Market Commentary 5/14/12
For the Week of May 14, 2012
The Markets
The markets mostly declined on Friday as shares ofU.S.banks slumped after J.P. Morgan Chase said it lost billions on bad trades. Gains in technology shares and increased consumer sentiment attempted to outweigh the bank losses. The Thompson Reuters/University ofMichiganpreliminary index of consumer sentiment advanced in April to its highest reading since January 2008. For the week, the Dow fell 1.50 percent to close at 12,820.60. The S&P dropped 1.06 percent to finish at 1,353.39 and the NASDAQ lost 0.76 percent to end the week at 2,933.82.
| Returns Through 05/11/12 | 1 Week | YTD | 1 Year | 3 Year | 5 Year |
|---|---|---|---|---|---|
| Dow Jones Industrials (TR) | -1.50 | 5.97 | 4.31 | 18.26 | 2.01 |
| NASDAQ Composite (PR) | -0.76 | 12.62 | 3.12 | 19.22 | 2.75 |
| S&P 500 (TR) | -1.06 | 8.44 | 3.07 | 16.59 | 0.04 |
| BarCap US Agg Bond (TR) | 0.09 | 1.74 | 7.22 | 6.97 | 6.45 |
| MSCI EAFE (TR) | -2.42 | 3.92 | -14.63 | 7.60 | -5.65 |
Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, BarCap US Agg Bond and S&P, excluding "1 Week" returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.
More Rent, Less Own – The number ofU.S. households that own homes declined by 442,000 in 2010 over the previous year's total. The number of renter households increased by 5.4 million in 2010. The two groups combined are equal to 117 million households (source: Housing and Urban Development, BTN Research).
More Years – When Franklin D. Roosevelt signed the Social Security legislation in 1935, the life expectancy of a 65-year old American was 12.5 years. Today, the life expectancy of a 65-year old American is 19.2 years (source: Center for Disease Control, BTN Research).
The Golden Years – An average American male who retires at age 55 will spend 32 percent of his life enjoying his retirement years (source: National Vital Statistics Reports, BTN Research).
WEEKLY FOCUS – Keep Contributing!
If you opened your first quarter 401(k) statement, you hopefully saw some gains as the markets have enjoyed a strong rally over the past several months, even reaching 14-year highs. So don't let the past few weeks of market fluctuations get you down.
For many employees, their employer's 401(k) is still the best vehicle for their retirement savings. Certainly if your employer offers 401(k) matches, you should continue contributing to your account at least up to the maximum employer match – otherwise, you're leaving money on the table that your employer is willing to give you. Even if your employer does not offer a 401(k) match, contributing to your 401(k) is probably one of the easiest ways to save for retirement – regardless of market gyrations.
Because your contribution is taken directly from your paycheck, you aren't faced with making the decision each pay period of whether or not to put money away – something you may be less likely to do when you're worried about cash flow. In addition, during market lows, you may be paying less for the investments you purchase within your 401(k) account. If you stop contributing, you will likely not restart until the market has already logged some significant increases, meaning you may miss out on the upside potential of those purchases. Market fluctuation is normal, especially following a lengthy amount of growth, such as we've seen through most of first quarter 2012.
Now may be a good time to review the amount you are contributing to your 401(k) and consider whether you could be contributing more, thereby potentially leveraging your purchasing power when prices are relatively low. You may also want to make adjustments in your investment allocations within your 401(k) account.
The Dow is still nearly 6 percent year-to-date and more than 18 percent for the past three years, so don't stop making contributions to your savings. We can help you review your 401(k) account to ensure you are making the most of this retirement vehicle. We can also suggest ways to potentially supplement your retirement savings with other investments. Call us today to schedule a 401(k) review today.