Markets, Economy

Weekly Kickstart (02/10/2020-02/14/2020)

2/10/20 8:00 AM

iStock-626627280.jpgStocks rebounded last week, as the S&P 500 rose by 3.17 percent to 3,327.71. That left the benchmark index up 3.00 percent 2020-to-date, and just 0.54 percent below the new all-time closing high hit on Thursday. In the previous Kickstart we explained how the economic disruptions from SARS and other recent epidemics were short-lived, and equities rallied sharply during the past few trading sessions as optimism grew that the new coronavirus outbreak could play out in a similar fashion. Specifically, an apparent slowing in the daily growth rate of infections, particularly outside of China, has raised hopes that the quick-response precautionary measures taken by governments across the globe have helped mitigate the contagion. Add to this the handful of positive economic reports released last week and it should not be surprising why confidence in a 2020 global reflation trade has once again picked up. However, there are still many unknowns surrounding the ultimate spread and severity of the coronavirus, as well as the accuracy of the reported infection statistics, so headline risk could remain elevated for the markets in the near-term.

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Experienced 401(k) participants, though, are perhaps less concerned about these potential swings in stock prices because they understand that volatility is a common occurrence, and what really matters when building a retirement nest egg is the combination of consistent saving and a long investment horizon. Moreover, updated EBRI data showed that just since the end of 2016 the average 401(k) account balance for younger (25-34), less-tenured (1-4 years) workers has jumped by 176 percent, while the S&P 500 has gained “only” 44 percent (through the end of January 2020). Older workers (55-64) with at least five years of tenure saw their 401(k) balances rise by an average of 59 percent during this same period since these individuals tend to have much larger accounts that are less sensitive to both contributions and stock fluctuations. Altogether, these significant gains should provide more evidence of how routine 401(k) contributions and the long-term resiliency of the market can together help offset periods of heightened volatility and maximize compound growth. Additional assistance is available by regularly consulting with a professional financial advisor and as always, we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last week, the positives included that small business job creation rebounded, nonfarm payrolls rose for a record 112th straight month, labor force participation climbed to a 7-year high, wage growth accelerated, the number of Americans making first-time claims for unemployment benefits fell to a near-half-century low, productivity growth increased, and gauges of manufacturing and service sector activity strengthened. As for the negatives, the nation’s trade deficit widened, construction spending declined, home-purchase applications slid, corporate layoff announcements jumped, and the unemployment rate ticked higher, albeit from a historically low level. This week the pace of economic data slows down but there are still several important reports on factory output, consumers, small business, and employment scheduled to be released, along with a few potentially market-moving speeches from Federal Reserve officials.

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What To Watch:

Monday

Tuesday

Wednesday

Thursday

Friday

 

 

Sources: Econoday, EBRI, WHO, FRBSL

Post author: Charles Couch

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