Market Alert March 11th, 2018: Come On, Participate!
Our two goals for our clients are for them to have financial peace of mind and for their money to last as long as they do.
Our investment philosophy of Buy, Hold, and SELL! Is designed to give us unlimited upside with a tolerable downside.
- Unemployment stayed at 4.1% in February for the fifth month in a row.
- Wages rose less than expected as the Labor Participation Rate Increased.
- We continue to stand by our Fearless Forecast of Dow 26,500 by the end of 2018.
- Household debt increased at 5.2% annual rate, the most since the fourth quarter of 2007.
- Do you have a plan for what to do when the next market crash comes?
- Do you know if you have enough money to retire on?
- What are 5 strategies that you can use to reduce your income taxes?
- How do you plan for your retirement cash flow?
- What should you do to maximize your Social Security benefits?
- Are you properly diversified?
We would love to review your entire financial plan, analyze what you have and see if we can help you. If we can, that’s terrific, if not that’s fine too. Either way, there is no charge or obligation, and we will part friends!
Unemployment stayed at 4.1% in February
The unemployment rate held at 4.1 percent, the fifth straight month at that level, according to the Labor Department. This is a level that many economists say is full employment and conclude that we cannot grow the economy any faster since there won’t be enough workers.
However, as we have reported to you in previous emails, it is the Labor Participation Rate that we watch. It is the percentage of working age people that are actually working. As long as that number stays at 50-year lows, we believe there are still ample numbers of workers to help grow the economy in the United States.
Wages increased less than expected as the Labor Participation Rate Increased.
The rising labor-force participation may be a factor holding down wage gains. The participation rate increased to 63 percent, the biggest monthly gain since 2010, according to the Bureau of Labor Statistics.
In Y2K the labor participation reached 67.3%. The 4.3% difference between now and then may not seem like much, but it represents another five and a half million people that could come back into the labor force, according to the US Census. This large supply of workers, we believe, is the reason that wages are not rising as fast as a 4.1% unemployment rate would imply it should.
We continue to stand by our Fearless Forecast of Dow 26,500 by the end of 2018.
We do not see a recession this year or early next, and therefore, do not see a bear market this year. Continued economic gains with low-interest rates and lower taxes should translate into further gains in the stock market.
I would like to invite you to come to one of our seminars. They are designed for those of you who are retired or retiring soon, and they are free.
At the free retirement seminar we will answer these burning questions:
- How do I help protect my retirement from the next market crash?
- How do I avoid three basic “pitfalls” of retirement distribution planning?
- Am I on track to be able to retire?
- When should I take Social Security? 62? 66? 70?
- Am I diversified properly?
- How much can I afford to spend during my retirement?
- What is the best investment I can use to fight inflation with?
- How do I determine how much risk is appropriate for me?
- Do I take my pension or a lump?
- How do I avoid having 85% of my social security being taxed?
- Should I rollover my 401(k)?
- How do I reduce my income taxes in the future?
Household debt increased at 5.2% annual rate, the most since the fourth quarter of 2007.
Debt is the Achilles Tendon that we see bringing down the world economy and causing the next market crisis. The fact that people are borrowing more and more money is good on the one hand, as it reflects confidence and spurs consumption, but we all know what too much debt can lead to.
According to Bloomberg, debt is rising at a rate commensurate with the fourth quarter of 2007. We saw what happened in 2008 after the large increase in debt in 2007.
Do not get complacent. Overconfidence is dangerous when it comes to investing.
While this year will most likely not be as good as last year, it is shaping up to be a good year also. We will never become complacent, however. We must never let our guard down and never take the market for granted. It is when overconfidence sets in that the market is the most vulnerable.
With the market near all-time highs, this is no time to be complacent and assume that the market only goes up! The best time to plan ahead for the next market crisis is now!
As you can see in the chart below, the market can turn around very quickly and very unexpectedly. The 2008 bear market wiped out 12 years of gains in just 17 months. Many of you participated in that bear and the one in Y2K.
Clients who followed our lead were out of the Stock market during the great market crash of 2008.
Source: Standard & Poor’s
All this upbeat, positive news does not change the fact that the future is not guaranteed. All bull markets end in a bear market, and the higher the market rises before it goes into a bear market, the farther it falls when the bear market does finally come, according to Bloomberg. Given that this will probably be the highest rising and longest running bull market in history, if history repeats, the next bear market could be quite attention-getting.
We believe that the risk that we have today is different than anything we have had in history.
The hundreds of trillions of dollars of global debt put a significant strain on government’s ability to do anything about the next recession. In fact, we see all of this debt exacerbating the effects of any economic slowdown. The worst recessions that we have had around the world have mostly been the results of governments taking on too much debt.
- Trade War With China, Who Wins?
- How To Diversify
- Long-Term Care Insurance: Do You Need It?
- Why Losing $ Is Far More Dangerous Than Not Making $
- Estate Tip: What Is A Living Trust
There is nothing more important to us than that. It is our singular goal to keep our clients from becoming poor. Preserving the wealth that they have built is job number one for us. I encourage you to join the Money Matters family!
I believe that avoiding large losses is the single most important thing that we should be concerned about as investors.
Perhaps you were given a package by your employer. Perhaps you sold an asset and want to know how to properly invest the proceeds. Perhaps you inherited money and want to keep it safe and grow it if you can. Perhaps you just want a second opinion. These are all reasons for you to take advantage of all of the resources that we at Money Matters have to offer you.
We want to help you to achieve your financial goals.
Thank you for subscribing to this newsletter. I hope it finds you and yours in good health and spirits.
Ken Moraif, CFP®, MBA