STOCK INVESTORS are hanging tough. Bond investors? Not so much.
Citing flow of funds data from EPFR, Bank of America Global Research says investors collectively purchased $195 billion of stocks this year through June 22. The implication: People aren’t panicking. That’s great news, and it supports the narrative that today’s stock investors are less bullied by market volatility.
It’s a different story in the bond market, where we’ve seen so-called capitulation. Bank of America notes that $193 billion of bonds have been sold this year by investors.
MORE WEALTH HAS been lost in this year’s stock and bond market decline than in any previous downturn, according to research firm Bespoke Investments. And, no, that doesn’t include the $2 trillion of crypto value that’s gone up in smoke.
A counterpoint to this jarring reality: Folks today are wealthier than during previous bear markets. Goldman Sachs reports that U.S. household net worth as a percentage of disposable personal income remains sharply above pre-pandemic levels.
CONSUMERS’ MOOD HAS never been worse—at least according to the University of Michigan Consumer Sentiment Index. The monthly survey, released last Friday morning, paralleled the worse-than-expected Consumer Price Index report. May’s inflation reading notched a fresh four-decade high as Americans—and the rest of the world—grapple with soaring food and energy costs. The issue is front and center, and we all feel it every day.
The hits keep on coming. This weekend, AAA confirmed a grim milestone: The average price of a gallon of regular gas topped $5.
GAS PRICES TOOK another step higher last week—troubling news for the millions of families planning their summer vacations.
It’s already shaping up as a big travel year. An estimated 39.2 million folks hit the road or took a flight over the Memorial Day weekend, according to AAA, up 8.3% from last year. GasBuddy data show the average price for a gallon of regular unleaded was $4.60 over the holiday weekend. Steep? By July 4,
INVESTING FOR education costs has never been more popular, as evidenced by recent Morningstar data. The research company found that 2021 was a record-breaking year for assets in 529 college savings plans. At almost $500 billion, total investments are up nearly fourfold over the past decade.
A big reason is the tax advantages—investments grow tax-free if they’re used for qualifying education expenses—plus 529 accounts are treated relatively leniently under the college financial-aid formulas. You can learn more about the accounts from other authors who have real life experience saving through 529 plans.
BEAR MARKET territory. On Friday, that phrase was all over the “financial pornography” channel, as commentator Carl Richards labels it. During trading, the S&P 500 finally dropped 20% from its early January all-time closing high. In truth, that number alone doesn’t mean much. Consider that stocks in both 2011 and late 2018 briefly encroached on 20% before bouncing back in a big way.
The media was ready last week to go with all the flashing banners and alerts.
AMID THIS YEAR’S market wreckage, perhaps the most disappointing performers have been target-date retirement funds (TDFs).
Many 401(k) investors are familiar with these products. Just one of these funds can be used throughout your investment lifetime, as it automatically shifts from a stock-heavy portfolio in the decades leading up to the targeted retirement date to owning more bonds in the years immediately before and after the target year. Normally, performance is pretty steady for TDFs close to their target date,
WHEN I STUDIED FOR the Chartered Financial Analyst (CFA) exams, I snagged extra prep time by listening to textbooks while commuting. As boring as that sounds, it helped me absorb the dry curriculum—and it made listening to financial information part of my daily routine.
While I no longer commute—or even own a car—I continue to plug in my earphones to catch up on the latest investment insights, often during my afternoon walks. Here are my eight favorite podcasts:
The Long View.
HAS THE ECONOMY reached peak inflation? That might be the biggest question in financial markets right now. Economists at several Wall Street firms, including Goldman Sachs and Bank of America, say the highest pace of consumer price increases may now be in the rearview mirror.
Inflation is typically measured as a percent change from a year ago. From here, prices for goods and services may still go up, but at a slower pace. That’s the hope.
EVERY MARKET DECLINE is different, but all of them can feel unnerving, even for the most steadfast of investors. Spooked by 2022’s financial market turmoil? There’s good news: Stock and bond values today look much more compelling than at the turn of the year.
Thanks to 2022’s 14% drop, the S&P 500 now trades below its five-year average price-to-earnings (P/E) ratio, based on expected profits. On top of that, corporate earnings rose impressively in this year’s first quarter.
THE S&P 500 IS DOWN 10% so far this year—but the pain hasn’t been dished out evenly. Value and steady dividend-paying stocks are about flat for 2022, while technology companies and speculative small-cap stocks have suffered mightily. Money has fled the market’s unprofitable glamor companies and flocked to old-fashioned cash flow generators.
Just how bad has the drubbing been among formerly hot growth names? Look no further than Cathie Wood’s ARK Innovation ETF (symbol: ARKK).
EXPERIENCED INVESTORS know that the stock market and the economy sometimes diverge. Early 2020 offered a stark example: Even as the economy was still contracting rapidly, stocks started bouncing back.
But right now, many areas of the stock market are doing about what you’d expect. After all the efforts by the Federal Reserve and Congress to prop up the economy over the past two years, rising inflation is front and center, along with rising interest rates.
IN THE MARKET FOR a home loan? Chances are, you aren’t pleased. Amid soaring real estate prices and intense demand, mortgage rates have climbed above the psychologically important 5% threshold. Mortgage News Daily published its rates update on Friday afternoon, and the figures weren’t pretty for prospective borrowers. The 5.06% average 30-year fixed-rate mortgage is close to the highest mark since late 2008.
Meanwhile, over the past 12 months, home prices are up 19.2%,
INVESTORS ENDURED a lot in the first quarter, including rising interest rates, high inflation, fears about a recession and news of war. But it’s important not to get caught up in the scary headlines. Consider COVID-19. Not so long ago, it dominated the news, but now it’s hardly discussed because the situation is much improved.
No doubt today’s fears will also abate. Indeed, despite 2022’s dire news, stocks staged an impressive recovery toward the end of the first quarter.
WHEN I TAUGHT at the University of North Florida, I always sought to arm my finance students with the best tools of the trade. College textbooks are notoriously expensive, so I aimed to provide some great free resources. Few things get me more pumped than when I come across an impressive financial website—one that doesn’t charge.
One of the most frequent questions from students: What sites do I visit every day? I would often share stories in class about various writing assignments and investment projects I was working on,