Ponderings For the Week of December 2 to 8, 2019

Another Strong Week for Stocks

Investors were in a holiday spirit last week as stocks worldwide added to their already hefty gains. It was a short trading week with the markets closed for Thanksgiving and shortened hours on Friday. Encouraging economic reports more than offset a tiff between China and the U.S. due to Uncle Sam’s support of the Hong Kong protestors.

This is a news-rich week with reports on how brick and mortar and online retailers fared after Thanksgiving as well as a number of November economic indicators, including employment data. Hopefully, the party will continue in December erasing memories of how terrible the month was last year when the Dow, S&P, and NASDAQ indexes each lost about 9%.

The investment community will start to opine on the outlook for 2020. An early look suggests that while stocks may have some further room to run up next year, any such gains are likely to be Lilliputian. Investors should be reminded that the same outlook has been tendered several times in recent years with scant accuracy.

This Time It’s (Probably Not) Different

A lot of people have said and will continue to say that “this time it’s different” insofar as our children will never be as well off financially as we are due to all the economic travails – past, present, and future – that we are enduring. This is by no means the first time I’ve heard this lament. The last time was in 2016 when there was a lot of press lamenting the disappearance of the middle class, before that it was the 2008 stock market crash, before that it was 2001, before that 1990, and 1982 before that. I don’t want to minimize the serious problems many people have to confront in the aftermath of the worst economic decline and slowest recovery since the Great Depression of the 1930s. But I don’t buy the argument that future generations will inevitably be consigned to a lower standard of living. Money and educational decisions you and the younger people in your life make now and in the future will strongly influence how you and they will fare financially later on. Keep in mind that financial success is not so much a function of how much you earn; rather, it is a function of what you do with what you earn. I will continue to emphasize the many ways you can control your financial future in future Ponderings. For matters you can’t control, I’ll show you ways to stack the odds in your favor.



Smart Money Tips

  • Don’t feel morose if you missed out on the recent stock market run up.  Many investors have pared back their stock holdings because of the huge run up in stock prices over the past several years, only to miss out on the recent rather prodigious gains. It is bad enough losing money when stocks decline, but now you may feel like a two time loser by missing some of the rebound. Before concluding that you are consigned to investment mediocrity, take some comfort in knowing that many professional investors have suffered the same fate. This most recent surge in stock prices is yet another example of the importance of having a generous dollop of stocks in your investment portfolio no matter how scary the outlook may be. Here’s another reason to be more bullish on stocks: There are still massive amounts of money sitting on the sidelines, and ultimately more of that vast cash hoard will reenter the stock market, further propelling stock prices. The trick right now is not to conclude that it’s too late. Instead, gradually move some of your idle money back into the stock market.
  • Give a gift of an IRA this holiday season.  Parents and grandparents – if you can afford to give a younger generation family member a cash gift and if he or she has some income from a part-time job – even if under age 18, consider giving a gift of a Roth IRA. This will impart a valuable lesson in saving for the future. While retirement is still decades away and is probably the last thing on the child’s mind, your gift is sending an important message that you, as a parent or grandparent, believe that the sooner you start putting money aside for retirement, the better. By the way, if a young adult in your life has embarked on a career, the gift of an IRA will provide the same lifelong lesson.







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