Market-Moving News[i]
Slippery slope
U.S. stock indexes posted some of the steepest weekly declines in more than a year, with the NASDAQ down nearly 6% as of Friday's close, the S&P 500 falling more than 4%, and the Dow declining almost 3%. Technology stocks were hit particularly hard amid fresh concerns about the short-term profit potential from artificial intelligence.
Mixed jobs data
Ahead of a mid-September U.S. Federal Reserve meeting, the government reported on Friday that the economy added 142,000 jobs in August. While that figure was above the previous month’s gain, it was less than the consensus expectations for around 160,000. In addition, initial estimates for June and July were revised downward by a combined 86,000 jobs.
Yields slide
Yields of U.S. government bonds fell sharply amid expectations of an interest-rate cut by the U.S. Federal Reserve at its two-day meeting that concludes on September 18. The yield of the 10-year U.S. Treasury bond ended the week at 3.72%—the lowest since June 2023 and down from 3.92% at the end of the previous week.
Oil slick
The price of U.S. crude oil fell nearly 8% for the week to the lowest level in about 14 months, with the commodity trading for around $68 per barrel on Friday afternoon. Concerns about sagging demand in the United States and China weighed on the price, which had been above $80 as recently as mid-July.
Volatility surge
As stocks fell, an index that tracks investors’ expectations of short-term U.S. market volatility jumped about 49% for the week. Although the Cboe Volatility Index rose on Friday to a closing level of around 22, that reading was still well below a recent peak of nearly 39 reached on August 5 during a surge in volatility that subsided after a few days.
Smal-cap rout
The week’s volatility was especially pronounced for U.S. small-cap stocks, which lagged their large-cap peers by a wide margin. The Russell 2000 Index, a small-cap benchmark, fell nearly 6%, sinking to the lowest level since August 14.
Inside Q2 earnings
Utilities posted the strongest earnings growth at the sector level in the recently completed earnings season with a 21% increase relative to the previous year’s second quarter, according to FactSet. Across all S&P 500 sectors, earnings grew by an average of 11.3%—the strongest result since the fourth quarter of 2021.
Price check ahead
A Consumer Price Index report set to be released on Wednesday will provide one of the last data points for the U.S. Federal Reserve as it considers cutting its key interest rate by either 25 or 50 basis points at a meeting ending September 18. The most recent CPI report released in August showed an annual inflation rate of 2.9%, the first reading below 3.0% since early 2021.
The Week Ahead: September 9-13
- Monday
- Wholesale inventories, U.S. Census Bureau
- Consumer credit, U.S. Federal Reserve
- Tuesday
- Small Business Optimism Index, National Federation of Independent Business
- Wednesday
- Consumer Price Index, U.S. Bureau of Labor Statistics
- Thursday
- Producer Price Index, U.S. Bureau of Labor Statistics
- Weekly unemployment claims, U.S. Department of Labor
- Federal budget, U.S. Department of the Treasury
- Friday
- University of Michigan Index of Consumer Sentiment, preliminary result
- Export and import prices, U.S. Bureau of Labor Statistics
Philosophy Quote of the Week[ii]
Nothing to Fear but Fear Itself
“But there is no reason to live and no limit to our miseries if we let our fears predominate.”
Seneca, Moral Letters, 13.12b
Tax Tips[iii]
IRS Online Tools for Year-Round Tax Help
Here are some of the online tools that the IRS offers to make filing your taxes less taxing:
- IRS Free File
- You can use IRS Free File to prepare and e-file your federal tax return for free. Free File will do much of the work for you with brand-name tax software or Fillable Forms. If you still need to file your 2018 tax return, Free File is available through Oct. 15, annually. The only way to use IRS Free File is through the IRS website.
- Where’s My Refund?
- Checking the status of your tax refund is easy when you use “Where’s My Refund?” You can also use this tool with the IRS2GO mobile app.
- Direct Pay
- Use “Direct Pay” service to pay your tax bill or pay your estimated tax directly from your checking or savings account. Direct Pay is safe, easy and free. The tool walks you through five simple steps to pay your tax in one online session.
