THE WEEK ON WALL STREET
Stocks pushed higher last week as investors cheered the White House’s constructive comments on trade, upbeat Q1 corporate reports, and an encouraging jobs report. The S&P 500 Index gained 2.92 percent, while the Nasdaq Composite Index rose 3.42 percent. The Dow Jones Industrial Average added 3.00 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, advanced 2.56 percent.
FACT OF THE WEEK
On May 5, 1978, area residents lined up outside a renovated gas station in Burlington, Vermont, for the grand opening of Ben & Jerry’s Homemade. Opened by childhood friends Ben Cohen and Jerry Greenfield, the store sells soups, crêpes, and pottery, but it is their homemade ice cream, made with locally sourced cream and butterfat and flavorful chunks of nuts, cookies, fruit, and candy, that becomes the main attraction.
Ben & Jerry’s ice cream would go on to become a worldwide phenomenon, expanding the market for super premium ice cream made with natural ingredients and extra butterfat. Häagen-Dazs had already carved out a significant niche in this market, but Ben & Jerry’s brought renewed attention, attracting customers with its folksy image, fun mix of ingredients and imaginative flavor names like Chubby Hubby, Cherry Garcia and Wavy Gravy.
Another Ben & Jerry’s tradition that was preserved: Free Cone Day. Every spring, Ben & Jerry’s celebrates the anniversary of its first store opening by serving up roughly 1 million free scoops.
MARKET MINUTE
Longest Winning Streak in 20 Years
During the first two trading days, stocks increased as investors responded favorably to White House comments on tariff deals. Then midweek—on the last day of the month—fresh data showed the economy contracted by 0.3 percent in Q1—the first decline in gross domestic product (GDP) in three years. Stocks initially fell on the news, but staged a stunning recovery to add a seventh day to the S&P 500’s and Dow Industrial’s winning streaks.
Q1 corporate reports from a couple of mega-cap tech companies boosted all three major averages over the next session, with Nasdaq leading the rise. By Thursday’s close, Nasdaq had returned to its pre-April 2nd levels.
The rally accelerated on Friday as a better-than-expected April jobs report eased some concerns about the economy’s strength. Signs of a potential thaw in Washington-Beijing trade relations also boosted enthusiasm. The Dow Industrials rose for a ninth straight session, as did the S&P 500—its longest winning streak in 20 years.
Solid Jobs Report
The April jobs report showed employers added 177,000 jobs last month—34,000 more than economists expected. The report quieted talk about a recession, which was welcomed news. The April figure also showed the economy was still adding jobs despite a sluggish Q1 GDP report. However, the strong report did prompt some traders to push out expectations for an interest rate adjustment until the Fed’s July meeting.
FINANCIAL STRATEGY OF THE WEEK
Risk Assessment
Risk is a factor in any investment decision that you make. Your tolerance for risk is something that you will want to consider when you make decisions alongside your trusted financial professional. Your risk tolerance is balanced against your time horizon, meaning the time between now and when you anticipate needing your money.
But is it possible to avoid a loss? No, not completely, but you can take steps to manage that risk when investing. This is where conversations about your risk tolerance are critical.
What would you rather have, $500 right now or a 50% chance at $2,000? Many people go for the $2,000 and rightfully so. Since you have a 50/50 chance, a decision tree shows the $2,000 answer carries a potential value of $1,000.
But let’s add a few zeros and see if that changes your perspective.
What would you rather have, $50,000 right now or a 50% chance at $200,000? The decision tree says the opportunity to win $200,000 has the highest potential value. But in reality, many people second-guess that decision because $50,000 is a lot of money.
Remember, there is no correct answer to these questions. They simply help you better understand the concept of risk.
Investment risk can be managed, but it can’t be eliminated entirely. All investments carry some level of risk. And in general, the greater the risk an investment carries, the higher its potential return.
Risk happens, but don’t let it get in the way of your dreams. Ultimately, these concerns should only serve to inform you and the questions that you ask the financial professional you are working with. The conversation should include your questions about the risks for each strategy presented, as well as questions about the investment goals you want and the aspirations you hope to realize.
If you have questions about your risk assessment or anything else, give my office a call and let's set up some time to talk. We are here for you.
