Monday, December 19, 2016

CEO Retirement Plans in the USA

100 CEOs have company retirement funds worth $4.7 billion — a sum equal to the entire retirement savings of the 41 percent of U.S. families with the smallest nest eggs.
This $4.7 billion total is also equal to the entire retirement savings of the bottom: 
59 percent of African-American families
 75 percent of Latino families
 55 percent of female-headed households
44 percent of white working class households
Source: Institute for Policy Studies The Institute for Policy Studies (www.IPS-dc.org) is a multi-issue research center that has conducted path-breaking research on executive compensation for more than 20 years.

Friday, December 2, 2016

December Market Update: Buy the Rumor (Sell the News)

The 2016 U.S. election is history, and we've experienced the "Trump rally." Many believe this rally has been driven by folks selling bonds and rotating into stocks. For those of you keeping track,  moving average indicators ended the month telling investors to avoid REITs (VNQ) and 10-year treasuries (IEF). This last month has reminded us of many investing and life lessons. For investors it's another example that emotions shouldn't drive investment decisions. In the internet age, it is more important than ever for investors to have the right temperament to invest and follow a well constructed plan. Now, let's look at Price, Sentiment, and Valuation at the end of November.

Price

Since May 2016, when the 5-month simple moving average rose above the 12-month simple moving average, the US market has, surprisingly to many, not disappointed. Further, looking at the 10-month and 12-month simple moving averages the S&P 500 had another monthly close above those levels suggesting that investors stay in stocks.

Sentiment


This index has moved significantly from last month's reading of "Extreme Fear" to "Greed." Last month, this indicator was telling us to avoid going to cash before the election (like many traders may have done).

Valuation
"Investors are buying in to the notion that a Trump presidency/Republican Congress can move the needle on business and personal tax cuts, infrastructure spending, and reduced regulatory burdens across multiple sectors.  All that adds up to greater earnings power, and that $1/share bump from the Wall Street strategist crowd is a nod to that belief." - Nick Colas, Chief Strategist at Converges
Please read his guest post at the Big Picture Blog from December 1, 2016 titled, "Are US stocks cheap, expensive or fairly valued? " He discusses five points about the current valuation and argues that the "Trump rally" in US stocks is not just an "uptick in asset prices" stretching valuations.

For the counter argument, read John Hussman weekly commentary for 11/28/2016:
"The stock market has reestablished an extreme overvalued, overbought, overbullish syndrome of conditions that - unlike much of half-cycle advance from 2009 to mid-2014 - lacks internal uniformity, particularly among interest-sensitive and globally-sensitive sectors. For that reason, the recent marginal highs are more consistent with a “blowoff” than a “breakout.” From a short-term perspective, it’s important to emphasize that if market internals were to become more uniformly favorable, we could infer a more robust shift toward risk-seeking among investors. That, in turn, could encourage a more neutral or constructive near-term view despite offensive valuations. As the data stand, however, the recent post-election advance appears much like the post-Brexit rally in global markets, where nearly all of the gains were compressed in the first 12 trading days, after which the enthusiasm flamed out. "By John P. Hussman, Ph.D.President, Hussman Investment Trust
In summary, price action tells us to remain in stocks, sentiment is getting greedy and valuation is adjusting for presumed increasing earnings in 2017. Let's see if bonds reverse course and longer dated interest rates start to drop after the Fed decision December 14, 2016 (if not sooner). For those of you concerned about the bond market, here is the best piece I've read on the subject from the economists Van Hoisington and Lacy Hunt at Hoisington Investment Management:
"Markets have a pronounced tendency to rush to judgment when policy changes occur. When the Obama stimulus of 2009 was announced, the presumption was that it would lead to an inflationary boom. Similarly, the unveiling of QE1 raised expectations of a runaway inflation. Yet, neither happened. The economics are not different now. Under present conditions, it is our judgment that the declining secular trend in Treasury bond yields remains intact."
Enjoy the holidays. Wise investing my friends.
Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.

Wednesday, November 30, 2016

Careful with Vehicle Expenses

For most american households, transportation costs eat up more of the annual budget than anything other than the house itself. Nearly all of that transportation money is spent on cars and car-related expenses. Data collected by the Bureau of Labor Statistics shows that transportation is the second-biggest expense for most households across the U.S. Hence, we need to be careful with vehicle expenses. Here are some general rules of thumb:

1) 20/4/10 rule: This simply states when purchasing a car put at least 20% down, finance for no more than 4 years and keep the monthly payments to no more than 10% of your gross income. If you need to finance for more than 4 years it is a sign that you cannot afford the vehicle.

