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Here is what matters if you are successful and want to keep it.
Do financial markets have your attention? I guess so. After all, the Dow's 800-point fall on Wednesday was the worst day on the US stock market this year. And while many investors have missed it, the fall in share prices in December 2018 limited a 20% decline that began in October. This could have made a lot of noise in projects recently retired or late career.
Tripping on the finish line?
Demographics tell us that there is a massive group of people aged 55 to 70 years old. They make up the majority of the "Baby Boomer" generation. Many of them have built some very nice nesting eggs, thanks to the solid American economy of the past 40 years. This period of technological innovation and globalization of the economy has also resulted in four decades of general interest rate declines. This has provided a historic opportunity to create wealth, if you have spared and invested patiently.
But we are here with a stock market close to all-time highs and interest rates approaching zero. The downwind that has raised baby boomers during their "years of accumulation" can become a headwind, just in time for them to start using money.
Focus on what matters
At this stage of their investment lives, baby boomers are tempted from all sides. They are told to bet on index funds, 60/40 portfolios, structured products and private partnerships. And, while everyone has their merits, I'm telling you what I consider to be a drag on the investment markets since this Baby Boomer was a Wall Street rookie in the beloved World Trade Center in New York City. much of the hogwash. It's a distraction. It's a sales pitch.
Take advantage of the wealth management companies' exaggerated attempts to improve their bottom line and their business, and focus on your own priorities. Today, even in the last 10 years, you should focus on true risk management.
This does not necessarily mean running for cash. It's a purely timed gesture, and it borders on speculation. But that means that the expected use of your accumulated assets (when you need them, how much you need and how you will navigate the markets of the future) should be
turned to the interior. Do not try to guess what the stock market will do.
Reduced rate? Check. Inversion? Check. Giant fall of the stock market? We will see.
The big news on Wednesday was the "inversion" of a portion under supervision of the US Treasury yield curve. Translated into English, this means that for the first time since 2007, US bonds maturing in 10 years yielded less than those maturing in 2 years. This is by no means the first observed reversal between different areas of the Treasury market. However, it is the one that is most widely followed as a recession alarm signal.
The graph above shows three essentially synchronized elements at the start of the last two down markets. The 10-2 spread was reversed, but quickly returned to normal. The Fed has cut interest rates for the first time in a long time. And the S & P 500 peaked in value and dropped more than 40% from this peak.
Let it flow, given what we have seen in the last two weeks alone. Then, let's move quickly to today, where we are in a very similar situation with respect to the reversal and the Fed. See this table below:
What strikes me the most in this chart, is how the gap between 10-year and 2-year returns is almost exactly opposite to that of the S & P 500's price movement. other words, when the 10-2 gap decreases, the S & P 500 generally rises higher. But when this gap starts to increase, it is likely that the S & P 500 will fall … strong. As a career graphic designer, I just can not ignore that.
I'm talking about the threat of a possible "10-2 reversal" on Forbes.com since April 2017. It's finally arrived this week, 19 months after what looks more and more like a period of returns mixed for investors. In other words, if they follow the same rules as they have followed in the last 10 years.
Recessions are bad, but it's worse
We have seen this week what I have been talking about since the beginning of last year: it will not take a recession statement to tip the global stock market into a panic selling process that is ruining retirement efforts. In order for stock prices to fall, it is enough to see the market react to the preponderance of evidence accumulated for some time now.
In other words, it is the fear of the future (recession) of the market that matters the most. At the moment a recession is officially declared, you do not need to react. The evil will already be done.
Specifically, a slowdown in the global economy, excessive "easy money" policies on the part of the Fed and its counterparts around the world, and a frenetic political environment in the United States. This has shaken investor confidence and the only thing that ultimately matters in your retirement portfolio: the prices / values of the securities you own are under pressure.
What to do about it
First, do not fall into the trap of market watchers whose livelihood depends on the gradual rise in stock prices. Corrections are not always healthy, diversification is often a trick, and long-term investments are geared toward 25 years!
For those who have "fought the good fight" to come to the precipice of a retreat that they have so deservedly deserved, the last thing they wish for is that this lifeless object ( financial markets) brings them back to a more compromised pension plan.
The best news about the current investment climate is that the tools we have to navigate through them are as numerous as ever. Even in a period of extremely low interest rates for people who accounted for between 4 and 6% of CDs paying their bills in retirement, bear markets in stocks and bonds can be treated and even exploited to your advantage.
Bull or bear? You should not worry about it!
Maybe this is not the "big problem" that the bearish experts have warned. Maybe it's just another shock on the road to a historically long bull market for stocks and bonds. But again, market timing and flagship events such as 10-2 spreads, recessions and more are not your priority.
What is your priority, if you want to improve your chances of successful retirement, and something different, is something different. To get away from the jargon and hype of the financial media, simplify your approach and adopt a simple strategy to preserve your capital in times of unusual threats to your wealth. I look forward to sharing your ideas on this in the coming days.
The comments provided are for informational purposes only and not individual investment advice or recommendations. Sungarden Provides Advisory Services Through Dynamic Wealth Advisors
To learn more, click RIGHT HERE
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Here is what matters if you are successful and want to keep it.
