Jeff’s Weekly Stock Market Commentary: Looking Back
Happy New Year!
Most investors will be happy to have 2015 in the rear-view mirror. The S&P 500 eked out a 1.4% return including dividends. Excluding dividends it was down -0.73%. A total return of 1.40% for the S&P 500 is the worst annual return since 2008. Overall, that sounds rather tame, but both the stock and bond markets gyrated more in 2015 than they have since 2009.
Jeff’s Weekly Stock Market Commentary: Will The Fed Kill Our Economy?
Last week the Federal Reserve shocked the markets by emphasizing that a December rate HIKE was “squarely back in play”. As a result, the odds of a December rate hike have gone from roughly 30% before the announcement to around 60% now.
If the Federal Reserve raises interest rates in December—even by 1 basis point—I believe that it will hasten a recession in the U.S. economy. More importantly, it is possibly that even the threat of a December rate hike could be the catalyst that causes the stock market to retest the August lows.
The S&P 500 index tumbled in August of 2014, bottoming out on August 24th at 1824. As I write this, the S&P 500 index is trading at 2105. Re-testing the August lows represents a 13% drop from today’s level. Keep in mind that virtually all but one recent economic data point shows that the U.S. economy continues to slow.
So why would the Federal Reserve raise rates into a slowing economy when they have repeatedly said that any increase would be ‘data dependent’?
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.
Jeff’s Weekly Stock Market Commentary: Retirement
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.
Jeff Voudrie’s Weekly Stock Market Commentary – Cyclical Downturn
The International Monetary Fund can be considered the worlds’ central bank. As such, the IMF has its finger on the pulse on economic activity globally. So when the IMF and the head of IMF, Christine Lagarde, begins to sound an alarm it behooves investors to take note:
“After more than a decade of stellar growth, emerging markets are falling headlong into new era of anemic output and market turmoil. Investors are pulling cash out in droves, fueled by an unexpectedly fast deceleration in China, the world’s second-largest economy. The IMF warns of a coming wave of corporate defaults after five years of gorging on central bank-fueled cheap credit. Emerging-market woes risk fomenting contagion in U.S. markets.”
Here are some more quotes from the article that are worthy of attention:
“…Christine Lagarde faces some of the most volatile conditions in global markets since the financial crisis, a reflection of deep-seated worries about the world economy’s course.”