Life is full of surprises. Consider this: 60% of current retirees retired sooner than they had expected, 7% retired later than expected and only 33% retired at the age that they had anticipated (Click here for details.)
ACTION NEEDED: Work with your advisor to develop a plan and run “what if” scenarios to stress test your situation for whatever life brings your way.
Most of the time, the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.
CONSUMER SPENDING: This grade is A- (very favorable).
THE FED AND ITS POLICIES: This factor is rated B (favorable). The U.S. economy can handle higher rates as long as the pace of future interest rate increases is slow. Fed Chair Janet Yellen made clear in her press conference after the December meeting that the path higher would be “gradual”.
The Fed’s plan to gradually raise rates in the coming years won’t derail the economy and brings some certainty to the market, says Morningstar’s Bob Johnson. The market consensus on the 2016 pace of increase is somewhere around two to possibly three rate increase of .25% each.
BUSINESS PROFITABILITY: This factor’s grade is a C (average).
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. While decreased, these risks still deserve our ongoing attention.
Last week, U.S. Stocks and Foreign Stocks increased. Bonds decreased. During the last 12 months, BONDS outperformed STOCKS.
|
Returns through 3-4-2016 |
1-week |
Y-T-D |
1-Year |
3-Years |
5-Years |
10-Years |
|
Bonds- BarCap Aggregate Index |
-.2 |
1.7 |
1.6 |
2.1 |
3.6 |
4.7 |
|
US Stocks-Standard & Poor’s 500 |
2.7 |
-1.7 |
-2.6 |
11.8 |
11.0 |
6.7 |
|
Foreign Stocks- MS EAFE Developed Countries |
4.7 |
-4.7 |
-10.1 |
2.1 |
1.5 |
2.0 |
Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.
The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®. This week Laurie will discuss: “Listener Income Tax Questions-Part II”
Laurie will take your calls on these topics and other inquiries this week. Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie. This show will be broadcast at the regular time. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton and Phillipsburg area– or listen to it online from anywhere on the internet. For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.
“It is not what you do for your children, but what you have taught them to do for themselves, that will make them successful human beings.”
– Ann Landers
The February blues melted away, and stocks roared ahead nearly 3% for a third consecutive weekly gain. Global equities jumped, particularly emerging markets.
Improved sentiment was supported by higher commodity prices; macroeconomic news that was, on balance positive; and little prospect of the Federal Reserve hiking interest rates March 16 when its Federal Open Market Committee next meets. U.S. economic data continue to be mixed to good. Investors are trying to have it both ways, hoping for positive data, but not so positive that the Fed will raise rates sooner than expected.
A general rebound in commodities, from copper to cotton, plus crude oil’s 37% rise from its lows have investors less worried about global growth. One technical negative note is that this stock market rebound continues to be characterized by low trading volumes, meaning conviction isn’t strong.
The Dow Jones Industrial Average tacked on 367 points, or 2.2%, to 17,006.77 last week, while the S&P 500 rose 52 pts to 1999.99. The Nasdaq rose 2.8% to 4717.02.The Labor Department on Friday reported better-than-expected data, as nonfarm payrolls picked up 242,000 jobs last month, compared to projections of 195,000. The unemployment rate was flat at 4.9%, and labor participation rose.
As good as the rebound has been, it remains suspect to some. “It’s hard to see the market propelled to higher levels,” says Margaret Patel, a senior portfolio manager at Wells Capital Management. The U.S economy is still growing slowly, emerging markets are still deteriorating, and Europe is just “slogging along, a little better than flat.”
Paul Nolte, a portfolio manager at Kingsview Asset Management, says the only good thing about the employment numbers was the payrolls headline. “Wage growth was terrible for an economic recovery that has lasted this long,” he notes. Average weekly earnings data fell to 1.6% growth year on year from 2.5% in January. “It’s just one month of data, but you’d expect higher wage gains with the rise in payrolls,” he says.
“It was an oversold condition with everyone on one side of the boat,” adds Michael Mullaney, chief investment officer of Fiduciary Trust, of the February downdraft. “With this rebound the market’s overall tone is better, and things have stopped getting worse,” he says, helped by Fed chatter that has been more dovish lately, backing away from the idea of four rate hikes this year.
For a sustained rebound, however, “we need to see positive earnings estimate revisions. You have to be somewhat suspect of the market’s ability to hold this level without that,” says Mullaney.
(Source: Barrons Online)