Do financial markets have your attention? I guess so. After all, the Dow's 800-point fall on Wednesday was the worst day on the US stock market this year. And while many investors have missed it, the fall in share prices in December 2018 limited a 20% decline that began in October. This could have made a lot of noise in projects recently retired or late career.
Tripping on the finish line?
Demographics tell us that there is a massive group of people aged 55 to 70 years old. They make up the majority of the "Baby Boomer" generation. Many of them have built some very nice nesting eggs, thanks to the solid American economy of the past 40 years. This period of technological innovation and globalization of the economy has also resulted in four decades of general interest rate declines. This has provided a historic opportunity to create wealth, if you have spared and invested patiently.
But we are here, with a stock market close to all-time highs and interest rates plummeted to zero. The downwind that has raised baby boomers during their "years of accumulation" can become a headwind, just in time for them to start using money.
Focus on what matters
At this stage of their investment lives, baby boomers are tempted from all sides. They are told to bet on index funds, 60/40 portfolios, structured products and private partnerships. And, while everyone has their merits, I'm telling you what I consider to be a drag on the investment markets since this Baby Boomer was a Wall Street rookie in the beloved World Trade Center in New York City. much of the hogwash. It's a distraction. It's a sales pitch.
Take advantage of the wealth management companies' exaggerated attempts to improve their bottom line and their business, and focus on your own priorities. Today, even in the last 10 years, you should focus on true risk management.
This does not necessarily mean running for cash. It's a purely timed gesture, and it borders on speculation. But that means that the expected use of your accumulated assets (when you need them, how much you need and how you will navigate the markets of the future) should be
turned to the interior. Do not try to guess what the stock market will do.
Reduced rate? Check. Inversion? Check. Giant fall of the stock market? We will see.
The big news on Wednesday was the "inversion" of a portion under supervision of the US Treasury yield curve. Translated into English, this means that for the first time since 2007, US bonds maturing in 10 years yielded less than those maturing in 2 years. This is by no means the first observed reversal between different areas of the Treasury market. However, it is the one that is most widely followed as a recession alarm signal.
The graph above shows three essentially synchronized elements at the start of the last two down markets. The 10-2 spread was reversed, but quickly returned to normal. The Fed has cut interest rates for the first time in a long time. And the S & P 500 peaked in value and dropped more than 40% from this peak.
Let it flow, given what we have seen in the last two weeks alone. Then, let's move quickly to today, where we are in a very similar situation with respect to the reversal and the Fed. See this table below:
What strikes me the most in this chart, is that the gap between 10-year and 2-year returns is almost exactly opposite to that of the S & P 500's price movement. other words, when the 10-2 gap decreases, the S & P 500 generally rises higher. But when this gap begins to rise, it is likely that the S & P 500 will drop soon. As a career graphic designer, I just can not ignore that.
I'm talking about the threat of a possible "10-2 reversal" on Forbes.com since April 2017. It's finally arrived this week, 19 months after what looks more and more like a period of returns mixed for investors. In other words, if they follow the same rules as they have followed in the last 10 years.
Recessions are bad, but it's worse
We have seen this week what I have been talking about since the beginning of last year: it will not take a recession statement to tip the global stock market into a panic selling process that is ruining retirement efforts. In order for stock prices to fall, it is enough to see the market react to the preponderance of evidence accumulated for some time now.
In other words, it is the fear of the future (recession) of the market that matters the most. At the moment a recession is officially declared, you do not need to react. The evil will already be done.
Specifically, a slowdown in the global economy, excessive "easy money" policies on the part of the Fed and its counterparts around the world, and a frenetic political environment in the United States. This has shaken investor confidence and the only thing that ultimately matters in your retirement portfolio: the prices / values of the securities you own are under pressure.
What to do about it
First, do not fall into the trap of market watchers whose livelihood depends on the gradual rise in stock prices. Corrections are not always healthy, diversification is often a trick, and long-term investments are geared toward 25 years!
For those who have "fought the good fight" to come to the precipice of a retreat that they have so deservedly deserved, the last thing they wish for is that this lifeless object ( financial markets) brings them back to a more compromised pension plan.
The best news about the current investment climate is that the tools we have to navigate through them are as numerous as ever. Even in a period of extremely low interest rates for people who accounted for between 4 and 6% of CDs paying their bills in retirement, bear markets in stocks and bonds can be treated and even exploited to your advantage.
Bull or bear? You should not worry about it!
Maybe this is not the "big problem" that the bearish experts have warned. Maybe it's just another shock on the road to a historically long bull market for stocks and bonds. But again, market timing and flagship events such as 10-2 spreads, recessions and more are not your priority.
What is your priority, if you want to improve your chances of successful retirement, and something different, is something different. To get away from the jargon and hype of the financial media, simplify your approach and adopt a simple strategy to preserve your capital in times of unusual threats to your wealth. I look forward to sharing your ideas on this in the coming days.
The comments provided are for informational purposes only and not individual investment advice or recommendations. Sungarden Provides Advisory Services Through Dynamic Wealth Advisors
To read more, click here