Markets, Economy

Weekly Kickstart (04/08/2019-04/12/2019)

4/8/19 8:00 AM

iStock-626627280.jpgStocks continued higher last week, as the S&P 500 rose by 2.06 percent to 2,892.74. That left the benchmark index up 15.39 percent 2019-to-date, and just 1.30 percent below the all-time closing high hit last September. The strong start to April trading was even more impressive given that it followed a 1.79 percent increase in March and a 13.07 percent spike during the first quarter of 2019. This V-shaped rebound off of December’s panic low, even if arguably a bit overdone in the near-term, highlights the resiliency of the market that long-term investors are able to benefit the most from. Similarly, updated EBRI data showed that the average 401(k) account balance for younger (25-34), less-tenured (1-4 years) workers lifted by 3.3 percent last month and 15.3 percent in Q1, a significant turnaround from December’s 4.9 percent decline.


The power of 401(k) plans, though, is more clearly observed over a longer time horizon that allows the combination of routine savings and persistent market participation to offset periods of elevated volatility and maximize compound growth. Since the end of 2016, for instance, the average 401(k) account balance for younger, less-tenured workers has surged by 116 percent, while the S&P 500 has gained just 27 percent (through the end of March 2019). Older workers (55-64) with at least five years of tenure saw their 401(k) balances rise by an average of “only” 38 percent during this same period since these individuals tend to have much larger accounts that are less sensitive to both contributions and market fluctuations. Altogether, these substantial gains should provide further evidence of how effective consistent participation in a tax-advantaged savings vehicle can be when trying to amass a large retirement nest egg. Additional assistance is available through the use of dollar-cost averaging and regularly consulting with a professional financial advisor. As always, we are here to help with any questions you may have.


To recap a few of the things we learned about the economy last week, the positives included that the 30-year mortgage rate held near a 14-month low, home purchase applications soared, construction spending increased, core durable goods orders rose, nonfarm payrolls growth rebounded, joblessness remained near a cycle low, and the number of Americans making first-time claims for unemployment benefits fell to the best level in almost half a century. As for the negatives, retail sales unexpectedly declined, a key gauge of capital investment softened, corporate layoff announcements remained elevated, wage growth cooled, job creation at smaller firms weakened, labor force participation decreased, and gauges of business activity in both the manufacturing and services sectors continued to send mixed signals. This week the pace of economic data slows down but there are still a few important reports on consumers, small business, employment, and inflation scheduled to be released, along with the potentially market-moving minutes from the last FOMC meeting due out on Wednesday.


**A more detailed snapshot of the U.S. economy can be found here.**

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Sources: Econoday, EBRI, FRBSL

Post author: Charles Couch