Stocks continued higher last week, as the S&P 500 rose by 1.79 percent to 2,978.71. That left the benchmark index up 18.82 percent 2019-to-date, and just 1.56 percent below the all-time closing high. Despite the welcome bullish reversal in equities, intraday price swings have often been substantial during the past two weeks as market participants had a constant influx of economic data and trade negotiation rumors to wade through. Such issues are especially important in the near-term because they could influence what Federal Reserve officials do at the next monetary policy meeting later this month. Current market pricing implies a 91.2 percent chance of at least one quarter-point cut occurring on September 18th, but much uncertainty still surrounds the next policy move, so it would not be too surprising if volatility stays elevated both ahead of and immediately after the upcoming FOMC announcement.
Savvy 401(k) investors are perhaps less concerned about these potential fluctuations in stock prices 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 rose by 0.6 percent last month, a lot better than the broad market’s 1.8 percent decline. Even more impressive is that since the end of 2016 the average 401(k) account balance for younger, less-tenured workers has surged by 140 percent, while the S&P 500 has gained just 31 percent (through the end of August 2019). Older workers (55-64) with at least five years of tenure saw their 401(k) balances rise by an average of “only” 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 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 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 (holiday-shortened) week, the positives included that the nation’s trade deficit narrowed, home-purchase applications rose, construction spending ticked higher, small business job creation rebounded, measures of unemployment and underemployment held near cycle lows, labor force participation increased, initial jobless claims did not exceed 300K for the 235th consecutive week, and Americans’ wage gains accelerated. As for the negatives, corporate layoff announcements jumped, nonfarm payrolls growth slowed, and gauges of both manufacturing and service sector activity continued to send mixed signals. This week the pace of economic data remains elevated with several important reports on consumers, small business, employment, and inflation scheduled to be released.
What To Watch:
- Consumer Credit 3:00 PM ET
- MBA Mortgage Applications 7:00 AM ET
- PPI-FD 8:30 AM ET
- Wholesale Trade 10:00 AM ET
- EIA Petroleum Status Report 10:30 AM ET
- 10-Yr Note Auction 1:00 PM ET
- CPI 8:30 AM ET
- Jobless Claims 8:30 AM ET
- EIA Natural Gas Report 10:30 AM ET
- 30-Yr Bond Auction 1:00 PM ET
- Retail Sales 8:30 AM ET
- Import and Export Prices 8:30 AM ET
- Business Inventories 10:00 AM ET
- Consumer Sentiment 10:00 AM ET
- Baker-Hughes Rig Count 1:00 PM ET
Sources: Econoday, CME, EBRI, FRBSL
Post author: Charles Couch