December Market Update - Cycles Still Matter

The S&P 500 gained 3.4% in November. To further describe our current investment landscape Kathy Jones, Chief Fixed Income Strategist at Schwab Center for Financial Research, recently wrote, “Ever since the Federal Reserve reversed course and began easing policy, markets have enjoyed smooth sailing. It looks like it can last a while, since we don’t anticipate a shift in central bank policies any time soon. The problem is that market valuations become skewed in environments like this. Low interest rates and high liquidity encourage risk-taking and yield-seeking. Asset valuations become elevated and investors become complacent.” ECRI published an update November 19 titled Hard Data Still Decelerating. Lachman Achutan's news item is a must read for anyone studying the U.S. economy. Let's review price, sentiment and valuation as we start December.

Retirement Data: Fidelity Plan Balances Q3 2019

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Source: Fidelity

From Fidelity's press release on November 14, 2019:

• Average 401(k), IRA and 403(b) balances decreased slightly in Q3 2019. The average 401(k) balance dipped to $105,200, less than a 1% decrease from $106,000 in Q2 2019. The year-over-year average balance is down just over 1% from a record high balance of $106,500 in Q3 2018. The average IRA balance dropped slightly to $110,200, less than half a percentage point from last quarter and less than 1% lower than the $111,000 balance one year ago. The average 403(b)/tax exempt account balance dipped to $88,000, less than a 1% decrease from last quarter but up slightly from Q3 2018.

November Market Update - Always Data Dependent

The S&P 500 gained 2.04% in October, ending at 3,037.56. The trailing 1-year return for the S&P 500 as of October 31, 2019 improved to 12.02%. Every market cycle has it's seasons and we currently have four big investment themes influencing investors and thus, the markets: 1) indexation 2) momentum trend following 3) buybacks 4) Central Bank manipulated price discovery (as opposed to natural price discovery). As market observers, we can see all four of these factors impacting markets. To learn more about where we are as we enter November please watch Danielle DiMartino Booth's presentation at the Stansberry Investment Conference 2019 titled: Still Fed Up. If you want to learn more about her, you can read her bio. Now, let's review price, sentiment and valuation as we enter November 2019.

October Market Update - A Sluggish Economy Where We Trade for Free

The S&P 500 gained 1.72% in September, ending at 2,976.73. The sugar high from the world's two largest economies (USA and China) is over and unfortunately the sugar store is closed. What do I mean? China's stimulus to help pull the global economy out of a slowdown from the 2015-16 dip cannot be replicated. It looks probable the U.S. used up it's last bit of fiscal stimulus before election day with the Tax Cuts and Jobs Act of 2017. Our current economic landscape shows Europe learning about the downside of negative rates and a banking system that has not healed from the Great Recession, Japan's central bank left with no impactful stimulus, aging demographics, underfunded pensions, Brexit, a corporate debt fiasco-in-the-making, and a developed world running out of labor. With this backdrop, at best, the U.S. sees a choppy directionless market until the election. Let's jump right into the details and review price, sentiment and valuation.

September Market Update: Prudent Risk Management

The S&P 500 posted a -1.81% return for the month of August. The trailing 1-year return for the S&P 500 as of August 31, 2019 was a wee 0.86%. The concern in the market is that, a bit over a decade into the recovery from the financial crisis, a trade war between the U.S. and China could create a substantial drag on the global economy and push the U.S. into recession. When the 3-month T-Bill and 10-Year Treasury bond curve inverts for one quarter which it did at the end of June, it historically has been a warning signal to investors that they need to reduce risk exposures of their investments. To learn more about this phenomenon please listen to Men Faber's podcast episode #172 with Professor Cam Harvey. Campbell Harvey is Professor of Finance at the Fuqua School of Business, Duke University and a Research Associate of the National Bureau of Economic Research in Cambridge, Massachusetts and he wrote his 1986 dissertation on the topic of yield curve inversions preceding recessions. Let's review price, sentiment and valuation as we enter September 2019.

Retirement Data: Fidelity Plan Balances Q2 2019

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Source: Fidelity

On August 21, 2019 Fidelity released its quarterly analysis of retirement savings trends, including account balances, contributions and savings behaviors, across more than 30 million retirement accounts. Average account balances continued to increase in the second quarter, reaching near-record levels after experiencing a dip at the end of 2018. Here are some findings from their press release:

August Market Update: Growth and Inflation Cycles Declining

The S&P 500 gained 1.31% in July. The S&P 500 starts the month less than one hundred points from an all-time high. The real action over the last few months has been in the bond market. U.S. ten-year treasury bonds have dropped from 2.503% on May 1 to 1.89% on August 1. Looking at one-year trailing returns iShares 7-10 Year Treasury Bond ETF, symbol IEF, has outperformed SPDR® S&P 500 ETF, symbol SPY, 11.90% to 7.07%. Let's examine price, sentiment and valuation as we start August.

July Market Update: Climbing a Wall of Worry

The S&P 500 gained 6.89% in June. YTD for the first half of 2019 the S&P 500 is up 17.35% (Note: YTD increase was 17.51% at the end of April). June market returns played out like the opposite of the December 2018 market. In the last week of November 2018, the S&P 500 had an incredible rally pushing the Ivy Portfolio signal to "invested" as we started December. I suggested investors not take the bait and stay in "cash." December returns declined until our current rally started after Christmas Eve market lows. Contrast that time period with the May to June period. At the end of May stocks declined on news of new tariffs potentially being placed on Mexican imports. This drove the Ivy Portfolio signal to "cash" on the last trading day of May, setting investors up for the opposite of the scenario that happened in the November-December timeframe of 2018. As soon as Trump indicated that Mexico had complied with his administrations' requests for help monitoring the flow of migrants the tariff threat stopped. This news sent stocks higher, helping investors ride the bullish stock wave a bit longer. Let's examine price, sentiment and valuation as we start July.

