Stocks remained under pressure last week, as the S&P 500 fell by 0.46 percent to 2,918.65. That still left the benchmark index up 16.43 percent 2019-to-date, and just 3.54 percent below the all-time closing high. Despite a handful of encouraging economic and policy developments, August is off to a lousy start for equities as another escalation in the trade war provided traders with an excuse to take profits following the 2-month run-up to record levels. Recent selling pressure has been intense, but the current peak-to-trough decline is still only 5.99 percent (closing basis). That is less than the 6.84 percent drawdown we saw in May, which itself is relatively low by historical standards. Further, there have now been over two dozen corrections in the S&P 500 of at least 5 percent since the March 2009 low. They each at the time might have felt like the end of the world to investors, but the market's resiliency is well-demonstrated.
This is especially true over longer time horizons, and savvy 401(k) participants are perhaps less concerned about the day-to-day fluctuations in the market because they understand that volatility is a natural occurrence, and what really matters when building a retirement nest egg is consistent saving and investing. Moreover, updated EBRI data showed that the average 401(k) account balance for younger (25-34), less-tenured (1-4 years) workers has surged by 139 percent in just the past two-and-a-half years, while the S&P 500 has gained only 33 percent (through the end of July 2019). Older workers (55-64) with at least five years of tenure saw their 401(k) balances rise by an average of just 46 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 30-year mortgage rate fell to a roughly 3-year low, home-purchase applications jumped, core wholesale prices decreased for the first time in 30 months, small business owner confidence firmed, initial claims for unemployment benefits declined, job vacancies outnumbered job seekers for the 16th consecutive month, and a gauge of Americans’ willingness to give up their current job security for better employment opportunities improved. As for the negatives, revolving credit growth turned negative, and service sector activity cooled. This week the pace of economic data picks up slightly, with several important reports on manufacturing, housing, consumers, small business, inflation, and productivity scheduled to be released.
What To Watch:
- Treasury Budget 2:00 PM ET
- MBA Mortgage Applications 7:00 AM ET
- Import and Export Prices 8:30 AM ET
- Atlanta Fed Business Inflation Expectations 10:00 AM ET
- EIA Petroleum Status Report 10:30 AM ET
- 10-Yr Note Settlement
- 30-Yr Bond Settlement
- Jobless Claims 8:30 AM ET
- Philadelphia Fed Business Outlook Survey 8:30 AM ET
- Retail Sales 8:30 AM ET
- Empire State Mfg Survey 8:30 AM ET
- Productivity and Costs 8:30 AM ET
- Industrial Production 9:15 AM ET
- Business Inventories 10:00 AM ET
- Housing Market Index 10:00 AM ET
- EIA Natural Gas Report 10:30 AM ET
Sources: Econoday, Twitter, EBRI, FRBSL
Post author: Charles Couch