Markets, Economy

Weekly Kickstart (06/10/2019-06/14/2019)

6/10/19 8:00 AM

iStock-626627280.jpgStocks rebounded last week, as the S&P 500 jumped by 4.41 percent to 2,873.34. That left the benchmark index up 14.62 percent 2019-to-date, and just 2.46 percent below the all-time closing high hit in April. The sharp bounce in the market is an encouraging start to the month of June, especially following the worst May for equities since 2010. However, even after last week’s rally a lot of uncertainty still surrounds the trade negotiations, monetary policy, global economic growth, and many other issues, all of which appear to still be weighing on investor sentiment. For example, the latest AAII survey revealed that 22.5 percent of individual investors anticipate stock prices will generally rise over the next six months, and 42.6 percent expect stock prices to decline. Those readings on bullish and bearish sentiment are both more than one standard deviation beyond their respective historical averages, a condition which in the past has often “been followed by higher-than-median six-month returns for the S&P 500 index.”


Savvy 401(k) investors are perhaps less concerned about potential fluctuations in the market because they understand that volatility is a natural occurrence, and what really matters when building a retirement nest egg is the combination of consistent saving and a long time horizon. Indeed, updated EBRI data showed that the average 401(k) account balance for younger (25-34), less-tenured (1-4 years) workers fell by 2.9 percent last month. That decline does not look so bad considering that it followed a 4.3 percent gain in April and a 15.3 percent spike in the first quarter of 2019. Even more impressive is that since the end of 2016 the average 401(k) account balance for younger, less-tenured workers has surged by 119 percent, while the S&P 500 has gained just 23 percent (through the end of May 2019). Older workers (55-64) with at least five years of tenure saw their 401(k) balances rise by an average of “only” 37 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 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 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 nation’s trade deficit narrowed (but widened with China), motor vehicle sales improved, revolving credit rebounded, the 30-year mortgage rate fell to a 22-month low, unit labor costs declined, the number of Americans making first-time claims for unemployment benefits held near a half-century low, and the national rate of underemployment fell to the best level of the current business cycle. As for the negatives, home purchase applications slid, private-sector residential construction spending weakened, corporate layoff announcements increased, small business job creation collapsed, nonfarm payrolls growth slowed, average hourly earnings disappointed forecasts, Q1 productivity was revised slightly lower, and gauges of both manufacturing and service sector activity continued to send mixed signals. This week the pace of economic data slows down but there are still a few important reports on factory output, consumers, employment, inflation, and small business scheduled to be released.


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Sources: Econoday, AAII, EBRI, Twitter, FRBSL

Post author: Charles Couch