2) Vehicle expenses including vehicle payments, insurance, and maintenance should not exceed 20% of your monthly take home pay.

3) Total value of your vehicles should be less than half your annual income.

Why do we want to be smart with vehicle costs? Seems like a no brainer, but for those of you who need a basic rule of building wealth, remember rich people buy assets that appreciate and most vehicles depreciate in value. After 5 years of ownership most new cars are worth 37% of what you paid for it. If you weren't following these guidelines and purchased a new car for $40,000 while making $50,000 per year you'd lose $25,200 in 5 years or $5,040 per year on average. If you were making $50,000 per year that is a negative savings rate( -10% per year $5,040/$50,000=0.1008x100=10.08% per year). Your car is literally killing any chance you have of getting ahead in life.

Let's run this example through our guidelines:

Guideline 1: To purchase a $40,000 vehicle, you would need 20% down ($40,000x0.20=$8,000), per month payment for 48 months equals $667 to $730 (0% loan to 4.5% loan),  10% of gross income is $5,000 for the year or $417 per month. Your monthly payment $667 is greater than $417 per month. Result: don't buy this vehicle.

Guideline 2: If you make $50,000 per year your take home pay is roughly $38,700. This is $3,225 per month. Your total car expenses should not exceed $645 per month ($3,225x0.20%=$645) Monthly payment on a four year loan with 0% interest equals $667. Not factoring in your other vehicle expenses like registration fees, insurance, etc. $667 is greater than $645 per month. Result: don't buy this vehicle.

Guideline 3: This is the simplest calculation, half of your income is $25,000 and $40,000 is greater than half your income. Result: don't buy this vehicle.

"Car payments and big car purchases will make you broke and keep you broke," Dave Ramsay. The alternative to an unaffordable car, if you make $50,000 per year in income, you can most likely afford a car worth $15,000-$20,000. Click for useful auto loan calculators.


American Savings Challenges Continue with Shift to 401(k) - How Can We Fix this Picture?

The State of American Retirement: How 401(k)'s have failed most American Workers by Monique Morrissey, Economic Policy Institute (EPI)
US News - Why the Average Family Has Only $5,000 for Retirement by Brian O'Connell

Friday, November 4, 2016

401(k) & IRA Balances - Fidelity Q3 Analysis

Bloomberg's Suzanne Woolley reported the following findings from Fidelity:
The average IRA balance rose 5 percent in the third quarter and is up 6 percent year over year, to a balance of $94,100, up from $66,100 five years ago.
The average 401(k) balance gained for the second quarter in a row, inching up 2 percent, to $90,600 for the third quarter. That amount is a 7 percent jump from 2015's third quarter and up from an average of $64,300 five years ago, according to Fidelity Investments. Fidelity administers 401(k) plans for more than 14 million plan participants.
People who have had a 401(k) with the same company for 15 years have average account balances of $331,200.
Fidelity press release with more information.