- Online Payment Agreement
- If you can’t pay your taxes in full, apply for an “Online Payment Agreement” at https://www.irs.gov. The Direct Debit payment plan option is a lowest-cost hassle-free way to make monthly payments.
- Withholding Calculator
- If you got a larger refund or owed more tax than you expected when you filed your tax return, you may need to change the amount of tax taken out of your paycheck. The Withholding Calculator tool can help you complete a new Form W-4, Employee’s Withholding Allowance Certificate to give to your employer.
- Get Transcript
- If you apply for a loan or student financial aid, you may need to get a tax transcript. With “Get Transcript,” you can download and print your transcript or ask the IRS to mail it to your address of record.
- Interactive Tax Assistant
- Use the “Interactive Tax Assistant” tool to get answers to common tax questions. The tool will guide you step-by-step to the answer to your question based on your situation.
- Tax Map
- The IRS Tax Map gives you a single point to get tax law information by subject. It integrates your topic with related tax forms, instructions and publications into one research tool.
- IRS Select Check
- If you want to deduct your gift to charity, the organization you give to must be qualified. Use the IRS Select Check tool to see if a group is qualified.
Remember – always contact your tax professional for help! That’s what you pay them for!
Life Insurance Awareness Month[iv]
Benefits of Life Insurance
Written By Amy Fontinelle & Ashlee Valentine
One of the top benefits of life insurance is financial. Another is emotional.
Financially, life insurance can provide your loved ones with a monetary safety net so they don’t have to struggle after your death. Some types of life insurance even have financial benefits you can use during your lifetime.
Emotionally, life insurance gives you one less thing to worry about. You can sleep better at night knowing that your family will be able to pay the bills if you pass away.
Here are ways life insurance provides valuable benefits.
Financial Benefits of Life Insurance
The death benefit from a life insurance policy can help your family pay for your final expenses—things like transportation, embalming, a casket, cremation, burial and a funeral service.
The national median cost for a funeral, viewing and burial is around $8,000. Your expenses might be less or much more. A direct cremation can cost less than $1,000, while a full-service funeral in some areas costs more than $10,000.
For most people, covering final expenses is not the main reason to purchase life insurance. A far more significant benefit is the enduring financial security a larger life insurance policy can provide for your loved ones.
Life insurance can replace years, even decades, of lost income. It can help your survivors maintain their living standards in your absence. That includes paying the mortgage, the car loan and any medical bills from your end-of-life care.
Life insurance death benefits are paid tax-free. Your beneficiaries can use the money however they want.
Benefits of Term Life Insurance
Term life insurance lets you lock in a level rate for a set number of years. After the term is up, the policy expires unless you renew (at a new, higher rate).
A term life policy’s locked-in rate can last from five to 40 years. Common term lengths are 10, 20 or 30 years. You’ll pay regular premiums to keep your policy in force, such as monthly or annually. When you purchase a term life insurance policy, you can count on your premiums staying the same year after year during the level term period.
If you pass away while the policy is in force, your beneficiaries will get your life insurance death benefit. Your beneficiaries don’t receive anything if you die after the policy expires.
Term life insurance is meant to protect against a shorter-term risk than permanent life insurance—like the risk of dying during your working years if your household counts on your income.
Term life insurance is easy to understand, and you’ll pay far less for a term life policy than a permanent policy with the same death benefit amount. It tends to be much more affordable than people assume, even if you have health conditions.
Benefits of Whole Life Insurance
Whole life insurance is a type of permanent life insurance that’s designed to last a lifetime, no matter when you die.
Whole life insurance also accumulates cash value. The policy’s cash value is guaranteed to grow over time regardless of how investments like stocks and bonds perform. Also, you don’t pay tax on the cash value growth.
A portion of your premium payments goes toward building your cash value. Once the cash value is large enough, you can use it to pay your premiums or take out a policy loan (with interest). If you decide to surrender a whole life insurance policy, its cash value means you might get some money back.
Some whole life insurance policies, called participating policies, also pay dividends. “Participating” means that you participate in a company’s profits as a policyholder. You’ll find participating policies through mutual insurance companies, which are owned by policyholders and not by shareholders.
