Published May 8, 2020
Then, just like that, it was over. The bull market did not end because of economic issues. This bull market ended because of a virus, and the growing realization of its impact on the global economy. The end of the market run was sudden and ferocious. Veteran investors were shocked and surprised. Warren Buffett observed that in all his years of investing, he had never seen anything like it.
Since the market is usually a forecaster of the economy, it appeared that the market was forecasting an event as big as the Great Depression, with unemployment at levels unseen at any time previously. Liz Sonders, chief investment strategist for Charles Schwab, said it was the Great Depression, the crash of 1987 and the 9-11 attacks all rolled into one.
Then on March 23, the U.S. equity market struck its low point for the year thus far. Since March 23, the market has been on a tear. First dismissed as […]
Published April 10, 2020
From its all-time high on Feb. 12, the S&P 500 hit a bottom of 2,237 on March 23. But will it still go lower this year? After the longest bull market in stock market history, the coronavirus dealt a body blow to the market. The market drop was the most precipitous in history. History tells us that the market will recover, but over what time period? Will it be a V-shaped or U-shaped or L-shaped recovery?
Since 1929, the S&P has suffered 14 bear markets, defined as peak-to-trough losses of 20 percent or more. That being said, bear markets result in declines of 39 percent on average, and last about 19 months. If this one feels particularly bad, it’s because it is. We’ve had a decline almost on a par with a typical full bear market cycle in just about three weeks.
Over the past 25 years, there have been seven virus-related market episodes. While there were market dislocations during these episodes, none of the infections were as contagious as the current coronavirus. While the Ebola virus outbreak in West Africa was potentially more problematic, it was contained quite quickly […]
Published March 6, 2020
This month I have received more than the usual amount of correspondence asking where my column is. It is flattering to know that people care, but pity the poor columnist in a market of volatility and government by tweet. Sometimes circumstances change so rapidly, I can’t keep up with the changes. But should you care about the volatility anyway?
Investors are people, and people are often impatient. No one likes to wait in line or wait longer than necessary for something – especially today, when so much is just a click or two away.
This impatience also manifests itself in the financial markets. When stocks slip, for example, some investors grow uneasy. Their impulse is to sell, get out, and perhaps get back in later. If they give in to that impulse, they may pay a steep price.
Across 30 years through Dec. 31, 2018, the Standard & Poor’s 500 posted an average annual return of 10 percent. During the same period, the average mutual fund stock investor realized a yearly return of just 4.1 percent. Why the difference? It could partly stem from impatience.
It’s important to remember that past performance […]
Published February 7, 2020
“It’s very hard to say what is affecting financial markets with any precision or confidence.” – Jerome Powell, U.S. Federal Reserve Board chairman.
Longtime readers of this column will recall that I am fond of quoting Will Rogers, who had rare sagacity. He once said “it is very difficult to make predictions, especially about the future.” Now, our Federal Reserve chairman agrees with him.
As we started the year, rosy optimism prevailed. The equity markets were up. Strength in the markets begat more strength, and it looked like we were off to a good start for the year. A good start to the year usually means a good year; optimism prevailed. The Federal Reserve met and pronounced the economy solid. The Fed declined to move rates, because a cut wasn’t needed, and an increase was not warranted. President Trump did not agree: The Fed should get smart and cut rates, he opined, arguing that high interest rates were putting the U.S. at a competitive disadvantage. (Interest rates are at historically low levels.) The president yearned for the negative interest rates of Europe, but they weren’t forthcoming.
Unemployment remained low. Consumer confidence […]
Published January 10, 2020
Much has been written about the classic financial mistakes that plague investors, family businesses, corporations and charities. Similar financial missteps also plague retirees. The beginning of a new decade is a good time to review these.
Calling them “mistakes” may be a bit harsh, because not all of them represent errors in judgment. Yet whether they result from ignorance or fate, we need to be aware of them as we plan for and enter retirement.
Leaving work too early
Adding years of earnings and savings can add significantly to the investment portfolio one will rely on in retirement. Also, since Social Security benefits rise about 8 percent for every year one delays receiving them, waiting a few years to apply for benefits can provide greater retirement income. Filing for monthly benefits before reaching Social Security’s Full Retirement Age (FRA) can mean comparatively smaller monthly payments. If possible, delay claiming Social Security until one must file for it, and see significantly more monthly benefits.
Underestimating medical bills
According to the latest estimate from the Center for Retirement Research at Boston College, the average retiree will need at least $4,300 per year to pay for […]
Published December 6, 2019
In this column, you have often heard me refer to the market climbing a wall of worry.
Surely, at this time, the market has a lot to worry about. Is that the reason the equity markets have climbed 20-30 percent year-to-date?
The slowing global economy, trade war with China, Brexit missteps, Hong Kong demonstrations and interest rates inverting have all been headline news and negatives for the U.S. economy and the stock market.
“Trade wars are good and easy to win,” opined President Trump, as he began the current dispute with China. With each passing month, we are told we are winning the trade dispute and that an agreement is at hand – even inches away, according to the White House – yet the dispute continues and in some cases worsens.
If you can count the outcome of the demonstrations in Hong Kong as a sign of winning against China’s control, then we should be optimistic. But political unrest in Hong Kong is threatening global stability.
Brexit also threatens disruption of the global economy, with the only solution offered being another general election in Britain; no consolation there.
The U.S. interest rate yield curve […]