Thursday, November 3, 2016

Pre-Election Market Update

What a week for the market? Down, down, down we go as the rally has started to stumble and everyone is concerned about the United States presidential election on November 8th. Let's look at the data to see where we are in terms of price, sentiment and valuation.
Price
Price action remains positive for owning stocks, however price action has deteriorated. The monthly moving averages for the S&P 500 are barely holding up and both the bond(IEF) and real estate(VNQ) markets have turned to monthly sell signals. Meb Faber's Timing Model shows all main asset classes near or below their 10-month simple moving averages. As I noted in January, we could be topping from the rally that started in 2009. Chris Kimble at Kimble Charting Solutions further demonstrates this peaking scenario with his recent post, Broad index at 2000 & 2007 levels, another top? Here is the graph he posted showing the Value-Line Geometric Composite Index:
Chris notes that this index remains inside of a 6-year rising bullish channel, despite the weakness over the past 18-months. If the index would break below this 6-year rising channel, suspect selling pressure would take place.
Sentiment
This gauge has dropped from 44 at the end of September 2016 to below 19. When sentiment drops this low it often makes sense to go against the crowd and invest. We'll know more at the end of November.
Valuation
Market remains overvalued, near the peak it reached in February 2015. Let's illustrate this with a chart from Advisor Perspective's Jill Mislinski writing for the Doug Short blog.
Jill writes: "As we've frequently pointed out, these indicators aren't useful as short-term signals of market direction. Periods of over- and under-valuation can last for many years. But they can play a role in framing longer-term expectations of investment returns. At present market overvaluation continues to suggest a cautious long-term outlook and guarded expectations. However, at today's low annualized inflation rate and the extremely poor return on fixed income investments (Treasuries, CDs, etc.) the appeal of equities, despite overvaluation risk, is not surprising."
In summary, price action barely remains positive for equities (negative for REITs), sentiment is too pessimistic and the market remains overvalued. Traders will probably add money back to the market after the election. They probably raised too much cash. The next U.S. president must face one of two scenarios during the first term: Either the president will have to deal with a recession in office, or the U.S. will have the longest economic expansion in its history. Barry Rithotz wrote a fantastic piece for BloombergView titled, Shift From Active to Passive Investing Isn’t What It Seems. It is a must read if you want to further understand the current popularity of passive investing. As John C. Bogle says, "The miracle of compounding returns is overwhelmed by the tyranny of compounding costs." Wise investing my friends.
Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.

Friday, October 28, 2016

Morningstar 2016 529 Ratings

Source for an interactive version of this map.

Friday, October 14, 2016

Rally! Rally! Rally?

Source: Bloomberg
As Lu Wang wrote October 14, 2016 for Bloomberg:
One ominous signal that marked trading in 2015 has begun to reassert itself, a pattern in which the benchmark index hovers near a 52-week high while the proportion of stocks that are similarly elevated dwindles.
On a more positive note for the market listen to Barry James, President and CIO James Investment Research, speak during this Bloomberg radio interview (Listen from minute 7 until 10). Their indicators are starting to look a bit better for stocks and they are increasing their stock allocation for their James Balanced Golden Rainbow Fund from 47% to 52%. This is a tactical fund focused on growth and capital preservation and can allocate between 20% and 80% to stocks. Wise investing my friends.
Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.

Friday, October 7, 2016

The One Monthly Payment Killing Your Wealth

Jeff Rose wrote this for Forbes as a contributor:
According to a recent State of the Automotive Finance Study from Experian, the average new car payment reached $499 per month last quarter. Worse, the average new car loan is 68 months long! Like my man Dave Ramsey says, it’s entirely preposterous when you really think about it.
Have you ever imagined what you could do with an extra $499 per month? Let’s face it; probably not. These days, we blame everything but our car payments for our inability to get ahead.
We blame our employers for not giving us the raises we deserve, or our parents for not educating us enough. We blame health insurance premiums, the price of groceries, the housing market, and even the price of gas. But, do we ever throw shade at our car payments? Heavens no.
Somewhere along the line, we’ve become socially conditioned to believe a huge car payment is a fact of life. We tell ourselves that everyone has a car payment, and that it’s normal and okay. And heck, if we’re going to have a car payment, we might as well get the car we want, right?
This kind of thinking is so widespread it’s practically an epidemic. The thing is, it’s also absolutely wrong….and it’s killing our wealth.
He ends with this:
If you work hard and still can’t get ahead, your car payment might be the culprit of your money woes. Before you head to the dealership, you should ask yourself if that new car smell is worth losing out on $179,640 the next thirty years – or up to $820,483 in investment returns. Chances are, it’s not even close.
Source: Jeff Rose, CFP

