The Markets
Despite January’s stronger-than-expected U.S. jobs report, stocks fell Friday amid concern over the impact the coronavirus will have on China’s economy. However, stocks still notched strong weekly gains. For the week, the Dow rose 3.06 percent to close at 29,102.51. The S&P gained 3.21 percent to finish at 3,327.71, and the NASDAQ climbed 4.04 percent to end the week at 9,520.51.
Returns Through 2/07/20 | 1 Week | YTD | 1 Year | 3 Year | 5 Year |
Dow Jones Industrials (TR) | 3.06 | 2.15 | 18.40 | 15.87 | 13.03 |
NASDAQ Composite (PR) | 4.04 | 6.11 | 30.63 | 18.84 | 14.95 |
S&P 500 (TR) | 3.21 | 3.17 | 25.45 | 15.51 | 12.39 |
Barclays US Agg Bond (TR) | -0.07 | 1.86 | 9.54 | 4.48 | 3.21 |
MSCI EAFE (TR) | 1.86 | -0.27 | 14.71 | 8.53 | 5.16 |
Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.
Most in a Few — 10 percent of American households own 84 percent of all stocks in the country, including direct ownership of general securities and indirect ownership through mutual funds and other pooled accounts that are held both in pre-tax and post-tax accounts (source: Survey of Consumer Finances, BTN Research).
Fewer Tools Available — The Fed cut short-term interest rates by 5 percentage points during the nation’s last recession (a downturn that ran from December 2007 to June 2009), an action that could not be replicated today since the Fed’s key short-term rate is 1.75 percent (source: Federal Reserve, BTN Research).
A Downturn Is Inevitable, I Think? — As of Feb. 1, the United States began its 128th consecutive month of an economic expansion, the longest in our nation’s history based on records maintained since 1854 (source: National Bureau of Economic Research, BTN Research).
WEEKLY FOCUS – Timing Matters!
You’ve probably heard about potential advantages of deferring retirement. Delaying retirement or even working part-time may allow you to add to your savings and postpone dipping into your reserves – giving them more time to grow. And, you can increase your Social Security benefits by 8 percent for each year you wait to draw them from your full retirement age until you turn 70.
But there’s another way your retirement timing can affect your financial well-being. It’s called sequence of returns risk. Negative returns early in retirement can impair a portfolio more significantly than the same returns later in retirement.
Beginning distributions for living expenses during a bear market can seriously impact retirees who may not have the time to recoup losses. Retirees forced to sell some holdings reduce shares that could grow to offset future withdrawals.
If the markets are down when you plan to retire, it may be wise to keep working in order to delay selling depressed investments. But what if you aren’t able to keep working? What if you retire not knowing the markets are about to drop?
It’s best to take steps well before retirement to reduce sequence of returns risk. One popular strategy is to separate assets into a variety of “buckets” or “pools” for different time periods, ranging from safer, more liquid classes to longer term investments with greater growth and risk potential. Even during retirement, advisors typically counsel retirees to keep some money in equities. Stocks’ growth capacity is critical, given increased lifespans and high inflation in unavoidable areas for older Americans, such as health care.
At the same time, you may want to reduce volatility on assets you’ll need to withdraw during your early years of retirement with short-term CDs, money market instruments or fixed-income investments, like annuities or bond ladders. A bond ladder is created with bonds that mature in ascending years, such as one-, two-, three-, four- and five-year periods.
Because every situation is unique, choosing the right mix of equities, fixed income, cash and possibly real estate is complicated. Whether you’re already retired, you’re approaching retirement or it’s a long way off, we can help you create an asset allocation strategy designed to safeguard your future.
Call us at 330.707.4135 or email us at info@wrpintaric.com.
Securities offered through Securities America, Inc., member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. William R. Pintaric & Associates and Securities America are separate entities.
Written by Securities America for distribution by David Pintaric.
Securities America and its advisors do not provide tax advice. Please consult with your tax professional regarding your individual tax situation.