Dividends on participating policies are not guaranteed, but many insurers have a long history of paying them consistently. You can typically use dividends to pay your premiums, increase your death benefit or add to your cash value.
However, the insurance company generally keeps your policy’s cash value when you die. Your beneficiaries only get the death benefit. And if you have any policy loans outstanding or have made withdrawals from cash value, those get subtracted from the death benefit.
Benefits of Universal Life Insurance
Universal life insurance is another form of permanent life insurance. It also offers a guaranteed death benefit but differs from whole life insurance in that universal life policies can offer the flexibility to adjust your premium payments and death benefits.
Universal life insurance also grows cash value, which you can access through a withdrawal or loan during your lifetime. The rate of growth depends on which type of universal life you buy.
- Guaranteed universal life insurance: This is the most affordable type of universal life insurance. It offers a guaranteed death benefit and premiums that will not change but typically has little cash value.
- Indexed universal life insurance: This has cash value growth that is tied to a stock market index, such as the S&P 500, or a combination of indexes. You may be able to adjust your premiums and death benefit with this type of policy.
- Variable universal life insurance: You’ll select sub-accounts and your cash value gains will depend on investment performance. This generally means you’ll need to actively manage your policy, but you also might have a fixed interest rate option for cash value. With variable universal life, you can also vary your death benefit and premiums, within limits.
The biggest difference between universal life insurance and whole life insurance is the cost. Whole life insurance is more expensive because policies offer a guaranteed rate of return on your cash value. By contrast, term life insurance is the cheapest type of insurance because it offers level premiums only for a defined time period and has no cash value component.
Benefits of Life Insurance Riders
If a standard life insurance policy doesn’t provide as much risk protection as you’d like, look into life insurance riders. They allow you to increase your coverage or add flexibility to your policy. Not all riders are worth the extra money based on your chances of using them, so think carefully before buying riders.
Here are some examples of riders you may be able to buy, depending on what the insurer offers and whether you’re eligible:
- Waiver of premium. This allows you to stop paying for your policy without losing coverage if you become disabled from an illness or injury.
- Additional purchase benefit. This lets you increase your coverage at certain points in the future without having to qualify medically.
Living Benefits of Life Insurance
Certain types of life insurance riders fall into the category of living benefits. They let you tap into a portion of your own death benefit during your lifetime under circumstances like these:
- Long-term care rider. This helps if you can no longer perform daily activities, like bathing, eating and toileting. When you need in-home care or assisted living, it can be pricey. This rider can provide funds for the extra expenses.
- Terminal illness. An accelerated death benefit riderhelps if you are diagnosed with a terminal illness and given a short time to live. (The rider will specify the length for eligibility.) You can spend your death benefit on palliative care or other expenses.
- Critical illness. This can be a big help if you are diagnosed with an illness that may shorten your life, like kidney failure, heart valve replacement or cancer.
Living benefits may be included with your policy or may cost extra. They add flexibility but using them typically reduces what your beneficiaries will receive when you die. It may reduce the benefit dollar-for-dollar, or it could reduce it by more.
Tax Benefits of Life Insurance
A life insurance policy’s death benefit is generally not taxable. There are exceptions, however.
Here are examples of taxable situations:
- You withdraw cash value from your policy that includes investment gains.
- You surrender your life insurance policy. You can be taxed on the portion of the money that came from investment gains.
- The life insurance policy was transferred to you for cash.
- Your beneficiary receives the death benefit in installments and interest accumulates as the insurer holds the policy in an interest-bearing account. They will need to pay taxes on the interest.
[i]https://www.jhinvestments.com/weekly-market-recap#market-moving-news, accessed 09.09.2024.
[ii] Holiday, Ryan. The Daily Stoic: 366 Meditations on Wisdom, Perseverance, and the Art of Living. Kindle edition, page 271. Accessed 09.09.2024.
[iii] Hockensmith, Robert F. 52 Ways to Outsmart the IRS, Weekly Tax Tips to Save You Money. Kindle edition, page 165-167, accessed 09.09.2024.
[iv]https://www.forbes.com/advisor/life-insurance/benefits-of-life-insurance/, accessed 09.09.2024.