Markets, Economy

Weekly Kickstart (10/08/2018-10/12/2018)

10/8/18 8:00 AM

iStock-626627280.jpgStocks were under pressure last week, as the S&P 500 fell by 0.97 percent to 2,885.57. That decline still left the benchmark index up 7.93 percent year-to-date, and just 1.54 percent below the record close. Although there are a handful of potential explanations for last week’s selloff, e.g. rising geopolitical tensions and interest rates, it should not be too surprising that equities pulled back after posting their best quarterly gain since 2013. Specifically, the S&P 500 in September survived some wild swings (spikes in volatility) and managed to end the month up 0.4 percent. That was the smallest increase since April but still enough to result in a 7.2 percent quarter-over-quarter return, the largest in half a decade. Participants in tax-advantaged 401(k) plans also appear to have fared well in Q3, according to updated data from the Employee Benefit Research Institute (EBRI).


For example, the average 401(k) account balance for younger (25-34), less-tenured (1-4 years) workers rose by 2.2 percent last month, and 11.2 percent during the third quarter. Even more impressive is that since the end of 2016, the average 401(k) account balance for younger, less-tenured workers has surged by 98.0 percent, while the S&P 500 has gained 30.2 percent (through the end of September 2018). Older workers (55-64) with at least five years of tenure saw their 401(k) balances rise by an average of “only” 33.3 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 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 construction spending improved, consumer credit rebounded, small business hiring strengthened, average hourly earnings increased, and both initial jobless claims and the official unemployment rate slid to near-half-century lows. As for the negatives, automobile sales tumbled, the nation’s trade deficit widened, corporate layoff announcements jumped, gauges of both manufacturing and services sector activity in America continued to send mixed signals, the underemployment rate edged higher, and nonfarm payrolls growth moderated (albeit due mainly to hurricane Florence). This week the pace of economic data slows down but there are still a few important reports on consumers, employment, small business, and inflation scheduled to be released, along with a handful of speeches from Federal Reserve officials.


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

What To Watch:


  • US Holiday: Columbus Day







Sources: Econoday, EBRI, NAPA, FRBSL

Post author: Charles Couch