Over the last several months I have said that I believe we have seen the market ‘highs’ (2133 on the S&P 500) and that we may see the recent lows (1810 on the S&P500) broken.
As we entered into 2016, the S&P500 had the worst first 6 weeks in the history of the S&P 500….EVER. It plunged 12%. Since then it has surged back up to 2064. If you listen to the Wall Street System pundits, you’d think that everything is fantastic!
Hmmm. I don’t agree. Let’s put this recent surge in the S&P 500 in context.
The S&P 500 hit an all-time high in May of 2015 at 2130. It has been downhill since then with a free-fall in the index during the middle of August where it slid to 1867. Many investors were shocked at the 12% plunge but were relieved that the markets recovered over the next two months—or did they? On January 20th, 2016 the S&P 500 was back down to 1860 and it is becoming obvious to even the most bullish investors that we may not recover for quite a while.
Jeff’s Weekly Stock Market Commentary: The Fed Conundrum – Will They Or Won’t They?
The Fed announced in late October that there is a live possibility that they will raise rates in December. The very announcement of that initially caused bonds yields to spike (going from 1.98% on October 14th to 2.34% on Nov 10th) and caused losses for those that are heavily invested in USTs.
Traditionally, the Fed lowers interest rates to spur the economy and raises rates to slow it down. There was one jobs report in October that was very positive (and that seemed to spur the Fed on), but virtually all of the significant data released since then has shown economic weakness both here in the U.S. and abroad.
For instance, the UK recently announced that it is emerging from its troubles and stimulus is no longer needed. Then the UK Construction PMI was released showing a dramatic slowdown: dropped from 58.8 to 55.3. The UK has been stronger than other European countries but may just be the last to begin slowing.
Jeff’s Weekly Stock Market Commentary: Traditional Financial Planning
I believe that the average stock market returns over the next 5-10 years may be considerably less than the 8% a year that the financial planners say you should expect. This is just one topic that I cover in the quarterly review.
Why Traditional Financial Planning Has Failed So Many Retirees (this is an updated version of an article that I published several years ago….)
People who have retired in the last 5-10 years are facing daunting challenges. Adding to their frustration is that the financial plan (upon which they based their decision to retire) indicated that they should be able to live comfortably for the rest of their lives.
I believe that those financial plans may fail because they were based on erroneous assumptions. Unless retirees recognize this and make the proper adjustments, they risk running out of money well before their life expectancy and become dependent on their children and/or the government to meet their basic needs.
Those 5-10 years or more from retirement have time and money on their side.
For those who are retired or near retirement, the number one priority must be to avoid significant losses. Many investors experienced losses of 30-60% in the crash of 2000-2003 and then again in the crash of 2007-2009. Depending on their age at the time, those who were still working and contributing to their 401k’s recovered over the ensuing years.
Keep in mind, though, that much of that recovery occurred because they continued to put more money in on a monthly basis. Their monthly contributions over the years 2000-2002 and/or 2007-2009 went into a market that had retreated by almost 50% from the highs. As the markets resumed their uptrend their accounts gained ground quickly.
That taught some investors that they will be fine as long as they hang in there because the markets will eventually recover and all will be fine. That may be true for those that are still 5-10 years or more away from retirement. They are probably at the highest salary level of their careers and are able to contribute a higher percentage of their income to their retirement nest egg. They have time and their income on their side.