The Week on Wall Street
Stocks moved higher during a holiday-shortened week of trading, capping off a turbulent, but otherwise strong year for equity investors.
The Dow Jones Industrial Average gained 1.35%, while the S&P 500 increased by 1.43% The Nasdaq Composite index, which led all year, added 0.65%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 2.02%.
FACT OF THE WEEK
One of the first forms of what we know today as a trivia game debuted on the 1940s radio program “Take It or Leave It.” In 1964, “Jeopardy!” entered millions of Americans’ homes through television and remains arguably America’s most iconic quiz show.
At the same time during the 60s, trivia night swept across college campuses all over the US. Then, in the 70s, pub quizzes emerged in the United Kingdom to entice people to head to their local pubs on traditionally slower evenings.
As trivia continued to gain momentum, Trivial Pursuit emerged in Montreal, Quebec, Canada in 1979 thanks to Chris Haney and Scott Abbott, becoming one of the world’s most famous board games. Since then, our love for obscure facts continues to take the world by storm through online gaming and other technology-driven formats. National Trivia Day is celebrated annually on January 4.
The Global Economy
The International Monetary Fund expects the world economy will contract 4.4% in 2020. If that estimate holds, 2020 will be the worst year for global growth since the 1930s.
The U.S. economy shrank 4.3% in 2020, according to the IMF's forecast. That is better than the 8.3% setback estimated for the eurozone. The IMF projects that China's economy grew 1.9% last year. As for 2021, it sees GDP advances of 8.2% for China, 5.2% for the eurozone, and 3.1% for the U.S.
The European Union and United Kingdom agreed to a post-Brexit trade deal on December 24. This completed the Brexit process, which began with the 2016 leave vote and included the U.K.'s formal exit from the E.U. last January. Businesses and financial firms based in the U.K. now face new trade rules and costs, even with the new pact in place.
Looking at stock benchmarks around the world, there were more ups than downs. South Korea's Kospi Composite stood out with a 30.75% 2020 gain. Argentina's MERVAL climbed 22.93%, Taiwan's TWII 22.80%. Two other notable 2020 advances: Japan's Nikkei 225 added 16.01%, and China's Shanghai Composite rose 13.87%. There were also notable retreats: Indonesia's IDX Composite lost 5.09%, France's CAC 40 7.14%, Russia's RTS 10.42%, and Spain's IBEX 15.45%. The MSCI EAFE index, a broad benchmark tracking developed-economy stock market performance in Europe and Asia, rose 5.43%.
FINANCIAL STRATEGY OF THE WEEK
How to Prepare Financially for Retirement
Build up Your Emergency Fund Savings Account
Do you have a minimum of three months worth of living expenses saved in a checking or savings account? Sometimes there are delays in the start date of pensions or Social Security. It is important to have savings you can rely on to cover your bills if you experience delays.
Make a Retirement Budget
Have you spent time analyzing your retirement expenses? Working through a before and after retirement budget is important. You should come up with an accurate estimate of what you spend now and what will change after retirement. Underestimating expenses is one of the biggest retirement mistakes people make.
Determine Your Health Insurance Options
Have you looked at how you will cover medical expenses and health insurance and included these items in your budget? Health insurance coverage can be expensive if you plan on retiring early. Medicare begins at age 65, but on average expect it to cover only about half of your total health care expenses.
Make a Retirement Income Timeline
Have you made a retirement income timeline to show you when different sources of income will begin? You can line up an income timeline against potential retirement expenses (also laid out in timeline format) to help you manage cash flow.
Use a Social Security Calculator Before You Claim Benefits
Have you used a Social Security calculator, or worked with a financial adviser who can give advice on your Social Security benefits? Don't begin benefits until you have done an analysis to see when it will be most advantageous to you and your spouse to each begin your Social Security benefits.
Make an Investment Plan
Have you created an investment plan so you have a disciplined approach to follow throughout retirement? An investment plan is like a job description. Once you know the job you need your money to do for you it becomes easier to make the right hire (select the most appropriate investments).
As always, please let us know if there is anything we can help with along the way or any financial concerns you may have.