2017’s First Quarter Market Results Hold Promise
Our latest look at the stock market returns gives hope that the U.S. economy, and, in turn, the markets are moving in the right direction.
A quick reminder on why a site dealing with savings advice and deals would write about recent stock market activities.
Who Cares About Fat Cat Investors
While a limited number of people own individual stocks, bonds and mutual funds, a large number of the U.S. population’s retirement monies are invested in those exact investments.
So, not everyone who has exposure to the stock market is a “Fat Cat.”
Pension funds, both government and corporate, invest pension dollars in stocks, and other investment vehicles (think real estate, commodities, and even things as unique as artwork and rare vehicles), to ensure enough money is available to meet pension payment obligations.
Typically, pensions need a 7% to 8% annual return to meet their promised obligations.
When the markets don’t hit those 7-8 percent return numbers, and especially if pensions “reached” for returns and got burned by a loser or two (or more), they become underfunded, which brings into question the funds ability to meet future payments.
Far too many pensions in the U.S. and, for that matter, around the world, are significantly underfunded.
Meaning, the pension you were counting on in retirement may not provide the payments you were expecting, and in the worst case, won’t provide anything at all.
I’ve written about a few of the pensions that are facing serious problems in previous quarterly updates. The California Public Employees Retirement System (CalPERS) being one of the more significantly troubled.
Recently, the California Policy Center released its California Local Government Pension Burdens Update in which it estimates local governments will have to increase their pension contributions from $5.3 billion in Fiscal Years 2017-2018 to $9.8 billion in Fiscal Years 2022-2023, an increase of 84%!, to ensure ongoing benefit payments.
What does that increase mean? One of two things – city and county governments will cut services commensurate with the required increased pension contributions, or tax increases for residents just to maintain the CalPERS pension payment status quo.
A third choice, reduction in pension payments, has thus far been denied by judicial decisions. We’ll see if those decisions hold once the funding situation becomes more dire.
Pensions aside, a strong stock market is important for those who save via a 401(k) or Individual Retirement Account, too. It’s rare (and foolhardy) to find those retirement funds sitting in a savings account, which today is earning less than 1 percent.
All of these factors illustrate why we at Savings Beagle provide these quarterly updates.
We’d all love to see a booming stock market and U.S. economy, lifting away any questions we might have about our future finances and retirements.
Unfortunately, that hasn’t been the case since 2008’s Great Recession.
Too big of a hole as a result of that downturn and too much-stunted growth since.
Just take a look at our previous quarterly updates to see what I mean.
However, this quarter does provide a glimmer that things are moving forward.
There are a number of factors at play, hope seemingly being the primary one. Hope that the corporate tax rate will be cut, hope that individual tax rates will be eased, hope that changes will be made to our health care/insurance system to limit continued cost increases, to name just a few.
We’ll see if hope, alone, is enough to keep the markets moving up.
First Quarter Performance
For now, though, here’s what the first quarter of 2017 gave us with regard to market returns.
The Dow Jones Industrials were up 900.62 points or 4.56% from January 3, 2017 – March 31, 2017.
The S&P 500 was up 123.89 points or 5.53% for that period.
And, the Nasdaq posted a percentage gain of 9.82%, rising 528.62 points.
Overall, pretty good market activity for the first quarter.
The last month has seen a leveling off of gains, though, bringing into question whether we’ll see continued increases as the year moves forward.
As always, time will tell.
Let Us Help You
As we say in each quarterly update, we at Savings Beagle are not investment advisors. Our goal is not to guide your investment decisions or sell you investment products.
Rather, this, and other quarterly updates are provided to get you thinking about your long-term financial situation.
A sound financial lifestyle is an important component to ensuring long-term fiscal stability. And saving money, wherever you can, plays a large part.
Which is where Savings Beagle comes in.
We’re here to find deals and pass along tips that’ll save you money, and help keep you on a sound financial course.
If you haven’t already, bookmark our site, follow us on Facebook, join us on Twitter or subscribe to our posts to ensure you receive every savings opportunity we’re able to pass along.
Saving money and planning for the future’s hard – we’re here to help make it a little easier.
Stock charts courtesy of morningstar.com
