Stock Market Commentary
For the week of April 6, 2009
The Market
For the fourth consecutive week, the major indexes ended with gains, with the Dow marking its best four-week streak since 1933. Despite unemployment rates reaching 8.5 percent, the highest since 1983 but in line with analysts’ expectations, the Dow closed above 8,000 for the first time since Feb. 9. At Friday’s close, the S&P stood 24.5 percent higher than its 12-year low set on March 9. The Dow ended the week up 3.13 percent to 8,017.59. The S&P gained 3.29 percent to close the week at 842.50, and the NASDAQ climbed 4.96 percent to finish the week at 1,621.87.
Tax Freedom Day – The Tax Foundation each year calculates the date on which the average American has earned enough money to pay his or her tax obligation for the year. This year, “Tax Freedom Day” arrives on April 13 – eight days earlier than in 2008 and two weeks earlier than 2007. The earlier date is due to declining tax collections because of the recession and the stimulus package tax cuts. Americans will still pay, on average, more in taxes in 2009 than they spend on food, clothing and housing combined. When looking at the state tax burden, Alaska got to celebrate tax freedom on March 23, while Connecticut will be the last to celebrate on April 30.
Signs of Spending – Orders for manufactured products posted their first increase in February following six straight months of declines. According to the Commerce Department report released Thursday, factory orders climbed 1.8 percent in February, surprising economists who had predicted a 1.1 percent decline.
Millionaires – One out of every 17 households in the U.S. have a net worth of at least $1 million not counting the value of their primary residence (Source: Fox Business, Spectrum Group, Census Bureau, BTN Research).
Please Take Me Out – Forty-eight percent of Americans would end their participation in the Social Security program if that option was available, i.e., make no contributions into the program and receive no benefits from it (Source: Sun Life, BTN Research).
Nervous – Nearly one out of every three Americans (32 percent) indicated last month that if they came into new money they would save it instead of investing it into the U.S. stock market. Using the current national average yield of 0.33 percent for tax-free money market funds, $1 will double in value to $2 over a period of 210 years (Source: Rasmussen Reports, Newsweek, iMoneyNet, BTN Research).
WEEKLY FOCUS – Evaluating A Buy Out Package
Your employer has announced it wants to eliminate several hundred jobs by offering buyouts, also known as early retirement packages, to a group of employees.That group includes you. To quote a famous rock anthem – should you stay or should you go? Will your job be eliminated later with a less attractive severance package or none at all? And if you stay and the job stays, how will you feel about working for an employer that gave you the highway option?
Your age and life stage also will greatly impact your decision. You may be young enough that retirement now isn’t an option, so the severance will be your paycheck while you find another job. Or you may have young children and decide severance will provide income while you stay at home for a few years. If you were looking at retirement within a few years anyway, this may give you the opportunity to start early. You’ll need to evaluate the financial pros and cons of accepting or rejecting the offer beyond just the bottom line cash, which companies usually calculate based on seniority and years of service. Consider bonuses, stock options, paid time off and insurance premium subsidies that you will no longer receive. Consult a tax specialist about the impact of receiving a lump sum or stretching it out over time – severance or early retirement pay is considered taxable income. You legally have 45 days to consider a buyout package,
and most people wait until the 11th hour. By signing a buy-out agreement, you forfeit your right to sue your employer later on any employment and compensation-related issues, so resolve those before time runs out.
Buyouts often occur after a merger when duplicate positions need to be eliminated. Companies may offer a staying bonus to those who don’t jump ship to ensure they have adequate staff to complete the transition. If you accept a staying bonus, you should still dust off your resume and check your finances to make sure you can survive being terminated when the transition is done. Take advantage of any extra services your employer may be offering to those who accept the buyout, such as career counseling or placement services, even if you plan to retire, so you can walk away assured you took advantage of every opportunity.
We can help you determine how your goals and objectives may change in light of the buyout. Even if you decide to stay, you may determine a need for greater cash reserves or other financial plan revisions to prepare for moving to another job if your employment future looks uncertain. Call our office for an appointment.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all
dividends. Written by Securities America. SAI# 296522
