Prior to the elections basically going the way most pundits projected (with the House switching to the Democrats and Republicans retaining the Senate), there was a lot being written about the potential impact of the mid-terms (and the historical instances of strong market performance following the uncertainty being replaced by clarity after the elections). This chart shows
As a summary update of what’s been happening in the markets, as well as how we are looking at things going forward, I wanted to share this from a Weekly piece put out last week by CLS Investments, a well-known 3rd-party money manager.
“As of this writing, with a few days left in the month, October has lived up to its scary reputation as one of the worst months of the year for the stock market. There is a bevy of reasons commonly cited for the stock market weakness with each holding some truth, but the leading reasons are
Economic growth numbers in the US have generally remained positive for much of the year, especially being seen now in the labor market. A small business optimism survey (NFIB) hit its highest mark ever (surpassing a previous high from 1983). A record 26% of firms plan to create new jobs. The problem now is
As we noted last month, the end of January and early February’s slide saw the S&P 500 Index lose just over 10% in value–an official correction–in just nine trading days. That’s right–nine trading days from an all-time high to a 10% decline which, according to LPL Research, was the quickest on record.
Let’s review the landscape. Moderate economic growth at home and abroad has been fueling corporate profits; analysts have been sharply revising 2018 profit estimates higher (Thomson Reuters); inflation has been low, and interest rates, while creeping upward, remain near historically low levels.
Well, this long-felt sense of unease people have had about things being “too good” showed up quickly last week and Monday as the stock markets had a sell-off (with a pretty solid comeback today). After the unprecedented run-up we have had to new highs seemingly every week with historically low volatility in 2017 there has been a feeling among many I've talked to of “not if, but when” there would be a pullback. Market pullbacks are historically a normal part of a healthy functioning market, but everything has pretty much lined up this past year to give us positive months in the S&P 500 ever since the election (and 22 of the last 23 months - Ycharts).
Corporate tax reform combined with strong earnings outlooks carried 2017 into January of this year with a 5.73% return to start the year for the S&P 500. The market action from the last few days (as of this writing) erased the 2018 gains and brought us back early January levels (still way up over this past year). It is important when you hear the scary-sounding headlines that we keep things in context. The drop on Monday, while the largest point drop in history, was only the 100th largest from a % standpoint in the history of the Dow and the 127th largest in the history of the S&P due to the massive increases in value the markets have experienced in the last 9 years. Where things go from here is the obvious question.
A few of the triggers for the drop:
While the full impact of the changes to our tax code are still being reviewed and considered, Nationwide has created a helpful, easy-to-read summary for you to view for how it may impact you. Click here to view.
When it comes to investing, the current standard of return on investment (ROI) can be self-limiting, adding pressure that is counterproductive. So much of ROI is not within our control. We can diversify investments––always a good strategy––but we cannot control how the markets perform or how global events affect the markets. Just as meteorologists can predict the weather but still be wrong, we can try to predict and plan for market upheavals, but we cannot control them.
It’s important to balance return on investments with return on life (ROL). ROL is defined as, ‘How well you are doing in living the life you want, with the money you have.”
Here are some key ROL indicators:
An important part of your retirement plan is a discussion of the benefits of working, regardless of age. Retirement is no longer an event––it is a segue into an altered definition of life as you know it.
One definition of “work” is that it consists of actions that bring value to others and meaning to you. While you may feel that you’ve had enough work, it’s probably the underlying issues (i.e., meetings, corporate politics, commuting) that have left you drained and exhausted.
Think about this: many people who go back to work after retirement are motivated by more than money––they are also motivated by the psychological and existential payoffs.
Happy September! I hope that you had a great Labor Day and end to your summer. Another year with summer seeming to fly by and now football is here again. My kids both started up new schools as Leilani is now officially a kindergartener & Joshua is in middle school! Crazy.
We have some exciting things coming up in the fall that I want to let you know about & also want to give an update on markets, the economy & things I'm keeping an eye on, but I will send those in separate emails since I have a lot to share in this email, primarily focused on retirement.
Picture this—it’s Friday afternoon, your work is done, and you have the weekend ahead of you. But what makes this weekend different than any other weekend is that two-week vacation following it. You wish your colleagues well, they express similar thoughts, and you head toward freedom.
Of course, you’re excited! Travel, new experiences, time away from the mundane, and time to recharge.
In the back of your mind, you know it’s temporary and you’ll be back at your desk before you know it. Maybe that’s part of the reason why the time away is special. It’s short-lived.
Now, let’s take this another step.
When it comes to retirement, it’s easy to dream about the perks: sleeping in, traveling, reading a good book, playing golf––name your fantasy. Even if your retirement is fully funded, the reality can be far less fulfilling if you don’t plan ahead.
Repeated studies have shown that people who do not have a rewarding retirement can suffer both physically and psychologically during retirement. Lack of mental stimulation is a primary reason. People are often forced into retirement before they are ready. Others think they are ready, and yet are not prepared for the day-to-day realities of a new lifestyle.
Whether you’ve been told you should retire at 62, 65, or some other age, only you can decide what is right for you. In fact, you may want to reconsider retiring at all––at least in the traditional sense.
Many of us don’t like the circumstances we find ourselves in––and look at retirement as the nirvana we’ve been missing. The truth probably lies somewhere between completely dropping out (i.e., piddling around in retirement) and never retiring (i.e., dying with their boots on).