The U.S. stock market is extremely expensive. In the past, stock markets have not remained expensive for long. Is it because of artificial intelligence? Perhaps, but a similar argument was made during the dot-com bubble.
A look at the highlights for the year to date via four charts, including updates about diversification, economic indicators and the national debt.
Inflation fears are not new, but the current path is beyond alarming. The U.S. is spending its way into a rampant inflation catastrophe. That is why gold and commodities are being bid up in price and will likely continue to be bid up.
In this article, I present a framework for investment models that integrates personal risk tolerance with academic lifetime investing theory that guides risk as the investor ages.
A picture is worth a thousand words. What follows, instead of 7,000 words, are seven illustrated examples of what could go wrong with the U.S. stock market or the economy.
We’ve reached the 100-year milestone for our dataset that we began collecting in the 1970s. We'll review key data from the prior century to gain perspective on that period and consider what it could mean for the future.
I’ve been reading a lot lately that the stock market is priced just right because earnings growth is expected to be high, growing at double digits. But earnings growth is not the sole determinant of stock price.
Those who have defaulted into TDFs need to un-default and take back risk control over their lifetime savings. Safe assets include Treasury bills and short-to-intermediate TIPS, even though their returns are low. The price of safety is low, but reliable, returns.
This article details personalization with a strong caution against trying to personalize what cannot be personalized because it’s not nice to fool mother nature with a 'managed' account that is not actually managed.
There have been no innovations to TDFs in their entire 19-year history, until now. It’s time. This article introduces trailblazing innovations that improve participant results.
Something changed this year. This year, diversification beyond U.S. stocks has added value, as can be seen in the performances of portfolios.
When the next crash comes, inevitably there will be an uproar. Baby boomers must not wait for that uproar. They need to get out of their TDFs now and move to the safety of T-bills and TIPS, following the guidance of academic theory. That’s just the smart thing to do.
The U.S. population of 340 million people is only 4% of the world, yet its $62 trillion stock market is about half of the world’s total for equities. The U.S. is the tail that is wagging the world’s economic dog. Global economics are dynamic, so the current situation will change even though it may feel like the U.S. is invincible. It’s not.
Until this year, U.S. stocks had consistently been the best-performing asset class over the past 15 years, so diversification did not work. And as a result of that runup, the U.S. stock market became very expensive. However, this year, diversification outside the U.S. into foreign stocks has added value, and gold is shining very brightly.
Is President Trump correct in his assertion that interest rates need to come down? Let’s look at the 99-year history of capital market returns spanning 1926–2024 as our
There is a seasonality in asset class investment performance that is revealed in the history of calendar month returns. Based on history, investors should be “all in” U.S. stocks this August but “mostly out” in September.
There’s a movement underway to improve retirement investments through personalization, but it will do more harm than good in the next stock market crash because it uses the wrong information for defaulted participants.
Baby boomers in TDFs should consider getting out and moving to safety. Stock investors should consider less expensive stock markets, and safer asset classes like TIPS and Treasury bills.
U.S. stocks are no longer the best-performing asset class this year. Gold and foreign stocks are the best performers.
The yield curve for U.S. government bonds is currently very unusual — it’s U-shaped. In addition to the changes in shape, also note the level of interest rates.
Investors nearing or in retirement who are currently defaulted into TDFs need to stop defaulting and move to safety now.
These are scary times. No surprise, the typical advice is to stay the course — that it will all work out fine — but those near retirement should take heed.
This may be the beginning of the long-awaited U.S. stock market crash, but even if it isn’t those near retirement need to protect themselves from sequence-of-return risk that can ruin the rest of their lives.
Quantitative easing has created serious inflation threats. The only way out is to increase tax receipts and reduce government spending, neither of which is in the Fed’s purview. Otherwise, serious inflation lies ahead, regardless of Fed actions.
Prices can continue to rise, until they don’t. Have we reached the point where they don’t?
The PPA has made a mistake in designating an MA as a QDIA. Perhaps the drafters of the PPA were thinking about accounts that are actually managed, but those participants do not default, so that flavor of MA is not a QDIA, and is typically reserved for executives of the sponsoring firm.
