Markets, Economy

Weekly Kickstart (09/10/2018-09/14/2018)

9/10/18 8:00 AM

iStock-626627280.jpgStocks were under pressure last week, as the S&P 500 fell by 1.0 percent to 2,871.7. That left the benchmark index up 7.4 percent year-to-date, and just 1.5 percent below the record close. On Tuesday we explained that it would not be too surprising if volatility picks up in September following five consecutive months of gains and a lot of headline risk still on the table. Retail investors that can stay calm and refrain from emotional (panic) trading during such potentially violent swings may be better positioned to capitalize on the long-term resiliency of the stock market, and encouragingly a new report from Alight Solutions suggests that most 401(k) participants have been able to ignore the daily fluctuations in equity valuations this summer. That is also good news because it is the consistent participants in these tax-advantaged savings vehicles who have been able to benefit the most from the current bull market.


Indeed, the average 401(k) account balance for younger (25-34), less-tenured (1-4 years) workers rose by 3.9 percent last month, according to updated Employee Benefit Research Institute figures, building on July’s 4.3 percent gain. Since the end of 2015, though, the average 401(k) account balance among these participants has surged by 161.0 percent, while the S&P 500 has gained just 42.0 percent (through the end of August 2018). Older workers (55-64) with at least five years of tenure saw their 401(k) balances rise by an average of “only” 50.3 percent during this same period, not surprising since these individuals tend to have much larger accounts that are less sensitive to both contributions and market fluctuations. More importantly, these substantial gains should provide further evidence of how effective persistent 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 (holiday-shortened) week, the positives included that private-sector construction spending rebounded, nonfarm payrolls growth accelerated, average hourly earnings rose by more than expected, the underemployment rate decreased, and initial jobless claims fell to a roughly half-century low. As for the negatives, the nation’s trade deficit widened, mortgage applications declined, corporate layoff announcements jumped, small business job creation moderated, and gauges of both manufacturing and services sector activity in America continued to send mixed signals. This week the pace of economic data picks up slightly, with a few important reports on factory output, consumers, employment, small business, and inflation scheduled to be released.


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

What To Watch:








Sources: Econoday, NAPA, Alight Solutions, EBRI, FRBSL

Post author: Charles Couch