Tuesday, September 27, 2016

September 2016 Market Update

Now that we have the first U.S. Presidential debate behind us and we have worked through most of September (historically one of the worst months for the market), let's take a look at the S&P 500.
The S&P 500 chart turned extremely cautious in September 2015 when the simple moving average, using monthly charts, showed the 5-month average fell below the 12-month average. The market bottomed in February 2016 and the S&P 500 saw bullish confirmation in May 2016 when the 5-month simple moving average on the market increased above the 12- month average. So the price action remains positive, but what about valuation and sentiment?
The CNNMoney Fear & Greed Index registers this morning with a reading of fear. This measure has been decreasing since a peak in the spring of 2016.
Below is the Shiller PE ratio:
Valuation on the S&P 500 continues to flash a warning sign to investors. The Current P/E on the S&P 500 shows a level near 25, currently 24.99, which illustrates an overvalued market. Let’s review the Shiller PE Ratio that is reading 26.80 (long-term mean of 16.70, median 16.05). This also shows that the market is overvalued. So price action is positive, investor sentiment is growing more fearful, and valuation continues to give investors a warning sign. S&P 500 earnings peaked in 2014, this also creates a warning as the market usually follows earnings.
This backdrop leads me to a few questions: What is the upside for passive indexers from this level? Is 2200 the hard ceiling on this market? If the earnings recession continues, when will the growth slowing situation start to impact the market? I see limited upside on this market unless market conditions change. A 10% increase from 2160 on the S&P moves the market to 2376 and a 10% decrease takes the market to 1944. Friends, do you see this market breaking 2193 and ultimately closing above 2200 this year? Remember this is where we are in the market since 1971:
As long as momentum is able to supersede fundamentals we need to invest with what the market is giving us. We can look at moving averages again at the end of October to see if the momentum can continue, but remember that adding long-term money to this market is an expensive proposition. The main benefit of investing in this market remains that the dividend rate is currently higher than the yield on 10-year treasury bonds (unfortunately this benefit is little help if a correction hits the market). Wise investing my friends.
Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.

Tuesday, August 23, 2016

Transamerica Center for Retirement Studies 17th Annual Retirement Survey

The current household savings in all retirement accounts among Baby Boomer workers is $147,000 (estimated median). It should be noted that many Baby Boomers were already mid-career when 401(k) plans were first introduced. Therefore, they have not had a full 40-year time horizon to save in 401(k) plans.
The 17th Annual Transamerica Retirement Survey finds that 45 percent of Baby Boomers are expecting a decrease in their standard of living when they retire, 83 percent of Generation X workers believe that their generation will have a harder time achieving financial security than their parents’ generation, and just 18 percent of Millennials are very confident about their future retirement. Approximately half of workers across all three generations plan to work at least part-time during their retirement. This vision of working during retirement is changing the landscape of retirement.
Research Report
TRCS Press Release

TIAA Survey Finds IRA's Owned by Only a Third of Americans

One-third (33 percent) of American adults have an IRA, with 18 percent currently contributing to their account. Employed individuals are more likely to have an IRA (25 percent) than those who are not employed (11 percent) or retired (8 percent).
Source: The Fifth Annual TIAA IRA Survey

Tuesday, July 12, 2016

Liquidity Trap or Market Breakout?

As the S&P 500 hits new record highs, let's review sector performance since the May 21, 2015 closing high. Since then the defensive sectors have been leading the market: Utilities, Telecom, Staples.
From Hedgeye: Stocks moving up on decelerating volume have the potential to create a liquidity trap and could signal a coming correction, while an outsized burst of volume on a strong up move in a stock could signal a breakout to new price levels.
Please pay attention to volume as the market moves to all time highs. In addition, reviewing the CNNMoney Fear and Greed Index shows the psychology of investors is registering at "extreme greed." As Warren Buffet likes to say: "Be fearful when others are greedy and greedy when others are fearful." Wise investing my friends.

Friday, July 8, 2016

Momentum Wins! US Markets Remain in Uncharted Territory

Value investors that look at company fundamentals have to be scratching their heads this morning as they watch the markets. Momentum traders who only care about following very short term trends must love the markets today. At the end of June, 10 and 12 month simple moving averages told us to stay invested in stocks, bonds, and REITs. The markets send signals and the simple moving average is showing us that the beginning of July was not the month to sell equities. How long can this rally from March 2009 last? The market has still not had a monthly close over 2130, but today's US Employment report almost guarantees that the shorts getting squeezed along with momentum trades will help the market climb the wall of worry over 2130 (until this happens the market peaked in 2015). Doug Short has illustrated that the markets are not cheap (link 1 , link 2 and link 3), but like other periods of overvaluation -this condition can last longer than investors expect and expensive markets frequently become more expensive. Jill Mislinski writing for Advisor Perspectives with Doug Short shows us that this market is in uncharted territory. Jill writes, "Never in history have we had 20+ P/E10 ratios with yields below 2.5%."John Hussman who has been waiting for this bubbly market to pop for years summed it up this way on his latest weekly commentary:
Much of America has still not recovered from the violent consequences of the last yield-seeking bubble the Fed engineered. Now the Fed has engineered another, and has drawn nearly every pendulum to an extreme. We expect $10 trillion of “paper wealth” to be wiped from the U.S. equity market over the completion of this cycle, because it is not “wealth” at all. From an investment standpoint, the value of any security is inherent in the long-term stream of cash flows it will deliver to investors over time. Artificially jacking up financial securities through reckless monetary policy doesn’t change the cash flows that those securities will deliver over time; it only converts future expected return into past realized return, leaving nothing but risk on the table for years to come. Central bank intervention is not a benefit to long-term economic prosperity. It is the head of the snake.
By John P. Hussman, Ph.D.
President, Hussman Investment Trust, Source
Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.