The future is impossible to predict, but looking at the patterns around price/earnings ratios can provide some insight about what one might expect.
Many boomers are business owners who are selling their businesses. This article provides guidance for these retiring business owners, their heirs and their advisors. This article also discusses opportunities for investors to capitalize on this once-in-a-lifetime mass exodus of baby boomer business owners.
Finally, an innovation has arrived in 401(k) investing. PTDAs are new. They combine multiple target date glidepaths with managed accounts, potentially using the best of both. Because they are new, it will be easy to think of them all as being the same, but that is far from the truth.
In response to the 2008 stock market and real estate crash, the Federal Reserve stimulated the economy by reducing interest rates to (almost) zero under its zero interest-rate policy (ZIRP). It “printed money” that amazingly did not bring serious inflation, yet.
The Roaring 2020s have been very good so far, but not exceptional when examined in isolation. That said, when viewed in the context of the past 16 years, this record-breaking bull market is spectacular.
Wall Street is forecasting an 8% return in 2025. That’s below the 10.4% average nominal return over the past 99 years, but it is a forecast of even higher highs. Do you believe it? Will “The Bull” keep running this new year, or is it getting tired?
It’s that time of year again, when pundits are forecasting next year’s stock market performance. I believe investors are being gaslighted more than usual this year because the basic underlying assumptions are optimistic and unlikely.
Wall Street expects the stock market to earn a return in 2025 that is similar to the average return over the past 100 years. Do you agree?
The odds are good that Santa won’t disappoint in 2024. Here’s the history of the past 99 Decembers, compared to the other months.
Short-term rates are going down because the Treasury is issuing related debt at lower rates. Meanwhile, long-term rates are going up because the Fed is not intervening.. The Fed is trapped in a vicious cycle. Can you see a way out?
Most of the time the yield on long-term bonds exceeds that on short-term bonds, in order to compensate for the greater risk attached to long-term debt. But until recently the yield curve was inverted, with short-term rates exceeding long-term rates. This happens when investors expect interest rates to decline in the future.
Protect yourself with Treasury Inflation Protected Securities (TIPS), precious metals, certain real estate like farmland, and other real assets.
GAO reports are intended to improve industry practices. GAO failed in its target date fund report but succeeded in its conflicts of interest report.
The ERISA Advisory Council is conducting hearings on Qualified Default Investment Alternatives (QDIAs), seeking recommendations for improvements. The big challenge is making better decisions for people who do not want to engage.
78 million baby boomers are about one-third of the voter-eligible population and 77 percent of them vote, so there are 60 million baby boomer votes. That 60 million is 38 percent of the 158 million votes cast in the 2020 presidential election. The baby boomer voters’ bloc is a big deal.
The “country” in this article is the wild and woolly market of small retirement savings plans (SRSPs) that have less than 100 participants. The “old men” are baby boomers who cannot afford to lose their lifetime savings. And the villain is the next stock market crash.
Baby Boomers likely won’t have time to recover from the next crash. Their loss is also their heirs’ loss. There’s $70 trillion in play. Baby boomers shouldn’t be greater fools.
Baby boomers need to be concerned about worst cases because the rest of their lives could be ruined by the next crash, and with $70 trillion at risk the stakes are high for them and their heirs. So rather than averages, let’s look at worst cases. That’s what baby boomers need to protect against.
Large-cap U.S. stocks, as measured by the S&P 500, have dominated in both absolute and risk-adjusted terms. They are soaring. It’s the Roaring ’20s again!
The next inflation wave will challenge the economy and the Fed. It will not be transitory. A pivot back toward a zero interest rate policy (ZIRP) will intensify the problem.
The GAO report was three years in the making. At $4 trillion and growing, target date funds are very important. The GAO report has the potential to improve the industry.
The Federal Reserve is expected to lower interest rates, but the economy and stock market don't need stimulation.
Inflation is not over. The next wave will be torturous and will last a long time.
The TDF industry is dominated by a few firms that form an oligopoly that is hard to disrupt. It’s no surprise that non-oligarchs are spearheading the movement to personalization.
