefit will be less, and if you wait until after full retirement age, your retirement benefit will exceed your PIA.
If this all sounds complicated, that’s because it is. However, the Social Security Administration allows you to calculate your personal benefits without you having to do any of the math.
Social Security is a complex retirement decision that requires careful preparation in order to maximize its value to you and your spouse in retirement. You should consider working with your financial professional as well as accessing the information resources at the Social Security Administration to help you make the decisions that are most appropriate to your needs.