Monday, June 27, 2016

Post Brexit Simple Math

During the past twelve months the S&P 500 has been in a range between 1810.10 and 2132.82. Given the earnings recession in the US, the extreme currency fluctuations, the significant decreases in global stock markets since last year, my take is the S&P isn't even worth purchasing until it is below 1970. Here is the simple math 2132.82-1810.10=322.72, which defines the range of the market. Taking 322.72 and dividing the range by 2 shows me the 50/50 risk reward point. 322.72 divided by 2 equals 161.36. 1810.10+161.36=1971.46. My simple math given this weakening economic environment is that I have little to no margin of safety at any S&P values above 1971. If you purchase the market at 1971 or lower and anticipate that it can eventually get back to the old high then you have ~8% upside and if it the market retests the lows there is about 8% downside. To get a 25% return to old highs the market needs to retreat to 1706. Going down to this level also completes a 20% correction in the market from the 2132.82 highs. Bottom line: market buy zone in my mind, using my simple math, is 1704 to 1971 and if the market breaks 1690 we could be in for an extended bear market. Let's see how this plays out. The asset classes continue telling a defensive story with increases in gold, utilities and the long US treasury. Value has also started doing better than growth, highlighting the growth slowing story. Wise investing my friends.
Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.

Wednesday, June 15, 2016

The State of Retirement in America

Today, many Americans rely on savings in 401(k)-type accounts to supplement Social Security in retirement. This is a pronounced shift from a few decades ago, when many retirees could count on predictable, constant streams of income from traditional pensions (see “Types of retirement plans,” below). This chartbook assesses the impact of the shift from pensions to individual savings by examining disparities in retirement preparedness and outcomes by income, race, ethnicity, education, gender, and marital status.
Source: Economic Policy Institute, PDF

Thursday, June 2, 2016

June Market Update - Make or Break Time for Market

As readers of my blog know, I like following moving averages for the market. At the end of May the 12 and 10 month moving averages suggested to be invested in stocks not cash. Furthermore the 5-month moving average crossed above the 12-month moving average for the first time since September 30 2015.
As we discussed in the April Market Update, momentum can beat fundamentals. Currently the low interest rate environment is forcing investors to seek return from expensive stocks. At some point this relationship will break. In the current bull market the levels on the S&P to watch are 2130, 2150 and 2200. Monthly closes above those levels will reinforce the momentum trade and could push this market closer to the 2007 overvaluation levels (of course not coming close to the overvaluation we saw in 2000). As I've said a few times be careful deploying capital into this market and remember we'll probably have better entry points as we complete this business cycle. Consider this a good time to raise some cash.
Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.

Retire into Happiness

If we combine "social connections," "having purpose" and "mental stimulation," these softer variables account for 65% of the most pressing losses retirees face in their post-work lives.
Read the article to learn more about the difference between what pre-retirees and post-retirees need from retirement.