Retirement Data: Vanguard How America Saves

The following is from Vanguard's press release:

The 18th edition of How America Saves delivers a comprehensive analysis of the retirement savings behavior of 5 million participants in about 1,900 defined contribution (DC) retirement plans for which Vanguard provides recordkeeping services. Our data-rich report examines trends in how participants accumulate, manage, and access retirement savings.

2019 edition highlights

• 6 of 10 Vanguard participants were invested in a professionally managed allocation at year-end 2018. The growing use of target-date funds continues to drive this trend. 

June Market Update - Caution Mode

The S&P 500 finished May with a monthly loss of 6.58%. It ended the month at 2,752.06. Are you wondering what the mood in the market is at the beginning of June? Sovereign bond markets have your answer. In the U.S., the 10-year treasury yield dropped from 2.503% May 1 to 2.13% May 31. During the same period, the German 10-year moved from 0.016% to -0.20%. On May 24, Scott Minerd, Global Chief Investment Officer of Guggenheim Partners wrote, "We have seen how sensitive markets have been to the trade news. Sovereign bond yields around the world are sending an ominous message, which investors in risk assets ignore at great peril." Now, let's review price, sentiment, and valuation as we start June.

Retirement Data: Fidelity Plan Balances Q1 2019

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Source: Fidelity

Fidelity recently released their Q1 2019 Retirement Account Balances press release. I focus on these numbers because of Fidelity's size. They have $7.4 trillion in client assets, including more than 30 million retirement accounts. Here are a few items to highlight from their press release:

• As of Q1 2019, 52% of individuals had all of their 401(k) savings in a target date fund, compared with just 16% in Q1 2009. In addition, a much lower percentage of individuals had all of their 401(k) savings in stocks -- only 7% of individuals had an all-stock 401(k), compared with 15% who had an all-stock 401(k) allocation in Q1 2009.

EBRI Retirement Confidence Survey 2019

Now in its 29th year, the annual Retirement Confidence Survey(RCS) is the longest-running survey of its kind, measuring worker and retiree confidence about retirement. It is conducted by the Employee Benefit Research Institute (EBRI) and independent research firm Greenwald & Associates. From the report: "The 2019 Retirement Confidence Survey (RCS) finds that two-thirds of American workers (67 percent) feel confident in their ability to retire comfortably, though only 23 percent feel very confident. The share of workers reporting that they feel either very or somewhat confident has increased compared with last year (67 percent vs. 64 percent in 2018). Worker confidence now resembles the levels measured in 2007 before the financial crisis of 2008."

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Source: EBRI, 2019 RCS Fact Sheet #4 Age Comparisons Among Workers

To learn more about this survey please visit the RCS website at EBRI.

To read more analysis about this survey read Richard Eisenberg's article Americans are confident about retirement. Are we kidding ourselves? at MarketWatch.

May Market Update - V-Shaped Recovery, Now What?

After gaining 13.07% in the first quarter of 2019, the S&P 500 started the second quarter increasing 3.93% in April. If you are interested in learning more about stock buybacks and their impact on the stock market since 2010, please read Chris Matthews, MarketWatch's Markets Reporter, article about corporate buybacks. Let's examine price, sentiment, and valuation for May.

April Market Update: 4, 3, 2, 1

The S&P 500 gained 1.79% in March and 13.07% for Q1 2019. The S&P 500 finished the month at 2,834.40; the change from 2,506.85 (12/31/2018 closing level) to 2,834.40 (3/29/2019 closing level) represents the best quarterly results for the S&P 500 since 2009 and best first quarter in 21 years, since 1998.  The U.S. growth cycle downturn continues after the U.S. growth cycle peaked in Q3 of 2018. Let's review price, sentiment and valuation as we prepare for the second quarter.

March Market Update - 138 Months

The S&P 500 gained 2.97% in February, ending the month at 2,784.49. Recent GDP forecasts, factoring in slowing economic data, show Q1 2019 GDP may decrease to around 1%. This macroeconomic environment creates difficult conditions for the S&P 500 to rise above the September 2018 record high of 2,940.91. I'll explain why I've titled this update "138 Months" in this month's summary. Let's review price, sentiment and valuation as we begin March 2019.

Retirement Data: Fidelity Plan Balances Q4 2018

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Source: Fidelity

Fidelity recently released their Q4 2018 Retirement Account Balances press release. I focus on these numbers because of Fidelity's size. They have $6.7 trillion in client assets, including more than 30 million retirement accounts. Here are a few items to highlight from their press release:

• As of Q4, more than half (50.6 percent) of 401(k) savers are 100% invested in a target date fund.

February Market Update - Will This Month Determine Markets' Fate?

The S&P 500 gained 7.94% in January, ending at 2,704.10. This was the best start to a year for the S&P 500 since 1987. The signals for the market going into February may surprise you. The partial government shutdown has made it more challenging to determine the state of the U.S. economy. The 35-day partial U.S. shutdown delayed many important economic reports. Hopefully the shutdown doesn't resume February 15. Let's jump right into the details and review price, sentiment and valuation.

January Market Update - 2019, What will you bring?

The S&P 500 lost 9.18% in December, and lost 13.97% for Q4 2018. For 2018 the S&P 500 decreased 6.24% ending at 2,506.85. Looking at the NASDAQ Composite, which was formed in 1971, we notice that it had its worst December on record down 9.48%. For 2018, the NASDAQ Composite lost 3.88%. Many headlines in the business section of major news outlets will highlight that stocks had their worst year since 2008. Let's leave 2018 behind us and review price, sentiment, and valuation as we start 2019.