Wednesday, April 20, 2016

April Market Update

Will the S&P 500 set a new high level and surpass 2130? Last summer we experienced a major technical breakdown in the market. At the end of September the 5-month moving average was below the 12-month moving average. In September of 2015, the 10 and 12 month simple moving averages suggested investing in cash not US stocks. The market has whipsawed back and forth since the late summer sell signal. Furthermore, we are currently well into an earnings recession, defined as two quarters of negative y/y change in earnings for the companies listed in the S&P 500. So how does this end? We've had a tremendous rally since Mid-February. The folks at Hedgeye are calling this a bear market bounce. The 10 and 12 month moving averages ended March in the positive and signaled that investors exit cash and own US stocks. Momentum investing can trump fundamentals over various periods of time, but ultimately the prices of stocks reflect earnings and dividends. What is the upside and downside risk from these levels? Do we see the next 10% up from 2,130 taking the S&P 500 to 2,343. Given decelerating earnings, is a 20% correction more likely from the 2,130 level? This means the S&P needs to go down to at least 1,704. For the S&P 500 to increase to 2,343 we will need to see an expensive market become even more expensive. Click on the charts to enlarge.
Look at the Schiller P/E ratio for the S&P 500:
P/E ratio for S&P 500:
This market is expensive and makes me lean toward the correction scenario, however as long as momentum is able to supersede fundamentals we need to invest with what the market is giving us. We can look at moving averages again at the end of April to see if the momentum can continue, but remember that adding long term money to this market is an expensive proposition. The main benefit of investing in this market is that the dividend rate is currently higher than the yield on 10-year treasury bonds. Lastly for earnings to increase, revenue needs to increase. Barry James of James Investment Research recently wrote this to help us understand why revenues are not accelerating in this economy:
We have previously seen a lot of share buybacks going on as companies were trying to get more money back into the hands of their shareholders. Harvard Business Review found that from 2003 – 2012 S&P 500 companies spent 54% of their profits buying back shares. They spent another 37% paying dividends, which have not left much for trying to grow their business. Much of this can be attributed to the financial crisis and poor economic policies which discourage business risk. We cannot expect the same level of share support in the future, so stocks will remain in limbo a bit longer. However, this should be good for a return of common sense investing in smaller and more value oriented stocks.
Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.

26th Retirement Confidence Survey from EBRI

For the 26th Retirement Confidence Survey, Employee Benefit Research Institute (EBRI) shares many sobering data points for the retirement challenge facing the United States. Please read the issue brief and fact sheets on their website. Here is one date point on assets saved:
A sizable percentage of workers say they have no or very little money in savings and investments. These workers without savings are concentrated among those without a retirement plan. Among RCS workers providing this type of information and not having a retirement plan, 83 percent report that the total value of their household’s savings and investments, excluding the value of their primary home and any DB plans, is less than $10,000. In contrast, 35 percent of workers with a retirement plan say their value of these assets is $100,000 or more.
Robert Powell at MarketWatch has also written a great article that references this study titled: "Proof that saving at the last minute won’t save your retirement."

Monday, March 21, 2016

56% of Americans Have Less Than $10,000 Saved for Retirement

Source: GoBankingRates
Please read the source for information about the breakdown by age and gender. For example the study found the following:
"Two-thirds of women (63 percent) say they have no savings or less than $10,000 in retirement savings, compared with just over half (52 percent) of men."

Tuesday, February 2, 2016

Oh February!

Let's start by looking at how we started 2016.
Source: CoreCapInvestments January 29, 2016 Update
ISM Trends
Source: Bespoke Investment Group
Note the year-over-year trend is negative for almost every factor in the ISM with some improvement or at least stabilization on a month-over-month basis. If you're bullish, unfortunately year-over-year data creates the trend.
Luckily January is over. Can we look to February for a boost? USA Today's Adam Shell reports:
February has a reputation for being a "flat" month for the 30 blue-chip stocks in the Dow, according to Bespoke Investment Group data. Over the past 100 years, the Dow has been up just 55% of the time in February, posting a puny gain of 0.1%, on average, which ranks No. 11 out of 12 months. The average gains over the past 50 and 20 years are muted, as well, with gains of roughly 0.25%.
Asset class returns so far in 2016 are showing investors are not moving money out of bonds into stocks, which may have been the Fed's hope. Instead the treasury market is telling us to exit stocks and buy treasuries. Economic data is rolling over on a year-over-year basis, and an earnings recession has begun. As the markets transition to pricing in the possibility an economic recession, February becomes the frontline for the bulls. The 10-Month and 12-Month simple moving averages have been whipsawed in the last six months. Based on monthly closes, 4 of the last 6 months these simple moving averages have indicated to investors to be in cash not stocks. The returns in January only made the case stronger for being out of the market. Chris Kimble shares this insight which sums up the feeling of many investors:
Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.